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Banks Must Not Be Outsourced

A recent study by financial experts has highlighted the importance of banks not being outsourced, particularly when it comes to functions that are critical to their operations. According to industry insiders, banks must assess all risks associated with outsourcing and establish a comprehensive policy that addresses those risks.

Key Elements for Outsourcing Policy

• General conditions approved by the board of directors regulating the activities or functions that may be outsourced
• Continuity of business
• Safety of the bank’s own information and its clients
• Observance of banking secrecy
• Access to information by the CMF
• Political risk

Due Diligence When Outsourcing

Banks must ensure that they do not outsource services to companies located in countries that do not have investment-grade ratings. The study also highlighted the importance of due diligence when outsourcing certain functions, particularly those that involve sensitive customer data.

Liquidity Risks

Another area of concern for banks is liquidity risks. According to a recent report by the Central Bank, banks must ensure that they maintain adequate liquidity to meet their financial obligations.

Liquidity Limits and Contingency Plans

• The sum of all term mismatches for up to 30 days cannot exceed basic capital.
• The same requirement must be met considering only flows in foreign currency.
• The sum of term mismatches of up to 90 days cannot exceed twice basic capital.
• Banks must establish a formal contingency plan, setting out the strategies to be adopted when facing a liquidity deficit in stress scenarios.

Stress Tests

Banks must perform stress tests at least quarterly to ensure that they can meet their financial obligations during times of stress.

Customer Relationships

In their relationships with customers, banks must follow strict rules governing banking activities. These rules include those contained in:

• Money Lending Operations Act
• Consumer Protection Act
• Data Protection Act

Lending Limit Regulations and Anti-Money Laundering Regulations

Banks are required to observe lending limit regulations when dealing with customers. Additionally, anti-money laundering regulations are applicable in the relationship between banks and their customers.

Conclusion

In conclusion, banks must ensure that they do not outsource critical functions that could compromise their operations or put customer data at risk. They must also maintain adequate liquidity to meet their financial obligations and follow strict rules governing banking activities. By doing so, banks can ensure the stability of the financial system and protect their customers’ interests.

Sources

• Central Bank
• Financial experts
• Industry insiders