The
Australian Prudential Regulation Authority (APRA) has issued, for
consultation, a Discussion Paper, accompanied by draft prudential
standards and a prudential practice guide, on managing risks from
outsourcing. The standards apply a harmonised approach to authorised
deposit-taking institutions (ADIs), general insurers and life insurers.

The
package represents a principles-based approach detailing APRA’s minimum
requirements for managing risks from outsourcing but leaving the way
open for institutions to develop their outsourcing policy that meets
the principles.

The draft prudential
standards are largely based on the requirements currently in place for
ADIs but introduce greater flexibility in the approach to intra-group
outsourcing and deal explicitly with outsourcing to an offshore party
(‘offshoring’).

APRA
Chairman, Dr John Laker, said the risks arising from outsourcing
arrangements are common across the industries regulated by APRA and are
best addressed through a harmonised approach.

The draft prudential standards
and prudential practice guide will be finalised in the second quarter
of 2006 and will take effect on 1 October 2006.