We welcome the PRA’s open and frank approach to its outsourcing proposals. Our members appreciate the regulator’s willingness to engage with the sector, particularly at the BSA event on operational resilience and outsourcing held in February 2020.
While questions on parts of the proposals remain, societies take comfort in the fact that the regulator views them as work in progress and is prepared to work collaboratively with industry. This is necessary to overcome the challenges of using market dominant and non-financial services providers and the PRA’s ability to influence them. We were therefore pleased to hear that the PRA has started to engage with third parties to prepare them for forthcoming changes.
Such a collaborative attitude could also be helpful in light of the COVID-19 restrictions which have tested the financial services sector’s resilience. How firms – and the regulator – have dealt with this real-life stress may affect how the proposals, both for outsourcing and operational resilience, are finally shaped. In view of this, we urge the PRA to review all its deadlines, particularly the one for the review of legacy outsourcing agreements, which we believe should be extended until at least 2023. This is especially important if the prudential context element is going to draw third party arrangements into the material outsourced classification. These do not currently fall under the definition of outsourcing even though they may be viewed as high risk and treated accordingly.
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