It is also stated that the outsourcing agreement should `facilitate the transfer of the outsourced function to another service provider or its reintegration into the payment institution or institution`, and also lists the provisions to support this requirement that financial institutions must include in the written outsourcing contract. The EBA has now clarified that the specific termination and exit guidelines only apply to contracts for the outsourcing of “critical or important functions”. However, Pinsent Masons` Luke Scanlon said it was unclear from the wording of the guidelines whether the termination rights section applies to all outsourcing agreements entered into by financial institutions or only to the outsourcing of “critical and important functions”. The guidelines explicitly specify that these termination rights should be included “at least” in contracts for the outsourcing of “critical or important functions”. “The EBA`s Q&A mechanism is a useful instrument that financial institutions and their suppliers should keep in mind when issues relating to the practical application of the EBA`s regulatory guidelines are open to interpretation. Clarifying issues related to the EBA`s outsourcing policies can help reduce the costs and costs of negotiating outsourcing contracts,” he said. The supervisory board clarified the extent of its outsourcing policies following a request from Pinsent Masons, the law firm behind out-law. The guidelines contain a specific section on termination rights. This section contains EBA`s expectation that financial institutions will expressly provide in their outsourcing agreements for the possibility of terminating this Agreement and provides a number of examples of situations in which the contract should allow the right of termination to be triggered. Some of these examples are cases where the service provider infringes the “contractual provisions”, “where obstacles are identified that may affect the performance of the outsourcing function” and “where significant changes concern the outsourcing agreement or the service provider”. Banks and other financial and payment institutions are not required to complete a specific list of European Banking Authority (EBA) regulatory directives regarding the termination of outsourcing agreements, unless they underestimate “critical and important functions”, the EBA confirmed. “It is hoped that the EBA and other regulators will be able to benefit from increased resources to respond quickly to the questions posed, regardless of the EBA`s other priorities, the challenges of Covid-19 and the need to prepare before the end of the Brexit transition period, in which case it took almost 18 months to get an answer.” Scanlon said.
“We will continue to work with the regulator on issues that are important and of concern to our customers.” “While it seemed reasonably clear what the EBA`s intention was in this case, it could have been interpreted in some way by reading the text,” Scanlon said. “The EBA`s clarification is a welcome and sensible conclusion.” Audit firms correctly apply “Going Concern” assessments, says FRC. . . .