Pearse Doherty (Donegal, Sinn Fein)
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157. To ask the Minister for Finance his plans following the Central Bank's report of March 2017 expressing concern at the level of outsourcing within the funds industry; and if he will make a statement on the matter. [18267/17]

Pearse Doherty (Donegal, Sinn Fein)
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160. To ask the Minister for Finance if, with regard to the reported large reliance of Irish-based funds on outsourced service providers, his views on whether outsourced providers are regulated sufficiently; if the lack of or lower levels of regulation may expose the State to risks; the steps being taken to minimise or eliminate those risks; and if he will make a statement on the matter. [18270/17]

Michael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 157 and 160 together.

Fund service providers are an important part of the investment fund sector and it is important that we have an appropriate regulatory framework in place for such entities.

The Central Bank of Ireland is responsible for the authorisation and supervision of fund service providers operating in Ireland The legislative framework that applies to these entities includes European and domestic legislation along with Central Bank regulations and guidance. Fund service providers are allowed to outsource certain activities, but the fund service provider ultimately remains responsible for those outsourced activities.

I have been informed by the Central Bank that when reviewing a Fund Service Provider's control environment, assessment of the governance and oversight of outsourcing arrangements is a key area of supervisory focus. The Bank robustly assesses and challenges governance and oversight of outsourcing arrangements. This is achieved by the Bank through regular engagement at individual firm level, industry thematic reviews on outsourcing and off-shore inspections of outsourcing services providers.

In a recent thematic review of outsourcing, the Bank found that outsourcing in larger fund service providers is extensive and observed good governance arrangements where risks were being managed adequately. The review also found some weaknesses and a letter has been sent to all Irish regulated Fund Administrators outlining examples of good practise and making a number of recommendations.

In addition to the letter, I have been informed by the Bank that it intends to issue guidance to supplement the Investment Firm Regulations (Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Investment Firms) Regulations 2017). The regulations and upcoming guidance will include provisions to further enhance fund service provider's oversight of outsourced activities. This will ensure that the Central Bank can subject fund service providers to a strong regulatory framework, and that the good practises found by the Bank in its recent review are more widely followed.