OSFI Revises Outsourcing Guideline B-10

On March 11, 2009, the Office of the Superintendent of Financial Institutions (OSFI) issued a letter advising and explaining revisions to Guideline B-10, Outsourcing of Business Activities, Functions and Processes. The revised guideline replaces the December 2003 version. The accompanying letter notes the following 7 significant revisions. the guideline:

1.  provides FREs with a transition measure to bring outsourcing arrangements that are obtained as part of an acquisition by the FRE into compliance with the Guideline.

2. clarifies the expectation that, as part of the FRE’s materiality test, a FRE would need to consider the potential influence on the FRE of multiple outsourcing arrangements with a single service provider.

3. clarifies the expectation that the FRE should ensure that the service provider regularly tests its business recovery system as it pertains to the outsourced activity, and that the FRE should ensure that a service provider addresses any material deficiencies. The Guideline further adds that a FRE may be asked by OSFI to provide a summary of the test results that pertain to the outsourced activity.

4. clarifies that the FRE will receive a notice from OSFI if OSFI chooses to exercise its audit rights. In addition, the Guideline sets out that OSFI would share any findings with the FRE, where appropriate.

5. includes a standardized template for a centralized list that FREs could use to summarize all material outsourcing arrangements.

6. clarifies OSFI’s expectation that the FRE’s review of the service provider’s ability to continue to deliver the service, in the manner expected, be commensurate with the level of risk involved. The Guideline further adds that, as part of this review, a FRE could include an assessment of the service provider’s circumstances, including the reliance on, and performance of, significant subcontractors.

7. removes any references to the requirement for Superintendent approval to maintain and process outside Canada information or data relating to the preparation and maintenance of certain corporate, accounting and customer records.