MAS proposes revisions to outsourcing regime for banks and ...

MAS will repeal the current Notices after the Outsourcing Notices take effect. Banks and merchant banks will be required to comply with the ... Skiptonavigation Skiptomaincontent(accesskeys) Skiptofooter(accesskeyx) 26February2019 On7February2019,theMonetaryAuthorityofSingapore(“MAS”)releasedaconsultationpaperon“OutsourcingbyBanksandMerchantBanks”,seekingfeedbackonproposedrevisionstotheregimegoverningtheoutsourcingarrangementsofbanksandmerchantbanks.TheproposalsincludeamendmentstotheBankingActtostrengthenMAS’oversightofoutsourcingarrangements,aswellastheissuanceofanOutsourcingNoticeforBanksandanOutsourcingNoticeforMerchantBanks(collectively,“OutsourcingNotices”)prescribingidenticalrequirementsforbanksandmerchantbanksinrelationtooutsourcingarrangementswhicharematerial(“materialoutsourcingarrangements”).Theconsultationcloseson8March2019. MASconsultedonaproposedOutsourcingNoticesettingoutminimumstandardsforfinancialinstitutions’(“FIs”)managementofoutsourcingarrangementsinSeptember2014.However,followingfeedbackwhichrevealedavariationinthescaleandnatureofutilisationofoutsourcingbydifferentclassesofFIs,MASnowintendstoadoptamoretargetedapproachbyissuingrequirementsforeachclassofFIswithinMAS’regulatorypurview. MASstatesthatitintendstoconsultontheoutsourcingrequirementsforotherclassesofFIsinfuture.Inthemeantime,itexpectssuchotherclassesofFIstocontinuetoobservetheMASGuidelinesonOutsourcingissuedinJuly2016. NewMASpowerstoprescriberequirementsrelatingtooutsourcingarrangementsofbanksandmerchantbanks TostrengthenMAS’oversightofbanks’outsourcingarrangements,MASproposestoincludeintheBankingActthepowertodirectbankstocomplywithrequirementsconcerningtheiroutsourcingarrangements.Theseincluderequiringbanksto: ensurethatanoutsourcingagreementincludestermsrequiringtheserviceprovidertoprotecttheconfidentialityofcustomerinformationandtoprovidedocumentsorinformationrelatingtotheoutsourcingarrangementtothebankorMAS,andallowingthebanktoterminatetheoutsourcingagreementunderprescribedcircumstances;  conductduediligenceontheserviceproviderbeforethebankentersintoanoutsourcingarrangementwiththeserviceprovider;and  establishandmaintainmeasurestominimisedisruptiontotheoperationsofthebankintheeventthattheserviceproviderisunabletoprovidetheservicetothebank. MASalsoproposessimilaroversightpowersovermerchantbanks. NewOutsourcingNoticesforbanksandmerchantbanksregardingmaterialoutsourcingarrangements RequirementtocomplywithOutsourcingNoticebeforecustomerinformationmaybedisclosed Currently,banksandmerchantbanksmustcomplywithMASNotice634andMASNotice1108respectively(“currentNotices”)ifanyoutsourcedfunctionistobeperformedoutsideSingapore,whenrelyingonanexceptionprovidedinitem3ofPartIIoftheThirdScheduletotheBankingActortheBankingRegulationsrespectively(“ThirdScheduleexception”)todisclosecustomerinformationtoserviceproviders. TheproposedOutsourcingNoticeswillincorporateexistingrequirementsunderthecurrentNoticesandimposeminimumrequirementsonthemanagementofmaterialoutsourcingarrangements,assessmentofserviceproviders,andadditionalrequirementsonaudit.MASwillrepealthecurrentNoticesaftertheOutsourcingNoticestakeeffect.BanksandmerchantbankswillberequiredtocomplywiththerespectiveOutsourcingNoticesbeforetheycanrelyontheThirdScheduleexceptiontodisclosecustomerinformationtotheirserviceprovider. TheconsultationpapersetsouttheproposedamendmentstotheThirdScheduletotheBankingAct.Similaramendmentswillalsobemadeinrespectofmerchantbanks. Revisionofdefinitionof“outsourcingarrangement”andtypesofoutsourcingarrangementstobeconsidered“materialoutsourcingarrangements” ThecurrentNoticesapplyonlywherecustomerinformationisdisclosedinconnectionwiththeperformanceofanoutsourcedfunctionoutsideSingapore.Incontrast,theproposedOutsourcingNoticeswillapplytoanyoutsourcingarrangementinvolvingthedisclosureofcustomerinformationregardlessofwheretheoutsourcedfunctionistobeperformed.Inthisregard,MASproposesto: amendthedefinitionof“outsourcingarrangement”toincorporatethedefinitionintheBankingActandinclude:(a)outsourcingarrangementsonwhichabankisnotdependentonanongoingbasis;and(b)outsourcingarrangementsenteredintobyarelatedentityofthebanktoprovideaservicetothebank;and  revisethetypesofoutsourcingarrangementstobeconsidereda“materialoutsourcingarrangement”andcoveredbytheproposedOutsourcingNoticestoincludealloutsourcingarrangementswherecustomerinformationisdisclosed,orwheretheserviceproviderorsub-contractorhasaccessto,possessesorcollectscustomerinformation.Thus,alloutsourcingarrangementsinvolvingdisclosureofcustomerinformationwillbeconsideredmaterialoutsourcingarrangements,regardlessofthetenureofthearrangementsandtheimpactofunauthorisedaccessordisclosure,lossortheftofsuchcustomerinformation. MASintendsfortheserevisionstosimilarlyapplytomerchantbanks. Twelve-monthtransitionperiodforOutsourcingNoticestotakeeffect MASproposesthattheOutsourcingNoticestakeeffect12monthsfromthedateofissuance.ThiswillallowbanksandmerchantbankstomakethenecessaryarrangementstocomplywiththeproposedOutsourcingNotices. Referencematerials ThefollowingmaterialsareavailableontheMASwebsitewww.mas.gov.sg: ConsultationPaperonOutsourcingbyBanksandMerchantBanks  AnnexB:DraftNoticeonOutsourcing(September2014consultation)  AnnexC:DraftAmendmentstotheBankingActSection58A  AnnexD:DraftAmendmenttoItem3ofPartIIoftheThirdScheduleoftheBankingAct  TemplateforResponsetoConsultationPaperonOutsourcingbyBanksandMerchantsBanks   DownloadPDF   Allen&GledhillRegulatory&Compliance Toassistourclientswithcompliancematters,ourconsultancyarm,Allen&GledhillRegulatory&Compliance,providesarangeofservicesandsolutions.Shouldyouhaveanyqueriesrelatingtocomplianceissuesarisingoutofthisdevelopment,pleasecontact: [email protected] Shareviaemail ShareviaLinkedin Joinourmailinglist Publications BacktoPublications Contacts: AdrianAng Singapore +6568907710 [email protected] FrancisMok Singapore +6568907786 [email protected] CatherineNeo Singapore +6568907195 [email protected] KarenTiah Singapore +6568907741 [email protected] Close Thissiteusescookiesandbyusingthesiteyouareconsentingtothis.Findoutwhyweusecookiesandhowtomanageyoursettings.Moreaboutcookies