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FSB call for comments: Regulatory and supervisory issues relating to outsourcing and third-party relationships
This discussion by the FSB provides an opportunity for outsourcing firms to show their thought leadership to a global audience. Continue reading below ....
The Financial Stability Board (FSB) has opened up a discussion on regulatory and supervisory issues that could arise from financial services firms outsourcing functions, notably technology.
The Financial Stability Board (FSB) coordinates at the international level the work of national financial authorities and international standard-setting bodies in order to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies. Its mandate is set out in the FSB Charter, which governs the policymaking and related activities of the FSB. These activities, including any decisions reached in their context, shall not be binding or give rise to any legal rights or obligations.
Attached is a paper entitled: Regulatory and supervisory issues relating to outsourcing and third-party relationships
In December 2019, the Financial Stability Board (FSB) published a report on Third-party dependencies in cloud services that explored potential issues for supervisory authorities and financial stability stemming from the scale of services provided via the cloud and the small number of globally dominant players providing such services. Many issues highlighted in the December 2019 FSB report are not just relevant to cloud services but to outsourcing and third-party relationships in general. The report also concluded that further discussion among supervisory and regulatory authorities on current approaches to the management of outsourcing and third-party risks and of relevant regulatory and supervisory approaches would be constructive. In January-March 2020, the FSB Standing Committee on Supervisory and Regulatory Cooperation (SRC) conducted a survey among its member jurisdictions on the existing regulatory and supervisory landscape relating to outsourcing and thirdparty risk management, including cross-border supervisory challenges and potential financial stability issues (SRC survey).
This Discussion Paper was developed on the basis of this survey. It presents an overview of the current and evolving regulatory and supervisory landscape on outsourcing and third-party risk management in FSB-SRC member jurisdictions. It is intended to facilitate and inform discussions among authorities (including supervisory and resolution authorities), financial institutions and third parties on how to address the issues identified in the SRC survey and the December 2019 FSB report.
The FSB is inviting comments on this Discussion Paper and the questions set out below.
Responses should be sent to firstname.lastname@example.org by 8 January 2021 with the subject line
“Outsourcing and third-party relationships”.
Responses will be published on the FSB’s website unless respondents expressly request otherwise.
1. What do you consider the key challenges in identifying, managing and mitigating the risks relating to outsourcing and third-party relationships, including risks in sub-contractors and the broader supply chain?
2. What are possible ways to address these challenges and mitigate related risks? Are there any concerns with potential approaches that might increase risks, complexity or costs?
3. What are possible ways in which financial institutions, third-party service providers and supervisory authorities could collaborate to address these challenges on a cross-border basis?
4. What lessons have been learned from the COVID-19 pandemic regarding managing and mitigating risks relating to outsourcing and third-party relationships, including risks arising in sub-contractors and the broader supply chain?
ECOSYSTEM NOTE: If you are providing outsourcing services to any firms in the financial sector OR if you plan to provide outsourcing services to such firms, it may be a worthwhile investment to submit comments to the FSB to showcase your own thought leadership. FSB indicates that all submitted letters will be published on their website.