Singapore: MAS Consults On Proposed Revisions To The Regime Governing Banks And Merchant Banks Outsourcing Arrangements

Last Updated: 26 February 2019
Article by Eric Chan
Most Read Contributor in Singapore, February 2019

On 7 February 2019, proposals to implement requirements for banks and merchant banks in respect of material outsourcing arrangements were introduced by the Monetary Authority of Singapore ("MAS"). These requirements will be implemented by way of MAS Notices directed at banks and merchant banks. MAS also intends for similar requirements to apply in relation to other financial sectors and will consult on this in due course.

This update outlines the key elements in MAS's public consultation on its proposed revisions to the regime governing banks' and merchant banks' outsourcing arrangements.

Introduction

In September 2014, MAS consulted on an Outsourcing Notice that sets out minimum standards for financial institutions' ("FIs") management of outsourcing arrangements. The proposed requirements were in line with MAS's expectation that an FI is to manage outsourcing arrangements as if the services were conducted by the FI. After receiving public feedback, MAS will instead adopt a more targeted approach by issuing requirements specific to each class of FIs within MAS's regulatory purview, the first being banks and merchant banks. While MAS Notice 634 and MAS Notice 1108 currently impose requirements on banks and merchant banks respectively, in relation to outsourcing arrangements, where any outsourced function is to be performed outside Singapore, MAS intends to enhance the regime governing these FIs' outsourcing arrangements by, among other things, issuing an Outsourcing Notice each for banks and merchant banks for material outsourcing arrangements ("Proposed Outsourcing Notices").

Broadly, the Proposed Outsourcing Notices will set out legally binding requirements for banks and merchant banks in relation to their material outsourcing arrangements in the areas of:

(a) management of such arrangements;

(b) assessment of service providers;

(c) access to information by MAS and the bank or merchant bank;

(d) protection of customer information;

(e) audit; and

(f) termination of such arrangements.

Powers to strengthen MAS's oversight of outsourcing arrangements of banks and merchant banks

MAS's powers to direct banks to comply with requirements in respect of outsourcing arrangements will be enhanced by way of amendments to the Banking Act. Examples include directing a bank to:

(a) include in its outsourcing agreement, terms relating to the protection of confidentiality of customer information, the right of MAS to inspect or audit the service provider and its sub-contractors, and termination of the outsourcing agreement under specified circumstances;

(b) conduct due diligence checks on the service provider before the bank enters into an outsourcing arrangement with the service provider;

(c) establish and maintain measures to minimise disruption to the operations of the bank in the event that the service provider is unable to provide the service to the bank;

(d) provide such record, document, information or report to MAS concerning the outsourcing arrangement; and

(e) terminate the outsourcing agreement under specified circumstances.

Similar provisions are proposed to apply to merchant banks as well.

Outsourcing arrangements involving disclosure of customer information to service providers

Banks and merchant banks have the legal duty to keep all customer information confidential. If they wish to disclose customer information to service providers in respect of an outsourced function that is to be performed outside Singapore, they must currently comply with requirements under MAS Notice 634 (for banks) and MAS Notice 1108 (for merchant banks), pursuant to an exception provided for under banking legislation ("Exception").

Instead of complying with MAS Notice 634 and MAS Notice 1108, the proposals mandate that banks and merchant banks will have to comply with the respective Proposed Outsourcing Notices, before they can rely on the Exception to disclose customer information to their service provider. In this regard, the Proposed Outsourcing Notices will incorporate existing requirements under MAS Notice 634 and MAS Notice 1108 (including the requirement to notify MAS of all outsourcing arrangements involving the disclosure of customer information in connection with the performance of an outsourced function outside Singapore), and impose minimum requirements relating to management of material outsourcing arrangements, assessment of service providers, and additional requirements on audit. To avoid any overlap, MAS Notice 634 and MAS Notice 1108 will be repealed in conjunction with the issuance of the Proposed Outsourcing Notices.

However, MAS intends for the application of the Proposed Outsourcing Notices to be broader and apply to all outsourcing arrangements involving the disclosure of customer information, regardless of where the outsourced function is to be performed. As such, all outsourcing arrangements involving the disclosure of customer information, even where written customer consent has been obtained, will be considered material outsourcing arrangements and be subject to the requirements in the Proposed Outsourcing Notices. This reflects MAS's intent for banks and merchants banks to pay due care to any outsourcing arrangement that involves the disclosure of customer information, whether such disclosure is in connection with the performance of an outsourced function within or outside Singapore.

Transition period

MAS recommends that the Proposed Outsourcing Notices take effect 12 months from the date of issuance so as to provide a transition period for banks and merchant banks to make the necessary arrangements to comply with the Proposed Outsourcing Notices.

Consultation Period

The consultation closes on 8 March 2019.

A copy of the consultation paper can be assessed here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
 
Email Address
Company Name
Password
Confirm Password
Country
Position
Industry
Mondaq Newsalert
Select Topics
Select Regions
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions