BMA issues new regulation on outsourcing
The Bahrain Monetary Agency (BMA) has issued new rules for regulating the outsourcing of operations by Bahrain’s banks. The laws, which come into effect from July 1, 2003, will apply to material outsourcing arrangements undertaken by banks regulated by the BMA.
The new regulation is aimed at protecting depositors and customers of the banks, while facilitating the growth and development of outsourcing business from the Kingdom. “Business process outsourcing (BPO) is a relatively new trend in the Middle East, although the global market is worth about $300 billion a year, and growing dramatically,” said Ahmed Abdulaziz Al-Bassam, Director of Licensing Policy at the BMA. “We want to ensure that when outsourcing is undertaken, it is done in a controlled manner to reduce risk.”
The new regulation makes clear that the board and management of financial institutions remain wholly responsible to their customers, even in cases where a specific activity may be outsourced. The regulations are largely directed at material outsourcing arrangements, which in case of failure would pose significant risks to the ongoing operations of the institution, its reputation or the quality of service to its customers.
Material activities include such functions as internal audit, customer sales and relationship management, settlements and processing, IT and data processing and financial control. The outsourcing of such material activities requires BMA approval, prior to such arrangements being effected.
Earlier this year, BMA granted a license for the establishment of a firm, which will offer outsourcing services to financial institutions. The Gulf Outsourcing Company, which will offer back office functions, will be the first operation of its kind in the Middle East. — (menareport.com)
© 2003 Mena Report (www.menareport.com)