SBP toughens rules for outsourcing in banks, DFIs

By
anjum
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5
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The central bank has decided that any investment portfolio of up to 15 percent of the equity of the banks, microfinance banks (MFBs) and development finance institutions (DFIs) would not be considered as core activity for the purpose of outsourcing arrangements under its guidelines. The State Bank of Pakistan (SBP) revealed this on Friday through issuing BPRD Circular Letter No 11. It may be pointed out that the State Bank’s guidelines on outsourcing arrangements prohibit banks, DFIs and MFBs from outsourcing certain core activities, functions and processes that require effective involvement of the Board of Directors and the senior management on a continuous basis.
Under the SBP guidelines, the banks and microfinance banks and development finance institutions are not allowed to outsource their core activities, functions and processes such as risk management function, internal audit function, treasury function, internal control function, compliance function and decision-making including determining compliance with Know Your Customer (KYC) requirements for opening deposit accounts and credit functions.

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