Chapter V - Managing of ICT third-party risk (Art. 28-44)

Art. 28 DORA - General principles arrow_right_alt

Financial entities shall manage ICT third-party risk as an integral component of ICT risk within their ICT risk management framework as referred to in Article 6(1), and in accordance with the following principles:
1. financial entities that have in place contractual arrangements for the use of ICT services to run their business operations shall, at all times, remain fully responsible for compliance with, and the discharge of, all obligations under this Regulation and applicable financial services law;
2. financial entities’ management of ICT third-party risk shall be implemented in light of the principle of proportionality, taking into account:
  1. the nature, scale, complexity and importance of ICT-related dependencies,
  2. the risks arising from contractual arrangements on the use of ICT services concluded with ICT third-party service providers, taking into account the criticality or importance of the respective service, process or function, and the potential impact on the continuity and availability of financial services and activities, at individual and at group level.
As part of their ICT risk management framework, financial entities, other than entities referred to in Article 16(1), first subparagraph, and other than microenterprises, shall adopt, and regularly review, a strategy on ICT third-party risk, taking into account the multi-vendor strategy referred to in Article 6(9), where applicable. The strategy on ICT third-party risk shall include a policy on the use of ICT services supporting critical or important functions provided by ICT third-party service providers and shall apply on an individual basis and, where relevant, on a sub-consolidated and consolidated basis. The management body shall, on the basis of an assessment of the overall risk profile of the financial entity and the scale and complexity of the business services, regularly review the risks identified in respect to contractual arrangements on the use of ICT services supporting critical or important functions.
As part of their ICT risk management framework, financial entities shall maintain and update at entity level, and at sub-consolidated and consolidated levels, a register of information in relation to all contractual arrangements on the use of ICT services provided by ICT third-party service providers.

The contractual arrangements referred to in the first subparagraph shall be appropriately documented, distinguishing between those that cover ICT services supporting critical or important functions and those that do not.

Financial entities shall report at least yearly to the competent authorities on the number of new arrangements on the use of ICT services, the categories of ICT third-party service providers, the type of contractual arrangements and the ICT services and functions which are being provided.

Financial entities shall make available to the competent authority, upon its request, the full register of information or, as requested, specified sections thereof, along with any information deemed necessary to enable the effective supervision of the financial entity.

Financial entities shall inform the competent authority in a timely manner about any planned contractual arrangement on the use of ICT services supporting critical or important functions as well as when a function has become critical or important.

Before entering into a contractual arrangement on the use of ICT services, financial entities shall:
1. assess whether the contractual arrangement covers the use of ICT services supporting a critical or important function;
2. assess if supervisory conditions for contracting are met;
3. identify and assess all relevant risks in relation to the contractual arrangement, including the possibility that such contractual arrangement may contribute to reinforcing ICT concentration risk as referred to in Article 29;
4. undertake all due diligence on prospective ICT third-party service providers and ensure throughout the selection and assessment processes that the ICT third-party service provider is suitable;
5. identify and assess conflicts of interest that the contractual arrangement may cause.
Financial entities may only enter into contractual arrangements with ICT third-party service providers that comply with appropriate information security standards. When those contractual arrangements concern critical or important functions, financial entities shall, prior to concluding the arrangements, take due consideration of the use, by ICT third-party service providers, of the most up-to-date and highest quality information security standards.
In exercising access, inspection and audit rights over the ICT third-party service provider, financial entities shall, on the basis of a risk-based approach, pre-determine the frequency of audits and inspections as well as the areas to be audited through adhering to commonly accepted audit standards in line with any supervisory instruction on the use and incorporation of such audit standards.

Where contractual arrangements concluded with ICT third-party service providers on the use of ICT services entail high technical complexity, the financial entity shall verify that auditors, whether internal or external, or a pool of auditors, possess appropriate skills and knowledge to effectively perform the relevant audits and assessments.

Financial entities shall ensure that contractual arrangements on the use of ICT services may be terminated in any of the following circumstances:
1. significant breach by the ICT third-party service provider of applicable laws, regulations or contractual terms;
2. circumstances identified throughout the monitoring of ICT third-party risk that are deemed capable of altering the performance of the functions provided through the contractual arrangement, including material changes that affect the arrangement or the situation of the ICT third-party service provider;
3. ICT third-party service provider’s evidenced weaknesses pertaining to its overall ICT risk management and in particular in the way it ensures the availability, authenticity, integrity and, confidentiality, of data, whether personal or otherwise sensitive data, or non-personal data;
4. where the competent authority can no longer effectively supervise the financial entity as a result of the conditions of, or circumstances related to, the respective contractual arrangement.
For ICT services supporting critical or important functions, financial entities shall put in place exit strategies. The exit strategies shall take into account risks that may emerge at the level of ICT third-party service providers, in particular a possible failure on their part, a deterioration of the quality of the ICT services provided, any business disruption due to inappropriate or failed provision of ICT services or any material risk arising in relation to the appropriate and continuous deployment of the respective ICT service, or the termination of contractual arrangements with ICT third-party service providers under any of the circumstances listed in paragraph 7.

Financial entities shall ensure that they are able to exit contractual arrangements without:

1. disruption to their business activities,
2. limiting compliance with regulatory requirements,
3. detriment to the continuity and quality of services provided to clients.

Exit plans shall be comprehensive, documented and, in accordance with the criteria set out in Article 4(2), shall be sufficiently tested and reviewed periodically.

Financial entities shall identify alternative solutions and develop transition plans enabling them to remove the contracted ICT services and the relevant data from the ICT third-party service provider and to securely and integrally transfer them to alternative providers or reincorporate them in-house.

Financial entities shall have appropriate contingency measures in place to maintain business continuity in the event of the circumstances referred to in the first subparagraph.

The ESAs shall, through the Joint Committee, develop draft implementing technical standards to establish the standard templates for the purposes of the register of information referred to in paragraph 3, including information that is common to all contractual arrangements on the use of ICT services. The ESAs shall submit those draft implementing technical standards to the Commission by 17 January 2024.

Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010.

The ESAs shall, through the Joint Committee, develop draft regulatory technical standards to further specify the detailed content of the policy referred to in paragraph 2 in relation to the contractual arrangements on the use of ICT services supporting critical or important functions provided by ICT third-party service providers.

When developing those draft regulatory technical standards, the ESAs shall take into account the size and the overall risk profile of the financial entity, and the nature, scale and complexity of its services, activities and operations. The ESAs shall submit those draft regulatory technical standards to the Commission by 17 January 2024.

Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010.

28
29
62
63
64
100

Recital 28

The extensive use of ICT services is evidenced by complex contractual arrangements, whereby financial entities often encounter difficulties in negotiating contractual terms that are tailored to the prudential standards or other regulatory requirements to which they are subject, or otherwise in enforcing specific rights, such as access or audit rights, even when the latter are enshrined in their contractual arrangements. Moreover, many of those contractual arrangements do not provide for sufficient safeguards allowing for the fully-fledged monitoring of subcontracting processes, thus depriving the financial entity of its ability to assess the associated risks. In addition, as ICT third-party service providers often provide standardised services to different types of clients, such contractual arrangements do not always cater adequately for the individual or specific needs of financial industry actors.

Recital 29

Even though Union financial services law contains certain general rules on outsourcing, monitoring of the contractual dimension is not fully anchored into Union law. In the absence of clear and bespoke Union standards applying to the contractual arrangements concluded with ICT third-party service providers, the external source of ICT risk is not comprehensively addressed. Consequently, it is necessary to set out certain key principles to guide financial entities’ management of ICT third-party risk, which are of particular importance when financial entities resort to ICT third-party service providers to support their critical or important functions. Those principles should be accompanied by a set of core contractual rights in relation to several elements in the performance and termination of contractual arrangements with a view to providing certain minimum safeguards in order to strengthen financial entities’ ability to effectively monitor all ICT risk emerging at the level of third-party service providers. Those principles are complementary to the sectoral law applicable to outsourcing.

Recital 62

To ensure a sound monitoring of ICT third-party risk in the financial sector, it is necessary to lay down a set of principle-based rules to guide financial entities’ when monitoring risk arising in the context of functions outsourced to ICT third-party service providers, particularly for ICT services supporting critical or important functions, as well as more generally in the context of all ICT third-party dependencies.

Recital 63

To address the complexity of the various sources of ICT risk, while taking into account the multitude and diversity of providers of technological solutions which enable a smooth provision of financial services, this Regulation should cover a wide range of ICT third-party service providers, including providers of cloud computing services, software, data analytics services and providers of data centre services. Similarly, since financial entities should effectively and coherently identify and manage all types of risk, including in the context of ICT services procured within a financial group, it should be clarified that undertakings which are part of a financial group and provide ICT services predominantly to their parent undertaking, or to subsidiaries or branches of their parent undertaking, as well as financial entities providing ICT services to other financial entities, should also be considered as ICT third-party service providers under this Regulation. Lastly, in light of the evolving payment services market becoming increasingly dependent on complex technical solutions, and in view of emerging types of payment services and payment-related solutions, participants in the payment services ecosystem, providing payment-processing activities, or operating payment infrastructures, should also be considered to be ICT third-party service providers under this Regulation, with the exception of central banks when operating payment or securities settlement systems, and public authorities when providing ICT related services in the context of fulfilling State functions.

Recital 64

A financial entity should at all times remain fully responsible for complying with its obligations set out in this Regulation. Financial entities should apply a proportionate approach to the monitoring of risks emerging at the level of the ICT third-party service providers, by duly considering the nature, scale, complexity and importance of their ICT-related dependencies, the criticality or importance of the services, processes or functions subject to the contractual arrangements and, ultimately, on the basis of a careful assessment of any potential impact on the continuity and quality of financial services at individual and at group level, as appropriate.

