Preamble Recitals

The provision of ICT services means digital and data services provided through ICT systems to one or more internal or external users on an ongoing basis, including hardware as a service and hardware services which includes the provision of technical support via software or firmware updates by the hardware provider, excluding traditional analogue telephone services; to financial entitiesas defined in Article 2, points (a) to (t) often depends on a complex chain of ICT subcontractors, whereby ICT third-party service providers means an undertaking providing ICT services; may enter into one or more subcontracting arrangements with other ICT third-party service providers means an undertaking providing ICT services;. Indirect reliance on ICT subcontractors may have an impact on a financial entity means a natural or legal person created and recognised as such under the national law of its place of establishment, which may, acting under its own name, exercise rights and be subject to obligations;’ ability to identify, assess, and manage its risks means the potential for loss or disruption caused by an incident and is to be expressed as a combination of the magnitude of such loss or disruption and the likelihood of occurrence of the incident;, including risks means the potential for loss or disruption caused by an incident and is to be expressed as a combination of the magnitude of such loss or disruption and the likelihood of occurrence of the incident; that are related to gaps in the information provided by ICT third-party service providers means an undertaking providing ICT services;, and to the limited ability of a financial entity means a natural or legal person created and recognised as such under the national law of its place of establishment, which may, acting under its own name, exercise rights and be subject to obligations; to obtain information from those ICT subcontractors that provide ICT services means digital and data services provided through ICT systems to one or more internal or external users on an ongoing basis, including hardware as a service and hardware services which includes the provision of technical support via software or firmware updates by the hardware provider, excluding traditional analogue telephone services; that support critical or important functions means a function, the disruption of which would materially impair the financial performance of a financial entity, or the soundness or continuity of its services and activities, or the discontinued, defective or failed performance of that function would materially impair the continuing compliance of a financial entity with the conditions and obligations of its authorisation, or with its other obligations under applicable financial services law; or material parts thereof. In that regard, where the provision of ICT services means digital and data services provided through ICT systems to one or more internal or external users on an ongoing basis, including hardware as a service and hardware services which includes the provision of technical support via software or firmware updates by the hardware provider, excluding traditional analogue telephone services; to financial entitiesas defined in Article 2, points (a) to (t) depends on a potentially long or complex chain of ICT subcontractors, it is essential that financial entitiesas defined in Article 2, points (a) to (t) identify the overall chain of subcontractors providing ICT services means digital and data services provided through ICT systems to one or more internal or external users on an ongoing basis, including hardware as a service and hardware services which includes the provision of technical support via software or firmware updates by the hardware provider, excluding traditional analogue telephone services; supporting critical or important functions means a function, the disruption of which would materially impair the financial performance of a financial entity, or the soundness or continuity of its services and activities, or the discontinued, defective or failed performance of that function would materially impair the continuing compliance of a financial entity with the conditions and obligations of its authorisation, or with its other obligations under applicable financial services law;.

Among those subcontractors that provide ICT services means digital and data services provided through ICT systems to one or more internal or external users on an ongoing basis, including hardware as a service and hardware services which includes the provision of technical support via software or firmware updates by the hardware provider, excluding traditional analogue telephone services; that support critical or important functions means a function, the disruption of which would materially impair the financial performance of a financial entity, or the soundness or continuity of its services and activities, or the discontinued, defective or failed performance of that function would materially impair the continuing compliance of a financial entity with the conditions and obligations of its authorisation, or with its other obligations under applicable financial services law;, financial entitiesas defined in Article 2, points (a) to (t) should focus in particular and continuously on those subcontractors that effectively underpin the ICT service means an ICT service as defined in Article 2, point (13), of Regulation (EU) 2019/881; that supports critical or important functions means a function, the disruption of which would materially impair the financial performance of a financial entity, or the soundness or continuity of its services and activities, or the discontinued, defective or failed performance of that function would materially impair the continuing compliance of a financial entity with the conditions and obligations of its authorisation, or with its other obligations under applicable financial services law;, including all the subcontractors that provide ICT services means digital and data services provided through ICT systems to one or more internal or external users on an ongoing basis, including hardware as a service and hardware services which includes the provision of technical support via software or firmware updates by the hardware provider, excluding traditional analogue telephone services; the disruption of which would impair the security or continuity of the service as laid down in the register of information referred to in Article 28(3) of Regulation (EU) 2022/2554.

