Resilience in Credit Institutions

Resilience in credit institutions is about lending and deposit-taking continuing to work together, because a credit institution does both at once. The central services are taking deposits, making and servicing loans, providing credit facilities to businesses, and managing the treasury and funding that support those activities. When those services stop, the harm reaches both sides of the balance sheet. Depositors cannot reach funds. Borrowers cannot draw on facilities they depend on. Businesses that expected credit to fund payroll or suppliers face a shortfall they did not plan for. A disruption to a credit institution is therefore not only a customer service problem. It touches the flow of credit itself, and the firms and households that depend on that flow.

Deposit-taking is the service most customers recognise: accounts that receive income, hold savings, and allow withdrawal and payment. It overlaps with retail banking, but in a credit institution it sits alongside lending on the same core ledger, and a disruption to that ledger affects both sides at once. Loan servicing is the second service: collecting repayments, applying interest and charges correctly, handling arrears fairly, and updating balances. A servicing failure can cause a borrower to be recorded as in arrears when payments were in fact made, with consequences for credit standing that are difficult to unwind.

Depositors are harmed by loss of access to funds, in the same way as retail banking customers, with the added concern that a credit institution holds savings that may represent a household's buffer against emergencies. Borrowers are harmed differently: a borrower who cannot draw on a facility, or whose repayment is misapplied, faces cash flow difficulty and potential damage to a credit record. A business borrower faces a further harm, because a missed supplier payment or payroll can damage trading relationships and, in a tight cash position, threaten the business itself. The harm is therefore both personal and commercial, and it spreads through supply chains when businesses cannot pay each other.

Credit institutions depend on a core ledger that holds deposit and loan records, on payment rails for moving funds, on credit bureaux and scoring providers for lending decisions, and on funding markets and treasury systems for liquidity. Each dependency can fail in a way that presents as a customer service failure. A credit bureau outage halts new lending decisions. A payment rail outage halts deposit and loan movements. A core ledger problem affects both sides of the balance sheet at once, which is why ledger integrity and reconciliation are central to recovery. A ledger that restarts with balances that cannot be trusted has not recovered, whatever its availability figures say.

A useful credit institution test follows a loan and a deposit through a core disruption. One example is a ledger outage during a repayment cycle: can repayments still be recorded, can borrowers be prevented from being wrongly marked in arrears, and can balances be reconciled accurately when the ledger returns? Another is a credit decisioning outage: can existing facilities still be drawn on, can new lending be paused fairly, and can applicants be told honestly why decisions are delayed? A third is a funding or treasury disruption: can the institution manage liquidity, can it prioritise critical payments, and can it communicate any lending restrictions to affected borrowers without causing unnecessary alarm?

Check whether the plan covers deposit-taking, loan servicing, and credit provision as separate services, with their own recovery priorities. Check whether ledger integrity and reconciliation are recovery conditions, not afterthoughts. Check whether credit decisioning and funding are in the map, and whether borrower communication during a servicing provider outage is addressed. And check which regime is being applied: DORA, which applies from 17 January 2025, and the UK regime under FCA PS21/3 and PRA PS6/21 are labelled separately in this guide.