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09.05.2014

Regulation on outsourcing the bank’s activities and operations, approved by the DCA of the NBM no.241 of November 3, 2011

Note: The translation is unofficial, for information purpose only

Published in the Official Monitor of the Republic of Moldova no.227-232 of December 23, 2011, Art.2099

Registered
at Ministry of Justice
of the Republic of Moldova
No. 858 of December 16, 2011

COUNCIL OF ADMINISTRATION
OF THE NATIONAL BANK OF MOLDOVA

 

DECISION no.241
of November 3, 2011

On the approval of the Regulation
on outsourcing the bank’s activities and operations

Pursuant to letter d) Article 5, Articles 11 and 44 of Law on the National Bank of Moldova no.548-XIII as of July 21, 1995 (Official Monitor of Republic of Moldova, 1995, no.56-57, art.624), with further amendments and completions, and letter h) paragraph (2) Articles 28, Article 281 and 40 of the Law on Financial Institutions no.550-XIIIas of July 21, 1995 (republished in the Official Monitor of Republic of Moldova, 2011, no.78-81, Art.199) with further amendments and completions, the Council of Administration of the National Bank of Moldova

DECIDES:

1) To approve the Regulation on outsourcing the bank’s activities and operations (see attached).

2) The bank that outsourced the activities and operations until December 17, 2010:
a) in case of materially important activities – shall be considered to have the permission of the National Bank of Moldova;
b) in case of outsourced activities/operations shall re-conclude the outsourcing contract according to the provision of the Regulation mentioned in item 1 and in case of materially important activities shall submit the respective contract to the National Bank of Moldova within 3 months from the date of entry into force of this Decision;
c) shall re-conclude within 3 months the internal policies and procedures on evaluation, management and control of outsourced activities/operations, according to the provision of the Regulation mentioned in item 1.

 

Chairman
of the Council of Administration

Dorin DRĂGUŢANU

Attachment
to the Decision of the Council of the Administration
of the National Bank of Moldova
no.241 of November 3, 2011

 

Regulation
on outsourcing the bank’s activities and operations

Chapter I
GENERAL PROVISIONS

1. Regulation on outsourcing the bank’s activities and operations (hereinafter – Regulation) establishes the conditions for outsourcing the bank’s activities/operations, the requirements and procedures for obtaining the permission for outsourcing materially important activities, the minimum content of the outsourcing contract, as well as the requirements on risk management and control of outsourced activities/operations.

2. For the purpose of this Regulation, the following notions shall be used:
a) materially important activity – type of activity subject to licensing and authorization, any other activity/operation of such importance, so that any difficulty or failure to carry out/perform them can lead to bank’s inability to continue its financial activity and/or comply with the provisions of the laws and other normative acts;
b) outsourcing – an employment on a contractual basis of a legal entity (hereinafter supplier) for carrying out certain activities/operations that are usually carried out/performed by the bank. Outsourcing does not cover the contracts mentioned in item 3;
c) chain outsourcing – outsourcing within which the supplier subcontracts with other suppliers elements of the services provided by the bank.

3. Outsourcing does not cover the contracts on purchasing of goods and services, if they do not provide the transmission to the supplier of the information about bank’s customers, which constitutes banking secret or other confidential information related to the customers and their activities.

4. The bank may outsource the activities/operations if these do not affect the continuity of the activity, reputation, effective risk management and its internal control systems.

5. The bank has the right to outsource the materially important activities after obtaining the permission in writing of the National Bank of Moldova (hereinafter - the National Bank) in the way established by this Regulation.

6. Outsourcing shall be performed in compliance with the paragraphs (2)-(9) of the Law on Financial Institutions no.550-XIIIas of July 21, 1995 and with the provisions of the legislation on the protection of personal data and this Regulation.

7. The bank shall be responsible for the proper management of risks associated to the outsourced activities/operations.

8. The bank shall disclose the information on outsourcing the activities/operations of the bank according to the Regulation on disclosure of information on the financial activity of the licensed banks from the Republic of Moldova, approved by the Decision of the Council of Administration of the National Bank of Moldova no.52, March 20, 2014.
(As amended March 20, 2014, Decision no. 52)

9. The bank shall report to the National Bank the information on outsourced materially important activity according to the requirements of the normative acts of the National Bank related to the reporting.

