Operational Suitability

Glossary of the Settlement Integrity Institute · v1.0 · Group I — Foundations

Definition

A determination that a settlement infrastructure — taken as a whole — is fit to bear the value, volume, counterparty exposure, and stress conditions placed upon it. Operational Suitability is established by examination of the infrastructure's components, their bindings, and the conditions under which they have been observed to hold; it is not established by attestation, certification of any single component, or compliance with rules governing parts of the system in isolation.

Notes

Existing supervisory frameworks examine operational risk within a regulated institution. The OCC Heightened Standards govern risk governance inside large national banks;1 the FFIEC IT Examination Handbook prescribes how an institution oversees its third-party technology providers;2 the Basel Committee's Principles for Operational Resilience set expectations for how a bank withstands disruption.3 Each is indispensable, and none was designed to evaluate a settlement system whose components span multiple institutions, jurisdictions, and trust regimes simultaneously. Operational Suitability is the cross-component determination those frameworks presume but do not themselves render.

The determination is of the whole: a settlement infrastructure whose individual components are each in compliance with their applicable rules may still be operationally unsuitable if the bindings between them are weak, untested, or undocumented. Conversely, an infrastructure whose components are unfamiliar to traditional supervisory frameworks may be operationally suitable where those bindings are demonstrably sound. Suitability is the property of the system, not the property of any participant in it.

See also

Trust Fabric · Infrastructure Trust Boundary · Assurance Gap · Methodology Authority

References

  1. ↩ Office of the Comptroller of the Currency, Guidelines Establishing Heightened Standards for Certain Large Insured National Banks, Insured Federal Savings Associations, and Insured Federal Branches (12 C.F.R. Part 30, Appendix D). occ.gov
  2. ↩ Federal Financial Institutions Examination Council, FFIEC Information Technology Examination Handbook — Architecture, Infrastructure, and Operations Booklet (June 2021). occ.gov
  3. ↩ Basel Committee on Banking Supervision, Principles for Operational Resilience, BCBS 516 (March 2021). bis.org