ESMA Publishes Guidelines on Outsourcing to Cloud Service Providers
ESMA published the final report on the guidelines for outsourcing to cloud service providers. The guidelines apply to competent authorities and various entities under the ESMA remit, including credit rating agencies, investment firms and credit institutions when they carry out investment services and activities, data reporting services providers, and market operators of trading venues. The guidelines apply from July 31, 2021 to all cloud outsourcing arrangements entered into, renewed, or amended on or after this date. In addition, ESMA announced recognition of Euroclear UK & Ireland Limited, a UK-established central securities depository (CSD) as a third-country CSD after Brexit transition on December 31, 2020. Yet another announcement involves registration of DTCC Data Repository (Ireland) PLC (by ESMA) as a trade repository under the European Market Infrastructure Regulation (EMIR) and the Securities Financing Transactions Regulation (SFTR), with effect from December 23, 2020.
The guidelines are intended to help firms identify, address, and monitor the risks arising from cloud outsourcing arrangements. The guidelines are also intended to support a convergent approach to the supervision of cloud outsourcing arrangements across competent authorities in EU. The report incorporates feedback received during the consultation process for these draft guidelines (during June 03, 2020 to September 01, 2020) as well as the relevant outsourcing guidelines from EBA and EIOPA. While working on these guidelines, ESMA has been also mindful of the proposal for a Digital Operational Resilience regulation, which the EC published in September 2020. The guidelines in this report focus on:
- Risk assessment and due diligence that firms should undertake with respect to the cloud service providers
- Governance, organizational, and control frameworks that firms should put in place to monitor the performance of cloud service providers
- How to exit the cloud outsourcing arrangements without undue disruption to business
- Contractual elements that a cloud outsourcing agreement should include
- Information to be notified to competent authorities
The guidelines apply from July 31, 2021 and firms should review and amend accordingly the existing cloud outsourcing arrangements with a view to ensuring that they take into account these guidelines by December 31, 2022. Where the review of cloud outsourcing arrangements of critical or important functions is not finalized December 31, 2022, firms should inform the respective competent authority about this, including the measures planned to complete the review or the possible exit strategy.
Related Links
Keywords: Europe, EU, Banking, Securities, Outsourcing, Cloud Computing, DTCC, Euroclear, ESMA
Related Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
