Customer protection or confusion
Outsourcing banking operations: new law agreed in principle but doubtful in details
By Aleksander Nowacki
The proposed changes to the banking law could drive publicly listed companies out of the market of outsourcing services to financial institutions, say alarmed IT firms. The law, which is expected to come into force at the beginning of next year, includes regulations on banks' outsourcing of services. While welcome by the industry in principle, some of the new rules could significantly distort the market.
The law provides for collective liability of both the bank and the outsourcing service provider in case of breach of contract with the bank's customer. While allowing for nearly every process - with the exception of management, internal audit and risk assessment - to be outsourced, the law could effectively drive international concerns out of the market.
"No company will accept liability that it cannot even assess and has no influence over (it) occurring," says Anna Sienko, director of outsourcing at IBM Polska. "This could mean potentially unlimited claims." She goes on to say that the shared liability would also make for consumer confusion, as it would become unclear which company should be sued.
Sienko also says that there was no precedent for this law in the European Union's current member states. Andrzej Więckiewicz, outsourcing director at Hewlett Packard (HP) Polska concurs, saying that the regulation could lead to the services being transferred abroad. He is also concerned that the increased risks to the providers of outsourcing services would lead to higher costs, disadvantaging both the local banks and outsourcing companies.
Więckiewicz says his company is actively lobbying to have the rule removed at a later stage in the legislative process. He is, however, doubtful as to how effective these efforts have been. He also says that he would like to see the Polish Banks Association (ZBP) take a more definitive stance on the issue, as it is also in the banks' interest that costs of outsourcing should be kept low.
"We oppose the regulation," says Jerzy Bańka, ZBP legal adviser. "It offers an illusory increase in the customer's protection, while in fact working to dilute responsibility." He did not, however, name any specific steps that the organization might be taking to address the issue.
There are, however, companies that do not seem concerned about the rule.
"This will not in any way restrict our operations," says Marcin Penczek, president of ADPayroll Services. "The only question is that some new procedures will be introduced. But the largest clients, that is to say international banks, have even stricter internal procedures anyway." The company, formed through a spin-off from the domestic software maker and integrator Hogart, derives 20 percent of its revenue from the banking sector.
All the market players are, however, unanimous that the new law would be an improvement on the existing free-for-all situation.
"There is definitely a certain amount of anxiety on the part of banks, as the issue is not regulated," HP's Więckiewicz says. That does not, however, distract 85 percent of banks from outsourcing some of their operations.
