Community banks routinely rely on third parties for a range of products, services, and other activities. Third parties can provide banks with access to new technologies and products; however, they may introduce new risks or increase existing risks. To assist community banks in developing and implementing their third-party risk management practices, the Federal Reserve, along with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, recently issued “Third-Party Risk Management: A Guide for Community Banks,” which is available at www.federalreserve.gov/publications/files/third-party-risk-management-guide-20240503.pdf.
The guide is a resource for community banks when managing the risk of third-party relationships and provides potential considerations, resources, and examples. It covers the following:
- Risk Management: Discusses risk considerations
- Third-Party Relationship Life Cycle: Explains the five stages of the life cycle
- Governance: Provides considerations for a bank’s governance over third-party relationships
- Appendix: Offers additional resources
The guide does not:
- act as a substitute for the 2023 Interagency Guidance on Third-Party Relationships: Risk Management;
- prescribe specific risk management practices;
- establish any safe harbors for compliance with laws or regulations; or
- have the force and effect of law.
The following resources have additional information about managing third-party risk:
- Supervision and Regulation (SR) letter 24-2/Consumer Affairs letter 24-1, “Third-Party Risk Management: A Guide for Community Banks,” available at www.federalreserve.gov/supervisionreg/srletters/SR2402.htm.
- SR letter 23-4, “Interagency Guidance on Third-Party Relationships: Risk Management,” available at www.federalreserve.gov/supervisionreg/srletters/SR2304.htm.
- Commercial Bank Examination Manual, Section 4062.1: Risk Management of Third-Party Relationships, available at www.federalreserve.gov/publications/files/cbem.pdf.
- “Community Bank Access to Innovation Through Partnerships,” October 2023, available at www.federalreserve.gov/publications/files/community-bank-access-to-innovation-through-partnerships-202109.pdf.
- “Conducting Due Diligence on Financial Technology Companies: A Guide for Community Banks,” October 2023, available at www.federalreserve.gov/publications/files/conducting-due-diligence-on-financial-technology-firms-202108.pdf.