49 - FortyNine, Centre for Economic Solutions

Banking Supervision Reforms: Outsourcing and IS Management

49-FortyNine started implementation of technical assistance to the Banking Supervisors in Bosnia and Herzegovina (BIH) to implement requirements presented by the EU Directives and technical preconditions for the country’s EU integration in the area of Outsourcing and Management of Information Systems.

Over the past several years the banking supervisors worked to increase the compliance of the financial services sector with international standards and EU Directives in order to help maintain the health and stability of the financial system. For instance, the banking sector reforms are focused on strengthening banking supervision and adapting it to EU Directives (2006/48/EC (CRD), 2006/49/EC (CAD) and others), Basel II Core Principles (BCP) and other applicable international standards and best practices, thus reducing the risks to which the large BiH banking sector is exposed.

Among other reform tasks, the banking supervision agencies of the Federation of BiH and Republika Srpska (jointly, the Agencies) are working to develop regulatory decrees to regulate the Outsourcing practice and the safety and management of information systems (IS) in the banking sector in BiH.

Given the rapid development and ubiquity of information technology in the business environment, the use of information systems is one of the key factors in the bank's operations. This use of information technology in all aspects of banking operations has created a critical dependence on information technology. It is therefore necessary to pay close attention to the management of information systems (MIS) as an integral part of bank management as a whole, as well as supervision of their operations. In efforts to reduce operating costs, and facing the requirements to engage a high level of service and very professional staff, banks often opt for outsourcing of business processes to (third party) service providers.

Given a great impact of outsourcing in the daily operations of banks and risks associated therewith, banks are required to adequately manage the relationship with the service providers and to monitor the service delivery in accordance with the provisions of the (outsourcing) contract.

The Project “EU Acquis Compliant Outsourcing Regulation – Technical Assistance in BiH” was designed to assist the banking supervisors in BiH to develop regulation in this area and improve supervisory capacities. The project is supported by the NL EVD

Download: Project Brief - Technical Assistance to Banking Supervisors in BiH

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