IRSG Response – FSB consultation on outsourcing and third-party relationships
IRSG Response – FSB consultation on outsourcing and third-party relationships
Published 18 Dec 2020
The IRSG welcomes the FSB’s consultation, and agrees that a further discussion among supervisory and regulatory authorities on their approaches to outsourcing and third-party risks is needed, to address current cross-border supervisory challenges and potential financial stability issues. With our submission, we call for the development of a global regulatory solution to tackle systemic risk challenges arising from concentration of outsourcing. Many challenges in this area will be new and time-sensitive, and this is an opportune time to achieve significant progress through this consultation process.
There is a potential for systemic risk arising from the concentration of outsourcing to large technology vendors, which is especially pertinent now due to the increasing reliance on technological solutions post-pandemic and the rise of home working. In the context of operational resilience, policymakers and financial regulators need to co-ordinate their efforts to address such concentrated outsourcing. If one very large technology vendor were to fail or be disrupted over a prolonged period, this could have significant consequences for a high number of financial services firms around the world and could constitute a major systemic event. We outline our response to the specific consultation questions in more detail below.
IRSG Response – FSB consultation on outsourcing and third-party relationships
Published 18 Dec 2020
The IRSG welcomes the FSB’s consultation, and agrees that a further discussion among supervisory and regulatory authorities on their approaches to outsourcing and third-party risks is needed, to address current cross-border supervisory challenges and potential financial stability issues. With our submission, we call for the development of a global regulatory solution to tackle systemic risk challenges arising from concentration of outsourcing. Many challenges in this area will be new and time-sensitive, and this is an opportune time to achieve significant progress through this consultation process.
There is a potential for systemic risk arising from the concentration of outsourcing to large technology vendors, which is especially pertinent now due to the increasing reliance on technological solutions post-pandemic and the rise of home working. In the context of operational resilience, policymakers and financial regulators need to co-ordinate their efforts to address such concentrated outsourcing. If one very large technology vendor were to fail or be disrupted over a prolonged period, this could have significant consequences for a high number of financial services firms around the world and could constitute a major systemic event. We outline our response to the specific consultation questions in more detail below.