The Circular CSSF 17/654 clarifies the applicable regulatory framework for IT outsourcing relying on a cloud-computing infrastructure provided by an external provider. The use of private clouds without outsourcing is thus excluded from the scope of this circular.
In addition, the Circular 17/654 specifies the five main characteristics of "cloud computing" and the requirements for outsourcing on a cloud computing infrastructure (e.g. resource operation, governance, notification and consent of customers, notification to CSSF in case of non-material outsourcing or authorisation by CSSF in case of material outsourcing, etc.). These requirements apply to the entire outsourcing chain as long as all outsourcing activities are exclusively of a data-processing/IT nature ("nature informatique") and at least one outsourcing activity corresponds to the definition of "cloud computing".
The Circular 17/654 distinguishes between two types of IT outsourcing, firstly “material outsourcing”, meaning outsourcing of any activity that, when not carried out in accordance with the rules, reduces the institution’s ability to meet the regulatory requirements or continue its operations as well as any activity necessary for sound and prudent risk management. Secondly “non-material outsourcing” that covers all other activities that are being outsourced to the cloud-computing infrastructure.
Since the publication of circular CSSF 17/654, the regulator has received a significant number of notifications related to non-material outsourcing arrangements as well as questions related to specific requirements of the circular. Therefore, the CSSF decided to make some substantial amendments to the existing circular, in order to provide additional guidance and clarity related to the regulatory obligations as well as to further align the framework with the recommendations on outsourcing to cloud service providers published by the European Banking Authority (EBA).
The newly adopted Circular changes some of the above-mentioned requirements. One of the major changes is the removal of the notification requirement in case of non-material outsourcing, as it is replaced by the requirement to set up a register of all cloud outsourcing an entity has in place. Moreover, the terms “material outsourcing” and “non-material outsourcing” are further explained via provided examples.
The aforementioned register should be maintained by the institution on an ongoing basis, and shall be transmitted to the CSSF upon request.
In addition, the principle of proportionality is applied in a more tangible way, as several requirements are no longer applicable in case of non-material activities, including audit rights and monitoring of activities.
Finally, the CSSF has provided new forms to be used in case of authorisation requests for material activities, which replace the former “compliance tables”, in order to reduce the documentation requirements for the institutions.
Apart from investment fund managers subject to Circular CSSF 18/698, the institutions shall establish and complete the aforementioned cloud register within six months as from the entry into force of this circular, i.e. by 27 September 2019.
Investment fund managers, which have already outsourced on a cloud computing infrastructure before the entry into force of this circular do not have to submit a notification or authorisation request to the CSSF for this outsourcing. They shall, however, establish and complete the cloud register within one year as from the entry into force of this circular, i.e. by 27 March 2020.
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