Dhaka, Bangladesh (BBN) – The central bank of Bangladesh is going to introduce guidelines on outsourcing arrangements for the banks to avert risks and monitor compliance with regulatory requirements.
“The central bank has already published draft guidelines on outsourcing arrangements seeking opinions from the stakeholders by May 15,” a senior official of the Bangladesh Bank (BB) told BBN in Dhaka.
He also said the BB will finalise the guidelines, to be introduced for the first time in Bangladesh, based on the opinions by the stakeholders.
Generally, the banks should only outsource the activities which can be effectively supervised by them and compliance with legal and regulatory requirements can be monitored, according to the draft guidelines.
The banks shall not, however, outsource core management functions that require effective involvement of Board and senior management, including Internal Audit, Control, Compliance and Treasury functions, ‘Know Your Customer exercise for deposit accounts, Credit evaluation and sanctioning.
“Sub-contracting by the third-party service provider of material outsourcing arrangements both in the case of local and foreign is not allowed,” it noted.
It also said the banks must develop criteria that enable them to assess, prior to selection, the third-party service provider’s capacity and ability to perform the outsourced activities effectively, reliably and with high standard, together with any potential risk factors associated with using a particular service provider.
“Outsourcing relationships should be governed by legally enforceable written contracts that clearly describe all material aspects of the outsourcing arrangements, including the rights, responsibilities and expectations of all parties,” the draft guidelines said.
It also said the banks should take appropriate steps in respect of service providers to protect confidential information of both the bank and its clients from intentional or inadvertent disclosure to unauthorised persons.
The banks should establish a comprehensive outsourcing risk management programme for an ongoing monitoring and controlling of all relevant aspects of outsourcing arrangements and procedures guiding corrective actions to be taken when certain events occur.
“When engaging service providers in a foreign country, banks should take into account and closely monitor government policies and political, social, economic and legal conditions in those countries, during the due diligence process and on a continuous basis after employing the service provider,” it noted.
BBN/SSR/AD-06May14-11:39 am (BST)
