FDIC issued a request for information on the potential for a public or private standard-setting partnership and voluntary certification program to promote the efficient and effective adoption of innovative technologies at FDIC-supervised financial institutions. The request for information, released as part of the FDiTech initiative, asks whether the proposed program might reduce the regulatory and operational uncertainty that may prevent financial institutions from deploying new technology or entering into partnerships with technology firms. Comments must be received by September 22, 2020. In addition, FDIC announced the start of a rapid prototyping competition to help develop a new and innovative approach to financial reporting, particularly for community banks.
With respect to the financial reporting initiative of FDIC, twenty technology firms from across the country have been invited to participate in the competition. The participating firms will develop proposed solutions over the next several months and present them to FDIC for consideration; these firms represent leaders in the financial services, data management, data analytics, and artificial intelligence or machine learning fields. These modern tools—and lessons learned in future competitions—are expected to help make financial reporting seamless and less burdensome for banks, provide more timely and granular data to the FDIC on industry health, and promote more efficient supervision of individual banks.
Meanwhile, the FDIC request for information seeks input on whether a standard-setting and voluntary-certification program could be established to support financial institutions' efforts to implement certain models (such as credit underwriting models) and manage model risk by certifying or assessing certain aspects of the models. Input is also sought on whether this program could be established to conduct due diligence of third-party providers of technology and other services by certifying or assessing certain aspects of the third-party providers' operations or condition. FDIC is especially interested in information on models and technology services developed and provided by financial technology companies, also referred to as fintechs.
In terms of input, FDIC is interested in comments regarding initial due diligence and ongoing monitoring elements associated with third-party providers of technology and other services that support a financial institution's financial and banking activities such as deposit, lending, and payment functions. FDIC also is interested in comments regarding due diligence for other types of providers such as third-party providers that support a financial institution's corporate activities such as payroll and human resources. FDIC seeks public input regarding all aspects of establishing a standard-setting organization, qualifying certification organizations, and implementing a voluntary conformity assessment process. FDIC is also considering, and seeking comments on, whether and how the FDIC supervisory and examination efforts would need to be modified to facilitate a financial institution's use of a certified model or a certified third party of outsourced technology services.
- Press Release on Certification Program
- Federal Register Notice on Certification Program
- FDIC Letter on Certification Program
- Press Release on Financial Reporting Initiative
Comment Due Date: September 22, 2020
Keywords: Americas, US, Banking, Fintech, FDiTech, Operational Risk, Outsourcing Arrangements, Artificial Intelligence, Machine Learning, Reporting, Credit Risk, Third-Party Arrangements, FDIC
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