}

28 January 2021

On 18 December 2020, the Monetary Authority of Singapore (“MAS”) released a Consultation Paper on Notices to Banks and Merchant Banks on Management of Outsourced Relevant Services to seek feedback on proposed requirements in relation to the management of outsourced relevant services by banks and merchant banks (“MBs”) in Singapore. The consultation closes on 29 January 2021.

The proposed Notices to Banks and Merchant Banks on Management of Outsourced Relevant Services (collectively referred to as “Notices”) set out requirements on:

  • Ongoing outsourced relevant services of banks and MBs in Singapore, with a focus on services which are material; and
  • Outsourced relevant services, including those which are not material or not ongoing, which involve the disclosure of customer information by banks or MBs to service providers. For such services, a subset of requirements aimed at protecting customer information will apply.

MAS is seeking comments on the proposed annexes of the proposed Notices relating to (a) the list of relevant services commonly performed by banks or MBs in Singapore, (b) the list of relevant services that are not commonly performed by banks or MBs, and thus, are excluded from the definition of outsourced relevant service, (c) the list of relevant services that are not commonly performed by banks or MBs, but are considered by MAS as outsourced relevant services, and (d) the list of exempted outsourced relevant services.

MAS also invites feedback on requirements relating to the following:

  • Submission to MAS of a register of outsourced relevant services semi-annually or upon request.
  • Management of material ongoing outsourced relevant services and evaluation of service providers.
  • Outsourcing agreements for material ongoing outsourced relevant services and terms required to be included in the outsourcing agreements.
  • Protection of customer information.
  • Use of sub-contractors for material ongoing outsourced relevant services.
  • Audit requirements for material ongoing outsourced relevant services.
  • Termination of material ongoing outsourced relevant services.
  • Provision of material ongoing outsourced relevant services by overseas regulated financial institution (“ORFI”).
  • Providing MAS with a confirmation from the overseas supervisor of the ORFI and the scope of such a confirmation.
  • Outsourced relevant services that involve the disclosure of customer information.
  • Implementation of a group policy on outsourced relevant services by a bank or an MB incorporated in Singapore.

Effective date

MAS intends to provide banks and MBs with a 12-month period from the date of issuance of the proposed Notices, to comply with the requirements in the proposed Notices, other than those relating to outsourcing agreements. For requirements that relate to outsourcing agreements, a bank or an MB will need to comply with them 12 months from the date of issuance of the proposed Notices, or from the date on which the bank or MB enters into a new agreement or renews an existing agreement, whichever is later. This will allow the bank or MB to make use of the opportunity during the negotiation of the agreement to include the terms required by the proposed Notices. MAS is also seeking comments on the effective dates of the proposed Notices.

The existing MAS Notices 634 and 1108 will be repealed when the proposed Notices take effect. Banks and MBs are to comply with the proposed Notices when disclosing customer information to service providers under the exceptions permitted in the Third Schedule to the Banking Act (“BA”).

Pending the issuance of the proposed Notices, MAS expects banks and MBs to continue to observe the Guidelines on Outsourcing (“Guidelines”) and adhere to existing requirements in MAS Notices 634 and 1108. MAS will subsequently review and amend the Guidelines to align with the proposed Notices.

Background

By way of background, on 6 January 2020, Parliament passed the Banking (Amendment) Act 2020 (“BAA”). The BAA introduces several amendments to the BA to update and enhance MAS’ banking regulatory framework. These include the consolidation of the regulation of MBs under the BA and the introduction of a new section 47A, which applies where a bank in Singapore obtains or receives any relevant service from any branch or office of the bank located outside Singapore (including the head office of the bank) or any person.

Reference materials

The following materials are available on the MAS website www.mas.gov.sg:

 

Allen & Gledhill Regulatory & Compliance

To assist our clients with compliance matters, our consultancy arm, Allen & Gledhill Regulatory & Compliance, provides a range of services and solutions. Should you have any queries relating to compliance issues arising out of these developments, please contact:

Lawrence Low
+65 6890 7448
lawrence.low@allenandgledhill.com