Outsourcing ‘no defence for regulatory failure’

Fines totalling in excess of €5m were dished out by the Central Bank to financial services firms last year.

Eleven different service providers were fined in 2014, including Ulster Bank, which in November was hit with the biggest such fine ever administered by the Central Bank following an IT failure that left thousands of customers without basic banking functions for almost a month, in 2012.

The bank was handed a €3.5m fine with the Central Bank saying at the time that the issue threatened confidence in the retail banking sector.

Other firms on the receiving end of fines last year were FBD Insurance (€490,000); the IFSC-based Bank of Montreal Ireland (€650,000) and UniCredit Bank Ireland (€315,000).

In light of the Ulster Bank case, and others, which arose from outsourced IT functions the Central Bank yesterday warned that outsourcing in a bid to reduce costs is no defence for regulatory failings.

Following concerns over governance and oversight of outsourcing activities in 2014, the Central Bank has made the area one of its enforcement priorities for the coming year.

“As firms continue to outsource functions to reduce costs and focus on core business, the Central Bank reminds firms that outsourcing is no defence to regulatory failings.

“The Central Bank expects full compliance with all applicable regulatory requirements and appropriate oversight and supervision by firms of the outsourced activity,” the Central Bank warned.

Other enforcement areas identified as especially important this year include the provision of timely, complete and accurate information; and adherence to prudential requirements which it describes as “a cornerstone” of its enforcement strategy for all sectors.