A joint press release was issued yesterday by the Board of Governors of the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) on managing the risks associated with third-party relationships. The guidance supports a risk-based approach to developing and implementing risk management practices for banks for all aspects of these third-party relationships.
This follows a July 19, 2021 posting in the Federal Register regarding interagency guidance on risk management practices "for all stages in the life cycle of third-party relationships," according to the publication. The interagency guidance is based on comments received and represents final guidance on this topic.
Key details include:
· Banking organizations keep in mind the need to practice compliance with related laws and regulations, as third-party relationships can increase risk;
· Effective due diligence in planning, monitoring and the establishment of procedures and triggers for terminating third-party relationships;
· Risk management practices should be based on the complexity, size and level of risk of banking organizations.
For banks and credit unions who currently have third-party relationships, or are considering the development of such relationships, this guidance can be an important resource for effective management and the creation of appropriate controls to mitigate the risks they pose.
Click on this link for more information: https://www.fdic.gov/news/financial-institution-letters/2023/fil23029.html. As always, reach out to NEACH staff for clarification and suggested risk management practices.
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Kathleen Shea
Consultant
NEACH Payments Group
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