4 Critical or important functions

Financial entities should always consider a function as critical or important in the following situations (⁴² ), where its disruption, discontinuity, defect or failure in its performance would materially impair:

• a. their continuing compliance with the conditions and obligations of its authorisation, or with its other obligations under applicable financial services law;
• b. their financial performance;
• c. the soundness or continuity of their services and activities.

⁴² See also Article 30 of the Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive on the scope of critical and important operational functions in the context of the provision of investment services and activities.

When relying on a TPSP for operational tasks of internal control functions, financial entities should always consider such tasks as critical or important functions, unless the assessment establishes that a failure to provide the tasks or the inappropriate provision of the tasks would not have an adverse impact on the effectiveness of the internal control functions.

When financial entities intend to use TPSPs for the provision of functions of banking activities or payment services or issuance of ARTs as defined in Article 3(1), point (6) of Regulation (EU) 2023/1114 to an extent that would require authorisation (⁴³ ) by a competent authority, they should automatically consider such function as critical or important, as referred to in Section 1211.1.

⁴³ Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets in crypto-assets, and amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937 (OJ L 150, 9.6.2023, pp. 40 – 205, ELI: http://data.europa.eu/eli/reg/2023/1114/oj).

In the case of financial entities that are subject to Directive 2014/59/EU (⁴⁴ ), particular attention should be given to the assessment of the criticality or importance of functions if the third-party arrangement concerns functions related to critical functions and core business lines as defined in Article 2(1), points (35) and (36) of Directive 2014/59/EU and using the criteria set out in Articles 6 and 7 of Commission Delegated Regulation (EU) 2016/778 (⁴⁵ ). Functions that are necessary to perform activities of core business lines or critical functions should be considered critical or important functions for the purpose of these Guidelines, unless the financial entity’s assessment establishes that a failure to provide the function or the inappropriate provision of such function would not have a material impact on the operational continuity of the core business lines or critical functions.

⁴⁴ 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 (BRRD) (OJ L 173, 12.6.2014, pp. 190 – 348, ELI: http://data.europa.eu/eli/dir/2014/59/oj).

⁴⁵ Commission Delegated Regulation (EU) 2016/778 of 2 February 2016 supplementing Directive 2014/59/EU of the European Parliament and of the Council with regard to the circumstances and conditions under which the payment of extraordinary ex post contributions may be partially or entirely deferred, and on the criteria for the determination of the activities, services and operations with regard to critical functions, and for the determination of the business lines and associated services with regard to core business lines (OJ L 131, 20.5.2016, pp. 41 – 47, ELI: http://data.europa.eu/eli/reg_del/2016/778/oj).