The European Association of CCP Clearing Houses (EACH) has provided feedback to the IOSCO Consultation Report “Principles on Outsourcing”. As part of some general remarks regarding the principles on outsourcing defined in the consultation,
EACH stressed that the importance of outsourcing is constantly increasing, and so is the need for a proper regulatory treatment. Moreover, regulated entities are facing a growing number and increasing complexity of regulatory requirements related to outsourcing.
However, the association considers certain selected aspects of the draft principles as inappropriate or overly burdensome, among which:
- The definition of “outsourcing” needs to be updated and requires further specification to adequately fit current challenges and recent developments.
- Service provision by dedicatedly authorized service providers should not fall within the scope of outsourcing, as they are subject to supervision by regulators and therefore do not pose comparable risks to outsourcing entities as other unregulated service providers.
- The effectiveness of intra-group structures should be considered when applying the Principles. Enforcement along the outsourcing chain can be much more powerful and effectively executed within a group than in the case of a third-party service provider outside such groups.
- Several factors to be considered by the regulated entity when assessing materiality or criticality are too far reaching or inexpedient. Factors determining materiality or criticality and requirements to be complied with once materiality or criticality has been assessed should not be mixed.
- The dangers of a strong market concentration with a few service providers must be actively countered not only by the regulated entity, but primarily by regulators.