Critical third party

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Critical third party

CTPAlso called CTP regime, critical third parties regime

Definition

A critical third party (CTP) is a company that supplies services to UK banks, insurers and market infrastructure and has been designated by HM Treasury because a failure or disruption of its services could threaten UK financial stability or confidence. Designated CTPs are overseen directly by the Bank of England, PRA and FCA.

CTP OVERSIGHTBANK OF ENGLANDPRAFCA
Fig. 1 · Critical third party
FSMA 2023, section 18 · PS16/24 · SI 2026/777
Key rulesFSMA 2023, section 18 · PS16/24 · SI 2026/777 · DORA Article 31
Applies toHM Treasury, the UK financial regulators and designated providers
RegionsUK · EU
01

How it works

The regime sits in the Financial Services and Markets Act 2000, as amended in 2023. HM Treasury designates a provider after a recommendation from the regulators. From that date the provider must meet the Fundamental Rules and the operational risk and resilience requirements. It maps its systemic services, runs scenario testing and reports incidents to the regulators. The first designations, covering four cloud providers, took effect on 13 July 2026.

The regime targets concentration risk. Many firms rely on the same few cloud and technology providers, so one outage can hit large parts of the market at once. Designation does not shift responsibility. Banks and insurers stay accountable for their own operational resilience and for managing their outsourcing arrangements, including arrangements with a designated CTP.

Step 1RecommendationRegulators recommend providers to HM Treasury for designation
Step 2DesignationHM Treasury designates the provider by statutory instrument
Step 3Self-assessmentCTP assesses itself and maps its systemic services
Step 4TestingCTP runs scenario testing and incident exercises
Step 5OversightBank of England, PRA and FCA supervise compliance
02

The rules

UK · 29 June 2023FSMA 2023, section 18Financial Services and Markets Act 2023, section 18, inserting Chapter 3C into Part 18 of FSMA 2000

Gives HM Treasury the power to designate critical third parties and gives the regulators direct powers to make rules for them and oversee them.

HM Treasury, the UK financial regulators and designated providers
UK · 12 November 2024PS16/24Operational resilience: Critical third parties to the UK financial sector (Bank of England, PRA and FCA policy statement)

Sets the Fundamental Rules and operational resilience requirements for CTPs, in force from 1 January 2025 and binding on a provider once designated.

Designated critical third parties
UK · 13 July 2026SI 2026/777The Critical Third Parties (Designation) Regulations 2026

The first designations under the regime, bringing four cloud service providers under joint oversight by the Bank of England, PRA and FCA.

Four cloud service providers
EU · 17 January 2025DORA Article 31Regulation (EU) 2022/2554 on digital operational resilience for the financial sector (DORA), Article 31

The EU counterpart, under which the European Supervisory Authorities designate critical ICT third-party service providers and a lead overseer supervises each one.

ICT third-party service providers critical to EU financial entities
03

Common questions

Who decides which firms are critical third parties?

HM Treasury makes the designation by statutory instrument, after a recommendation from the Bank of England, PRA and FCA. It looks at how material the services are to the financial sector and how many firms depend on the provider.

Which providers have been designated?

HM Treasury designated four cloud service providers with effect from 13 July 2026. These were the first designations since the CTP rules took effect on 1 January 2025. Further designations are expected as the regime develops.

Does a CTP designation reduce a bank's own duties?

No. Firms remain responsible for their own operational resilience and for managing outsourcing and third-party risk. The regulators have stated that the CTP rules do not change those duties, so firms still need contracts, testing and exit plans for designated providers.

How does the UK regime differ from DORA?

Both regimes oversee critical technology providers directly. Under DORA the European Supervisory Authorities designate critical ICT providers and appoint a lead overseer. In the UK, HM Treasury designates and the Bank of England, PRA and FCA oversee jointly. The UK regime is not limited to ICT services.