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New outsourcing rules in Austria reinforce regulator's role

Chris Hamblin, Editor, London, 22 November 2017

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Austria has legislated to formalise banks' outsourcing arrangements, with written agreements mandatory after 3rd January. One of the prime rules is that these agreements must not hamper the supervisory functions of the Financial Market Authority.

There is still no EU-wide regime to govern the outsourcing of banks' functions. Austria's new regime is to be found in s25 Banking Act. This section states that no agreement must stop the FMA from scrutinising the activities of the firm that sets it up.

Every outsourcing venture, including intra-group outsourcing, must ensure that the service provider has the right qualifications, arrange for regular assessments, monitor the performance of the provider constinuously, and plan for the contingency of data breaches. When outsourcing a function to a service provider outside the European Union (to which Austria belongs), a bank must keep a close eye on political, legal and economic developments there, the aim being to facilitate the FMA's job of supervising it. All new outsourcing initiatives must be reported to the FMA in advance.

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