US Agencies Propose Guidance for Managing Third-Party Risks
US Agencies proposed guidance to help banking organizations manage risks associated with third-party relationships, including relationships with cloud service providers. The US Agencies that proposed this guidance are the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System (FED), and the Office of the Comptroller of the Currency (OCC). The proposed guidance, which would replace each agency’s existing guidance on this topic, is open for comments for 60 days within its publication in the Federal Register.
The proposed guidance considers the level of risk, complexity, and size of the banking organization and the nature of the third-party relationship. It describes third-party relationships as business arrangements between a banking organization and another entity, by contract or otherwise. The proposed guidance emphasizes that a banking organization’s use of third parties does not diminish its responsibility to perform an activity in a safe and sound manner and in compliance with applicable laws and regulations. The proposed guidance also discusses supervisory reviews of third-party relationships and is intended for all third-party relationships; it is especially important for relationships that a banking organization relies on to a significant extent, relationships that entail greater risk and complexity, and relationships that involve critical activities as described in the proposed guidance. The proposed guidance describes the third-party risk management life cycle and identifies principles applicable to each stage of the life cycle, including:
- Developing a plan that outlines the banking organization’s strategy, identifies the inherent risks of the activity with the third party, and details how the banking organization will identify, assess, select, and oversee the third party
- Performing proper due diligence in selecting a third party
- Negotiating written contracts that articulate the rights and responsibilities of all parties
- Having the board of directors and management oversee the banking organization’s risk management processes, maintaining documentation and reporting for oversight accountability, and engaging in independent reviews
- Conducting ongoing monitoring of the third party’s activities and performance
- Developing contingency plans for terminating the relationship in an effective manner
Related Links
Comment Due Date: FR + 60 Days
Keywords: Americas, US, Banking, Fintech, Regtech, Third-Party Risk, Guidance, Cloud Computing, Third-Party Service Providers, US Agencies
Previous Article
UK Agencies Examine Financial Stability OutlookRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
