European Banking Authority updates guidelines for working with contractors — Cyprus Mail
In Cyprus, the European Banking Authority (EBA) has published new guidelines on arrangements with third parties supporting critical or important functions of banks and other financial institutions. As Cyprus Mail reports, the document is part of efforts to simplify the EU banking sector’s regulatory system.
Focus on critical functions
The guidelines concern arrangements whose disruption could materially impair the performance of a financial institution’s functions. This approach is intended to allow supervisory authorities and institutions to focus resources on higher-risk activities while reducing the operational and supervisory burden associated with less significant arrangements.
The document covers information and communication technology services and services outside this area. The guidelines apply to the entire cycle of engagement with third parties: risk assessment and due diligence, contract conclusion, subcontracting, monitoring, documentation, and exit strategies.
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Transition period and legal basis
The EBA has provided for a two-year transition period so that financial institutions and supervisory authorities can adapt to the new requirements gradually and proportionately. In preparing the final version of the guidelines, feedback received through public consultations and targeted stakeholder events, as well as international standards, including the Basel Committee on Banking Supervision’s principles for the sound management of third-party risks, was taken into account.
The guidelines were developed in accordance with Directive 2013/36/EU, which requires the EBA to further harmonise governance arrangements, processes, and mechanisms at EU financial institutions. The Authority also took into account the second Payment Services Directive, the Investment Firms Directive, the Markets in Financial Instruments Directive, the Markets in Crypto-Assets Regulation, and the regulation establishing the EBA.
