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  1. Banking & Finance
  2. International: Bite-size Briefings - Outsourcing regulation

International: Bite-size Briefings - Outsourcing regulation

Ed. No. 10
17 Oct 2022    2 minute read
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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".

 

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