Blog Post- EBA Publishes Guidelines on Third Party Outsourcing
The European Banking Authority (EBA) printed its revised tips on outsourcing arrangements starting off specific provisions for the governance frameworks of all monetary establishments. The aim of the rules is to establish a harmonic framework for these monetary establishments, particularly credit establishments and investment companies.
This blog will concentrate on who the rules apply to, once the rules acquire force and what are the key reforms
Who do the rules Apply to?
The Guidelines now apply to all financial institutions that are:
- Within the scope of the EBA’s mandate, including credit institutions
- Investment firms subject to Directive (EU) 2013/36 IV (Capital Requirements Directive)
- Payment institutions
- Electronic money institutions
When do the rules acquire force?
The Guidelines are enforceable on the 30th of September 2019. The EBA tips on Outsourcing Arrangements are considerably prescriptive than the 2006 CEBS tips.
What are the Key Reforms?
- ‘Critical or vital functions’ assessment: The rules impose stricter necessities on outsourcing arrangements wherever ‘critical or vital’ functions are being outsourced and therefore the definition of ‘critical or important functions’ relies on the choice of words of MiFID II.
- Outsourcing arrangement registers: Companies should maintain a comprehensive internal register of all outsourcing arrangements that distinguishes between vital and non-critical outsourced functions.
- Sub-outsourcing: Companies should bear in mind the degree and nature of sub-outsourcing by their outsourced service suppliers (OSPs) and embrace such info in their outsourcing registers. Companies should recognize sure facts concerning sub-outsourced activities, like the situation of the sub-outsourced service supplier.
- Focus on FinTech and cloud service suppliers (CSPs): The rules are significantly involved with the power of CSPs to adequately shield information confidentiality and to stick to relevant information necessities.
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