Basel II outsourcing rules seem likely

New York -- Firms who use outsourcing extensively may have to reconsider those arrangements in light of potential additions to regulatory text both at the Basel II level and within various domestic jurisdictions that would require firms to account for the way various risks are either retained or transferred to the outsourcing provider.

At Incisive Media’s OpRisk USA conference in New York at the end of March, Roger Cole, senior associate director at the Federal Reserve Board in New York, said that firms should expect to see additional language in Basel II. "The advanced measurement approach (AMA) does provide for the implicit recognition of outsourcing by a firm," he said. "With regard to the basic indicator approach (BIA) and the standardised approach (STA), we are considering taking a somewhat more prescriptive approach. We