GRIMY TIMES
The Board of Governors of the Federal Reserve System, along with the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency, have jointly issued final guidance on managing third-party risks in the banking sector. This landmark move aims to help financial institutions better navigate their relationships with external entities, particularly those involving financial technology companies.
The comprehensive guideline outlines principles and considerations for risk management practices at various stages of third-party relationships: from initial planning and due diligence to contract negotiation, ongoing monitoring, and termination. It also includes illustrative examples tailored for community banks to align their risk mitigation strategies with the specific risks associated with their partnerships.
This new guidance replaces each agency’s previous general third-party risk management guidance, promoting consistency in supervisory approaches across the board. The streamlined language and enhanced clarity are a result of public comments received on the proposed guidance released in July 2021.
FDIC officials have expressed a commitment to engaging directly with community banks to ensure they can effectively manage relevant third-party risks. Additionally, the agencies plan to develop further resources to support these institutions in the near future.
The release of this final guideline marks a significant step forward in enhancing the security and stability of the banking system by addressing one of its most critical vulnerabilities: third-party risk management.
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