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Impact Tolerances—A Perspective on Wholesale Markets for Institutional Clients
Impact Tolerances—A Perspective on Wholesale Markets for Institutional Clients
March 2022
In March 2021, after nearly three years of discussion and consultation, the Bank of England (BoE), Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) finalized their latest guidance and policy on operational resilience. This body of work aims to provide a framework for improving the operational resilience of UK financial services firms by introducing a wide set of requirements including concepts such as Important Business Services and impact tolerances, which require identification by March 2022 and thoughtfulness to be implemented at scale.
In this paper, BNY Mellon and PwC discuss some of these concepts with a focus on wholesale markets and institutional clients, however the concepts and the way that they are applied are also relevant and applicable to retail services. Topics covered include:
- Identifying Important Business Services, defining impact tolerances (including the distinction from Recovery Time Objectives), commencing a program of scenario testing and meeting regulatory deadlines.
- Interpreting impact tolerance statements and the importance of comparing impact tolerance thresholds as well as firms' own analyses of their impacts in disruption.
- Key challenges around impact tolerance disclosure including lack of a statistical baseline, as well as the requirement to anticipate future revisions.
- Benefits to service receivers as firms shift their thinking to the possible impacts of their potential inability to deliver services on third parties, and specifically financial markets and clients.
- Considerations for service receivers subject to impact tolerance requirements and the value of service providers and recipients discussing perspectives on Important Business Services and impact tolerances.
- The three year transition period and how approaches are expected to mature as best practice emerges over time.
Asset Servicing Global Disclosure
© 2022 The Bank of New York Mellon Corporation. All rights reserved.
© 2022 PwC. All rights reserved. PwC refers to the US member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.