Final guidelines aimed at bolstering third-party risk management in banking organisations have been issued by a cohort of federal bank regulatory agencies.
This initiative is designed to help such institutions better navigate the risks arising from relationships with third-party entities, with a particular emphasis on financial technology, or FinTech, enterprises.
The finalised guidance outlines the principles and key considerations for banking organisations as they manage the risks associated with their third-party relationships. It provides a comprehensive risk management framework covering all stages of the third-party relationship life cycle, which includes planning, due diligence, third-party selection, contract negotiation, ongoing monitoring, and termination.
Illustrative examples to assist banking organisations, notably community banks, are included in the final guidance. These examples are designed to ensure that risk management practices align with the nature and risk profile of their respective third-party relationships. The agencies have expressed their intention to engage with community banks promptly and are planning to develop additional resources soon to assist in managing pertinent third-party risks.
The final guidance supersedes each agency’s current general third-party guidance and promotes consistency in their supervisory approaches towards third-party risk management. This updated guidance includes streamlined language and enhanced clarity based on the agencies’ consideration of public feedback on the preliminary guidance released in July 2021.
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