APRA will terminate risky outsourcing contracts

The banking industry regulator will have the power to conduct onsite inspections of companies doing outsourcing work for financial institutions under its supervision, under the terms of new prudential standards for outsourcing. APRA has the power to require an approved deposit-taking institution to “make other arrangements” if it forms the view that the ADI cannot manage the risks involved in the relationship. Against a background of growing public concern about bank outsourcing, especially where it involves offshoring, APRA has adopted a much harder line on the issue.

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