UK Introduces New Regulations for Critical Third-Party Providers

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UK Introduces New Rules for Critical Third-Party Providers

The UK is rolling out a new regulatory framework for critical third-party providers (CTPs) to strengthen financial system resilience. Regulators will identify and oversee key technology firms whose services are essential to financial operations. While compliance responsibilities will be shared between firms and providers, financial institutions must still maintain their own operational resilience and risk management.

Feb 27, 2025

Tags: Industry News Regulation and Compliance Vendor and Third Party Risk

UK Introduces New Rules for Critical Third-Party Providers

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The UK is introducing a regulatory framework for critical third-party providers (CTPs) in 2025.
Financial regulators will designate key technology firms for direct oversight.
Designated CTPs will face stricter compliance requirements, while financial firms remain responsible for their resilience.
The new rules aim to strengthen financial stability but could increase compliance costs.

The UK government is introducing a new regulatory regime for critical third-party providers (CTPs) in 2025, granting financial regulators additional oversight over key technology firms essential to the financial system.

These rules will not replace existing outsourcing and operational resilience regulations but will shift part of the compliance responsibility onto designated CTPs.

The Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA), and Bank of England will assess and recommend CTPs for official designation by HM Treasury.

Only designated CTPs will be subject to the new requirements, which include incident management protocols, reporting obligations, self-assessments, and scenario-based testing.

Financial firms, however, will remain responsible for their own operational resilience and third-party risk management.

The new framework is expected to impact cloud service providers like Amazon Web Services and Google Cloud, data providers such as Bloomberg and Moody’s, and technology infrastructure firms, including cybersecurity and artificial intelligence providers.

The exact process for determining CTPs remains unclear, but independent financial advisers (IFAs) and firms relying on such services should prepare for compliance.

Financial institutions are advised to maintain thorough due diligence on CTPs, establish clear communication channels, and ensure contingency plans are in place to mitigate disruptions.

While compliance costs for CTPs may increase, firms could benefit from improved transparency and risk management insights. The new framework ultimately aims to enhance the stability and security of the UK’s financial sector.