Recital 100

To facilitate the comparability of reports on major ICT-related incidents and major operational or security payment-related incidents, as well as to ensure transparency regarding contractual arrangements for the use of ICT services provided by ICT third-party service providers, the ESAs should develop draft implementing technical standards establishing standardised templates, forms and procedures for financial entities to report a major ICT-related incident and a major operational or security payment-related incident, as well as standardised templates for the register of information. When developing those standards, the ESAs should take into account the size and the overall risk profile of the financial entity, and the nature, scale and complexity of its services, activities and operations. The Commission should be empowered to adopt those implementing technical standards by means of implementing acts pursuant to Article 291 TFEU and in accordance with Article 15 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010.

Art. 29 DORA - Preliminary assessment of ICT concentration risk at entity level arrow_right_alt

When performing the identification and assessment of risks referred to in Article 28(4), point (c), financial entities shall also take into account whether the envisaged conclusion of a contractual arrangement in relation to ICT services supporting critical or important functions would lead to any of the following:
1. contracting an ICT third-party service provider that is not easily substitutable; or
2. having in place multiple contractual arrangements in relation to the provision of ICT services supporting critical or important functions with the same ICT third-party service provider or with closely connected ICT third-party service providers.

Financial entities shall weigh the benefits and costs of alternative solutions, such as the use of different ICT third-party service providers, taking into account if and how envisaged solutions match the business needs and objectives set out in their digital resilience strategy.

Where the contractual arrangements on the use of ICT services supporting critical or important functions include the possibility that an ICT third-party service provider further subcontracts ICT services supporting a critical or important function to other ICT third-party service providers, financial entities shall weigh benefits and risks that may arise in connection with such subcontracting, in particular in the case of an ICT subcontractor established in a third-country.

Where contractual arrangements concern ICT services supporting critical or important functions, financial entities shall duly consider the insolvency law provisions that would apply in the event of the ICT third-party service provider’s bankruptcy as well as any constraint that may arise in respect to the urgent recovery of the financial entity’s data.

Where contractual arrangements on the use of ICT services supporting critical or important functions are concluded with an ICT third-party service provider established in a third country, financial entities shall, in addition to the considerations referred to in the second subparagraph, also consider the compliance with Union data protection rules and the effective enforcement of the law in that third country.

Where the contractual arrangements on the use of ICT services supporting critical or important functions provide for subcontracting, financial entities shall assess whether and how potentially long or complex chains of subcontracting may impact their ability to fully monitor the contracted functions and the ability of the competent authority to effectively supervise the financial entity in that respect.

Art. 30 DORA - Key contractual provisions arrow_right_alt

The rights and obligations of the financial entity and of the ICT third-party service provider shall be clearly allocated and set out in writing. The full contract shall include the service level agreements and be documented in one written document which shall be available to the parties on paper, or in a document with another downloadable, durable and accessible format.
The contractual arrangements on the use of ICT services shall include at least the following elements:
1. a clear and complete description of all functions and ICT services to be provided by the ICT third-party service provider, indicating whether subcontracting of an ICT service supporting a critical or important function, or material parts thereof, is permitted and, when that is the case, the conditions applying to such subcontracting;
2. the locations, namely the regions or countries, where the contracted or subcontracted functions and ICT services are to be provided and where data is to be processed, including the storage location, and the requirement for the ICT third-party service provider to notify the financial entity in advance if it envisages changing such locations;
3. provisions on availability, authenticity, integrity and confidentiality in relation to the protection of data, including personal data;
4. provisions on ensuring access, recovery and return in an easily accessible format of personal and non-personal data processed by the financial entity in the event of the insolvency, resolution or discontinuation of the business operations of the ICT third-party service provider, or in the event of the termination of the contractual arrangements;
5. service level descriptions, including updates and revisions thereof;
6. the obligation of the ICT third-party service provider to provide assistance to the financial entity at no additional cost, or at a cost that is determined ex-ante, when an ICT incident that is related to the ICT service provided to the financial entity occurs;
7. the obligation of the ICT third-party service provider to fully cooperate with the competent authorities and the resolution authorities of the financial entity, including persons appointed by them;
8. termination rights and related minimum notice periods for the termination of the contractual arrangements, in accordance with the expectations of competent authorities and resolution authorities;
9. the conditions for the participation of ICT third-party service providers in the financial entities’ ICT security awareness programmes and digital operational resilience training in accordance with Article 13(6).
The contractual arrangements on the use of ICT services supporting critical or important functions shall include, in addition to the elements referred to in paragraph 2, at least the following:
1. full service level descriptions, including updates and revisions thereof with precise quantitative and qualitative performance targets within the agreed service levels to allow effective monitoring by the financial entity of ICT services and enable appropriate corrective actions to be taken, without undue delay, when agreed service levels are not met;
2. notice periods and reporting obligations of the ICT third-party service provider to the financial entity, including notification of any development that might have a material impact on the ICT third-party service provider’s ability to effectively provide the ICT services supporting critical or important functions in line with agreed service levels;
3. requirements for the ICT third-party service provider to implement and test business contingency plans and to have in place ICT security measures, tools and policies that provide an appropriate level of security for the provision of services by the financial entity in line with its regulatory framework;
4. the obligation of the ICT third-party service provider to participate and fully cooperate in the financial entity’s TLPT as referred to in Articles 26 and 27;
5. the right to monitor, on an ongoing basis, the ICT third-party service provider’s performance, which entails the following:
  1. unrestricted rights of access, inspection and audit by the financial entity, or an appointed third party, and by the competent authority, and the right to take copies of relevant documentation on-site if they are critical to the operations of the ICT third-party service provider, the effective exercise of which is not impeded or limited by other contractual arrangements or implementation policies;
  2. the right to agree on alternative assurance levels if other clients’ rights are affected;
  3. the obligation of the ICT third-party service provider to fully cooperate during the onsite inspections and audits performed by the competent authorities, the Lead Overseer, financial entity or an appointed third party; and
  4. the obligation to provide details on the scope, procedures to be followed and frequency of such inspections and audits;
6. exit strategies, in particular the establishment of a mandatory adequate transition period:
  1. during which the ICT third-party service provider will continue providing the respective functions, or ICT services, with a view to reducing the risk of disruption at the financial entity or to ensure its effective resolution and restructuring;
  2. allowing the financial entity to migrate to another ICT third-party service provider or change to in-house solutions consistent with the complexity of the service provided.

By way of derogation from point (e), the ICT third-party service provider and the financial entity that is a microenterprise may agree that the financial entity’s rights of access, inspection and audit can be delegated to an independent third party, appointed by the ICT third-party service provider, and that the financial entity is able to request information and assurance on the ICT third-party service provider’s performance from the third party at any time.

When negotiating contractual arrangements, financial entities and ICT third-party service providers shall consider the use of standard contractual clauses developed by public authorities for specific services.
The ESAs shall, through the Joint Committee, develop draft regulatory technical standards to specify further the elements referred to in paragraph 2, point (a), which a financial entity needs to determine and assess when subcontracting ICT services supporting critical or important functions.

When developing those draft regulatory technical standards, the ESAs shall take into consideration the size and overall risk profile of the financial entity, and the nature, scale and complexity of its services, activities and operations.

The ESAs shall submit those draft regulatory technical standards to the Commission by 17 July 2024.

Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010.

65
66
67
68
69
70
71
72
73
74
75
99

Recital 65

The conduct of such monitoring should follow a strategic approach to ICT third-party risk formalised through the adoption by the financial entity’s management body of a dedicated ICT third-party risk strategy, rooted in a continuous screening of all ICT third-party dependencies. To enhance supervisory awareness of ICT third-party dependencies, and with a view to further supporting the work in the context of the Oversight Framework established by this Regulation, all financial entities should be required to maintain a register of information with all contractual arrangements about the use of ICT services provided by ICT third-party service providers. Financial supervisors should be able to request the full register, or to ask for specific sections thereof, and thus to obtain essential information for acquiring a broader understanding of the ICT dependencies of financial entities.

Recital 66

A thorough pre-contracting analysis should underpin and precede the formal conclusion of contractual arrangements, in particular by focusing on elements such as the criticality or importance of the services supported by the envisaged ICT contract, the necessary supervisory approvals or other conditions, the possible concentration risk entailed, as well as applying due diligence in the process of selection and assessment of ICT third-party service providers and assessing potential conflicts of interest. For contractual arrangements concerning critical or important functions, financial entities should take into consideration the use by ICT third-party service providers of the most up-to-date and highest information security standards. Termination of contractual arrangements could be prompted at least by a series of circumstances showing shortfalls at the ICT third-party service provider level, in particular significant breaches of laws or contractual terms, circumstances revealing a potential alteration of the performance of the functions provided for in the contractual arrangements, evidence of weaknesses of the ICT third-party service provider in its overall ICT risk management, or circumstances indicating the inability of the relevant competent authority to effectively supervise the financial entity.

Recital 67

To address the systemic impact of ICT third-party concentration risk, this Regulation promotes a balanced solution by means of taking a flexible and gradual approach to such concentration risk since the imposition of any rigid caps or strict limitations might hinder the conduct of business and restrain the contractual freedom. Financial entities should thoroughly assess their envisaged contractual arrangements to identify the likelihood of such risk emerging, including by means of in-depth analyses of subcontracting arrangements, in particular when concluded with ICT third-party service providers established in a third country. At this stage, and with a view to striking a fair balance between the imperative of preserving contractual freedom and that of guaranteeing financial stability, it is not considered appropriate to set out rules on strict caps and limits to ICT third-party exposures. In the context of the Oversight Framework, a Lead Overseer, appointed pursuant to this Regulation, should, in respect to critical ICT third-party service providers, pay particular attention to fully grasp the magnitude of interdependences, discover specific instances where a high degree of concentration of critical ICT third-party service providers in the Union is likely to put a strain on the Union financial system’s stability and integrity and maintain a dialogue with critical ICT third-party service providers where that specific risk is identified.

