Featured Product

    ECB Issues Opinion on German Law on Outsourcing Arrangements by Banks

    February 26, 2021

    On request from the German Ministry of Finance, ECB delivered an opinion, containing its observations, on a draft law that concerns the supervision of outsourcing arrangements by BaFin. ECB notes that it understands that the new powers for the supervision of external service providers are granted to BaFin without prejudice to the supervisory responsibilities established under the EU Regulation 1024/201321; this EU regulation assigns, to ECB, responsibilities as competent authority for the supervision of significant credit institutions, including the supervision of the outsourcing arrangements entered into by credit institutions with third parties. ECB also notes that once the Digital Operational Resilience Act (DORA) is adopted at the EU level, the German legislator will need to review this draft law.

    In specific, the ECB opinion was requested on Article 5 of the draft German law, which introduces changes to the Law on banking, and on Article 8 of the draft law, which introduces changes to the Law on capital investment. ECB has  confined its opinion to Article 5 of the draft law, which introduces changes to the Law on banking concerning BaFin’s supervision of outsourcing arrangements entered into by credit institutions. The draft law introduces a wide definition of what is regarded as an "external service provider," a term that includes any company to which a credit institution has outsourced activities or processes to execute its ordinary services. In general, ECB notes that enhancing the digital operational resilience of credit institutions by extending supervisory powers directly to external service providers is a topical issue that needs to be addressed. Thus, it is understood that the German legislator will review the draft law once the DORA proposal of EC is adopted to ensure full consistency with the EU legislation. However, once EU legislation is adopted, the draft law will require additional adaptation, not just by the legislator but also on the part of credit institutions and their external service providers.

    Additionally, ECB observes that certain aspects of the draft law go beyond the scope of the EBA guidelines on outsourcing arrangements (EBA/GL/2019/02), such as the obligation on credit institutions to ensure contractually that the external service provider appoints an authorized agent in Germany to whom BaFin may serve documents and notifications. Some of these requirements, such as the new power granted to BaFin to issue orders directly to external service providers to which material activities and processes have been outsourced, combined with the power to impose sanctions if such orders are not complied with, go beyond the traditional construct of the Capital Requirements Directive, where the role of the competent authorities is articulated exclusively vis-à-vis the credit institution, which is the addressee of potential decisions or supervisory measures aimed at reducing the risk posed by a particular outsourcing arrangement.

     

    Related Link: Opinion (PDF)

     

    Keywords: Europe, EU, Germany, Banking, Opinion, Outsourcing Arrangements, DORA, Cloud Computing, Operational Resilience, CRD, ECB

    Related Articles
    News

    PRA Finalizes Supervisory Approach for Non-Systemic Banks in UK

    PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.

    April 15, 2021 WebPage Regulatory News
    News

    EBA Finalizes Standards on Methods of Prudential Consolidation

    EBA published a report that sets out the final draft regulatory technical standards specifying the conditions according to which consolidation shall be carried out in line with Article 18 of the Capital Requirements Regulation (CRR).

    April 15, 2021 WebPage Regulatory News
    News

    EBA Updates List of Other Systemically Important Institutions in EU

    EBA updated the list of other systemically important institutions (O-SIIs) in EU.

    April 15, 2021 WebPage Regulatory News
    News

    BCBS Report Concludes Basel Risk Categories Can Capture Climate Risks

    BCBS published two reports that discuss transmission channels of climate-related risks to the banking system and the measurement methodologies of climate-related financial risks.

    April 14, 2021 WebPage Regulatory News
    News

    UK Authorities Welcome FSB Review of their Remuneration Regime

    UK Authorities (FCA and PRA) welcomed the findings of FSB peer review on the implementation of financial sector remuneration reforms in the UK.

    April 14, 2021 WebPage Regulatory News
    News

    PRA and FCA Letter on Addressing Risks from Use of Deposit Aggregators

    PRA and FCA jointly issued a letter that highlights risks associated with the increasing volumes of deposits that are placed with banks and building societies via deposit aggregators and how to mitigate these risks.

    April 14, 2021 WebPage Regulatory News
    News

    MFSA to Amend Banking Act and Rules in Coming Months to Transpose CRD5

    MFSA announced that amendments to the Banking Act, Subsidiary Legislation, and Banking Rules will be issued in the coming months, to transpose the Capital Requirements Directive (CRD5) into the national regulatory framework.

    April 14, 2021 WebPage Regulatory News
    News

    EC Delegated Regulation on Specialized Lending Exposures Under CRR

    EC finalized the Delegated Regulation 2021/598 that supplements the Capital Requirements Regulation (CRR or 575/2013) and lays out the regulatory technical standards for assigning risk-weights to specialized lending exposures.

    April 14, 2021 WebPage Regulatory News
    News

    OSFI Proposes to Enhance Assurance Expectations for Basel Returns

    OSFI launched a consultation to explore ways to enhance the OSFI assurance over capital, leverage, and liquidity returns for banks and insurers, given the increasing complexity arising from the evolving regulatory reporting framework due to IFRS 17 (Insurance Contracts) standard and Basel III reforms.

    April 13, 2021 WebPage Regulatory News
    News

    ECB Issues Results of Benchmarking Analysis of Recovery Plans of Banks

    ECB published results of the benchmarking analysis of the recovery plan cycle for 2019.

    April 13, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6858