Featured Product

    PRA Finalizes Policy on Outsourcing and Third-Party Risk Management

    March 29, 2021

    PRA published the policy statement PS7/21 that sets out the final supervisory statement SS2/21 on outsourcing and third-party risk management. Firms will be expected to comply with the expectations in SS2/21 by March 31, 2022. PS7/21 also contains feedback to responses to the consultation paper CP30/19, which was published in December 2019 and had set out proposals to modernize the regulatory framework on outsourcing and third-party risk management. PRA revised the policy in SS2/21 based on responses received to CP30/19; the revisions relate to the text on definition of outsourcing, proportionality, governance and record-keeping, pre-outsourcing phase, outsourcing agreements, data security, and business continuity and exit plans.

    SS2/21 elaborates on the definition of outsourcing in the PRA Rulebook. It notes that there are arrangements between firms and third parties that fall outside this definition and are, consequently, outside the scope of the existing requirements on outsourcing and some of the detailed expectations in SS2/21. However, these third-party arrangements are still subject to the PRA Fundamental Rules and other PRA requirements and expectations on business continuity, governance, operational resilience, and risk management. SS2/21 clarifies the application of the principle of proportionality to intragroup outsourcing and to "non-significant firms." SS2/21 further sets out the expectations on governance, including under the Senior Managers and Certification Regime (SM&CR), and record keeping. SS2/21 also sets out expectations for firms during the pre-outsourcing phase and aims to:

    • Complement the requirements and expectations on operational resilience, as set out in the PRA Rulebook, SS1/21, and statement of policy on operational resilience
    • Facilitate greater resilience and adoption of the cloud and other new technologies, as set out in the response of BoE to the "Future of Finance" report
    • Implement the EBA guidelines on outsourcing arrangements and clarify how PRA expects banks to approach the EBA Outsourcing Guidelines in the context of its requirements and expectations
    • Implement the relevant sections of the EBA guidelines on information and communication technology and security risk management

    Outsourcing arrangements entered into on or after March 31, 2021 should meet the expectations in SS2/21 by March 31, 2022. Firms should seek to review and update legacy outsourcing agreements entered into before March 31, 2021 at the first appropriate contractual renewal or revision point to meet the expectations in SS2/21 as soon as possible on or after March 31, 2022. SS7/21 is relevant to banks, building societies, and PRA-designated investment firms, insurance and reinsurance firms, groups in scope of Solvency II, including the Society of Lloyd’s and managing agents, and branches of overseas banks and insurers. Some content in SS2/21 is also relevant to credit unions and non-directive firms. The policy set out in PS7/21 has been designed in the context of the UK having left EU and the transition period having come to an end. Unless otherwise stated, any references to EU or EU-derived legislation refer to the version of the legislation that forms part of the retained EU law. PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework.


    Related Links

    Effective Date: March 31, 2022

    Keywords: Europe, UK, Banking, Insurance, Proportionality, Operational Resilience, Third-Party Arrangements, Operational Risk, Outsourcing Risk, PRA

    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

    March 20, 2024 WebPage Regulatory News

    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.

    March 18, 2024 WebPage Regulatory News

    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

    March 18, 2024 WebPage Regulatory News

    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.

    March 07, 2024 WebPage Regulatory News

    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

    March 05, 2024 WebPage Regulatory News

    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).

    February 28, 2024 WebPage Regulatory News

    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.

    February 28, 2024 WebPage Regulatory News

    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.

    February 26, 2024 WebPage Regulatory News

    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.

    February 23, 2024 WebPage Regulatory News

    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.

    February 23, 2024 WebPage Regulatory News
    RESULTS 1 - 10 OF 8957