Recital 68

To evaluate and monitor on a regular basis the ability of an ICT third party service provider to securely provide services to a financial entity without adverse effects on a financial entity’s digital operational resilience, several key contractual elements with ICT third-party service providers should be harmonised. Such harmonisation should cover minimum areas which are crucial for enabling a full monitoring by the financial entity of the risks that could emerge from the ICT third-party service provider, from the perspective of a financial entity’s need to secure its digital resilience because it is deeply dependent on the stability, functionality, availability and security of the ICT services received.

Recital 69

When renegotiating contractual arrangements to seek alignment with the requirements of this Regulation, financial entities and ICT third-party service providers should ensure the coverage of the key contractual provisions as provided for in this Regulation.

Recital 70

The definition of ‘critical or important function’ provided for in this Regulation encompasses the ‘critical functions’ as defined in Article 2(1), point (35), of Directive 2014/59/EU of the European Parliament and of the Council ⁽¹⁾. Accordingly, functions deemed to be critical pursuant to Directive 2014/59/EU are included in the definition of critical functions within the meaning of this Regulation.

^{(1) Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council (OJ L 173, 12.6.2014, p. 190).}

Recital 71

Irrespective of the criticality or importance of the function supported by the ICT services, contractual arrangements should, in particular, provide for a specification of the complete descriptions of functions and services, of the locations where such functions are provided and where data is to be processed, as well as an indication of service level descriptions. Other essential elements to enable a financial entity’s monitoring of ICT third party risk are: contractual provisions specifying how the accessibility, availability, integrity, security and protection of personal data are ensured by the ICT third-party service provider, provisions laying down the relevant guarantees for enabling the access, recovery and return of data in the case of insolvency, resolution or discontinuation of the business operations of the ICT third-party service provider, as well as provisions requiring the ICT third-party service provider to provide assistance in case of ICT incidents in connection with the services provided, at no additional cost or at a cost determined ex-ante; provisions on the obligation of the ICT third-party service provider to fully cooperate with the competent authorities and resolution authorities of the financial entity; and provisions on termination rights and related minimum notice periods for the termination of the contractual arrangements, in accordance with the expectations of competent authorities and resolution authorities.

Recital 72

In addition to such contractual provisions, and with a view to ensuring that financial entities remain in full control of all developments occurring at third-party level which may impair their ICT security, the contracts for the provision of ICT services supporting critical or important functions should also provide for the following: the specification of the full service level descriptions, with precise quantitative and qualitative performance targets, to enable without undue delay appropriate corrective actions when the agreed service levels are not met; the relevant notice periods and reporting obligations of the ICT third-party service provider in the event of developments with a potential material impact on the ICT third-party service provider’s ability to effectively provide their respective ICT services; a requirement upon the ICT third-party service provider to implement and test business contingency plans and have ICT security measures, tools and policies allowing for the secure provision of services, and to participate and fully cooperate in the TLPT carried out by the financial entity.

Recital 73

Contracts for the provision of ICT services supporting critical or important functions should also contain provisions enabling the rights of access, inspection and audit by the financial entity, or an appointed third party, and the right to take copies as crucial instruments in the financial entities’ ongoing monitoring of the ICT third-party service provider’s performance, coupled with the service provider’s full cooperation during inspections. Similarly, the competent authority of the financial entity should have the right, based on notices, to inspect and audit the ICT third-party service provider, subject to the protection of confidential information.

Recital 74

Such contractual arrangements should also provide for dedicated exit strategies to enable, in particular, mandatory transition periods during which ICT third-party service providers should continue providing the relevant services with a view to reducing the risk of disruptions at the level of the financial entity, or to allow the latter effectively to switch to the use of other ICT third-party service providers or, alternatively, to change to in-house solutions, consistent with the complexity of the provided ICT service. Moreover, financial entities within the scope of Directive 2014/59/EU should ensure that the relevant contracts for ICT services are robust and fully enforceable in the event of resolution of those financial entities. Therefore, in line with the expectations of the resolution authorities, those financial entities should ensure that the relevant contracts for ICT services are resolution resilient. As long as they continue meeting their payment obligations, those financial entities should ensure, among other requirements, that the relevant contracts for ICT services contain clauses for non-termination, non-suspension and non-modification on grounds of restructuring or resolution.

Recital 75

Moreover, the voluntary use of standard contractual clauses developed by public authorities or Union institutions, in particular the use of contractual clauses developed by the Commission for cloud computing services could provide further comfort to the financial entities and ICT third-party service providers, by enhancing their level of legal certainty regarding the use of cloud computing services in the financial sector, in full alignment with the requirements and expectations set out by the Union financial services law. The development of standard contractual clauses builds on measures already envisaged in the 2018 Fintech Action Plan that announced the Commission’s intention to encourage and facilitate the development of standard contractual clauses for the use of cloud computing services outsourcing by financial entities, drawing on cross-sectorial cloud computing services stakeholders’ efforts, which the Commission has facilitated with the help of the financial sector’s involvement.

Recital 99

Regulatory technical standards should ensure the consistent harmonisation of the requirements laid down in this Regulation. In their roles as bodies endowed with highly specialised expertise, the ESAs should develop draft regulatory technical standards which do not involve policy choices, for submission to the Commission. Regulatory technical standards should be developed in the areas of ICT risk management, major ICT-related incident reporting, testing, as well as in relation to key requirements for a sound monitoring of ICT third-party risk. The Commission and the ESAs should ensure that those standards and requirements can be applied by all financial entities in a manner that is proportionate to their size and overall risk profile, and the nature, scale and complexity of their services, activities and operations. The Commission should be empowered to adopt those regulatory technical standards by means of delegated acts pursuant to Article 290 TFEU and in accordance with Articles 10 to 14 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010.

Art. 31 DORA - Designation of critical ICT third-party service providers arrow_right_alt

The ESAs, through the Joint Committee and upon recommendation from the Oversight Forum established pursuant to Article 32(1), shall:
1. designate the ICT third-party service providers that are critical for financial entities, following an assessment that takes into account the criteria specified in paragraph 2;
2. appoint as Lead Overseer for each critical ICT third-party service provider the ESA that is responsible, in accordance with Regulations (EU) No 1093/2010, (EU) No 1094/2010 or (EU) No 1095/2010, for the financial entities having together the largest share of total assets out of the value of total assets of all financial entities using the services of the relevant critical ICT third-party service provider, as evidenced by the sum of the individual balance sheets of those financial entities.
The designation referred to in paragraph 1, point (a), shall be based on all of the following criteria in relation to ICT services provided by the ICT third-party service provider:
1. the systemic impact on the stability, continuity or quality of the provision of financial services in the event that the relevant ICT third-party service provider would face a large scale operational failure to provide its services, taking into account the number of financial entities and the total value of assets of financial entities to which the relevant ICT third-party service provider provides services;
2. the systemic character or importance of the financial entities that rely on the relevant ICT third-party service provider, assessed in accordance with the following parameters:
  1. the number of global systemically important institutions (G-SIIs) or other systemically important institutions (O-SIIs) that rely on the respective ICT third-party service provider;
  2. the interdependence between the G-SIIs or O-SIIs referred to in point (i) and other financial entities, including situations where the G-SIIs or O-SIIs provide financial infrastructure services to other financial entities;
3. the reliance of financial entities on the services provided by the relevant ICT third-party service provider in relation to critical or important functions of financial entities that ultimately involve the same ICT third-party service provider, irrespective of whether financial entities rely on those services directly or indirectly, through subcontracting arrangements;
4. the degree of substitutability of the ICT third-party service provider, taking into account the following parameters:
  1. the lack of real alternatives, even partial, due to the limited number of ICT third-party service providers active on a specific market, or the market share of the relevant ICT third-party service provider, or the technical complexity or sophistication involved, including in relation to any proprietary technology, or the specific features of the ICT third-party service provider’s organisation or activity;
  2. difficulties in relation to partially or fully migrating the relevant data and workloads from the relevant ICT third-party service provider to another ICT third-party service provider, due either to significant financial costs, time or other resources that the migration process may entail, or to increased ICT risk or other operational risks to which the financial entity may be exposed through such migration.
Where the ICT third-party service provider belongs to a group, the criteria referred to in paragraph 2 shall be considered in relation to the ICT services provided by the group as a whole.
Critical ICT third-party service providers which are part of a group shall designate one legal person as a coordination point to ensure adequate representation and communication with the Lead Overseer.
The Lead Overseer shall notify the ICT third-party service provider of the outcome of the assessment leading to the designation referred in paragraph 1, point (a). Within 6 weeks from the date of the notification, the ICT third-party service provider may submit to the Lead Overseer a reasoned statement with any relevant information for the purposes of the assessment. The Lead Overseer shall consider the reasoned statement and may request additional information to be submitted within 30 calendar days of the receipt of such statement.

After designating an ICT third-party service provider as critical, the ESAs, through the Joint Committee, shall notify the ICT third-party service provider of such designation and the starting date as from which they will effectively be subject to oversight activities. That starting date shall be no later than one month after the notification. The ICT third-party service provider shall notify the financial entities to which they provide services of their designation as critical.

