According to the proposals, the Monetary Authority of Singapore (MAS) will have broad powers to direct banks to take steps to ensure risks stemming from planned material outsourcings are addressed.
The MAS directions would be "legally binding" and banks would be prohibited from commencing with material outsourcings until the requirements have been provided for in their written contracts with service providers.
MAS would be free to set out requirements relevant to how banks manage material outsourcing arrangements and with regards to due diligence checks before finalising the outsourcing contracts. In addition, the central bank would be able to make stipulations around banks' record-keeping and its access to that information, around the protection of customer information, its powers of audit, and in relation to the termination of material outsourcing arrangements.
The definition of 'material outsourcing arrangement' is to be revised to apply to "all outsourcing arrangements where customer information is disclosed, or where the service provider or sub-contractor has access to, possesses or collects, customer information".
"A key implication of the revisions is that all outsourcing arrangements involving disclosure of customer information will be considered material outsourcing arrangements, regardless of the tenure of the arrangements and the impact of unauthorised access or disclosure, loss or theft of such customer information," the MAS said. "MAS is of the view that this reflects the high standard of care expected of banks and merchant banks when customer information is disclosed."
"Accordingly, all outsourcing arrangements involving the disclosure of customer information, even where written customer consent for onward disclosure of such information has been obtained, will be considered material outsourcing arrangements and be subject to the requirements in the proposed Outsourcing Notices," it said.
Banks will have a year from the date the new outsourcing notices are issued to "make the necessary arrangements to comply" with them, MAS said. It said it plans to dis-apply existing outsourcing requirements that banks in Singapore face once the new rules are in effect.
The MAS consultation is open until 8 March.