US regulators propose bank third-party risk guidelines

Four U.S. financial regulators have proposed new third-party risk guidelines that would let banks and credit unions tailor oversight to each outside relationship while replacing existing guidance. Summary Four federal regulators have opened the proposed guidelines to public comment. The nonbinding framework would replace third-party risk guidance issued in 2023 and 2024. Community banks with less than $30 billion in assets would receive a separate practical guide. Federal Reserve Governor Michael Barr dissented, warning of supervisory gaps and added financial risk. Proposed bank guidelines favor risk-based oversight The Federal Reserve, Federal Deposit Insurance Corporation, National Credit Union Administration, and Office of the Comptroller of the Currency announced the proposal on Sep. 11, saying financial institutions should match their controls to the risks posed by each third-party relationship. Under the proposal, banks and credit unions would consider both the possible harm from an outside provider and the likelihood of the harm occurring. Institutions could use less detailed checks, standard contracts, or less frequent monitoring when a relationship carries limited risk. Th...