The Commission is empowered to adopt a delegated act in accordance with Article 57 to supplement this Regulation by specifying further the criteria referred to in paragraph 2 of this Article, by 17 July 2024.
The designation referred to in paragraph 1, point (a), shall not be used until the Commission has adopted a delegated act in accordance with paragraph 6.
The designation referred to in paragraph 1, point (a), shall not apply to the following:
1. 1. financial entities providing ICT services to other financial entities;
  2. ICT third-party service providers that are subject to oversight frameworks established for the purposes of supporting the tasks referred to in Article 127(2) of the Treaty on the Functioning of the European Union;
  3. ICT intra-group service providers;
  4. ICT third-party service providers providing ICT services solely in one Member State to financial entities that are only active in that Member State.
The ESAs, through the Joint Committee, shall establish, publish and update yearly the list of critical ICT third-party service providers at Union level.
For the purposes of paragraph 1, point (a), competent authorities shall, on a yearly and aggregated basis, transmit the reports referred to in Article 28(3), third subparagraph, to the Oversight Forum established pursuant to Article 32. The Oversight Forum shall assess the ICT third-party dependencies of financial entities based on the information received from the competent authorities.
The ICT third-party service providers that are not included in the list referred to in paragraph 9 may request to be designated as critical in accordance with paragraph 1, point (a).

For the purpose of the first subparagraph, the ICT third-party service provider shall submit a reasoned application to EBA, ESMA or EIOPA, which, through the Joint Committee, shall decide whether to designate that ICT third-party service provider as critical in accordance with paragraph 1, point (a).

The decision referred to in the second subparagraph shall be adopted and notified to the ICT third-party service provider within 6 months of receipt of the application.

Financial entities shall only make use of the services of an ICT third-party service provider established in a third country and which has been designated as critical in accordance with paragraph 1, point (a), if the latter has established a subsidiary in the Union within the 12 months following the designation.
The critical ICT third-party service provider referred to in paragraph 12 shall notify the Lead Overseer of any changes to the structure of the management of the subsidiary established in the Union.

84
87
89

Recital 84

To facilitate communication with the Lead Overseer and to ensure adequate representation, critical ICT third-party service providers which are part of a group should designate one legal person as their coordination point.

Recital 87

To ensure that critical ICT third-party service providers are appropriately and effectively overseen on a Union level, this Regulation provides that any of the three ESAs could be designated as a Lead Overseer. The individual assignment of a critical ICT third-party service provider to one of the three ESAs should result from an assessment of the preponderance of financial entities operating in the financial sectors for which that ESA has responsibilities. This approach should lead to a balanced allocation of tasks and responsibilities between the three ESAs, in the context of exercising the oversight functions, and should make the best use of the human resources and technical expertise available in each of the three ESAs.

Recital 89

Due to the significant impact of being designated as critical, this Regulation should ensure that the rights of critical ICT third-party service providers are observed throughout the implementation of the Oversight Framework. Prior to being designated as critical, such providers should, for example, have the right to submit to the Lead Overseer a reasoned statement containing any relevant information for the purposes of the assessment related to their designation. Since the Lead Overseer should be empowered to submit recommendations on ICT risk matters and suitable remedies thereto, which include the power to oppose certain contractual arrangements ultimately affecting the stability of the financial entity or the financial system, critical ICT third-party service providers should also be given the opportunity to provide, prior to the finalisation of those recommendations, explanations regarding the expected impact of the solutions, envisaged in the recommendations, on customers that are entities falling outside the scope of this Regulation and to formulate solutions to mitigate risks. Critical ICT third-party service providers disagreeing with the recommendations should submit a reasoned explanation of their intention not to endorse the recommendation. Where such reasoned explanation is not submitted or where it is considered to be insufficient, the Lead Overseer should issue a public notice summarily describing the matter of non-compliance.

Art. 32 DORA - Structure of the Oversight Framework arrow_right_alt

The Joint Committee, in accordance with Article 57(1) of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010, shall establish the Oversight Forum as a sub-committee for the purposes of supporting the work of the Joint Committee and of the Lead Overseer referred to in Article 31(1), point (b), in the area of ICT third-party risk across financial sectors. The Oversight Forum shall prepare the draft joint positions and the draft common acts of the Joint Committee in that area.

The Oversight Forum shall regularly discuss relevant developments on ICT risk and vulnerabilities and promote a consistent approach in the monitoring of ICT third-party risk at Union level.

The Oversight Forum shall, on a yearly basis, undertake a collective assessment of the results and findings of the oversight activities conducted for all critical ICT third-party service providers and promote coordination measures to increase the digital operational resilience of financial entities, foster best practices on addressing ICT concentration risk and explore mitigants for cross-sector risk transfers.
The Oversight Forum shall submit comprehensive benchmarks for critical ICT third-party service providers to be adopted by the Joint Committee as joint positions of the ESAs in accordance with Article 56(1) of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010.
The Oversight Forum shall be composed of:
1. the Chairpersons of the ESAs;
2. one high-level representative from the current staff of the relevant competent authority referred to in Article 46 from each Member State;
3. the Executive Directors of each ESA and one representative from the Commission, from the ESRB, from ECB and from ENISA as observers;
4. where appropriate, one additional representative of a competent authority referred to in Article 46 from each Member State as observer;
5. where applicable, one representative of the competent authorities designated or established in accordance with Directive (EU) 2022/2555 responsible for the supervision of an essential or important entity subject to that Directive, which has been designated as a critical ICT third-party service provider, as observer.

The Oversight Forum may, where appropriate, seek the advice of independent experts appointed in accordance with paragraph 6.

Each Member State shall designate the relevant competent authority whose staff member shall be the high-level representative referred in paragraph 4, first subparagraph, point (b), and shall inform the Lead Overseer thereof.

The ESAs shall publish on their website the list of high-level representatives from the current staff of the relevant competent authority designated by Member States.

The independent experts referred to in paragraph 4, second subparagraph, shall be appointed by the Oversight Forum from a pool of experts selected following a public and transparent application process.

The independent experts shall be appointed on the basis of their expertise in financial stability, digital operational resilience and ICT security matters. They shall act independently and objectively in the sole interest of the Union as a whole and shall neither seek nor take instructions from Union institutions or bodies, from any government of a Member State or from any other public or private body.

In accordance with Article 16 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010, the ESAs shall by 17 July 2024 issue, for the purposes of this Section, guidelines on the cooperation between the ESAs and the competent authorities covering the detailed procedures and conditions for the allocation and execution of tasks between competent authorities and the ESAs and the details on the exchanges of information which are necessary for competent authorities to ensure the follow-up of recommendations pursuant to Article 35(1), point (d), addressed to critical ICT third-party service providers.
The requirements set out in this Section shall be without prejudice to the application of Directive (EU) 2022/2555 and of other Union rules on oversight applicable to providers of cloud computing services.
The ESAs, through the Joint Committee and based on preparatory work conducted by the Oversight Forum, shall, on yearly basis, submit a report on the application of this Section to the European Parliament, the Council and the Commission.

30
76
77
78
79
92

Recital 30

A certain lack of homogeneity and convergence regarding the monitoring of ICT third-party risk and ICT third-party dependencies is evident today. Despite efforts to address outsourcing, such as EBA Guidelines on outsourcing of 2019 and ESMA Guidelines on outsourcing to cloud service providers of 2021 the broader issue of counteracting systemic risk which may be triggered by the financial sector’s exposure to a limited number of critical ICT third-party service providers is not sufficiently addressed by Union law. The lack of rules at Union level is compounded by the absence of national rules on mandates and tools that allow financial supervisors to acquire a good understanding of ICT third-party dependencies and to monitor adequately risks arising from the concentration of ICT third-party dependencies.

Recital 76

With a view to promoting convergence and efficiency in relation to supervisory approaches when addressing ICT third-party risk in the financial sector, as well as to strengthening the digital operational resilience of financial entities which rely on critical ICT third-party service providers for the provision of ICT services that support the supply of financial services, and thereby to contributing to the preservation of the Union’s financial system stability and the integrity of the internal market for financial services, critical ICT third-party service providers should be subject to a Union Oversight Framework. While the set-up of the Oversight Framework is justified by the added value of taking action at Union level and by virtue of the inherent role and specificities of the use of ICT services in the provision of financial services, it should be recalled, at the same time, that this solution appears suitable only in the context of this Regulation specifically dealing with digital operational resilience in the financial sector. However, such Oversight Framework should not be regarded as a new model for Union supervision in other areas of financial services and activities.

Recital 77

The Oversight Framework should apply only to critical ICT third-party service providers. There should therefore be a designation mechanism to take into account the dimension and nature of the financial sector’s reliance on such ICT third-party service providers. That mechanism should involve a set of quantitative and qualitative criteria to set the criticality parameters as a basis for inclusion in the Oversight Framework. In order to ensure the accuracy of that assessment, and regardless of the corporate structure of the ICT third-party service provider, such criteria should, in the case of a ICT third-party service provider that is part of a wider group, take into consideration the entire ICT third-party service provider’s group structure. On the one hand, critical ICT third-party service providers, which are not automatically designated by virtue of the application of those criteria, should have the possibility to opt in to the Oversight Framework on a voluntary basis, on the other hand, ICT third-party service providers, that are already subject to oversight mechanism frameworks supporting the fulfilment of the tasks of the European System of Central Banks as referred to in Article 127(2) TFEU, should be exempted.

Recital 78

Similarly, financial entities providing ICT services to other financial entities, while belonging to the category of ICT third-party service providers under this Regulation, should also be exempted from the Oversight Framework since they are already subject to supervisory mechanisms established by the relevant Union financial services law. Where applicable, competent authorities should take into account, in the context of their supervisory activities, the ICT risk posed to financial entities by financial entities providing ICT services. Likewise, due to the existing risk monitoring mechanisms at group level, the same exemption should be introduced for ICT third-party service providers delivering services predominantly to the entities of their own group. ICT third-party service providers providing ICT services solely in one Member State to financial entities that are active only in that Member State should also be exempted from the designation mechanism because of their limited activities and lack of cross-border impact.

