MAS and AI in financial institutions
MAS Notice 658, paragraphs 2 to 4 — Management of Outsourced Relevant Services for Banks
The cross-sector Guidelines on Outsourcing were cancelled. Since 11 December 2024 a bank in Singapore owes a binding Notice as well as a Guideline, and Notice 658 requires a register of outsourced relevant services submitted to the Authority semi-annually. Whether a model API belongs on it turns on three definitions, none of which mentions technology.
§ 1 — In practice
Three definitions, and the one nobody applies to a model API
The Guidelines on Outsourcing dated 27 July 2016 and last revised 5 October 2018 are marked cancelled and were in effect until 10 December 2024. What replaced them is not a like-for-like document. For banks, outsourcing is now a binding Notice — 658, issued under section 47A of the Banking Act 1970 — read together with the Guidelines on Outsourcing (Banks). For merchant banks the Notice is 1121. For every other MAS-regulated institution the replacement is the Guidelines on Outsourcing (Financial Institutions other than Banks), which is a Guideline and not a Notice. So the same third-party AI arrangement sits inside a legally binding requirement in one firm and inside a supervisory expectation in another, and a group policy written to a single standard will be wrong somewhere in the group. Any policy still citing the 2016 document is citing a cancelled instrument.
Three definitions do the work, and each is a trap for AI procurement. An outsourced relevant service is a relevant service, other than one set out in Annex B, which the bank performs or previously performed itself, or which is integral to a business the bank may carry on under section 30(1) of the Banking Act, or which is set out in Annex C. An ongoing one is obtained for more than twelve months, or for twelve months or less where the agreement is renewed or extended, or intended to be, such that the cumulative duration exceeds a year. A material one is where the bank has reasonable grounds to believe that unauthorised disclosure of or access to information held by the provider, unauthorised access to the provider’s books, systems or premises, or a failure by the provider to supply the service in accordance with the agreement, will materially and adversely affect its section 30(1) business, its customers, its financial soundness or reputation, its ability to manage its risks, or its ability to comply with the laws and regulatory requirements applying to it. The determination requires reading the annexes, which set out included, excluded and exempted services; nothing on this page characterises their contents.
The twelve-month limb is where AI procurement most often falls outside a register it belongs on. A one-year subscription to a model API that the bank intends to renew is an ongoing arrangement on the definition’s own words: the duration is cumulative and the test is forward-looking, so intention alone is enough. Most model and copilot purchases are exactly that, and most are booked as software licences by a procurement function nobody has asked to apply an outsourcing definition to an inference endpoint. The register is submitted to the Authority semi-annually and at any time upon request, which changes what an omission is. It is not an internal gap to be found at the next audit. It is an incomplete filing.
Materiality here is not the AI risk materiality a firm assigns to a model, and the two are merged routinely because they share a word. This Notice’s test concerns the consequence of the provider failing or being compromised. A model risk materiality rating concerns the consequence of the model being wrong. A recommendation model with modest decision impact, supplied by a provider whose outage would halt a business line, sits low on one scale and material on the other — and only the second puts it inside paragraph 4. Limb (iv) is the one that catches AI most often, because an AI component inside transaction monitoring or sanctions screening becomes compliance-critical before it becomes financially significant, and a provider failure impairing the bank’s ability to comply is caught on those terms alone. Where a deployer’s own duties reach only what that deployer controls is the boundary Article 26 draws; this register admits no such boundary, because it records what the bank obtains however little of it the bank can see.
Nothing in the Notice moves the obligation to the provider. Paragraph 4 requires the bank to implement policies and procedures identifying all material ongoing outsourced relevant services and assessing, managing and monitoring the risks; to maintain effective supervision, with approving authorities commensurate with the scale and complexity of the arrangement; and to establish and implement measures minimising disruption where the provider cannot adequately provide the service or the bank exercises a right to terminate. Establish and implement: an exit plan never once exercised satisfies the first verb only. In the Union there is a mechanism by which responsibilities move along a supply chain, addressed at Article 25. Here there is none in either direction, and the bank holds the duty whoever built the model.
§ 2 — What discharges it
What the register and its determinations must show
The artefacts an assessor asks to see, and what makes each one sufficient rather than merely present.
01
The register as most recently submitted to the Authority
The filed version rather than the working copy, with the model and AI services identified on it and reconciled against the firm’s own inventory of AI systems. Differences between the two populations are the finding, whichever way they run.
02
The three-limb determination for each AI vendor
Relevant service, ongoing, material — decided separately and recorded, including for vendors determined to sit outside. A single materiality rating with no anterior determination has skipped two of the three questions.
03
The twelve-month analysis, including renewal intention
Term, renewal and extension history, and the bank’s stated intention, for every AI subscription. Intention is what the ongoing limb turns on, and it is held by the business rather than by the contract file.
04
Exit measures for a material AI service, exercised
What the bank does if the provider stops or the agreement ends, tested rather than described, with elapsed time and throughput achieved. The paragraph requires such measures to be established and implemented.
05
The approving-authority record for AI arrangements
Who approved each material arrangement and at what level, tested against supervision commensurate with scale and complexity. A committee that approves everything evidences a queue rather than an authority.
