The EBA guidelines on outsourcing arrangements, made under Article 74(3) of the CRD, published back in February 2019 and reviewed by us then, came into force on Monday. Over recent years, financial institutions have been increasingly interested in outsourcing in order to reduce costs and increase flexibility, including using cloud services (they include the ECB’s recommendation on outsourcing to cloud service providers, originally published in December 2017) and other fintech. A key issue is the need for adequate supervision:
“the management body should ensure that sufficient resources are available to appropriately support and ensure the performance of those responsibilities, including overseeing all risks and managing the outsourcing arrangements. Outsourcing must not lead to a situation in which an institution becomes an ‘empty shell’ that lacks the substance to remain authorised.”
These are not particularly about Brexit, although they are relevant to it. Readers will remember the ECB’s August 2019 statement that some EU27 banks needed to reduce their “back-branching” (outsourcing or “back-branching” from an EU27 brass plate subsidiary to a UK parent being an obvious way to address Brexit). The only mention of Brexit comes in the analysis of feedback: some respondents had requested more “flexibility” due to Brexit; they got very short shrift.