The proposals will expand MAS’ powers to impose requirements on banks’ and merchant banks’ outsourcing arrangements, regardless of where outsourced functions are performed.
MAS (the Monetary Authority of Singapore) has issued a consultation paper on new requirements for banks’ and merchant banks’ outsourcing arrangements.
Following feedback from a September 2014 consultation setting out minimum standards for the management of outsourcing arrangements by financial institutions, MAS decided to revise the proposals and instead adopt a more targeted approach by issuing requirements for each class of financial institutions within MAS’ regulatory purview.
This new consultation paper seeks feedback on proposed revisions to the regime governing the outsourcing arrangements of banks and merchant banks, including amendments to the Banking Act. The revisions will replace MAS Notice 634 and MAS Notice 1108, which currently impose requirements on banks and merchant banks, respectively, in relation to outsourced functions performed outside Singapore.
MAS intends to enhance the existing regime with new powers that would allow it to impose requirements for banks and merchant banks to conduct due diligence checks on service providers, include customer data protection terms in outsourcing agreements, establish measures to minimise any service disruption, maintain records, and report to MAS on outsourcing arrangements.
MAS will also have the right to inspect or audit service providers and their sub-contractors, and be able to terminate banks’ and merchant banks’ outsourcing agreements under specified circumstances.
Additionally, MAS proposes that new requirements apply to any outsourcing arrangements involving the disclosure of customer information regardless of where outsourced functions are performed. Currently, MAS Notice 634 and MAS Notice 1108 apply only where outsourced functions involve of disclosure of customer information outside Singapore.
MAS plans to allow a 12 months transition period for banks and merchant banks to make the necessary compliance arrangements.
Banks, merchant banks and other interested parties are invited to submit comments to the consultation paper, available here, by 8 March 2019.
MAS will seek feedback on requirements for other classes of financial institutions in due course.