This drive resulted in the emergence of operational continuity in resolution (OCiR) regulation. This blog examines the degree to which firms have demonstrated effective implementation of OCiR as well as noting areas where further improvement may be needed, Be UK having worked with several clients to support their OCiR adoption.

Background

OCiR is a Prudential Regulation Authority (PRA) requirement. Supervisory statement SS4/21 sets out the expectations for banks, building societies and investment firms to ensure the operational continuity of critical services are provided to customers to facilitate recovery actions, resolution and related restructuring.

Implementation of this regulation is mandatory for firms that, within the past 36 months, falls within one of three criteria:

1. The firm's average total assets reported under chapters 7 and 9 of the BoE Rulebook exceed £10bn.
2. The firm's average safe custody assets reported per SUP 16.14 of the FCA Handbook exceed £10bn.
3. The average sight deposits reported or would've been reported under the ITS on supervisory reporting are greater than £350m.

Executives have accountability, under the Senior Managers’ and Certifdication regime, to ensure provision for OCiR and ongoing compliance against the following pillars as shown in figure 1 below.

Identifying common pillar specific gaps

In assisting various financial institutions with regulation adherence, Be UK has identified common areas where further attention is often needed to ensure robust compliance.

Service mapping

The PRA expects firms to illustrate how operational arrangements support recovery and resolution through a service catalogue. While many firms use static platforms, such as Excel, risking data integrity, adopting dynamic platforms ensures accurate and immediately accessible information, crucial for regulatory inquiries.

Service continuity

Firms must ensure critical service continuity during restructuring, yet deficiencies in playbook coverage are common. Inadequate provisions, communications, and testing scenarios for recovery and resolution may lead to unpreparedness, with regulators potentially requesting this information urgently.

Contract management

Reviewing contracts is imperative to ensure resolution-resilient terms for critical services. If contracts lack protective clauses, firms should develop a remediation plan, including a robust substitutability approach in case suppliers resist adopting revised terms.

Financial resilience

The PRA mandates firms to maintain financial resources for stress resilience, consider charging structures, operational assets, risks, liquidity provisions and early warning indicators. While progress is apparent, firms should anticipate regulatory requests for clear evidence on various financial calculations, ensuring confidence on contingency funding provisions.

Management and governance

Firms require appropriate forums to ensure OCiR's delivery and response to stress scenarios. Confusion is common during recovery and resolution roleplays, often exacerbated by OCiR governance being absorbed into broader committees. Establishing a specialised forum and bolstering OCiR education is crucial for clarity and focussed execution.

Closing thoughts

Firms will often have many initiatives to consider and cost implications to balance when undertaking regulatory improvements. They should not risk regulator scrutiny through lack of addressing their OCiR gaps, many of which are easily identifiable and rectifiable.