 

Chapter II
THE DOCUMENTS NECCESARY FOR OBTAINING THE PERMISSION ON OUTSOURCING MATERIALLY IMPORTANT ACTIVITIES

10. In case of outsourcing the materially important activities, the bank, within 15 days from the date of taking the outsourcing decision by the bank’s Board, shall inform in written the National Bank of Moldova about the outsourced decision and outsourcing concept.

11. For the purpose of obtaining the permission on outsourcing materially important activities, at least 60 days before the expected date when the outsourcing contract will be concluded, the bank shall submit to the National Bank a request. The request shall be written in the official language and signed by the chairman of the bank’s Board.

12. The following documents and information shall be attached to the request for obtaining the permission on outsourcing materially important activities:
a) the Decision of the bank’s Board on outsourcing the respective activities;
b) detailed description of the outsourced activities/operations and of the considerations for which these activities were qualified as materially important;
c) foundation of the outsourced activities/operations;
d) the analyses and management plan of the risks associated to outsourcing, including the measures to be implemented by the bank for the purpose of ensuring the stability, performance and continuity at the level of the outsourced activities/operations;
e) estimated impact on the situation and the bank's financial performance;
f) submitting the information related to the supplier, which shall include at least: the name, headquarter, sphere of activity, operation market and his position market, applicable jurisdiction, persons holding the participation shares of 5 percent and more in the capital of the supplier, indicating the share held and, depending by the case, indicating the supplier membership to the group or bank to which it belongs and the specification whether the supplier is included or not in consolidated supervision at group level;
g) the draft of the outsourcing contract;
h) the internal policies and procedures related to the outsourced activities/operations, containing the description of the procedures through which the outsourced activities/operations will be reintegrated in the bank’s activity;
i) the copy of the valid license/authorization of the supplier (other that the bank from the Republic of Moldova), issued by the competent authority for licensing/authorizing for carrying out the activities intended to be outsourced, legalized by the supplier.

13. In the event that the submitted documents and information are insufficient for taking the decision on issuing the permission on outsourcing the materially important activities or are unclear, the National Bank may request additional documents and information, may perform additional investigations, as well as may consult with public authorities and other competent authorities.

 

Chapter III
THE DECISION ON ISSUING THE PERMISSION ON OUTSOURCING

MATERIALLY IMPORTANT ACTIVITIES

14. Within 30 days from the date of receiving the complete documents and information according to the items 12 13, the National Bank issues the permission on outsourcing materially important activities or may reject the request, informing in written the applicant upon the decision, indicating the reason of the rejection.

15. In case of necessity to perform certain additional investigations by the National Bank of Moldova, the term stipulated in item 14 can be extended up to 15 days, by informing in written the bank.

16. In case of outsourcing the materially important activities, the National Bank may impose certain conditions taking into account factors such as: bank’s size, nature and complexity of the activity intended to be outsourced, characteristics and the proposed supplier's market position, duration of the contract, conflicts of interest that could be generated by outsourcing, or may oppose the outsourcing of the activities/operations.

17. The permission on outsourcing the materially important activities is not transferable to other persons and it is valid during the period of the outsourcing contract concluded between the bank and supplier.

18. As reasons for rejecting the request on issuing the permission on outsourcing the materially important activities shall be:
a) failure to submit the complete set of documents and information provided in items 12, 13 and/or submitting incorrect documents and information;
b) non-compliance of the bank’s activity with the provisions of the Law on Financial Institutions no.550-XIII as of July 21, 1995 and adopted normative acts in order to execute it as a result of outsourcing the respective activities;
c) disproportionally (insufficiency) of control measures of the banks reported to the risks associated to the outsourcing or the existence of significant risks disproportional to the benefits claimed by the bank.

