UK banks warned to review outsourcing practices
LONDON, UNITED KINGDOM — A stark warning has been issued to UK financial firms following a newsletter from the European Central Bank (ECB) that revealed a significant lack of compliance with EU outsourcing regulations.
Mhairi Mival, an outsourcing expert at law firm Pinsent Masons, said that the UK’s Financial Conduct Authority (FCA) might conduct a similar investigation.
“Even though the ECB released this information, the FCA could carry out its own review. Therefore, UK banks regulated by the FCA should review their outsourcing agreements to ensure they’re in line with regulations,” Mival explained.
The ECB’s Single Supervisory Mechanism reported that a mere 12% of material outsourcing contracts were compliant, highlighting the urgency for financial institutions to rectify their contractual processes.
The newsletter further disclosed that 20% of the non-compliant contracts lacked proper risk assessment, and 60% had not been audited. Such deficiencies pose a considerable threat to the financial system’s stability and customer protection.
Mival advises banks under ECB regulation to examine their outsourcing contracts, especially those within the same corporate group or with companies abroad, to ensure they meet European Banking Authority guidelines.
The expert added that UK financial firms must ensure their outsourcing practices are up to standard to prevent regulatory backlash and maintain system integrity.
Read more here.
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