OCC official: Strong third-party risk management ‘essential’ to customer, bank safety

In testimony today before the House Subcommittee on Digital Assets, Financial Technology and Inclusion, Donna Murphy, the OCC’s acting deputy comptroller for the Office of Financial Technology, discussed her agency’s supervision activities related to banks’ use of emerging financial technologies.

Murphy also highlighted the OCC’s work with banks to navigate the rapid development occurring in financial technology and to “balance safety, soundness and fairness with innovation and growth.” The OCC’s current financial technology focus includes bank and fintech partnerships, artificial intelligence, digital assets and tokenization, as well as other new technologies and business models, she said.

“Banks’ relationships with third parties, including fintech companies, continue to expand. The use of third parties has significant potential benefits, but strong third-party risk management is essential to avoid harm to consumers or weakening of bank safety and soundness,” Murphy told the subcommittee. She also noted that the OCC “recognizes the potential of other technologies, including distributed ledger technology” and but that the agency maintains a “careful and cautious approach” to their use while industry standards develop and legal and ethical questions are addressed.