A guide to support community banks in managing risks presented by third-party relationships was introduced by federal bank regulatory agencies this week.
Community banks engage with third parties to help them better compete in an evolving financial services landscape. However, third-party relationships present varied risks that community banks. As such, banks must be able to appropriately identify, assess, monitor, and control these risks to ensure that their activities are performed in a safe and sound manner and that they are compliant with applicable laws and regulations. These laws and regulations include those designed to protect consumers and those addressing financial crimes.
This new guide is designed to be a helpful resource for community banks. It offers potential considerations, resources, and examples through each stage of the third-party relationship. It was developed by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC).
The guide is organized under the following topics:
• Risk Management. Discussion on risk considerations.
• Third-Party Relationship Life Cycle. The five stages of the life cycle are explained.
• Governance. Considerations for governance related to third-party risk.
It should be noted that while the guide illustrates the principles discussed in the third-party risk management guidance issued by the agencies in June 2023, it is not a substitute for that guidance.