We see the European Commission's proposal as an important step toward a more proportionate and risk-based approach to outsourcing within financial groups. The proposal helps reduce fragmentation, duplicative controls and unnecessary compliance costs. Outsourcing within a group differs fundamentally from outsourcing to external parties. Within groups, integrated governance structures, centralized risk management and shared control functions typically exist.
At the same time, we believe that the current scope of the proposal does not sufficiently reflect the practice in which financial groups operate internationally and functions such as IT, administration, risk management and compliance are often organized centrally. We therefore advocate a broader application of the derogation. In doing so, we specifically call attention to:
- inclusion of the pension industry (IORPs);
- A broader interpretation of group entities;
- Application of the derogation to non-EU group entities.
