Bowman: Fed Eyeing Updates to Third-Party Guidance

In a speech at the Federal Reserve Bank of Atlanta today, Federal Reserve Governor Michelle Bowman discussed how the Fed can help boost transparency and provide more clarity to community banks about relationships with vendors and third-party service providers. Elaborating on comments made at ABA’s Conference for Community Bankers earlier this month, Bowman outlined several ways the Fed can achieve this goal.

Among other things, Bowman highlighted a need for more clear and transparent guidance to ensure consistent supervision of partnerships between banks and third parties. She noted that the Fed is working with the other agencies to update its existing third-party guidance, and added that “the Federal Reserve should, as a starting point, move toward adopting the [OCC]’s guidance.”

Bowman also said the Fed should:

  • Encourage community banks to work collaboratively to conduct due diligence on potential partnerships where appropriate.
  • Increase the transparency of its third-party supervisory program by releasing more information about the firms it examines and the outcomes of those evaluations.
  • Ensure that examiners are properly tailoring their expectations for small community banks with regard to third-party monitoring.