What are considered to be critical or important functions with regards to outsourcing?

Payment Institutions (<a href="/glossarycollection/payment-institution" style="color:#48277C;" target="_blank" title="Payment Institution">PI</a>) should always consider a function as critical or important in the following situations. 

1. Where a defect or failure in its performance would materially impair 

a) their continuing compliance with the conditions of their authorisation or its other obligations and their regulatory obligations. 

b) their financial performance; or 

c) the soundness or continuity of their banking and payment services and activities; 

2. When operational tasks of internal control functions are outsourced, unless the assessment establishes that a failure to provide the outsourced function or the inappropriate provision of the outsourced function would not have an adverse impact on the effectiveness of the internal control function. 

3. When they intend to outsource functions of banking activities or payment services to an extent that would require authorisation by a competent authority, 

Functions that are necessary to perform activities of core business lines or critical functions should be considered as critical or important unless the PI’s assessment establishes that a failure to provide the outsourced function or the inappropriate provision of the outsourced function would not have an adverse impact on the operational continuity of the core business line or critical function. 

For credit and investment institutions there is further guidance provided in EU Directive 2014/59/EU on establishing a framework for the recovery and resolution of credit institutions and investment firms; (see under 'Show More Info') 

"New powers should enable authorities, for example, to maintain uninterrupted access to deposits and payment transactions, sell viable portions of the institution where appropriate, and apportion losses in a manner that is fair and predictable. Those objectives should help avoid destabilising financial markets and minimise the costs for taxpayers"