Federal bank regulators released final joint guidance to help banks manage risks associated with third-party relationships, including financial technology companies.
Specifically, the final guidance describes principles and considerations for banks to manage risks associated with third-party relationships. Further, the final guidance covers risk management practices for the various stages in the life cycle of third-party relationships including planning, due diligence and third-party selection, contract negotiation, ongoing monitoring, and termination.
In addition, the final guidance includes illustrative examples to help banking organizations, particularly community banks, align their risk management practices with the nature and risk profile of their third-party relationships. The agencies plan to engage with community banks and develop additional resources to assist them in managing relevant third-party risks.
The joint final guidance was issued by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency.
It should be noted that the final guidance replaces each agency’s existing general third-party guidance. Moreover, the final joint guidance promotes consistency in the agencies’ supervisory approaches toward third-party risk management. Finally, the final guidance reflects streamlined language and improved clarity based on the agencies’ consideration of public comments on the proposed guidance released in July 2021.