Recital 79

The digital transformation experienced in financial services has brought about an unprecedented level of use of, and reliance upon, ICT services. Since it has become inconceivable to provide financial services without the use of cloud computing services, software solutions and data-related services, the Union financial ecosystem has become intrinsically co-dependent on certain ICT services provided by ICT service suppliers. Some of those suppliers, innovators in developing and applying ICT-based technologies, play a significant role in the delivery of financial services, or have become integrated into the financial services value chain. They have thus become critical to the stability and integrity of the Union financial system. This widespread reliance on services supplied by critical ICT third-party service providers, combined with the interdependence of the information systems of various market operators, create a direct, and potentially severe, risk to the Union financial services system and to the continuity of delivery of financial services if critical ICT third-party service providers were to be affected by operational disruptions or major cyber incidents. Cyber incidents have a distinctive ability to multiply and propagate throughout the financial system at a considerably faster pace than other types of risk monitored in the financial sector and can extend across sectors and beyond geographical borders. They have the potential to evolve into a systemic crisis, where trust in the financial system has been eroded due to the disruption of functions supporting the real economy, or to substantial financial losses, reaching a level which the financial system is unable to withstand, or which requires the deployment of heavy shock absorption measures. To prevent these scenarios from taking place and thereby endangering the financial stability and integrity of the Union, it is essential to provide the convergence of supervisory practices relating to ICT third-party risk in finance, in particular through new rules enabling the Union oversight of critical ICT third-party service providers.

Recital 92

The Oversight Framework should not replace, or in any way or for any part substitute for, the requirement for financial entities to manage themselves the risks entailed by the use of ICT third-party service providers, including their obligation to maintain an ongoing monitoring of contractual arrangements concluded with critical ICT third-party service providers. Similarly, the Oversight Framework should not affect the full responsibility of financial entities for complying with, and discharging, all the legal obligations laid down in this Regulation and in the relevant financial services law.

Art. 33 DORA - Tasks of the Lead Overseer arrow_right_alt

The Lead Overseer, appointed in accordance with Article 31(1), point (b), shall conduct the oversight of the assigned critical ICT third-party service providers and shall be, for the purposes of all matters related to the oversight, the primary point of contact for those critical ICT third-party service providers.
For the purposes of paragraph 1, the Lead Overseer shall assess whether each critical ICT third-party service provider has in place comprehensive, sound and effective rules, procedures, mechanisms and arrangements to manage the ICT risk which it may pose to financial entities.

The assessment referred to in the first subparagraph shall focus mainly on ICT services provided by the critical ICT third-party service provider supporting the critical or important functions of financial entities. Where necessary to address all relevant risks, that assessment shall extend to ICT services supporting functions other than those that are critical or important.

The assessment referred to in paragraph 2 shall cover:
1. ICT requirements to ensure, in particular, the security, availability, continuity, scalability and quality of services which the critical ICT third-party service provider provides to financial entities, as well as the ability to maintain at all times high standards of availability, authenticity, integrity or confidentiality of data;
2. the physical security contributing to ensuring the ICT security, including the security of premises, facilities, data centres;
3. the risk management processes, including ICT risk management policies, ICT business continuity policy and ICT response and recovery plans;
4. the governance arrangements, including an organisational structure with clear, transparent and consistent lines of responsibility and accountability rules enabling effective ICT risk management;
5. the identification, monitoring and prompt reporting of material ICT-related incidents to financial entities, the management and resolution of those incidents, in particular cyber-attacks;
6. the mechanisms for data portability, application portability and interoperability, which ensure an effective exercise of termination rights by the financial entities;
7. the testing of ICT systems, infrastructure and controls;
8. the ICT audits;
9. the use of relevant national and international standards applicable to the provision of its ICT services to the financial entities.
Based on the assessment referred to in paragraph 2, and in coordination with the Joint Oversight Network (JON) referred to in Article 34(1), the Lead Overseer shall adopt a clear, detailed and reasoned individual oversight plan describing the annual oversight objectives and the main oversight actions planned for each critical ICT third-party service provider. That plan shall be communicated yearly to the critical ICT third-party service provider.

Prior to the adoption of the oversight plan, the Lead Overseer shall communicate the draft oversight plan to the critical ICT third-party service provider.

Upon receipt of the draft oversight plan, the critical ICT third-party service provider may submit a reasoned statement within 15 calendar days evidencing the expected impact on customers which are entities falling outside of the scope of this Regulation and where appropriate, formulating solutions to mitigate risks.

Once the annual oversight plans referred to in paragraph 4 have been adopted and notified to the critical ICT third-party service providers, competent authorities may take measures concerning such critical ICT third-party service providers only in agreement with the Lead Overseer.

80

Recital 80

The Oversight Framework largely depends on the degree of collaboration between the Lead Overseer and the critical ICT third-party service provider delivering to financial entities services affecting the supply of financial services. Successful oversight is predicated, inter alia, upon the ability of the Lead Overseer to effectively conduct monitoring missions and inspections to assess the rules, controls and processes used by the critical ICT third-party service providers, as well as to assess the potential cumulative impact of their activities on financial stability and the integrity of the financial system. At the same time, it is crucial that critical ICT third-party service providers follow the Lead Overseer’s recommendations and address its concerns. Since a lack of cooperation by a critical ICT third-party service provider providing services that affect the supply of financial services, such as the refusal to grant access to its premises or to submit information, would ultimately deprive the Lead Overseer of its essential tools in appraising ICT third-party risk, and could adversely impact the financial stability and the integrity of the financial system, it is necessary to also provide for a commensurate sanctioning regime.

Art. 34 DORA - Operational coordination between Lead Overseers arrow_right_alt

Art. 35 DORA - Powers of the Lead Overseer arrow_right_alt

For the purposes of carrying out the duties laid down in this Section, the Lead Overseer shall have the following powers in respect of the critical ICT third-party service providers:
1. to request all relevant information and documentation in accordance with Article 37;
2. to conduct general investigations and inspections in accordance with Articles 38 and 39, respectively;
3. to request, after the completion of the oversight activities, reports specifying the actions that have been taken or the remedies that have been implemented by the critical ICT third-party service providers in relation to the recommendations referred to in point (d) of this paragraph;
4. to issue recommendations on the areas referred to in Article 33(3), in particular concerning the following:
  1. the use of specific ICT security and quality requirements or processes, in particular in relation to the roll-out of patches, updates, encryption and other security measures which the Lead Overseer deems relevant for ensuring the ICT security of services provided to financial entities;
  2. the use of conditions and terms, including their technical implementation, under which the critical ICT third-party service providers provide ICT services to financial entities, which the Lead Overseer deems relevant for preventing the generation of single points of failure, the amplification thereof, or for minimising the possible systemic impact across the Union’s financial sector in the event of ICT concentration risk;
  3. any planned subcontracting, where the Lead Overseer deems that further subcontracting, including subcontracting arrangements which the critical ICT third-party service providers plan to enter into with ICT third-party service providers or with ICT subcontractors established in a third country, may trigger risks for the provision of services by the financial entity, or risks to the financial stability, based on the examination of the information gathered in accordance with Articles 37 and 38;
  4. refraining from entering into a further subcontracting arrangement, where the following cumulative conditions are met:

—the envisaged subcontractor is an ICT third-party service provider or an ICT subcontractor established in a third country;

—the subcontracting concerns critical or important functions of the financial entity; and

—the Lead Overseer deems that the use of such subcontracting poses a clear and serious risk to the financial stability of the Union or to financial entities, including to the ability of financial entities to comply with supervisory requirements.

For the purpose of point (iv) of this point, ICT third-party service providers shall, using the template referred to in Article 41(1), point (b), transmit the information regarding subcontracting to the Lead Overseer.

When exercising the powers referred to in this Article, the Lead Overseer shall:
1. ensure regular coordination within the JON, and in particular shall seek consistent approaches, as appropriate, with regard to the oversight of critical ICT third-party service providers;
2. take due account of the framework established by Directive (EU) 2022/2555 and, where necessary, consult the relevant competent authorities designated or established in accordance with that Directive, in order to avoid duplication of technical and organisational measures that might apply to critical ICT third-party service providers pursuant to that Directive;
3. seek to minimise, to the extent possible, the risk of disruption to services provided by critical ICT third-party service providers to customers that are entities falling outside the scope of this Regulation.
The Lead Overseer shall consult the Oversight Forum before exercising the powers referred to in paragraph 1.

Before issuing recommendations in accordance with paragraph 1, point (d), the Lead Overseer shall give the opportunity to the ICT third-party service provider to provide, within 30 calendar days, relevant information evidencing the expected impact on customers that are entities falling outside the scope of this Regulation and, where appropriate, formulating solutions to mitigate risks.

The Lead Overseer shall inform the JON of the outcome of the exercise of the powers referred to in paragraph 1, points (a) and (b). The Lead Overseer shall, without undue delay, transmit the reports referred to in paragraph 1, point (c), to the JON and to the competent authorities of the financial entities using the ICT services of that critical ICT third-party service provider.
Critical ICT third-party service providers shall cooperate in good faith with the Lead Overseer, and assist it in the fulfilment of its tasks.
In the event of whole or partial non-compliance with the measures required to be taken pursuant to the exercise of the powers under paragraph 1, points (a), (b) and (c), and after the expiry of a period of at least 30 calendar days from the date on which the critical ICT third-party service provider received notification of the respective measures, the Lead Overseer shall adopt a decision imposing a periodic penalty payment to compel the critical ICT third-party service provider to comply with those measures.
The periodic penalty payment referred to in paragraph 6 shall be imposed on a daily basis until compliance is achieved and for no more than a period of six months following the notification of the decision to impose a periodic penalty payment to the critical ICT third-party service provider.
The amount of the periodic penalty payment, calculated from the date stipulated in the decision imposing the periodic penalty payment, shall be up to 1 % of the average daily worldwide turnover of the critical ICT third-party service provider in the preceding business year. When determining the amount of the penalty payment, the Lead Overseer shall take into account the following criteria regarding non-compliance with the measures referred to in paragraph 6:
1. the gravity and the duration of non-compliance;
2. whether non-compliance has been committed intentionally or negligently;
3. the level of cooperation of the ICT third-party service provider with the Lead Overseer.

