Document Properties
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Type of Publication: Letter
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Date: March 11, 2009
- Reference: Guideline
for Banks / BHC / FBB / T&L / Co-op / Life / P&C / Fraternals
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To:
- Banks
- Bank Holding Companies,
- Foreign Bank Branches,
- Federally Regulated Trust and Loan Companies,
- Federally Regulated Cooperative Credit Associations,
- Federally Regulated Life Insurance Companies
and Fraternal Benefit Societies,
- Federally Regulated Property and Casualty
Insurance Companies,
- Insurance Holding Companies
OSFI has released a final revised version of Guideline B-10, Outsourcing
of Business Activities, Functions and Processes, which sets
out OSFI’s expectations for federally regulated entities (FREs)
that outsource or contemplate the outsourcing of one or more of
their business activities to a service provider.
On April 20, 2007, as a result of the coming into force of Bill
C-37, the need for a federally regulated entity no longer needs
to obtain the approval of the Superintendent to maintain and process
outside Canada information or data relating to the preparation and
maintenance of certain corporate, accounting and customer records.
The revisions to Guideline B-10 primarily reflect the repeal of
this approval requirement, or are otherwise designed to clarify
OSFI’s expectations.
The Guideline includes, among others, the following revisions
from the December 2003 Guideline.
- The Guideline provides FREs with a transition measure to bring
outsourcing arrangements that are obtained as part of an acquisition
by the FRE into compliance with the Guideline.
- The Guideline clarifies the expectation that, as part of the
FRE’s materiality test, a FRE would need to consider the potential
influence on the FRE of multiple outsourcing arrangements with
a single service provider.
- The Guideline clarifies the expectation that the FRE should
ensure that the service provider regularly tests its business
recovery system as it pertains to the outsourced activity, and
that the FRE should ensure that a service provider addresses any
material deficiencies. The Guideline further adds that a FRE may
be asked by OSFI to provide a summary of the test results that
pertain to the outsourced activity.
- The Guideline clarifies that the FRE will receive a notice from
OSFI if OSFI chooses to exercise its audit rights. In addition,
the Guideline sets out that OSFI would share any findings with
the FRE, where appropriate.
- The Guideline includes a standardized template for a centralized
list that FREs could use to summarize all material outsourcing
arrangements.
- The Guideline clarifies OSFI’s expectation that the FRE’s review
of the service provider’s ability to continue to deliver the service,
in the manner expected, be commensurate with the level of risk
involved. The Guideline further adds that, as part of this review,
a FRE could include an assessment of the service provider’s circumstances,
including the reliance on, and performance of, significant subcontractors.
- Any references to the requirement for Superintendent approval
to maintain and process outside Canada information or data relating
to the preparation and maintenance of certain corporate, accounting
and customer records have been removed to reflect the repeal of
this approval requirement.
OSFI does not expect the revised Guideline will necessitate changes
to existing contracts that a FRE has in place with service providers,
or substantive amendments to policies and procedures. As such, no
new transition period is suggested for compliance with the revised
Guideline.
Questions with respect to the Guideline should be addressed to
Emiel van der Velden at (613) 998-7479 or by e-mail at emiel.vandervelden@osfi-bsif.gc.ca.
This version of the Guideline supersedes the December 2003 Guideline.
- Robert Hanna
- Assistant Superintendent
- Regulation Sector