Outsourcing in the Banking Sector in the Bailiwick of Guernsey - Thematic Report (2008-11)

Summary

This is a thematic report issued by the Guernsey Financial Services Commission summarising the findings of its 2008 review into outsourcing practices in the Bailiwick's banking sector. It is explicitly stated not to be formal regulatory guidance, but rather a summary of good practice and identified weaknesses intended to help banks improve risk management around outsourcing.

• Scope of review: Covered an industry wide survey (June 2008) of all licensed banks plus on site visits to five selected banks (completed by mid August 2008), assessing outsourced functions, service providers used, service level agreements, and rationale for outsourcing.
• Key findings: Most core banking functions outsourced (IT systems, treasury, investments, payments, credit, custody, card services) are outsourced intra group; third party outsourcing is largely limited to non core support functions; a minority of arrangements lacked service level agreements, mainly relating to group treasury and investment management services.
• Areas needing improvement: Some banks had inconsistent definitions of outsourcing (excluding intra group arrangements), gaps in SLA coverage of dispute resolution and fee structures, insufficient ongoing monitoring of outsourced functions, and in one case no formal due diligence or tender policy.
• Commission expectation: The Commission states it expects banks with service level agreements still under draft or awaiting approval to prioritise finalising them, particularly for core functions such as treasury, and indicates it will continue to monitor outsourcing as part of its ongoing supervisory programme.

Because this is a thematic report rather than a rule or guidance note, it does not itself create new binding legal requirements; instead it describes existing supervisory expectations under Core Principle 15 (Operational Risk) and references the Commission's separate outsourcing guidance note for investment business licensees.

Applies to

licensed banks in the Bailiwick of Guernsey