Banking Agencies Finalize Interagency Guidance on Third-Party Risk Management

Cadwalader, Wickersham & Taft LLP

Cadwalader, Wickersham & Taft LLP

On June 6, the three Federal bank regulatory agencies (the Federal Reserve Board (“FRB”), Federal Deposit Insurance Corporation (“FDIC”) and Office of the Comptroller of the Currency (“OCC”)), issued final interagency guidance on risk management associated with third-party relationships (the “Guidance”). The Guidance is effective immediately. 

The Guidance replaces and supersedes each agency’s existing third-party guidance “and promotes consistency in the agencies’ supervisory approaches toward third-party risk management,” and incorporates changes based on comments on the July 2021 proposed guidance.

In comparison to the July 2021 proposed guidance, the Guidance emphasizes a tailored approach to third-party risk management and a banking organization’s size, level of risk, complexity, and the nature of risks presented by each third-party relationship. In reviewing each banking organization’s third-party risk management risk framework, the agencies stated that they would also be instituting similar tailoring. 

The Guidance also explicitly notes the benefits and risks in bank-fintech partnerships. The Guidance especially noted the heightened risk that may be present in arrangements where the fintech interacts directly with the end customer.

FRB Governor Michelle Bowman was the sole dissenting vote on issuing the guidance at the FRB. In her statement, Gov. Bowman stated that she did not think the Guidance went far enough in mitigating regulatory burden on smaller institutions, calling it “a troubling pattern of the agencies' deviation from the risk-based, tailored approach to supervising and regulating banks.”    

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Cadwalader, Wickersham & Taft LLP | Attorney Advertising

Written by:

Cadwalader, Wickersham & Taft LLP

Cadwalader, Wickersham & Taft LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide