WASHINGTON D.C. – In a shocking move, the FDIC, Federal Reserve, and OCC have issued a joint final guidance on third-party risk management, but critics are questioning whether it’s too little, too late.
The guidance, which was finalized on June 6, 2023, aims to help banking organizations manage risks associated with third-party relationships, including relationships with financial technology companies. But insiders claim that the move is merely a Band-Aid solution to a much deeper problem.
At the heart of the issue is the FDIC’s failure to adequately regulate third-party relationships, leaving banks vulnerable to cyber attacks and other types of financial crimes. According to sources, the FDIC has been aware of the risks associated with third-party relationships for years, but has done little to address the issue.
The final guidance describes principles and considerations for banking organizations’ risk management of third-party relationships, covering risk management practices for the stages in the life cycle of third-party relationships: planning, due diligence and third-party selection, contract negotiation, ongoing monitoring, and termination.
But critics argue that the guidance is vague and lacks teeth, leaving banking organizations to interpret the rules for themselves. ‘This is just a watered-down version of what we’ve been asking for,’ said one banking expert. ‘It’s a weak attempt to address a serious problem.’
The FDIC has come under fire in recent years for its handling of third-party risk management, with several high-profile cases of cyber attacks and financial crimes making headlines. The agency’s failure to act has left many in the industry wondering if the guidance is too little, too late.
The final guidance replaces each agency’s existing general third-party guidance and promotes consistency in the agencies’ supervisory approaches toward third-party risk management. But as one insider noted, ‘It’s not about consistency, it’s about getting it right.’
The FDIC has declined to comment on the guidance, citing the need for further review. But one thing is clear: the agency has a long way to go in addressing the third-party risk management scandal that has plagued the industry for years.
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Key Facts
- Agency: FDIC
- Category: White Collar Crime
- Source: Official Source â†â€â€ÂÂ
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