EBA comments on the implementation of its new Outsourcing Guidelines

14 October 2019

EBA says progress has been slow and more needs to be done by banks to be operationally resilient and resolution ready.

The EBA Guidelines on Outsourcing came into effect on 30th September this year. Speaking at the Single Resolution Board Conference last week, the EBA Chair, Jose Manuel Campa, said that not enough has been done to ensure that outsourced critical functions will continue to operate in the event of a Resolution. Management bodies need to be aware of what is outsourced, confirm they have clear contracts and adequate governance of outsourced service providers.

At the next level of detail, the EBA Guidelines seem to require that banks can “look through” their outsourced service providers down the supply chain. The EBA confirmed this requirement and that direct access to service providers by regulators also applies through the supply chain for critical functions. Mr Campa noted that banks must ensure that funding will be available to continue to fund outsourced functions in the event of a Resolution.

The SRB confirmed that the requirements of the EBA Guidelines on Outsourcing are integral to the operation of the Resolution regime and in particular to ensure in advance that there will be operational continuity. The Director of Resolution, Mr Carascosa, said that banks must continue to check that their outsourcing agreements have “resolution resilient features” as required by the Bank Recovery and Resolution Directive but also acknowledged that there is no “one size fits all” approach; outsourcing contracts must be appropriate to each bank’s service delivery model and own resolution strategy.

This month we are waiting for the PRA’s new outsourcing supervisory statement. It will be interesting to see to what extent these reflect the EBA Guidelines.

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Future Dates

* Estimated date

  • 9 December 2019

    PRA Consultation CP20/19 closes. 

  • 9 December 2019

    The changes set out in the appendices of PRA PS20/19, implementing changes to the prescribed responsibility for recovery and resolution under SM&CR,  will come into force. 

  • 31 December 2019

    Following PRA's policy statement (PS10/17) - operational continuity firms are expected to submit the template (PRA109) 45 business days after the first reporting period ending 31 December.