Objective and key requirements of this PObjective and key requirements of this Prudential Standard

Objective and key requirements of this Prudential Standard

This Prudential Standard requires that all outsourcing arrangements involving material business activities entered into by an APRA-regulated institution be subject to appropriate due diligence, approval and ongoing monitoring. All risks arising from outsourcing material business activities must be appropriately managed to ensure that the regulated institution is able to meet its financial and service obligations to its depositors and/or policyholders.

The ultimate responsibility for the outsourcing policy of an APRA-regulated institution (or of the members of a Level 2 group) rests with its Board of directors (or equivalent).

The key requirements of this Prudential Standard are that a regulated institution must:

• have a policy, approved by the Board, relating to outsourcing of material business activities;
• have sufficient monitoring processes in place to manage the outsourcing of material business activities;
• for all outsourcing of material business activities with third parties, have a legally binding agreement in place, unless otherwise agreed by APRA;
• consult with APRA prior to entering into agreements to outsource material business activities to service providers that conduct their activities outside Australia; and
• notify APRA after entering into agreements to outsource material business activities.

Where a regulated institution is the Head of a Level 2 group, this Prudential Standard requires that any outsourcing arrangements involving material business activities entered into by members of the group must be subject to appropriate due diligence, approval and on-going monitoring, and the provisions of this Prudential Standard must be are applied appropriately throughout the group.