Interagency Guidelines on Third Party Relations proposed by three banking regulators highlight the risks financial institutions face as banks increasingly rely on external vendors and fintech companies for their products and services. services, industry observers said.

The Federal Deposit Insurance Corp., the Federal Reserve System Board of Governors and the Office of the Comptroller of the Currency are seeking comments on proposed guidance that provides a risk management framework for third party relationships, the agencies said. this week. Third parties mentioned in the document include vendors, fintech companies, affiliates and holding companies of banking organizations, the agencies said.

The 93-page guidance document takes into account the level of risk, complexity and size of a banking organization as well as the nature of the relationship with third parties, and is intended to help promote compliance, including with laws and regulations relating to consumer protection, the agencies said.

The branches said the proposed guidance would replace each branch’s existing guidance on the subject and would be addressed to all banking organizations overseen by the branches. The public would have 60 days to submit comments after the proposal was posted in the Federal Register.

Although third-party risk management has been a part of bank reviews for years, observers said the proposal, which became public on Tuesday, reflects the renewed focus of regulators on these issues as banks seek third parties to help provide services and activities, including basic banking processing. , accounting, compliance, human resources and loan services. These third parties potentially offer significant benefits for banks, including faster and more efficient access to new technologies, human capital and new markets, the agencies said.

“Regulators felt it was important enough to talk about these issues in a unified way. It’s important, ”said Daniel Stipano, partner at Davis Polk & Wardwell LLP who has already spent over 30 years at OCC.

According to David Schwartz, president and CEO of the Florida International Bankers Association, the proposal, which offers more detailed guidance than previous notes, also offers a more modernized approach that addresses issues such as privacy and data security. The proposal could also be an opportunity for regulators to hear from the industry on the existing practices of banks regarding third-party relationship management and address any concerns, he said.

“They have seen this in their reviews and advancements in technology, so there is an increase in the use of third parties with these innovative products and new technology,” Mr. Schwartz said. “It could be a concern – when there is something new, there are always increased concerns about how you are dealing with those risks. “

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