The top US banking regulators have issued a guide for community banks seeking to partner with financial technology companies.
The Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency have collectively issued the guidance, aimed at banks looking to expand their reach and serve new customer bases through tech partnerships.
The guide contains detailed information and recommendations on “six key due diligence topics”. These include the business experience and qualifications of companies being considered for partnerships, the companies’ financial condition, legal and regulatory compliance issues, risk management and control processes, information security, and operational resilience.
The regulators said the guidance was recommended but not mandatory, and also emphasized that it did not cover all types of third-party relationship.
While aimed at community banks, the regulators said the fundamental concepts could also be adopted by other kinds of banks and for other kinds of outsourcing partnerships.
The guide stated: “By providing access to new or innovative technologies, companies specializing in financial technologies can provide community banks with many benefits, such as enhanced products and services, increased efficiency, and reduced costs, all bolstering competitiveness.
“Like other third-party relationships, arrangements with fintech companies can also introduce risks. Assessing the benefits and risks posed by these relationships is key to a community bank’s due diligence process.”
Several community banks established fintech partnerships to assist with the distribution and administration of Paycheck Protection Program loans. North Carolina-based Surrey Bank & Trust recently expanded just such a relationship with Teslar Software last month.
- ABA Opposes Legislation to Expand Credit Union Business Lending
- Basel Committee Urges Banks to Up Their Cyber Risk Preparedness
- Banks not pleased with Biden’s Comptroller of the Currency Nominee
- Banking Exchange Leads Discussion on Open Banking Trends
- People’s Bank of China States That All Crypto-related Activities are Illegal