In summary the Guidelines introduce additional technical monitoring and control of outsourced activities and set out the powers that the Bank of Tanzania (the Bank) has in terms of enforcing the Guidelines.
Key definitions under the Guidelines:
- Outsourcing means an arrangement whereby a bank or financial institution receives goods or services from another entity that form part of the business processes and which are necessary to support the provision of banking or related financial services.
- Service provider means the supplier of goods or services who may be a related entity or independent third party.
Part I
Part I of the Guidelines provides an introduction as to what activities can be outsourced. Particularly, Guideline 6 provides the classification of strategic activities and non-strategic but material activities. Strategic activities are activities compatible with the managers’ obligation to run the institution under their own responsibility and include strategic oversight, risk management and strategic control, while non-strategic but material activities mean activities of such importance that any weakness or failure in the provision of those activities can have a significant effect on the bank’s or financial institution’s ability to meet its regulatory responsibilities or to carry on its business.
Guideline 7 sets out a requirement to obtain prior written approval from the Bank before planning material outsourcing and also sets out the Bank’s criteria on evaluating these outsourcing requests. It is important to note that Guideline 8 defines material outsourcing arrangements as those, which if disrupted, have the potential to significantly impact the business operations, reputation or profitability of a bank or financial institution. The Bank will consider a number of factors when determining whether the outsourcing arrangement will be material. These include, but are not limited to:
Part I of the Guidelines provides an introduction as to what activities can be outsourced. Particularly, Guideline 6 provides the classification of strategic activities and non-strategic but material activities. Strategic activities are activities compatible with the managers’ obligation to run the institution under their own responsibility and include strategic oversight, risk management and strategic control, while non-strategic but material activities mean activities of such importance that any weakness or failure in the provision of those activities can have a significant effect on the bank’s or financial institution’s ability to meet its regulatory responsibilities or to carry on its business.
Guideline 7 sets out a requirement to obtain prior written approval from the Bank before planning material outsourcing and also sets out the Bank’s criteria on evaluating these outsourcing requests. It is important to note that Guideline 8 defines material outsourcing arrangements as those, which if disrupted, have the potential to significantly impact the business operations, reputation or profitability of a bank or financial institution. The Bank will consider a number of factors when determining whether the outsourcing arrangement will be material. These include, but are not limited to:
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