Bank of England sets operational resilience standards for CSDs
The Bank of England has issued a Supervisory Statement outlining its approach to operational resilience for central securities depositories (CSDs). The statement explains the Bank's expectations for CSDs to prevent, respond to, recover from, and learn from operational disruptions.
Safeguarding settlement stability
This Supervisory Statement (SS) from the Bank of England details its supervisory approach to operational resilience for all authorised and authorising central securities depositories (CSDs).
The Bank considers disruption to settlement a potential financial stability issue, making CSD resilience crucial.
The SS aims for CSDs to be resilient to operational disruption events, consistent with the approach for other Financial Market Infrastructure firms (FMIs).
It outlines actions CSDs must undertake to achieve sufficient operational resilience, covering both minimising disruption likelihood and mitigating/recovering from events.
The framework ensures CSDs' risk management covers prevention, mitigation, and recovery.
The policy is designed post-Brexit, referencing retained EU law where applicable.
Defining resilience and tolerance
The Bank's expectations align with EU regulations such as CSDR and RTS 2017/392, particularly Article 70 on operational risk management.
This Supervisory Statement introduces an 'Operational Resilience Framework,' requiring CSDs to identify 'important business services' – defined more broadly than CSDR's 'critical operations' – and establish an 'impact tolerance' for these.
CSDs must map dependencies, use scenario testing, and implement policies for identifying and mapping operational assets (people, processes, technology, facilities, information).
Robust communication planning is also a key component of the framework.