OSFI Releases New Guideline for Federally Regulated Financial Institutions that Outsource Business Functions

The Office of the Superintendent of Financial Institutions ("OSFI") recently released for comment a draft of a new Guideline B-10 – Outsourcing of Business Functions. The new Guideline will apply to federally regulated financial institutions such as banks and insurance companies, subsidiaries and parent companies of such institutions, and foreign financial institution branches, as well as bank holding companies (collectively, for the purposes of this bulletin, "FRFIs").

Outsourcing arrangements involve an agreement between a FRFI and a service provider pursuant to which the service provider performs a business function that would otherwise be performed by the FRFI. Some business functions which are commonly outsourced are information system management and maintenance, document processing, application processing, loan administration and human resources functions.