Introduction

The economic crisis that began in October 2008 in the United States led to several actions by the U.S. government, including the Troubled Asset Relief Program (TARP). Some of these provisions have implications for how U.S. financial services companies manage their offshoring programs. This has led to significant concern as the U.S. financial services industry has been one of the leading adopters of offshoring. Further, media attention on the activities of financial services companies has been heightened. Several negative reports have been targeted at the continued use of offshoring by these companies.

This report provides a fact-based view of the implications of the regulatory and legal provisions on offshoring by U.S. financial services companies. Specifically, the report focuses on the impact of the Troubled Asset Relief Program (TARP) and related regulations on offshoring activities. In addition, the report also provides a forward-looking perspective on potential regulations and associated implications for the offshoring industry.

Scope

• Proposed and enacted regulatory changes
• Types of companies impacted and degree of potential impact
• Assessment of impact of changes on current and future offshoring activities

Contents

Our research concludes that there has been limited impact of recent regulations on the offshoring plans of leading financial services companies. Specifically, companies will continue to leverage offshoring, continue to grow offshore operations, and expand across multiple geographies. The key impact has been in terms of increased complexity of managing offshoring. Increased regulatory oversight, heightened media sensitivity to offshoring by TARP recipients, and increased executive attention have led to greater complexity and efforts in managing offshoring programs.

The Durbin-Grassley bill and the proposed change to the U.S. tax code have potential implications for offshoring, albeit not restricted to financial services companies. Both of these are significant developments. The degree and extent of impact will be determined by several factors, including which provisions are enacted. The report includes an assessment of the potential impact of these actions.