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FDIC, FRB, OCC: Banking Regulators Release Guidance on Third Party Partnerships

Cooley | Jun 15, 2023

Banking regulators issue guidance - FDIC, FRB, OCC:  Banking Regulators Release Guidance on Third Party Partnerships

Banking regulators release comprehensive guidance on managing risks and maximizing benefits in third-party partnerships, urging banks to adopt a risk-based approach tailored to the complexity and level of risk associated with each partnership.

  • Risk-based approach to third-party partnerships
    • It emphasizes that not all partnerships require the same level of oversight or risk management. Each banking organization should assess the risks associated with each third-party partner and tailor their risk management processes accordingly.
    • Banks need to conduct comprehensive risk assessments of their third-party relationships and calibrate their risk management practices based on the level of risk and complexity involved. This approach allows banks to allocate resources effectively and focus on partnerships that pose higher risks.

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  • Regulatory scrutiny on fintech partnerships
    • The guidance specifically addresses the risks associated with fintech partnerships and highlights the potential for new or increased risks due to the unique nature of these arrangements. Regulators emphasize that banks must understand the structure of such partnerships and assess the types and levels of risks involved.
    • Fintech companies partnering with banks can expect enhanced compliance obligations and regulatory oversight. As regulators increase their scrutiny of these partnerships, banks need to ensure they have robust risk management processes in place to manage the associated risks effectively.
  • Considerations for effective risk management
    • Examples of considerations for effective risk management throughout the lifecycle of a third-party relationship such as:
      • Maintaining an inventory of relationships
      • Conducting due diligence
      • Reviewing contractual obligations related to compliance with laws and regulations
      • Regular risk assessments, thorough due diligence, and clear contractual agreements

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NCFA Jan 2018 resize - FDIC, FRB, OCC:  Banking Regulators Release Guidance on Third Party PartnershipsThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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