Featured Product

    ESMA Issues Guidelines on Outsourcing to Cloud Service Providers

    May 10, 2021

    ESMA published the final guidelines on outsourcing to cloud service providers. These guidelines apply from July 31, 2021 to all cloud outsourcing arrangements entered into, renewed, or amended on or after this date. Firms should review and, accordingly, amend the existing cloud outsourcing arrangements to ensure that these arrangements consider the guidelines by December 31, 2022. Where the review of cloud outsourcing arrangements of critical or important functions is not finalized by December 31, 2022, firms should inform their competent authority about this, along with the measures planned to complete the review or the possible exit strategy.

    These guidelines are intended to establish consistent, efficient, and effective supervisory practices within the European System of Financial Supervision. The guidelines apply to competent authorities; investment firms; credit institutions when carrying out investment services and activities; tier 2 third-country central counterparties that comply with the relevant requirements of European Market Infrastructure Regulation (EMIR); data reporting services providers and market operators of trading venues; credit rating agencies; trade repositories; securitization repositories; and administrators of critical benchmarks. The guidelines aim to help firms and competent authorities identify, address, and monitor the risks and challenges arising from cloud outsourcing arrangements that could span from making the decision to outsource, selecting a cloud service provider, and monitoring outsourced activities to providing for exit strategies. The guidelines cover the following key elements:

    • Governance. A firm should have a defined and up-to-date cloud outsourcing strategy that is consistent with the firm’s relevant strategies and internal policies and processes, including in relation to information and communication technology, information security, and operational risk management.  
    • Pre-outsourcing analysis and due diligence. Before entering into any cloud outsourcing arrangement, a firm should assess if the cloud outsourcing arrangement concerns a critical or important function; identify and assess all relevant risks of the cloud outsourcing arrangement; undertake appropriate due diligence on the prospective cloud service provider; and identify and assess any conflict of interest that the outsourcing may cause.
    • Key contractual elements. The respective rights and obligations of a firm and its cloud service provider should be clearly set out in a written agreement.
    • Exit strategies. In case of outsourcing of critical or important functions, a firm should ensure that it is able to exit the cloud outsourcing arrangement without undue disruption to its business activities and services to its clients, and without any detriment to its compliance with its obligations under the applicable legislation, as well as the confidentiality, integrity and availability of its data.
    • Access and audit rights. A firm should ensure that the cloud outsourcing written agreement does not limit the firm’s and competent authority’s effective exercise of the access and audit rights and oversight options on the cloud service provider.
    • Sub-outsourcing. If sub-outsourcing of critical or important functions (or material parts thereof) is permitted, the cloud outsourcing written agreement between the firm and the cloud service provider should, among other things, specify any part or aspect of the outsourced function that are excluded from potential sub-outsourcing. 
    • Written notification to competent authorities. A firm should notify, in writing, its competent authority in a timely manner about the planned cloud outsourcing arrangements that concern a critical or important function. 
    • Supervision of cloud outsourcing arrangements. Competent authorities should assess risks arising from a firm's cloud outsourcing arrangements as part of their supervisory process; this assessment should focus on the arrangements that relate to the outsourcing of critical or important functions. 

     

    Related Links

    Keywords: Europe, EU, Banking, Securities, Cloud Service Providers, Fintech, Regtech, Outsourcing, Cloud Computing, ESMA

    Related Articles
    News

    EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models

    The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.

    June 21, 2022 WebPage Regulatory News
    News

    BIS Hub Updates Work Program for 2022, Announces New Projects

    The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.

    June 17, 2022 WebPage Regulatory News
    News

    US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule

    Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)

    June 16, 2022 WebPage Regulatory News
    News

    EIOPA Consults on Review of Securitization Framework in Solvency II

    The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.

    June 16, 2022 WebPage Regulatory News
    News

    UK Authorities Issue Regulatory and Reporting Updates for Banks

    The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.

    June 15, 2022 WebPage Regulatory News
    News

    BaFin Consults on Resolvability Requirements for Resolution Planning

    The Federal Financial Supervisory Authority of Germany (BaFin) proposed to amend the “Capital Investment Conduct And Organization Ordinance” and issued a draft circular on the minimum resolvability requirements for resolution planning.

    June 10, 2022 WebPage Regulatory News
    News

    EBA Consults on Certain Standards and Guidelines Under CRR and BRRD

    The European Banking Authority (EBA) proposed guidelines, for the resolution authorities, on the publication of the write-down and conversion and bail-in exchange mechanic, with the comment period ending on September 07, 2022.

    June 08, 2022 WebPage Regulatory News
    News

    OJK Publishes Regulatory Updates for Financial Sector Entities

    The Financial Services Authority of Indonesia (OJK) is strengthening cooperation with the Australian Prudential Regulation Authority (APRA) and the Japanese Financial Services Agency (JFSA)

    June 03, 2022 WebPage Regulatory News
    News

    EU Publishes Rules on DLT and Data Governance

    The European Parliament and the Council published Regulation 2022/868 on European data governance (Data Governance Act).

    June 03, 2022 WebPage Regulatory News
    News

    EBA Publishes Phase 2 of Reporting Framework 3.2

    The European Banking Authority (EBA) published phase 2 of its reporting framework 3.2. The technical package supports the implementation of the updated reporting framework by providing standard specifications

    June 03, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8267