Committee of European Banking Supervisors (CEBS) releases consultation paper on high level principles on outsourcing

At the second meeting of the Committee of European Banking Supervisors (CEBS) on 31 March, members agreed on a set of high level principles (HLPs) on outsourcing. These principles, which are based on widespread current practices and the common policy elements which exist in various member states, are now subject to CEBS' first public consultation exercise on a specific convergence issue ( CP02 ). The consultation process will be conducted on the basis of CEBS' draft Public Statement on Consultation Practices, which has been released for public consultation yesterday.

The chairman of CEBS, José-María Roldán noted that:

"Outsourcing is a key issue since it is increasingly used in the finance industry. It is of particular relevance from a financial stability perspective. CEBS is concerned to see a level playing field for institutions. These principles set out what supervisory authorities should expect from institutions. And from a prudential point of view they provide standards for supervisors. We hope others will also consider them when they come to formulate legislative or other measures."

These principles are based on a three-tier classification of activities:

- Strategic or core activities which cannot be outsourced

- Non-strategic but material activities, which should be pre-notified to the supervisory authority; and

- Non-strategic and non-material activities, which do not have to be pre-notified but for which the institution must remain responsible for ensuring any supervisory guidelines are still met.

CEBS acknowledges that there is scope for future work in this field, in relation to further developing these principles as well as with a view to address additional principles on supervisor's own activities. Therefore, respondents are also invited to provide their views as regards areas where CEBS should conduct additional analysis or future work. 

The HLPs on outsourcing have been developed with a general perspective and thus, CEBS thinks that they could also be a useful contribution in promoting convergence across the financial sectors.

Comments of interested parties are highly welcomed and should be sent to CEBS by 31 July 2004 ( CP02@c-ebs.org ).  CEBS will publish the responses received (unless the respondent requires otherwise) as well as a reasoned explanation addressing all major points raised.  It is envisaged that a final version of the HLPs on outsourcing will then be formally adopted by CEBS.

Notes:

1. CEBS was established by a Decision of the European Commission [1] and took up its duties on 1 January 2004.

2. CEBS will fulfil the functions of Level 3 Committee for the banking sector in the application of the "Lamfalussy" Process.  Its tasks are to:

a) Advise the Commission, in particular as regards the preparation of draft implementing measures in the field of banking activities;

b) Contribute to the consistent implementation of Community Directives and to the convergence of supervisory practices;

c) Enhance supervisory co-operation, including the exchange of information.

3. CEBS is comprised of high level representatives from the banking supervisory authorities and central banks of the European Union.  The EU acceding countries will participate as observers until 1 May 2004.  The EEA countries which are not members of the EU will participate as observers on a permanent basis.

4. The Committee is chaired by Mr José-María Roldán (Banco de España, Spain).  The Chair is supported by a Vice-Chair and a "Bureau", comprising 3 Members of the Committee. The Committee's Secretariat will be based in London, UK.