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What are the European Banking Authority (EBA) Guidelines on outsourcing and why are they relevant?

From the European Banking Authority (<a href="/glossarycollection/european-banking-authority" style="color:#48277C;" target="_blank" title="European Banking Authority"><u>EBA</u></a>) guidelines on outsourcing:<br/><br/>

"These guidelines set out which arrangements with third-parties are to be considered as outsourcing and provide criteria for the identification of critical or important functions that have a strong impact on the financial institution’s risk profile or on its internal control framework. If such critical or important functions are outsourced, stricter requirements apply to these outsourcing arrangements than to other outsourcing arrangements.<br/><br/>

Competent authorities are required to effectively supervise financial institutions’ outsourcing arrangements, including identifying and monitoring risk concentrations at individual service providers and assessing whether or not such concentrations could pose a risk to the stability of the financial system. To identify such risk concentrations, competent authorities should be able to rely on comprehensive documentation on outsourcing arrangements compiled by financial institutions."

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