Financial entitiesas defined in Article 2, points (a) to (t) vary widely in size, structure, internal organisation, and in the nature and complexity of their activities. To ensure proportionality, that diversity should be taken into account when specifying which elements a financial entity means a natural or legal person created and recognised as such under the national law of its place of establishment, which may, acting under its own name, exercise rights and be subject to obligations; should determine and assess when subcontracting ICT services means digital and data services provided through ICT systems to one or more internal or external users on an ongoing basis, including hardware as a service and hardware services which includes the provision of technical support via software or firmware updates by the hardware provider, excluding traditional analogue telephone services; that support critical or important functions means a function, the disruption of which would materially impair the financial performance of a financial entity, or the soundness or continuity of its services and activities, or the discontinued, defective or failed performance of that function would materially impair the continuing compliance of a financial entity with the conditions and obligations of its authorisation, or with its other obligations under applicable financial services law;.

When permitted by the financial entitiesas defined in Article 2, points (a) to (t) in accordance with Article 30(2) of Regulation (EU) 2022/2554, the use of subcontracted ICT services means digital and data services provided through ICT systems to one or more internal or external users on an ongoing basis, including hardware as a service and hardware services which includes the provision of technical support via software or firmware updates by the hardware provider, excluding traditional analogue telephone services; supporting critical or important functions means a function, the disruption of which would materially impair the financial performance of a financial entity, or the soundness or continuity of its services and activities, or the discontinued, defective or failed performance of that function would materially impair the continuing compliance of a financial entity with the conditions and obligations of its authorisation, or with its other obligations under applicable financial services law; by ICT third-party services providers means an undertaking providing ICT services; cannot reduce the ultimate responsibility for the management bodies means a management body as defined in Article 4(1), point (36), of Directive 2014/65/EU, Article 3(1), point (7), of Directive 2013/36/EU, Article 2(1), point (s), of Directive 2009/65/EC of the European Parliament and of the Council (^31^), Article 2(1), point (45), of Regulation (EU) No 909/2014, Article 3(1), point (20), of Regulation (EU) 2016/1011, and in the relevant provision of the Regulation on markets in crypto-assets, or the equivalent persons who effectively run the entity or have key functions in accordance with relevant Union or national law; Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ L 302, 17.11.2009, p. 32). of the financial entitiesas defined in Article 2, points (a) to (t) to manage their risks means the potential for loss or disruption caused by an incident and is to be expressed as a combination of the magnitude of such loss or disruption and the likelihood of occurrence of the incident; and to comply with their legislative and regulatory obligations. Where subcontracting ICT services means digital and data services provided through ICT systems to one or more internal or external users on an ongoing basis, including hardware as a service and hardware services which includes the provision of technical support via software or firmware updates by the hardware provider, excluding traditional analogue telephone services; supporting critical or important functions means a function, the disruption of which would materially impair the financial performance of a financial entity, or the soundness or continuity of its services and activities, or the discontinued, defective or failed performance of that function would materially impair the continuing compliance of a financial entity with the conditions and obligations of its authorisation, or with its other obligations under applicable financial services law; is permitted, it is important that financial entitiesas defined in Article 2, points (a) to (t) have a clear and holistic view of the risks means the potential for loss or disruption caused by an incident and is to be expressed as a combination of the magnitude of such loss or disruption and the likelihood of occurrence of the incident; associated with subcontracting services that support critical or important functions means a function, the disruption of which would materially impair the financial performance of a financial entity, or the soundness or continuity of its services and activities, or the discontinued, defective or failed performance of that function would materially impair the continuing compliance of a financial entity with the conditions and obligations of its authorisation, or with its other obligations under applicable financial services law; so that they are able to monitor, manage and mitigate those risks means the potential for loss or disruption caused by an incident and is to be expressed as a combination of the magnitude of such loss or disruption and the likelihood of occurrence of the incident;. They should therefore assess those risks means the potential for loss or disruption caused by an incident and is to be expressed as a combination of the magnitude of such loss or disruption and the likelihood of occurrence of the incident; before subcontracting those services.