For the purposes of the first subparagraph, in order to ensure a consistent approach, the Lead Overseer shall engage in consultation within the JON.

Penalty payments shall be of an administrative nature and shall be enforceable. Enforcement shall be governed by the rules of civil procedure in force in the Member State on the territory of which inspections and access shall be carried out. Courts of the Member State concerned shall have jurisdiction over complaints related to irregular conduct of enforcement. The amounts of the penalty payments shall be allocated to the general budget of the European Union.
The Lead Overseer shall disclose to the public every periodic penalty payment that has been imposed, unless such disclosure would seriously jeopardise the financial markets or cause disproportionate damage to the parties involved.
Before imposing a periodic penalty payment under paragraph 6, the Lead Overseer shall give the representatives of the critical ICT third-party service provider subject to the proceedings the opportunity to be heard on the findings and shall base its decisions only on findings on which the critical ICT third-party service provider subject to the proceedings has had an opportunity to comment.

The rights of the defence of the persons subject to the proceedings shall be fully respected in the proceedings. The critical ICT third-party service provider subject to the proceedings shall be entitled to have access to the file, subject to the legitimate interest of other persons in the protection of their business secrets. The right of access to the file shall not extend to confidential information or to the Lead Overseer’s internal preparatory documents.

81
88
91

Recital 81

Against this background, the need of the Lead Overseer to impose penalty payments to compel critical ICT third-party service providers to comply with the transparency and access-related obligations set out in this Regulation should not be jeopardised by difficulties raised by the enforcement of those penalty payments in relation to critical ICT third-party service providers established in third countries. In order to ensure the enforceability of such penalties, and to allow a swift roll out of procedures upholding the critical ICT third-party service providers’ rights of defence in the context of the designation mechanism and the issuance of recommendations, those critical ICT third-party service providers, providing services to financial entities that affect the supply of financial services, should be required to maintain an adequate business presence in the Union. Due to the nature of the oversight, and the absence of comparable arrangements in other jurisdictions, there are no suitable alternative mechanisms ensuring this objective by way of effective cooperation with financial supervisors in third countries in relation to the monitoring of the impact of digital operational risks posed by systemic ICT third-party service providers, qualifying as critical ICT third-party service providers established in third countries. Therefore, in order to continue its provision of ICT services to financial entities in the Union, an ICT third-party service provider established in a third country which has been designated as critical in accordance with this Regulation should undertake, within 12 months of such designation, all necessary arrangements to ensure its incorporation within the Union, by means of establishing a subsidiary, as defined throughout the Union acquis, namely in Directive 2013/34/EU of the European Parliament and of the Council ^{(1)^.}

^{(1) Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, p. 19).}

Recital 88

Lead Overseers should be granted the necessary powers to conduct investigations, to carry out onsite and offsite inspections at the premises and locations of critical ICT third-party service providers and to obtain complete and updated information. Those powers should enable the Lead Overseer to acquire real insight into the type, dimension and impact of the ICT third-party risk posed to financial entities and ultimately to the Union’s financial system. Entrusting the ESAs with the lead oversight role is a prerequisite for understanding and addressing the systemic dimension of ICT risk in finance. The impact of critical ICT third-party service providers on the Union financial sector and the potential issues caused by the ICT concentration risk entailed call for taking a collective approach at Union level. The simultaneous carrying out of multiple audits and access rights, performed separately by numerous competent authorities, with little or no coordination among them, would prevent financial supervisors from obtaining a complete and comprehensive overview of ICT third-party risk in the Union, while also creating redundancy, burden and complexity for critical ICT third-party service providers if they were subject to numerous monitoring and inspection requests.

Recital 91

The exercise of the oversight should be guided by three operational principles seeking to ensure: (a) close coordination among the ESAs in their Lead Overseer roles, through a joint oversight network (JON), (b) consistency with the framework established by Directive (EU) 2022/2555 (through a voluntary consultation of bodies under that Directive to avoid duplication of measures directed at critical ICT third-party service providers), and (c) applying diligence to minimise the potential risk of disruption to services provided by the critical ICT third-party service providers to customers that are entities falling outside the scope of this Regulation.

Art. 36 DORA - Exercise of the powers of the Lead Overseer outside the Union arrow_right_alt

When oversight objectives cannot be attained by means of interacting with the subsidiary set up for the purpose of Article 31(12), or by exercising oversight activities on premises located in the Union, the Lead Overseer may exercise the powers, referred to in the following provisions, on any premises located in a third-country which is owned, or used in any way, for the purposes of providing services to Union financial entities, by a critical ICT third-party service provider, in connection with its business operations, functions or services, including any administrative, business or operational offices, premises, lands, buildings or other properties:
1. in Article 35(1), point (a); and
2. in Article 35(1), point (b), in accordance with Article 38(2), points (a), (b) and (d), and in Article 39(1) and (2), point (a).

The powers referred to in the first subparagraph may be exercised subject to all of the following conditions:

1. 1. the conduct of an inspection in a third-country is deemed necessary by the Lead Overseer to allow it to fully and effectively perform its duties under this Regulation;
  2. the inspection in a third-country is directly related to the provision of ICT services to financial entities in the Union;
  3. the critical ICT third-party service provider concerned consents to the conduct of an inspection in a third-country; and
  4. the relevant authority of the third-country concerned has been officially notified by the Lead Overseer and raised no objection thereto.
Without prejudice to the respective competences of the Union institutions and of Member States, for the purposes of paragraph 1, EBA, ESMA or EIOPA shall conclude administrative cooperation arrangements with the relevant authority of the third country in order to enable the smooth conduct of inspections in the third country concerned by the Lead Overseer and its designated team for its mission in that third country. Those cooperation arrangements shall not create legal obligations in respect of the Union and its Member States nor shall they prevent Member States and their competent authorities from concluding bilateral or multilateral arrangements with those third countries and their relevant authorities.

Those cooperation arrangements shall specify at least the following elements:

1. the procedures for the coordination of oversight activities carried out under this Regulation and any analogous monitoring of ICT third-party risk in the financial sector exercised by the relevant authority of the third country concerned, including details for transmitting the agreement of the latter to allow the conduct, by the Lead Overseer and its designated team, of general investigations and on-site inspections as referred to in paragraph 1, first subparagraph, on the territory under its jurisdiction;
2. the mechanism for the transmission of any relevant information between EBA, ESMA or EIOPA and the relevant authority of the third country concerned, in particular in connection with information that may be requested by the Lead Overseer pursuant to Article 37;
3. the mechanisms for the prompt notification by the relevant authority of the third-country concerned to EBA, ESMA or EIOPA of cases where an ICT third-party service provider established in a third country and designated as critical in accordance with Article 31(1), point (a), is deemed to have infringed the requirements to which it is obliged to adhere pursuant to the applicable law of the third country concerned when providing services to financial institutions in that third country, as well as the remedies and penalties applied;
4. the regular transmission of updates on regulatory or supervisory developments on the monitoring of ICT third-party risk of financial institutions in the third country concerned;
5. the details for allowing, if needed, the participation of one representative of the relevant third-country authority in the inspections conducted by the Lead Overseer and the designated team.
When the Lead Overseer is not able to conduct oversight activities outside the Union, referred to in paragraphs 1 and 2, the Lead Overseer shall:
1. exercise its powers under Article 35 on the basis of all facts and documents available to it;
2. document and explain any consequence of its inability to conduct the envisaged oversight activities as referred to in this Article.

The potential consequences referred to in point (b) of this paragraph shall be taken into consideration in the Lead Overseer’s recommendations issued pursuant to Article 35(1), point (d).

82
83

Recital 82

The requirement to set up a subsidiary in the Union should not prevent the critical ICT third-party service provider from supplying ICT services and related technical support from facilities and infrastructure located outside the Union. This Regulation does not impose a data localisation obligation as it does not require data storage or processing to be undertaken in the Union.

Recital 83

Critical ICT third-party service providers should be able to provide ICT services from anywhere in the world, not necessarily or not only from premises located in the Union. Oversight activities should be first conducted on premises located in the Union and by interacting with entities located in the Union, including the subsidiaries established by critical ICT third-party service providers pursuant to this Regulation. However, such actions within the Union might be insufficient to allow the Lead Overseer to fully and effectively perform its duties under this Regulation. The Lead Overseer should therefore also be able to exercise its relevant oversight powers in third countries. Exercising those powers in third countries should allow the Lead Overseer to examine the facilities from which the ICT services or the technical support services are actually provided or managed by the critical ICT third-party service provider, and should give the Lead Overseer a comprehensive and operational understanding of the ICT risk management of the critical ICT third-party service provider. The possibility for the Lead Overseer, as a Union agency, to exercise powers outside the territory of the Union should be duly framed by relevant conditions, in particular the consent of the critical ICT third-party service provider concerned. Similarly, the relevant authorities of the third country should be informed of, and not have objected to, the exercise on their own territory of the activities of the Lead Overseer. However, in order to ensure efficient implementation, and without prejudice to the respective competences of the Union institutions and the Member States, such powers also need to be fully anchored in the conclusion of administrative cooperation arrangements with the relevant authorities of the third country concerned. This Regulation should therefore enable the ESAs to conclude administrative cooperation arrangements with the relevant authorities of third countries, which should not otherwise create legal obligations in respect of the Union and its Member States.

