FDIC, FRB, OCC: Banking Regulators Release Guidance on Third Party Partnerships | National Crowdfunding & Fintech Association of Canada

Cooley | Jun 15, 2023

Banking regulators release comprehensive guidance on managing risks and maximizing benefits in third-party partnerships, urging banks to adopt a risk-based approach tailored to the complexity and level of risk associated with each partnership.

• Risk-based approach to third-party partnerships
  • It emphasizes that not all partnerships require the same level of oversight or risk management. Each banking organization should assess the risks associated with each third-party partner and tailor their risk management processes accordingly.
  • Banks need to conduct comprehensive risk assessments of their third-party relationships and calibrate their risk management practices based on the level of risk and complexity involved. This approach allows banks to allocate resources effectively and focus on partnerships that pose higher risks.

See:  enhanced compliance obligations and regulatory oversight. As regulators increase their scrutiny of these partnerships, banks need to ensure they have robust risk management processes in place to manage the associated risks effectively.

Considerations for effective risk management

• Examples of considerations for effective risk management throughout the lifecycle of a third-party relationship such as:
  • Maintaining an inventory of relationships
  • Conducting due diligence
  • Reviewing contractual obligations related to compliance with laws and regulations
  • Regular risk assessments, thorough due diligence, and clear contractual agreements

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View the regulatory resource and guidance –> here

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