Agencies seek comment on proposed third-party risk management guidance and issue statement on community bank engagement with core service providers

The Federal Deposit Insurance Corporation, Federal Reserve Board, National Credit Union Administration, and Office of the Comptroller of the Currency jointly proposed guidance to help financial institutions manage risks tied to third-party relationships. The proposal draws on supervisory experience and aims to align risk management practices with the specific risks of each third-party arrangement. The guidance emphasizes a principles-based approach and is non-binding, with plans to replace existing guidance upon finalization to promote consistency in the banking sector.

The agencies also issued a statement addressing community banks' interactions with core service providers, outlining factors regulators will consider in supervisory and enforcement decisions. The statement clarifies expectations for how community banks should oversee these critical service providers. Both the proposed guidance and the statement are part of ongoing efforts to modernize risk management frameworks in response to evolving banking practices.

Separately, the Federal Reserve Board requested comment on a proposed third-party risk management guide tailored specifically for Federal Reserve-supervised community banks. This document is designed to complement the joint agencies' broader guidance, providing additional clarity for smaller institutions. The proposal reflects the Fed's focus on ensuring community banks maintain robust risk management practices in line with their unique operational needs.

Comments on the joint agencies' proposed guidance and the Federal Reserve's companion guide are due 60 days after publication in the Federal Register. The proposals underscore the regulators' commitment to updating supervisory tools to address emerging risks in third-party relationships while maintaining flexibility for institutions to tailor their approaches.