ICT intra-group subcontractors that provide ICT services means digital and data services provided through ICT systems to one or more internal or external users on an ongoing basis, including hardware as a service and hardware services which includes the provision of technical support via software or firmware updates by the hardware provider, excluding traditional analogue telephone services; that support critical or important functions means a function, the disruption of which would materially impair the financial performance of a financial entity, or the soundness or continuity of its services and activities, or the discontinued, defective or failed performance of that function would materially impair the continuing compliance of a financial entity with the conditions and obligations of its authorisation, or with its other obligations under applicable financial services law; or material parts thereof, including ICT intra-group subcontractors that are fully or collectively owned by financial entitiesas defined in Article 2, points (a) to (t) within the same institutional protection scheme, should be considered as ICT subcontractors.

Where applicable, in a group means a group as defined in Article 2, point (11), of Directive 2013/34/EU; context, the parent undertaking means a parent undertaking within the meaning of Article 2, point (9), and Article 22 of Directive 2013/34/EU; of financial entitiesas defined in Article 2, points (a) to (t) should ensure that the policy on the use of ICT subcontractors providing ICT services means digital and data services provided through ICT systems to one or more internal or external users on an ongoing basis, including hardware as a service and hardware services which includes the provision of technical support via software or firmware updates by the hardware provider, excluding traditional analogue telephone services; that support critical or important functions means a function, the disruption of which would materially impair the financial performance of a financial entity, or the soundness or continuity of its services and activities, or the discontinued, defective or failed performance of that function would materially impair the continuing compliance of a financial entity with the conditions and obligations of its authorisation, or with its other obligations under applicable financial services law; or a material part thereof is applied in a consistent and coherent way within the group means a group as defined in Article 2, point (11), of Directive 2013/34/EU;.

It is important to ensure a comprehensive management of the risks means the potential for loss or disruption caused by an incident and is to be expressed as a combination of the magnitude of such loss or disruption and the likelihood of occurrence of the incident; that can arise when ICT services means digital and data services provided through ICT systems to one or more internal or external users on an ongoing basis, including hardware as a service and hardware services which includes the provision of technical support via software or firmware updates by the hardware provider, excluding traditional analogue telephone services; that support critical or important functions means a function, the disruption of which would materially impair the financial performance of a financial entity, or the soundness or continuity of its services and activities, or the discontinued, defective or failed performance of that function would materially impair the continuing compliance of a financial entity with the conditions and obligations of its authorisation, or with its other obligations under applicable financial services law; are subcontracted. For that reason, financial entitiesas defined in Article 2, points (a) to (t) should follow the steps of the life cycle of a contractual arrangement for the use of ICT services means digital and data services provided through ICT systems to one or more internal or external users on an ongoing basis, including hardware as a service and hardware services which includes the provision of technical support via software or firmware updates by the hardware provider, excluding traditional analogue telephone services; that support those functions and that are provided by ICT third-party service providers means an undertaking providing ICT services;, including for subcontracting arrangements. It is therefore necessary to lay down requirements for financial entitiesas defined in Article 2, points (a) to (t) that should be reflected in their contractual arrangements with ICT third-party service providers means an undertaking providing ICT services; where the use of subcontracted ICT services means digital and data services provided through ICT systems to one or more internal or external users on an ongoing basis, including hardware as a service and hardware services which includes the provision of technical support via software or firmware updates by the hardware provider, excluding traditional analogue telephone services; supporting critical or important functions means a function, the disruption of which would materially impair the financial performance of a financial entity, or the soundness or continuity of its services and activities, or the discontinued, defective or failed performance of that function would materially impair the continuing compliance of a financial entity with the conditions and obligations of its authorisation, or with its other obligations under applicable financial services law; is permitted.

