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
    News

    APRA Sets LAC for D-SIBs, Proposes to Enhance Crisis Preparedness

    APRA issued a letter on the loss-absorbing capacity (LAC) requirements for domestic systemically important banks (D-SIBs) and published a discussion paper, along with the proposed the prudential standards on financial contingency planning (CPS 190) and resolution planning (CPS 900).

    December 02, 2021 WebPage Regulatory News
    News

    EC to Review Macro-Prudential Rules while ESRB Assesses Policy Stance

    The European Commission (EC) launched a call for evidence, until March 18, 2022, as part of a comprehensive review of the macro-prudential rules for the banking sector under the Capital Requirements Regulation (CRR) and Directive (CRD IV).

    December 01, 2021 WebPage Regulatory News
    News

    FSB Sets Out Good Practices for Crisis Management Groups

    The Financial Stability Board (FSB) published a report that sets out good practices for crisis management groups.

    November 30, 2021 WebPage Regulatory News
    News

    APRA Penalizes Heritage Bank for Incorrect Reporting of Capital

    The Australian Prudential Regulation Authority (APRA) found that Heritage Bank Limited had incorrectly reported capital because of weaknesses in operational risk and compliance frameworks, although the bank did not breach minimum prudential capital ratios at any point and remains well-capitalized.

    November 29, 2021 WebPage Regulatory News
    News

    OSFI Releases Annual Report 2021-2022

    The Office of the Superintendent of Financial Institutions (OSFI) released the annual report for 2020-2021.

    November 29, 2021 WebPage Regulatory News
    News

    OSFI Updates Timeline for Implementation of Certain Basel Rules

    Through a letter addressed to the banking sector entities, the Office of the Superintendent of Financial Institutions (OSFI) announced deferral of the domestic implementation of the final Basel III reforms from the first to the second quarter of 2023.

    November 29, 2021 WebPage Regulatory News
    News

    EC Defers Adoption of Regulatory Standards for Disclosures Under SFDR

    EIOPA recently published a letter in which EC is informing the European Parliament and Council that it could not adopt the set of draft regulatory technical standards for disclosures under the Sustainable Finance Disclosure Regulation (SFDR) within the stipulated three-month period, given their length and technical detail.

    November 29, 2021 WebPage Regulatory News
    News

    FCA Releases MIFIDPRU Application Forms and Third Set of Rules on IFPR

    The Financial Conduct Authority (FCA) published the third in a series of policy statements that set out rules to introduce the UK Investment Firm Prudential Regime (IFPR), which will take effect on January 01, 2022.

    November 29, 2021 WebPage Regulatory News
    News

    APRA Finalizes Capital Adequacy Standards for Banks

    The Australian Prudential Regulation Authority (APRA) published, along with a summary of its response to the consultation feedback, an information paper that summarizes the finalized capital framework that is in line with the internationally agreed Basel III requirements for banks.

    November 29, 2021 WebPage Regulatory News
    News

    CPMI-IOSCO Seek Comments on Access to Central Clearing and Portability

    The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) issued a consultative report focusing on access to central counterparty (CCP) clearing and client-position portability.

    November 29, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7751