PRA SS2/21 — Outsourcing & Third-Party Risk¶

In one sentence¶

The PRA's expectations for how UK banks and insurers govern outsourcing and material third-party arrangements: register them, assess them, contract properly, monitor them, and be able to exit cleanly.

Who does it apply to?¶

UK banks, building societies, insurance firms, and PRA-designated investment firms with material outsourcing or third-party arrangements.

For an AI agent: the LLM provider (and its sub-providers) are third parties; the cloud provider is a third party; any external tool the agent calls is potentially a third party.

The two-minute explainer¶

SS2/21 came into force in 2022. It applies the PRA's view of outsourcing risk to a world where firms increasingly depend on cloud and SaaS. Its core demands:

Register of outsourcing and material third-party arrangements. With classification by criticality.
Pre-contract due diligence and risk assessment.
Written contracts with required terms (audit rights, sub-outsourcing disclosure, data location, exit, business continuity).
Ongoing monitoring with documented controls.
Documented exit plan — including in stressed scenarios.

The PRA explicitly addresses cloud and AI here: an LLM provider is a critical third party in many production AI agent deployments.

What it actually requires of an engineer¶

Register entry per material third party. Includes the LLM provider, the cloud provider, and any third-party tool the agent uses.
Data location captured. Region pinning is part of the register and contracts.
Exit capability proof. Can you switch providers? In how long? At what cost?
Audit rights exercised. Show evidence of audits — even where performed via SOC 2 / ISO 27001 reports rather than direct.
Long retention of records (5+ years).

What Regulus does for you¶

RegulusAuditPlugin emits third_party_id, third_party_criticality, exit_plan_ref on every event when the pra-ss2-21 profile is active.
ModelRegistry maintains the LLM provider entries; metadata exposes sub- outsourcing.
RegulusDataResidencyPlugin enforces the data-location commitments made in the contract.
RegulusKillSwitchPlugin is the technical exit primitive: if a provider fails, the firm can cut traffic.

Saves you ~¶

Third-party register integration: ~3 engineer-weeks.
Audit-linkage to register entries: ~1 engineer-week.
Exit-plan substantiation evidence: ~2 engineer-weeks.

Net: ~6 engineer-weeks incremental.

Code: minimal¶

regulus:
  compliance:
    profiles: [pra-ss2-21]

Code: production¶

Usually paired with SS1/23 + FCA SYSC:

regulus:
  compliance:
    profiles: [pra-ss2-21, pra-ss1-23, fca-sysc, uk-gdpr]
  adk:
    audit:
      sink: kafka
      kafka-topic: audit.pra-out.v1
    residency:
      allowed-regions: [europe-west2]
      require-cmek: true

How to verify¶

Audit events have third_party_id + third_party_criticality populated.
A configured exit-plan reference is present.
Region drift is impossible because of the residency plugin's fail-closed startup.

What an auditor will ask¶

"Show me your outsourcing register entry for the LLM provider." Linked from audit events.
"What does your exit plan look like?" Off-Regulus document; we surface its reference.
"How do you exercise audit rights?" SOC 2 / ISO 27001 evidence; incidents in audit log.
"Demonstrate provider failover." Operational drill.

What this doesn't cover¶

Negotiating contracts. Operational / legal.
The exit plan itself. Document outside Regulus; we link to it.
Cross-border outsourcing law beyond residency (e.g. tax, FX, employment).

Framework mapping¶

NIST AI RMF — SS2/21 §3 (register) ↔ GOVERN-6.1. §6 (residency) ↔ MEASURE-2.7. §10 (exit) ↔ MANAGE-2.2.
ISO/IEC 42001 — SS2/21 §3 ↔ A.10.3. §6 ↔ A.6.2.4. §7 (audit rights) ↔ A.10.2.

Citations¶

PRA Supervisory Statement 2/21 — https://www.bankofengland.co.uk/prudential-regulation/publication/2021/march/outsourcing-and-third-party-risk-management-ss
SS2/21 §3 — register and classification.
SS2/21 §6 — data residency and location.
SS2/21 §7 — audit rights.
SS2/21 §10 — exit plans.