Art. 37 DORA - Request for information arrow_right_alt

The Lead Overseer may, by simple request or by decision, require critical ICT third-party service providers to provide all information that is necessary for the Lead Overseer to carry out its duties under this Regulation, including all relevant business or operational documents, contracts, policies, documentation, ICT security audit reports, ICT-related incident reports, as well as any information relating to parties to whom the critical ICT third-party service provider has outsourced operational functions or activities.
When sending a simple request for information under paragraph 1, the Lead Overseer shall:
1. refer to this Article as the legal basis of the request;
2. state the purpose of the request;
3. specify what information is required;
4. set a time limit within which the information is to be provided;
5. inform the representative of the critical ICT third-party service provider from whom the information is requested that he or she is not obliged to provide the information, but in the event of a voluntary reply to the request the information provided must not be incorrect or misleading.
When requiring by decision to supply information under paragraph 1, the Lead Overseer shall:
1. refer to this Article as the legal basis of the request;
2. state the purpose of the request;
3. specify what information is required;
4. set a time limit within which the information is to be provided;
5. indicate the periodic penalty payments provided for in Article 35(6) where the production of the required information is incomplete or when such information is not provided within the time limit referred to in point (d) of this paragraph;
6. indicate the right to appeal the decision to ESA’s Board of Appeal and to have the decision reviewed by the Court of Justice of the European Union (Court of Justice) in accordance with Articles 60 and 61 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010.
The representatives of the critical ICT third-party service providers shall supply the information requested. Lawyers duly authorised to act may supply the information on behalf of their clients. The critical ICT third-party service provider shall remain fully responsible if the information supplied is incomplete, incorrect or misleading.
The Lead Overseer shall, without delay, transmit a copy of the decision to supply information to the competent authorities of the financial entities using the services of the relevant critical ICT third-party service providers and to the JON.

Art. 38 DORA - General investigations arrow_right_alt

In order to carry out its duties under this Regulation, the Lead Overseer, assisted by the joint examination team referred to in Article 40(1), may, where necessary, conduct investigations of critical ICT third-party service providers.
The Lead Overseer shall have the power to:
1. examine records, data, procedures and any other material relevant to the execution of its tasks, irrespective of the medium on which they are stored;
2. take or obtain certified copies of, or extracts from, such records, data, documented procedures and any other material;
3. summon representatives of the critical ICT third-party service provider for oral or written explanations on facts or documents relating to the subject matter and purpose of the investigation and to record the answers;
4. interview any other natural or legal person who consents to be interviewed for the purpose of collecting information relating to the subject matter of an investigation;
5. request records of telephone and data traffic.
The officials and other persons authorised by the Lead Overseer for the purposes of the investigation referred to in paragraph 1 shall exercise their powers upon production of a written authorisation specifying the subject matter and purpose of the investigation.

That authorisation shall also indicate the periodic penalty payments provided for in Article 35(6) where the production of the required records, data, documented procedures or any other material, or the answers to questions asked to representatives of the ICT third-party service provider are not provided or are incomplete.

The representatives of the critical ICT third-party service providers are required to submit to the investigations on the basis of a decision of the Lead Overseer. The decision shall specify the subject matter and purpose of the investigation, the periodic penalty payments provided for in Article 35(6), the legal remedies available under Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010, and the right to have the decision reviewed by the Court of Justice.
In good time before the start of the investigation, the Lead Overseer shall inform competent authorities of the financial entities using the ICT services of that critical ICT third-party service provider of the envisaged investigation and of the identity of the authorised persons.

The Lead Overseer shall communicate to the JON all information transmitted pursuant to the first subparagraph.

Art. 39 DORA - Inspections arrow_right_alt

In order to carry out its duties under this Regulation, the Lead Overseer, assisted by the joint examination teams referred to in Article 40(1), may enter in, and conduct all necessary onsite inspections on, any business premises, land or property of the ICT third-party service providers, such as head offices, operation centres, secondary premises, as well as to conduct off-site inspections.

For the purposes of exercising the powers referred to in the first subparagraph, the Lead Overseer shall consult the JON.

The officials and other persons authorised by the Lead Overseer to conduct an on-site inspection shall have the power to:
1. enter any such business premises, land or property; and
2. seal any such business premises, books or records, for the period of, and to the extent necessary for, the inspection.

The officials and other persons authorised by the Lead Overseer shall exercise their powers upon production of a written authorisation specifying the subject matter and the purpose of the inspection, and the periodic penalty payments provided for in Article 35(6) where the representatives of the critical ICT third-party service providers concerned do not submit to the inspection.

In good time before the start of the inspection, the Lead Overseer shall inform the competent authorities of the financial entities using that ICT third-party service provider.
Inspections shall cover the full range of relevant ICT systems, networks, devices, information and data either used for, or contributing to, the provision of ICT services to financial entities.
Before any planned on-site inspection, the Lead Overseer shall give reasonable notice to the critical ICT third-party service providers, unless such notice is not possible due to an emergency or crisis situation, or if it would lead to a situation where the inspection or audit would no longer be effective.
The critical ICT third-party service provider shall submit to on-site inspections ordered by decision of the Lead Overseer. The decision shall specify the subject matter and purpose of the inspection, fix the date on which the inspection shall begin and shall indicate the periodic penalty payments provided for in Article 35(6), the legal remedies available under Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010, as well as the right to have the decision reviewed by the Court of Justice.
Where the officials and other persons authorised by the Lead Overseer find that a critical ICT third-party service provider opposes an inspection ordered pursuant to this Article, the Lead Overseer shall inform the critical ICT third-party service provider of the consequences of such opposition, including the possibility for competent authorities of the relevant financial entities to require financial entities to terminate the contractual arrangements concluded with that critical ICT third-party service provider.

Art. 40 DORA - Ongoing oversight arrow_right_alt

When conducting oversight activities, in particular general investigations or inspections, the Lead Overseer shall be assisted by a joint examination team established for each critical ICT third-party service provider.
The joint examination team referred to in paragraph 1 shall be composed of staff members from:
1. the ESAs;
2. the relevant competent authorities supervising the financial entities to which the critical ICT third-party service provider provides ICT services;
3. the national competent authority referred to in Article 32(4), point (e), on a voluntary basis;
4. one national competent authority from the Member State where the critical ICT third-party service provider is established, on a voluntary basis.

Members of the joint examination team shall have expertise in ICT matters and in operational risk. The joint examination team shall work under the coordination of a designated Lead Overseer staff member (the ‘Lead Overseer coordinator’).

Within 3 months of the completion of an investigation or inspection, the Lead Overseer, after consulting the Oversight Forum, shall adopt recommendations to be addressed to the critical ICT third-party service provider pursuant to the powers referred to in Article 35.
The recommendations referred to in paragraph 3 shall be immediately communicated to the critical ICT third-party service provider and to the competent authorities of the financial entities to which it provides ICT services.

For the purposes of fulfilling the oversight activities, the Lead Overseer may take into consideration any relevant third-party certifications and ICT third-party internal or external audit reports made available by the critical ICT third-party service provider.

95

Recital 95

To leverage the specific competences, technical skills and expertise of staff specialising in operational and ICT risk within the competent authorities, the three ESAs and, on a voluntary basis, the competent authorities under Directive (EU) 2022/2555, the Lead Overseer should draw on national supervisory capabilities and knowledge and set up dedicated examination teams for each critical ICT third-party service provider, pooling multidisciplinary teams in support of the preparation and execution of oversight activities, including general investigations and inspections of critical ICT third-party service providers, as well as for any necessary follow-up thereto.

Art. 41 DORA - Harmonisation of conditions enabling the conduct of the oversight activities arrow_right_alt

The ESAs shall, through the Joint Committee, develop draft regulatory technical standards to specify:
1. the information to be provided by an ICT third-party service provider in the application for a voluntary request to be designated as critical under Article 31(11);
2. the content, structure and format of the information to be submitted, disclosed or reported by the ICT third-party service providers pursuant to Article 35(1), including the template for providing information on subcontracting arrangements;
3. the criteria for determining the composition of the joint examination team ensuring a balanced participation of staff members from the ESAs and from the relevant competent authorities, their designation, tasks, and working arrangements.
4. the details of the competent authorities’ assessment of the measures taken by critical ICT third-party service providers based on the recommendations of the Lead Overseer pursuant to Article 42(3).
The ESAs shall submit those draft regulatory technical standards to the Commission by 17 July 2024.

Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in paragraph 1 in accordance with the procedure laid down in Articles 10 to 14 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010.

99
100
101

Recital 99

Regulatory technical standards should ensure the consistent harmonisation of the requirements laid down in this Regulation. In their roles as bodies endowed with highly specialised expertise, the ESAs should develop draft regulatory technical standards which do not involve policy choices, for submission to the Commission. Regulatory technical standards should be developed in the areas of ICT risk management, major ICT-related incident reporting, testing, as well as in relation to key requirements for a sound monitoring of ICT third-party risk. The Commission and the ESAs should ensure that those standards and requirements can be applied by all financial entities in a manner that is proportionate to their size and overall risk profile, and the nature, scale and complexity of their services, activities and operations. The Commission should be empowered to adopt those regulatory technical standards by means of delegated acts pursuant to Article 290 TFEU and in accordance with Articles 10 to 14 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010.

Recital 100

To facilitate the comparability of reports on major ICT-related incidents and major operational or security payment-related incidents, as well as to ensure transparency regarding contractual arrangements for the use of ICT services provided by ICT third-party service providers, the ESAs should develop draft implementing technical standards establishing standardised templates, forms and procedures for financial entities to report a major ICT-related incident and a major operational or security payment-related incident, as well as standardised templates for the register of information. When developing those standards, the ESAs should take into account the size and the overall risk profile of the financial entity, and the nature, scale and complexity of its services, activities and operations. The Commission should be empowered to adopt those implementing technical standards by means of implementing acts pursuant to Article 291 TFEU and in accordance with Article 15 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010.

Recital 101

Since further requirements have already been specified through delegated and implementing acts based on technical regulatory and implementing technical standards in Regulations (EC) No 1060/2009 ⁽¹⁾, (EU) No 648/2012 ⁽²⁾, (EU) No 600/2014 ⁽³⁾ and (EU) No 909/2014 ⁽⁴⁾ of the European Parliament and of the Council, it is appropriate to mandate the ESAs, either individually or jointly through the Joint Committee, to submit regulatory and implementing technical standards to the Commission for adoption of delegated and implementing acts carrying over and updating existing ICT risk management rules.

