Central Bank reviews outsourcing arrangements of Fund Administration Activities

• Review on outsourcing arrangements of Irish regulated Fund Administrators.
• Outsourcing is a key area in relation to operational risk.

The Central Bank has completed a review on outsourcing carried out by Irish regulated Fund Administrators.  Outsourcing is a key area in relation to operational risk and is now integral to the business model of a significant number of Irish Fund Administrators. 

The Central Bank review focused on:

1. The extent to which larger Irish Fund Administrators (the firms) have outsourced fund administration activities to global service providers.
2. The governance and oversight arrangements in place within the Irish firms regarding outsourced fund administration activities.

Michael Hodson, Director of Asset Management Supervision said: “This review found that outsourcing in larger Fund Administrators is extensive and continues to grow.  Certain good governance arrangements, where firms were adequately managing risks in relation to outsourcing were observed, but some weaknesses in the oversight of service providers remain.  Fund Administrators should review the examples of good practice outlined in the Central Bank’s letter.  The information provided aims to support the development of consistent industry practices to assist in ensuring compliance by firms with the Outsourcing Requirements.”

The Central Bank has issued a letter (PDF 3.11MB) to all Irish regulated Fund Administrators highlighting observations and recommendations to assist Fund Administrators who outsource fund administration activities.