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

Art. 28 DORA - General principles arrow_right_alt

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

Art. 30 DORA - Key contractual provisions arrow_right_alt

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

Art. 32 DORA - Structure of the Oversight Framework arrow_right_alt

  1. 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.

  1. 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.
  2. 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.
  3. 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.

  1. 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.

  1. 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.

  1. 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.
  2. 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.
  3. 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.
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  • 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

Art. 34 DORA - Operational coordination between Lead Overseers arrow_right_alt

Art. 35 DORA - Powers of the Lead Overseer arrow_right_alt

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

Art. 37 DORA - Request for information arrow_right_alt

Art. 38 DORA - General investigations arrow_right_alt

Art. 39 DORA - Inspections arrow_right_alt

Art. 40 DORA - Ongoing oversight arrow_right_alt

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

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

Art. 43 DORA - Oversight fees arrow_right_alt

Art. 44 DORA - International cooperation arrow_right_alt