Independent Banker - October 2017 - 72

Risks & Rules
RISK MANAGEMENT
A path through?
The Office of the Comptroller of the Currency's clarifying memo on third-party
risk management brought some relief to community banks.
By Cheryl Winokur Munk
C
ommunity banks can
now breathe a little
easier about their vendor
relationships thanks to
clarity the Office of the
Comptroller of the Currency has
provided on issues related to thirdparty
risk.
In June, the OCC published a
series of 14 frequently asked questions
that pertain to issues such as
reducing oversight for lower-risk
relationships, working with marketplace
lenders and partnering with
startup fintechs that have limited
financial information.
The FAQs helps banks flesh out
information the OCC provided in
guidance dating back to October
2013. Since this initial guidance
came out, the OCC has continued
to draw attention to third-party risk
management in its Semiannual Risk
Perspective publications, as well as in
examination procedures published in
January 2017.
" While the information isn't
necessarily new, it does highlight
the hot-button areas-fintechs and
marketplace lenders-and gives
you ammunition against rogue field
examiners pushing for a greater level
of due diligence FFIEC guidance
requires, " says Brad Smith, managing
director of Cornerstone Advisors'
Technology Solutions practice.
One important area the FAQs
address is how banks can reduce
72 ICBA IndependentBanker October 2017
their oversight costs for lower-risk
relationships. Until now, many community
banks have been treating most
vendors as equal and requiring the
same level of documentation across
the board, which means they have
been spending way too much time on
low-risk vendors, Smith explains.
While the OCC reiterated that
it expects banks to perform due
diligence and ongoing monitoring
for all third-party relationships, the
guidance states that the " level of due
diligence and ongoing monitoring...
may differ for, and should be specific
to, each third-party relationship. "
In practice, this means that banks
won't have to expend as much time
and energy on extremely low-risk

Independent Banker - October 2017

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Table of Contents
Independent Banker - October 2017 - Intro
Independent Banker - October 2017 - Cover1
Independent Banker - October 2017 - Cover2
Independent Banker - October 2017 - Table of Contents
Independent Banker - October 2017 - 2
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