 

Chapter IV
OUTSOURCING CONTRACT

19. The outsourcing contract shall clearly define conditions, rights and obligations, as well as responsibilities of the parties and shall include:
1) the definition of the activity/operation to be outsourced;
2) the specific quantitative and qualitative requirements on carrying out the activity/performing the outsourced operation, which shall allow the bank to assess whether the provision of services is appropriate;
3) the rights and obligation of the bank and supplier, aiming at the enforcement during the contract period of the legislation in force, requirements and prudential measures, regulating the outsourced activities/operations;
4) a termination clause of the contract at the initiative of the bank, if it is considered necessary and proportionate with the outsourced activity/operation, allowing the transfer of the activity/operation to another supplier accepted by the bank or its reintegration within the bank, and a termination clause in the event that the termination of the contract is prescribed by the National Bank;
5) provisions related to the information protection, which constitutes a bank secret and other secrets protected by the law, processing of this information and keeping the secrets by the supplier, at least as much as the bank;
6) provisions related to the monitoring and permanent evaluation by the bank of the performance of the contract by the supplier, so that the bank can promptly take the necessary measures;
7) the establishment of the following obligations to the supplier:
a) to provide any information on outsourcing activities to the bank;
b) to allow full access within the bank to the internal audit to the information processed by the supplier, respectively, to allow, without restrictions, the inspection and auditing of the respective information by the bank's external auditor;
c) to allow direct access to the National Bank to the bank’s information processed by the supplier, as well as the performing by the empowered staff of the National Bank of the onsite control (inspections);
8) the establishment of the obligation to the supplier to request the preliminary agreement of the bank for chain outsourcing, except for the outsourcing of the materially important activities;
9) the contract duration;
10) the detailed description of the rights and obligations of the parties, in case of termination of the contract before the term, in order to ensure the continuity of the service provision;
11) dispute resolution procedure;
12) other provisions that do not contravene to the legislation in force, as well as internal policies and procedures of the bank.

20. At the elaboration of the outsourcing contract, the bank shall take into consideration the level of monitoring, evaluation, inspection and auditing, which shall be proportional to the size and complexity of the outsourced activity/operation and its associated risks.

21. After the outsourcing of a materially important activity, the bank shall notify the National Bank of this, attaching a copy of the outsourcing contract.

22. The bank shall notify the National Bank of:
a) intension to change the supplier to which were outsourced the materially important activity, indicating the reason of such changing and submitting the documents and information provided for in letter a), f) g) i) item 12;
b) eventual reintegration within the bank of the outsourced materially important activities, submitting a detailed action plan and concrete terms;
c) any significant developments that could affect the activity of the supplier of the materially important activities and/or his ability to meet obligations, possible measures adopted by the bank in such cases, including the change of supplier, modifications in the outsourcing contract.
The notification shall be written in official language and signed by the chairman of the bank’s Board.

23. The National Bank have the right to prescribe the termination of the outsourcing contract in cases stipulated in the paragraph (10) art.281 of the Law no.550-XIII as of July 21, 1995, on Financial Institutions, giving the bank reasonable time to remove the deficiencies related to the outsourced activities/operations.

 

Chapter V
RISK MANAGMENT, CONTROL OF THE OUTSOURCED ACTIVITIES/OPERATIONS

24. The bank shall elaborate internal policies and procedures on outsourcing, covering all its aspects, no matter whether the outsourcing takes place within or outside the group of which the bank takes part of, and shall include at least the following:
1) description of the activities/operations intended to be outsourced;
2) foundation of the of the outsourcing opportunity, including in terms of associated risks;
3) the selection criteria of the supplier;
4) the terms and conditions of achievement of the outsourced activities/operations, including the requirements regarding the supplier and the quality of services provided by the supplier;
5) performance of the audit of the outsourced activities/operations;
6) analysis of the risks associated with outsourcing and the impact on the financial performance of the bank, including the cost-benefit of the outsourcing draft and establishment of the methods to be used for managing the aforementioned risks. Factors that may be used in determining the nature of the outsourced materially important activities/operation shall include the following:
a) financial, reputational and operational impact on the financial performance of the bank, in case the supplier's inability to perform adequately the activity;
b) potential losses of the bank’s customers due to the incompetence of a supplier;
c) consequences of the outsourced activity on the bank’s ability to comply with the regulatory requirements;
d) cost-benefit of the outsourcing;
e) correlation of the outsourced activity with other activities of the bank;
f) affiliation or other relationship between the bank and supplier;
g) difficulty level and the necessary time for selecting an alternative supplier or for reintegrating the outsourced activities/operations in the bank activity, if it is necessary;
7) the potential effects of the outsourcing on certain important functions within the bank shall be explicitly taken into consideration when performing the risk analysis before the outsourcing;
8) ensuring proper monitoring and evaluation by the bank’s management of the financial performance of the supplier and other changes in the organizational structure and in its ownership structure, so that to be able to take promptly any necessary measures;
9) statement on internal subdivisions or responsible persons for monitoring and managing each outsourcing contract;
10) clearly defined plans for exceptional circumstances and strategies in case of termination of providing services by the supplier, to ensure the continuity of the bank’s activity;
11) preparation and submission of the reports to the bank’s management on risk exposure associated to the outsourcing.