To mitigate risks means the potential for loss or disruption caused by an incident and is to be expressed as a combination of the magnitude of such loss or disruption and the likelihood of occurrence of the incident; that are linked to subcontracting, it is necessary to specify the conditions under which ICT third-party service providers means an undertaking providing ICT services; can use subcontractors for the provision of ICT services means digital and data services provided through ICT systems to one or more internal or external users on an ongoing basis, including hardware as a service and hardware services which includes the provision of technical support via software or firmware updates by the hardware provider, excluding traditional analogue telephone services; that support critical or important functions means a function, the disruption of which would materially impair the financial performance of a financial entity, or the soundness or continuity of its services and activities, or the discontinued, defective or failed performance of that function would materially impair the continuing compliance of a financial entity with the conditions and obligations of its authorisation, or with its other obligations under applicable financial services law;. For that purpose, ICT contractual arrangements between financial entitiesas defined in Article 2, points (a) to (t) and ICT third-party service providers means an undertaking providing ICT services; should set out such conditions, including the planning of subcontracting arrangements, the risk means the potential for loss or disruption caused by an incident and is to be expressed as a combination of the magnitude of such loss or disruption and the likelihood of occurrence of the incident; assessments, the due diligence, and the approval process for new ICT subcontracting arrangements on ICT services means digital and data services provided through ICT systems to one or more internal or external users on an ongoing basis, including hardware as a service and hardware services which includes the provision of technical support via software or firmware updates by the hardware provider, excluding traditional analogue telephone services; supporting critical or important functions means a function, the disruption of which would materially impair the financial performance of a financial entity, or the soundness or continuity of its services and activities, or the discontinued, defective or failed performance of that function would materially impair the continuing compliance of a financial entity with the conditions and obligations of its authorisation, or with its other obligations under applicable financial services law; or material parts thereof, or material changes to existing ones made by the ICT third-party service provider means an undertaking providing ICT services;.

To identify risks means the potential for loss or disruption caused by an incident and is to be expressed as a combination of the magnitude of such loss or disruption and the likelihood of occurrence of the incident; that could arise before a financial entity means a natural or legal person created and recognised as such under the national law of its place of establishment, which may, acting under its own name, exercise rights and be subject to obligations; enters into an arrangement with an ICT subcontractor, ICT third-party service providers means an undertaking providing ICT services; should assess, in appropriate and proportional way, the suitability of potential subcontractors on the basis of the ICT contractual arrangements that the ICT third-party service provider means an undertaking providing ICT services; concluded with the financial entity means a natural or legal person created and recognised as such under the national law of its place of establishment, which may, acting under its own name, exercise rights and be subject to obligations;. Those ICT contractual arrangements should therefore require the ICT third-party service provider means an undertaking providing ICT services;, or the financial entity means a natural or legal person created and recognised as such under the national law of its place of establishment, which may, acting under its own name, exercise rights and be subject to obligations; directly, as appropriate, assesses the resources of the potential subcontractor, including its expertise and whether it has the proper financial, human and technical resources, its information security, and its organisational structure, including the risk means the potential for loss or disruption caused by an incident and is to be expressed as a combination of the magnitude of such loss or disruption and the likelihood of occurrence of the incident; management and internal controls that the subcontractor should have in place.

To mitigate any vulnerabilities means a weakness, susceptibility or flaw of a product with digital elements that can be exploited by a cyber threat; and threats that may pose risks means the potential for loss or disruption caused by an incident and is to be expressed as a combination of the magnitude of such loss or disruption and the likelihood of occurrence of the incident; to their ICT systems and operations, financial entitiesas defined in Article 2, points (a) to (t) should be able to monitor the performance of the ICT service means an ICT service as defined in Article 2, point (13), of Regulation (EU) 2019/881; and to be informed of any relevant changes within their ICT subcontracting chain where such changes concern critical or important functions means a function, the disruption of which would materially impair the financial performance of a financial entity, or the soundness or continuity of its services and activities, or the discontinued, defective or failed performance of that function would materially impair the continuing compliance of a financial entity with the conditions and obligations of its authorisation, or with its other obligations under applicable financial services law;.

