Authorization

What notification/authorization requirements exist for appointing agents?

DFS providers (bank and non-bank) that use agent networks are often not required to request and receive authorisation to appoint individual or bulk agents. Yet, in some cases, there may be regulations to submit strategy documents, risk management policies, or general provider-agent contracts. In some cases, only a notification framework may exist (i.e. no authorization is required)

Arguments for Greater Oversight

Consumer protection

Regulators need to ensure that agents will function properly, and thus, contribute to increase access and trust in financial providers. 

Prudential oversight

Outsourcing service provision to agents is risky and could affect the financial viability of an institution.

Arguments for Greater Flexibility

Principal responsibility

Regulators can protect consumers by

1. requiring that the provider conduct due diligence on potential agents.
2. holding the provider responsible for the actions (or omissions) of its agents.
3. requiring providers to periodically submit information regarding agency agreements.

Risk-based regulation

Regulatory review of individual agents is costly and time-consuming. In most cases, agent risk – both to individual providers and to the financial sector – does not require prudential oversight.

• To ensure that DFS providers have a well-thought-out agent due diligence plan, regulators may wish to require that providers submit detailed plans for how they intend to appoint and manage their agents.
• To maximize efficient use of limited supervisory resources, regulators may wish to require DFS providers to periodically share updated lists of agents rather than reviewing and approving appointment of individual agents.
• Proportionate agent supervision could help to ensure that DFS providers are following proper due diligence procedures and effectively mitigating agent risk.