25. At the elaboration of the internal policies and procedures related to outsourcing, the bank shall take into account the following phases:
a) decisional phase, consisting in the decision to outsource or modify an outsourcing contract;
b) pre-contractual phase, consisting in checking and assessing the supplier, namely in terms of its ability to provide services in compliance with the quantitative and qualitative requirements established by the bank, as well as elaboration of the draft contract and specifications regarding the provided services;
c) contractual phase, consisting in achieving, monitoring and mananing an outsourcing contract, within which can be included the monitoring of the changes in the supplier’s situation, such as important changes in the structure of ownership, strategies and profitability of the operations of the supplier;
d) post-contractual phase, consisting in approaching the situations of termination of the contract and suspension of the provision of services by the supplier. The bank shall establish and apply activity continuity plans, in the event that the services provided by the supplier are not performed or are performed in inappropriately, or in the event of other changes in the supplier’s situation.

26. Information on outsourced activities/operations shall be registered centrally by the bank, continuously updated and easily accessible to the bank’s management.

27. The internal and external audit of the bank shall periodically (but not less than once per year) evaluate the currentness and adequate nature of the internal policies, procedures and practices for risks management associated with outsourcing.

28. The bank, at least once per year, shall analyze the financial and operational situation of the supplier, including performance, confidentiality and information security in order to assess its ability to continue the fulfillment of obligations related to the outsourcing.

29. The bank shall report to the National Bank any incident that had a significant impact, representing a situation and effect from the perspective of risk management related to the bank’s activity, which could lead to disruption of the outsourced activities/operation and bank’s inability to comply with the legislation in force on the outsourced activities/operations not later than 5 working days of its detection.

 

Chapter VI
INDEPENDENT AUDIT OF THE OUPTSOURCED ACTIVITIES/OPERATIONS

30. The bank shall ensure, annually or at the National Bank request, the audit of outsourced activities/operations by an international audit company accepted by the National Bank.

31. The audit company shall be considered accepted by the National Bank, if it meets at least the following criteria:
a) represents a company holding the license for carrying out the audit activity and has at least 3 years of experience in auditing and consulting;
b) the experience of the audit company includes audit projects similar to the project that shall be carried out in connection with the outsourced activities/operations of the bank;
c) the audit company and the members of the audit team adhered to the best standards and practices in the field of auditing and hold certificates confirming this.

32. Within the annual audit of the outsourced activities/operations by the bank, the auditor shall evaluate at least the following aspects:
a) the compliance of the internal policies and procedures of the supplier with the nature of the outsourced activities/operations;
b) the supplier ability (financial, technological, organizational, etc.) to carry out the outsourced activities/operations in a qualitative, safe and continuous manner;
c) the procedure of managing the risks and incidents related to the outsourcing;
d) observance of outsourcing contract framework .

33. Within the external audit of the outsourced activities/operations, initiated at the request of the National Bank, the external auditor shall evaluate the aspects established by the National Bank.

34. In case of outsourcing the materially important activities, the National Bank may establish, within the issuing of respective permission, specific requirements to the external audit of the outsourced activities/operations.

35. Independent audit of the outsourced activities/operations may be carried out from the initiative and on behalf of the supplier, with the condition of compliance with the requirements provided for in items 31-34, as well as submitting to the bank by the supplier of the report containing relevant conclusions of the independent auditor.

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