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EBA comments on the implementation of its new Outsourcing Guidelines

14/10/2019

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Related topics: Banking and finance

The EBA Guidelines on Outsourcing came into effect on 30th September this year. Speaking at the Single Resolution Board Conference last week, the EBA Chair, Jose Manuel Campa, said that not enough has been done to ensure that outsourced critical functions will continue to operate in the event of a Resolution. Management bodies need to be aware of what is outsourced, confirm they have clear contracts and adequate governance of outsourced service providers.

At the next level of detail, the EBA Guidelines seem to require that banks can “look through” their outsourced service providers down the supply chain. The EBA confirmed this requirement and that direct access to service providers by regulators also applies through the supply chain for critical functions. Mr Campa noted that banks must ensure that funding will be available to continue to fund outsourced functions in the event of a Resolution.

The SRB confirmed that the requirements of the EBA Guidelines on Outsourcing are integral to the operation of the Resolution regime and in particular to ensure in advance that there will be operational continuity. The Director of Resolution, Mr Carascosa, said that banks must continue to check that their outsourcing agreements have “resolution resilient features” as required by the Bank Recovery and Resolution Directive but also acknowledged that there is no “one size fits all” approach; outsourcing contracts must be appropriate to each bank’s service delivery model and own resolution strategy.

This month we are waiting for the PRA’s new outsourcing supervisory statement. It will be interesting to see to what extent these reflect the EBA Guidelines.

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