06
Change control catching AI added to an existing service
The contractual notification owed before a purchased service becomes AI-enabled, and the register update that follows one. Most firms will meet AI first through a vendor feature release, not through a procurement.
§ 3 — Who it binds
Banks, merchant banks, and everyone else
Financial institution
Banks in Singapore, under paragraph 1.1 of Notice 658; merchant banks under Notice 1121. Financial institutions other than banks are outside the Notice and inside the Guidelines on Outsourcing (Financial Institutions other than Banks), which is a supervisory expectation rather than a binding requirement. Inside a bound bank the register reaches every ongoing outsourced relevant service, and every outsourced relevant service involving disclosure of customer information whatever its duration.
§ 4 — Worked example
Worked example — a twelve-month licence that was not one
A bank buys a document-understanding service to extract data from trade finance paperwork. It is a twelve-month subscription with an auto-renew clause, priced as software, approved by the technology procurement committee, and recorded in the application inventory. The vendor runs the models on its own cloud; the bank sends scanned documents containing customer names and account numbers. Trade operations has redesigned its process around the service and no longer double-keys.
Does it belong on the register, and if so under which limb?
It belongs there twice over. It is an outsourced relevant service if extraction is integral to a business the bank carries on, or if the bank performed that work itself before buying the service — and trade operations dropping double-keying is the fact that establishes the second. It is ongoing: a twelve-month term with auto-renewal produces a cumulative duration exceeding twelve months on the definition’s own words, and the clause removes any argument about intention. Because customer information is disclosed to the provider, it also falls within the second limb of the register requirement whatever its duration. Materiality is a separate determination and the answer is probably yes, but it has to be reached on the Notice’s grounds rather than assumed — the bank should ask what happens to trade finance processing if the vendor is unavailable for a week, now that the manual path has been retired. The finding a supervisor reaches first is not that the answer was wrong. It is that nobody was asked the question, because the purchase was routed as a licence.
§ 5 — What a weak answer looks like
The platform registered, the service not
The register that lists the cloud and not the service running on it. A bank shows a complete, promptly updated filing in which the hyperscaler appears with a material rating and a thorough exit plan, while the model services consumed through that platform appear nowhere — procurement treated them as consumption inside an arrangement already registered. Each is separately obtained, separately terminable and separately capable of failing on its own, and the definitions attach to the service rather than to the invoice it happens to arrive on.
§ 6 — When it applies
When the replacement took effect
11 December 2024
The Notice is dated 11 December 2023 and took effect on 11 December 2024 — a commencement date for a legally binding requirement. The cross-sector Guidelines on Outsourcing it displaces were in effect until 10 December 2024.
§ 7 — Exposure
What follows from a binding Notice
Binding: an incomplete or unsubmitted register contravenes a Notice issued under the Banking Act 1970.
Notice 658 is issued under section 47A(2), (4), (6), (7) and (12) of the Banking Act 1970. MAS states that Notices primarily impose legally binding requirements on a specified class of financial institutions or persons, and that Directions have legal effect, meaning MAS could specify whether a contravention of a direction is a criminal offence. No monetary figure appears here: the statutory provision text could not be read from a primary source, and an unverified number is not published in this collection.
§ 8 — Elsewhere
Third-party duties elsewhere
Where another instrument addresses the same obligation. These are correspondences, not comparisons — the Council does not rank one framework against another.
Article 26 sets out what a deployer owes for a high-risk system it puts into use. The duties here attach to the bank as the institution obtaining a service, and are not framed in provider or deployer terms at all.
Article 25 addresses how responsibilities move between actors in a supply chain. This Notice contains no transfer mechanism: the register and the management duties stay with the bank.
FEAT Principles
FEAT principle 8 states that firms using AIDA are accountable for both internally developed and externally sourced models. It is the principles-level form of what this Notice turns into a filing obligation.
A correspondence indicates that two instruments address the same underlying obligation. It is not a mapping endorsed by either body, not a statement that one satisfies the other, and not a judgement about which is more demanding.
§ 9 — provenance
The provision itself
This page sets out what the instrument requires and what discharges it. The official text is the authority — these go straight to it.
- MAS Notice 658, Management of Outsourced Relevant Services for Banks, dated 11 December 2023. Paragraph 2 definitions, paragraph 3 register, paragraph 4 management of material ongoing outsourced relevant services.
- MAS third-party risk management page: Notices 658 and 1121 and both Outsourcing Guidelines dated 11 December 2023, effective 11 December 2024.
- Cancellation record for the cross-sector Guidelines on Outsourcing dated 27 July 2016, last revised 5 October 2018, in effect until 10 December 2024.
- MAS’ statement of instrument classes, which supplies the legal effect asserted here and nothing beyond it.
§ 10 — Also read
Also read
Critical-system classification for AI — MAS Notice FSM-N05
Certification
Assessed on the same standard of evidence
Every Council credential is examined on applied judgement against a published anchor, set out the way the obligations on this page are. The Certified Applied AI Associate, the Council’s flagship, is open to any adult today, its fee waived by a coupon code from the AI-Readiness Check, and the register lists what is open for enrolment.