Regulator Releases Video for Board & Executive Management
Your bank's board has responsibility for vendor management
The FDIC released a video today that is designed to assist community bank directors and executive management in developing a comprehensive risk assessment program for vendor management.
Previous statements by various banking regulators have strongly encouraged banks to perform enhanced due diligence on those vendors that 1) Are not examined by Federal banking regulators and 2) Outsource some or all of the services they perform for a bank to other third parties. One banking regulator reminded banks that if a bank’s vendor was not examined by Federal banking agencies and if examiners were not pleased with the bank’s due diligence on the vendor then the regulatory agencies had the authority to examine the vendor and assess the bank the exam fee.
Regulators have focused extensively on community bank technology risk management capabilities and have commented that operational risks, driven by the rapid changes in technology, are making this the number one risk banks face ahead of both credit and interest rate risk. The bank’s board and executive management are expected to effectively assess and govern risks associated with the bank’s technology systems and the vendors that provide those systems.
The FDIC’s video is designed to educate the board and executive management as to their responsibilities regarding key vendor management issues such as:
• Policies & Procedures
• Risk Assessment Process
• Selection, Evaluation & Ongoing Management
• Business Continuity Planning
The video is available for viewing on the FDIC’s website at https://fdic.gov/news/news/financial/2016/fil16019.html
Technology and outsourcing has become more complex with more vendors than ever before providing services to financial institutions. And many of these vendors are new to the banking industry or have limited experience in dealing with banks and their security, reliability and regulatory requirements.
Whether your bank is supervised by the FDIC or one of the other Federal regulators, having board members watch the video will provide a better understanding of board responsibilities related to vendor management. Documenting when board members watch the video will enhance your regulator’s perception of your attention to an issue they consider being a top risk for your bank.
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