^{(1) Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies (OJ L 302, 17.11.2009, p. 1).

(2) Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (OJ L 201, 27.7.2012, p. 1).

(3) Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012 (OJ L 173, 12.6.2014, p. 84).

(4) Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012 (OJ L 257, 28.8.2014, p. 1).}

Art. 42 DORA - Follow-up by competent authorities arrow_right_alt

Within 60 calendar days of the receipt of the recommendations issued by the Lead Overseer pursuant to Article 35(1), point (d), critical ICT third-party service providers shall either notify the Lead Overseer of their intention to follow the recommendations or provide a reasoned explanation for not following such recommendations. The Lead Overseer shall immediately transmit this information to the competent authorities of the financial entities concerned.
The Lead Overseer shall publicly disclose where a critical ICT third-party service provider fails to notify the Lead Overseer in accordance with paragraph 1 or where the explanation provided by the critical ICT third-party service provider is not deemed sufficient. The information published shall disclose the identity of the critical ICT third-party service provider as well as information on the type and nature of the non-compliance. Such information shall be limited to what is relevant and proportionate for the purpose of ensuring public awareness, unless such publication would cause disproportionate damage to the parties involved or could seriously jeopardise the orderly functioning and integrity of financial markets or the stability of the whole or part of the financial system of the Union.

The Lead Overseer shall notify the ICT third-party service provider of that public disclosure.

Competent authorities shall inform the relevant financial entities of the risks identified in the recommendations addressed to critical ICT third-party service providers in accordance with Article 35(1), point (d).

When managing ICT third-party risk, financial entities shall take into account the risks referred to in the first subparagraph.

Where a competent authority deems that a financial entity fails to take into account or to sufficiently address within its management of ICT third-party risk the specific risks identified in the recommendations, it shall notify the financial entity of the possibility of a decision being taken, within 60 calendar days of the receipt of such notification, pursuant to paragraph 6, in the absence of appropriate contractual arrangements aiming to address such risks.
Upon receiving the reports referred to in Article 35(1), point (c), and prior to taking a decision as referred to in paragraph 6 of this Article, competent authorities may, on a voluntary basis, consult the competent authorities designated or established in accordance with Directive (EU) 2022/2555 responsible for the supervision of an essential or important entity subject to that Directive, which has been designated as a critical ICT third-party service provider.
Competent authorities may, as a measure of last resort, following the notification and, if appropriate, the consultation as set out in paragraph 4 and 5 of this Article, in accordance with Article 50, take a decision requiring financial entities to temporarily suspend, either in part or completely, the use or deployment of a service provided by the critical ICT third-party service provider until the risks identified in the recommendations addressed to critical ICT third-party service providers have been addressed. Where necessary, they may require financial entities to terminate, in part or completely, the relevant contractual arrangements concluded with the critical ICT third-party service providers.
Where a critical ICT third-party service provider refuses to endorse recommendations, based on a divergent approach from the one advised by the Lead Overseer, and such a divergent approach may adversely impact a large number of financial entities, or a significant part of the financial sector, and individual warnings issued by competent authorities have not resulted in consistent approaches mitigating the potential risk to financial stability, the Lead Overseer may, after consulting the Oversight Forum, issue non-binding and non-public opinions to competent authorities, in order to promote consistent and convergent supervisory follow-up measures, as appropriate.
Upon receiving the reports referred to in Article 35(1), point (c), competent authorities, when taking a decision as referred to in paragraph 6 of this Article, shall take into account the type and magnitude of risk that is not addressed by the critical ICT third-party service provider, as well as the seriousness of the non-compliance, having regard to the following criteria:
1. the gravity and the duration of the non-compliance;
2. whether the non-compliance has revealed serious weaknesses in the critical ICT third-party service provider’s procedures, management systems, risk management and internal controls;
3. whether a financial crime was facilitated, occasioned or is otherwise attributable to the non-compliance;
4. whether the non-compliance has been intentional or negligent;
5. whether the suspension or termination of the contractual arrangements introduces a risk for continuity of the financial entity’s business operations notwithstanding the financial entity’s efforts to avoid disruption in the provision of its services;
6. where applicable, the opinion of the competent authorities designated or established in accordance with Directive (EU) 2022/2555 responsible for the supervision of an essential or important entity subject to that Directive, which has been designated as a critical ICT third-party service provider, requested on a voluntary basis in accordance with paragraph 5 of this Article.

Competent authorities shall grant financial entities the necessary period of time to enable them to adjust the contractual arrangements with critical ICT third-party service providers in order to avoid detrimental effects on their digital operational resilience and to allow them to deploy exit strategies and transition plans as referred to in Article 28.

The decision referred to in paragraph 6 of this Article shall be notified to the members of the Oversight Forum referred to in Article 32(4), points (a), (b) and (c), and to the JON.

The critical ICT third-party service providers affected by the decisions provided for in paragraph 6 shall fully cooperate with the financial entities impacted, in particular in the context of the process of suspension or termination of their contractual arrangements.

Competent authorities shall regularly inform the Lead Overseer on the approaches and measures taken in their supervisory tasks in relation to financial entities as well as on the contractual arrangements concluded by financial entities where critical ICT third-party service providers have not endorsed in part or entirely recommendations addressed to them by the Lead Overseer.
The Lead Overseer may, upon request, provide further clarifications on the recommendations issued to guide the competent authorities on the follow-up measures.

90
93

Recital 90

Competent authorities should duly include the task of verifying substantive compliance with recommendations issued by the Lead Overseer in their functions with regard to prudential supervision of financial entities. Competent authorities should be able to require financial entities to take additional measures to address the risks identified in the Lead Overseer’s recommendations, and should, in due course, issue notifications to that effect. Where the Lead Overseer addresses recommendations to critical ICT third-party service providers that are supervised under Directive (EU) 2022/2555, the competent authorities should be able, on a voluntary basis and before adopting additional measures, to consult the competent authorities under that Directive in order to foster a coordinated approach to dealing with the critical ICT third-party service providers in question.

Recital 93

To avoid duplications and overlaps, competent authorities should refrain from taking individually any measures aiming to monitor the critical ICT third-party service provider’s risks and should, in that respect, rely on the relevant Lead Overseer’s assessment. Any measures should in any case be coordinated and agreed in advance with the Lead Overseer in the context of the exercise of tasks in the Oversight Framework.

Art. 43 DORA - Oversight fees arrow_right_alt

The Lead Overseer shall, in accordance with the delegated act referred to in paragraph 2 of this Article, charge critical ICT third-party service providers fees that fully cover the Lead Overseer’s necessary expenditure in relation to the conduct of oversight tasks pursuant to this Regulation, including the reimbursement of any costs which may be incurred as a result of work carried out by the joint examination team referred to in Article 40, as well as the costs of advice provided by the independent experts as referred to in Article 32(4), second subparagraph, in relation to matters falling under the remit of direct oversight activities.

The amount of a fee charged to a critical ICT third-party service provider shall cover all costs derived from the execution of the duties set out in this Section and shall be proportionate to its turnover.

The Commission is empowered to adopt a delegated act in accordance with Article 57 to supplement this Regulation by determining the amount of the fees and the way in which they are to be paid by 17 July 2024.

96
98

Recital 96

Whereas costs resulting from oversight tasks would be fully funded from fees levied on critical ICT third-party service providers, the ESAs are. however, likely to incur, before the start of the Oversight Framework, costs for the implementation of dedicated ICT systems supporting the upcoming oversight, since dedicated ICT systems would need to be developed and deployed beforehand. This Regulation therefore provides for a hybrid funding model, whereby the Oversight Framework would, as such, be fully fee-funded, while the development of the ESAs’ ICT systems would be funded from Union and national competent authorities’ contributions.

Recital 98

In order to further quantify and qualify the criteria for the designation of ICT third-party service providers as critical and to harmonise oversight fees, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission to supplement this Regulation by further specifying the systemic impact that a failure or operational outage of an ICT third-party service provider could have on the financial entities it provides ICT services to, the number of global systemically important institutions (G-SIIs), or other systemically important institutions (O-SIIs), that rely on the ICT third-party service provider in question, the number of ICT third-party service providers active on a given market, the costs of migrating data and ICT workloads to other ICT third-party service providers, as well as the amount of the oversight fees and the way in which they are to be paid. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making ⁽¹⁾. In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council should receive all documents at the same time as Member States’ experts, and their experts should systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.

^{(1) OJ L 123, 12.5.2016, p. 1.}

Art. 44 DORA - International cooperation arrow_right_alt

Without prejudice to Article 36, EBA, ESMA and EIOPA may, in accordance with Article 33 of Regulations (EU) No 1093/2010, (EU) No 1095/2010 and (EU) No 1094/2010, respectively, conclude administrative arrangements with third-country regulatory and supervisory authorities to foster international cooperation on ICT third-party risk across different financial sectors, in particular by developing best practices for the review of ICT risk management practices and controls, mitigation measures and incident responses.
The ESAs shall, through the Joint Committee, submit every five years a joint confidential report to the European Parliament, to the Council and to the Commission, summarising the findings of relevant discussions held with the third countries’ authorities referred to in paragraph 1, focusing on the evolution of ICT third-party risk and the implications for financial stability, market integrity, investor protection and the functioning of the internal market.

94

Recital 94

To promote convergence at international level as regards the use of best practices in the review and monitoring of ICT third-party service providers’ digital risk-management, the ESAs should be encouraged to conclude cooperation arrangements with relevant supervisory and regulatory third-country authorities.

Digital Operational Resilience Act (DORA)