FFIEC IT Examination Handbook
Outsourcing Technology Services booklet (June 2004) – FFIEC IT Examination Handbook

FFIEC IT Examination Handbook OTS-13: Contract Inducement Concerns (Outsourcing Technology Services)

What does OTS-13 require?

The institution does not sign servicing contracts with provisions or inducements that could harm it, such as extended terms of up to ten years, steep cost increases after the early years, substantial cancellation penalties, or inducements that mask capital problems (asset purchases at book value above market, purchases of the institution's stock, cash bonuses on conversion, up-front cash for unmeasured future savings, deferred conversion or processing fees, or low installation costs traded for high future support costs), ensures the provider furnishes adequate service over the life of the contract, and accounts for any inducement under GAAP and regulatory reporting.

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