In September 2014, the Monetary Authority of Singapore stated that it wanted every financial institution to manage outsourcing arrangements as thought it were providing the services itself. It has now changed its mind slightly, proposing to issue rules for each class of financial institution.

In a short consultative paper, P002-2019, the MAS justifies this new approach by reference to "the variation in scale and nature of how outsourcing is utilised by different classes of financial institutions." The paper asks for feedback about its proposals for revising the regime governing banks’ outsourcing arrangements, including amendments to the Banking Act.

The MAS intends to:

• ask the Government to introduce a new section in the Banking Act to empower it to impose requirements relating to banks’ outsourcing arrangements;
• issue an "outsourcing notice for banks for material outsourcing arrangements"; and
• repeal MAS Notices 634 and 1108 after incorporating their requirements into the proposed outsourcing notices.

The proposed Outsourcing Notices will set out legally binding requirements for banks (and merchant banks, which the MAS is including as a separate category) in relation to their material outsourcing arrangements in the areas of (i) the management of such arrangements, (ii) the assessment of service providers, (iii) access to information by the regulator and the bank in question, (iv) the protection of information about or belonging to consumers, (v) audit and (vi) the discontinuation of such arrangements.

Once the new section of the Banking Act is in force, the regulator ought to be entitled to order a bank:

• to include various terms in this-or-that outsourcing agreement - terms relating to the confidentiality of customers' information, the right of the MAS to inspect or audit the service provider and its sub-contractors and the cancellation of the outsourcing agreement under specified circumstances;
• to conduct 'duly diligent' checks on this-or-that service provider before it signs an outsourcing arrangement with it;
• establish and maintain measures to minimise disruption that might occur to its operations in the event of the service provider ceasing to be able to do its job;
• provide the regulator with information about an outsourcing arrangement; and
• annul the outsourcing agreement under specified circumstances.