New regulatory powers Powers in relation to critical third parties Designating critical third parties
The Act addresses the issue by enabling HM Treasury to designate certain third parties as ‘critical’ and giving the Bank, PRA and FCA the ability to directly oversee critical services provided to regulated firms and financial market infrastructures by designated critical third parties. This will allow the regulators to intervene to raise the resilience of these services and reduce the risk of systemic disruption in the finance sector.
	The Act enables HM Treasury to designate third parties as critical on the basis of the following criteria:
the materiality of the services which a third party provides to firms; and
the number and type of firms which use a third party.
	HM Treasury will have to consult the Bank, the PRA or the FCA before designating a critical third party. In practice, designation will generally follow a recommendation from the regulators. Before designating critical third parties, HM Treasury must take representations from potential critical third parties and may consult others with an interest. Designation will itself be made by secondary legislation as the list of critical third parties will change over time.