International: Bite-size Briefings - Outsourcing regulation

Ed. No. 10

In brief

A series of briefings that take a bite-size look at international trends in different jurisdictions, drawing on Baker McKenzie's expert financial services practitioners with local market knowledge.

This edition explores developments in outsourcing regulation across Germany and the EU, Hong Kong SAR, Singapore, Switzerland, the UK and the US.


Contents

Key takeaways

  • Outsourcing service providers, which often sit outside the regulatory perimeter, are fast becoming an integral part of the financial infrastructure. This is because many financial institutions are becoming progressively more dependent on outsourcing due to its ability to reduce costs and, for digital services, to adopt and scale new technology more quickly, accelerating their digital transformation.
  • While, for example, cloud services offer advantages, such as economies of scale, flexibility, operational efficiencies and cost-effectiveness, outsourcing can also present challenges in terms of data protection, banking secrecy, security issues and concentration risk. These are challenges not just for individual businesses, but also at a systematic level because large providers risk becoming a single point of failure where many institutions rely on them.
  • Regulators are increasingly concerned about operational resilience and continuity of service, not just for in-house systems and controls, but also in outsourced services. A further issue arises where providers, in effect, may be the dominant party, such as banking-as-a-service or if they carry on licensed activities. All this is reflected in growing regulatory scrutiny of outsourcing and the issue of regulatory requirements and guidelines to regulated institutions. In some jurisdictions, there are proposals to grant regulators supervisory direct powers over some providers.

Click here to access "Bite-size Briefings".

LOGO_Wong&Leow_Singapore

© 2022 Baker & McKenzie.Wong & Leow. All rights reserved. Baker & McKenzie.Wong & Leow is incorporated with limited liability and is a member firm of Baker & McKenzie International, a global law firm with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a "principal" means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an "office" means an office of any such law firm. This may qualify as "Attorney Advertising" requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.


Copyright © 2024 Baker & McKenzie. All rights reserved. Ownership: This documentation and content (Content) is a proprietary resource owned exclusively by Baker McKenzie (meaning Baker & McKenzie International and its member firms). The Content is protected under international copyright conventions. Use of this Content does not of itself create a contractual relationship, nor any attorney/client relationship, between Baker McKenzie and any person. Non-reliance and exclusion: All Content is for informational purposes only and may not reflect the most current legal and regulatory developments. All summaries of the laws, regulations and practice are subject to change. The Content is not offered as legal or professional advice for any specific matter. It is not intended to be a substitute for reference to (and compliance with) the detailed provisions of applicable laws, rules, regulations or forms. Legal advice should always be sought before taking any action or refraining from taking any action based on any Content. Baker McKenzie and the editors and the contributing authors do not guarantee the accuracy of the Content and expressly disclaim any and all liability to any person in respect of the consequences of anything done or permitted to be done or omitted to be done wholly or partly in reliance upon the whole or any part of the Content. The Content may contain links to external websites and external websites may link to the Content. Baker McKenzie is not responsible for the content or operation of any such external sites and disclaims all liability, howsoever occurring, in respect of the content or operation of any such external websites. Attorney Advertising: This Content may qualify as “Attorney Advertising” requiring notice in some jurisdictions. To the extent that this Content may qualify as Attorney Advertising, PRIOR RESULTS DO NOT GUARANTEE A SIMILAR OUTCOME. Reproduction: Reproduction of reasonable portions of the Content is permitted provided that (i) such reproductions are made available free of charge and for non-commercial purposes, (ii) such reproductions are properly attributed to Baker McKenzie, (iii) the portion of the Content being reproduced is not altered or made available in a manner that modifies the Content or presents the Content being reproduced in a false light and (iv) notice is made to the disclaimers included on the Content. The permission to re-copy does not allow for incorporation of any substantial portion of the Content in any work or publication, whether in hard copy, electronic or any other form or for commercial purposes.