To enable financial entitiesas defined in Article 2, points (a) to (t) to assess the risks means the potential for loss or disruption caused by an incident and is to be expressed as a combination of the magnitude of such loss or disruption and the likelihood of occurrence of the incident; associated with subcontracting arrangements or material changes thereto, ICT third-party service providers means an undertaking providing ICT services; should inform the financial entitiesas defined in Article 2, points (a) to (t) to which they provide ICT services means digital and data services provided through ICT systems to one or more internal or external users on an ongoing basis, including hardware as a service and hardware services which includes the provision of technical support via software or firmware updates by the hardware provider, excluding traditional analogue telephone services; of all such new arrangements or changes well before such arrangements or changes start to apply. For the same reason, financial entitiesas defined in Article 2, points (a) to (t) should have the right to terminate the contract with the ICT third-party service provider means an undertaking providing ICT services; where the outcome of their risk means the potential for loss or disruption caused by an incident and is to be expressed as a combination of the magnitude of such loss or disruption and the likelihood of occurrence of the incident; assessment shows that the new arrangements or material changes carry a level of risk means the potential for loss or disruption caused by an incident and is to be expressed as a combination of the magnitude of such loss or disruption and the likelihood of occurrence of the incident; that exceed their risk means the potential for loss or disruption caused by an incident and is to be expressed as a combination of the magnitude of such loss or disruption and the likelihood of occurrence of the incident; tolerance.

The European Supervisory Authorities have conducted an open public consultation on the draft regulatory technical standards means a standard as defined in Article 2, point (1), of Regulation (EU) No 1025/2012 of the European Parliament and of the Council (^29^); Regulation (EU) No 1025/2012 of the European Parliament and of the Council of 25 October 2012 on European standardisation, amending Council Directives 89/686/EEC and 93/15/EEC and Directives 94/9/EC, 94/25/EC, 95/16/EC, 97/23/EC, 98/34/EC, 2004/22/EC, 2007/23/EC, 2009/23/EC and 2009/105/EC of the European Parliament and of the Council and repealing Council decision 87/95/EEC and Decision No 1673/2006/EC of the European Parliament and of the Council (OJ L 316, 14.11.2012, p. 12). on which this Regulation is based, analysed the potential related costs and benefits and requested the advice of the ESAEuropean Supervisory Authority’s Stakeholder Groups means a group as defined in Article 2, point (11), of Directive 2013/34/EU; established in accordance with Article 37 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council (²)Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC (OJ L 331, 15.12.2010, p. 12, ELI: http://data.europa.eu/eli/reg/2010/1093/oj)., Article 37 of Regulation (EU) No 1094/2010 of the European Parliament and of the Council (³)Regulation (EU) No 1094/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/79/EC (OJ L 331, 15.12.2010, p. 48, ELI: http://data.europa.eu/eli/reg/2010/1094/oj)., and Article 37 of Regulation (EU) No 1095/2010 of the European Parliament and of the Council (⁴)Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/77/EC (OJ L 331, 15.12.2010, p. 84, ELI: http://data.europa.eu/eli/reg/2010/1095/oj)..

The European Data Protection Supervisor was consulted in accordance with Article 42(1) of Regulation (EU) 2018/1725 of the European Parliament and of the Council (⁵)Regulation (EU) 2018/1725 of the European Parliament and of the Council of 23 October 2018 on the protection of natural persons with regard to the processing of personal data by the Union institutions, bodies, offices and agencies and on the free movement of such data, and repealing Regulation (EC) No 45/2001 and Decision No 1247/2002/EC (OJ L 295, 21.11.2018, p. 39, ELI: http://data.europa.eu/eli/reg/2018/1725/oj). and delivered an opinion on 20 August 2024,