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Australian regulator to assess Indian outsourcing standards

July 04
03:51 2012

MELBOURNE: A team of Australian Prudential Regulation Authority (APRA) will visit India later this year to evaluate standards of Indian service providers amid their growing role in overseeing back office functions for the country’s largest four banks.

A report quoted an APRA spokesman as saying that all new and existing outsourcing arrangements must adhere to Prudential Standard CPS 231, which came into force on July 1, and ensure that APRA has access to the offshore operations relevant to all Australian lenders.

Regulated institutions must also provide unimpeded access to their overseas operations to APRA inspectors.

According to the report by the Australian Financial Review, the team will assess the operations of companies that outsource for the financial services players, the Indian operations of other multinational IT suppliers, and the ring-fenced operations of Australian institutions, such as ANZ Banking Group.

APRA’s team will fly out in the final quarter of 2012 under the leadership of the head of IT risk, David Pegrem.

Commonwealth Bank of Australia technology chief Michael Harte said CBA had been involved in outsourcing and off-shoring activities for more than 14 years, and that APRA’s wish to monitor the situation on the ground should be applauded.

CBA has outsourced work to companies operating out of India such as IBM, HCL Technologies, Tata Consultancy Services, HP and Accenture.

Harte said the emergence of cloud computing meant regulators need to broaden their definition and assessment of outsourcing arrangements.

In cloud computing, end users are not required to buy software or devices as these are provided by service providers on a rental basis.

“The fact that they are taking an active interest in seeing operations first hand is great and consistent with a sensible approach,” Harte said.

“Cloud is another example of external provision that we are increasingly keen on because of the lower cost and greater flexibility, and regulators should be aware, as we are, of the solid risk assessments and the bona fides of suppliers,” he added.

-PTI

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