Banks asked to develop outsourcing guidelines

Posted by BankInfo on Tue, Jan 20 2015 10:26 am

Bangladesh Bank (BB) has directed all local and foreign banks operating in Bangladesh to develop comprehensive policy guidelines for outsourcing some of their services to ensure proper monitoring of the third-party services.
In a circular on Monday, BB said banks are increasingly using outsourcing for reducing costs and achieving strategic aims, but managing the risk factors associated with the third-party services requires effective policy guidelines, reports BSS.
“Banks can mitigate these risks by taking steps to formulate a comprehensive and clear outsourcing policies, analyze the financial and infrastructure resources of the service provider, negotiate appropriate outsourcing contracts, require contingency planning by the outsourcing firm, and establish effective risk management programs, the circular said.
BB directive also drew a detail of the principles of the guideline to be followed by the banks when using outsourcing at home or abroad, that would help banks better mitigate the concerns.
It said the policy should include, inter-alia, identification of and the extent to which the relevant activities are appropriate for outsourcing, criteria for selecting suitable service providers, delegation of approval authorities for outsourcing depending on risks and materiality, risk mitigation measures and governance structure clearly defining roles and responsibilities of Board of Directors and management to monitor and review the operations.
The Board or the chief of Bangladesh operations in case of foreign banks will have the overall responsibility for ensuring that all ongoing outsourcing decisions taken by the bank, and activities undertaken by the service providers, are in keeping with its outsourcing policy. In addition, the officers responsible to manage a specific outsourcing arrangement shall also be personally responsible where personal liability needs to be assigned to individual bank officials for legal, regulatory or others purposes.
According to the circular, outsourcing means when any activity of a bank-company or part thereof done by another party from inside or outside the bank premises, from within Bangladesh or abroad irrespective of the term used for the relationship.
An outsourcing service provider can be an office of the banking company situated outside Bangladesh, its holding or subsidiary company or any of its affiliates in Bangladesh or abroad, or an unrelated third party in Bangladesh or abroad. 

News:Daily Sun/20-Jan-2015
Posted in Banking, News

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