The US Federal Reserve, Treasury Department’s Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation, are seeking public comment on their jointly proposed guidance on third-party risk management.
The guidance comes as competition, innovation in the banking industry, and technological advancements have increased banking organizations’ reliance on third parties for products, services, and activities such as bank processing, information technology services, accounting, and compliance. The heightened use of third party vendors invites complexity in managing consumer compliance risks. The proposal aims to help banking organizations identify and address risks regarding consumer protection, information security, and other operational risks.
In order to eliminate inconsistencies in supervisory expectations for third-party risk management across the three agencies, the proposed guidance will help establish a single, harmonized framework for assessing banking organizations’ third party risk management, which will be based largely on the OCC’s 2013 guidance and the agency’s 2020 FAQ supplement.
Similar to the OCC’s earlier guidance, the proposed guidance would establish principles for risk management in each stage of a third-party relationship life cycle: planning for the relationship and associated risks, due diligence and third-party selection, contract negotiation, oversight and accountability, ongoing monitoring, and termination of the relationship.
Public comments on the proposed guidance must be submitted to either of the three agencies no later than 60 days after the date it is published in the federal register.