The FCA's expectations regarding firms' review of legacy outsourcing arrangements

Outsourcing, and its monitoring, is something that firms across the spectrum of the financial services universe have to contend with. Many firms will be familiar with the EBA guidelines on outsourcing and the increasing interest in this area from the FCA and the PRA.

The EBA guidelines require firms to review and amend existing outsourcing arrangements to ensure that they are compliant with the guidelines. Where the review of outsourcing arrangements of critical or important functions is not finalised by 31 December 2021, institutions and payment institutions must inform their competent authority of that fact.

However, the FCA has updated its webpage on outsourcing to confirm that, while the EBA guidelines will remain relevant to firms following the UK's departure from the EU, firms are not expected to report to the FCA on their progress towards meeting the timeline of 31 December 2021. The FCA's expectation is that firms should review any outstanding critical or important outsourcing arrangement at the first appropriate contract renewal following the first renewal date of each existing outsourcing arrangement or revision point. Where arrangements of critical or important outsourcing arrangements have not been finalised by 31 March 2022, firms should inform the FCA.