This action is being taken in response to the growing reliance of financial institutions and financial market infrastructures (FMIs) on a small number of vital third-party suppliers.

The potential of these providers to increase industry competitiveness amplifies their significance. Disruptions like power outages or cyberattacks, however, might have a significant impact and endanger the stability of the financial system in the United Kingdom.

In 2023, the government responded to these weaknesses by giving regulatory agencies additional authority to monitor these vital service providers in order to reduce the threats to financial stability.

The Prudential Regulation Authority, the Bank of England, and the Financial Conduct Authority have now detailed their plans for using these additional powers after lengthy discussions and partnerships with the sector. These rules are comparable to the EU's Digital Operational Resilience Act and are intended to conform to international standards.

The new regulations will strengthen the resilience of the UK financial services industry as a whole, as well as the services offered to specific businesses. By strengthening market stability, this strategic improvement seeks to maintain the UK's appeal as a commercial location.

Notwithstanding these additional actions, financial institutions and FMIs still have an obligation to manage third-party relationships and preserve resilience against operational shocks while abiding by the current regulations regarding outsourcing and operational resilience. As these regulations are put into effect over the next few months, the authorities have urged continued industry participation.