On 8 June 2022, HM Treasury published its Policy Paper, outlining a proposal to regulate third parties services providers considered critical to financial services and financial market infrastructure firms.
The purpose of the proposal is to mitigate the risk of disruption caused by these third parties (e.g. cloud services providers) as financial institutions rely heavily on them and at times on the same third party.
Some of the key requirements of the critical third party regime :
HM Treasury will collaborate with the financial regulators and other bodies to designate certain third parties as ‘critical’.
Designation will be made by secondary legislation that will consider high-level criteria. This designation framework will be set out in primary legislation.
Third parties designated as ‘critical’ will be subject to financial regulators oversight in respect of any material services provided to the finance sector.
The primary legislation for this proposed regime will be introduced “when parliamentary time allows”. Once introduced, financial regulators will publish a joint discussion paper.