Federal regulators on Friday issued new guidance to help community banks assess risk as they increasingly consider partnering with financial technology companies to meet customers’ evolving digital preferences.
The Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency released a guide suggesting that banks consider six key pillars of due diligence when evaluating potential fintech partners. Banks should assess a fintech’s: business experience and qualifications; financial condition; compliance with laws and regulations; risk management and control processes; information security; and operational resilience, according to the guide.
The regulators said the
“Due diligence is an important component of an effective third-party risk management process,” the regulators noted in the guide. “During due diligence, a community bank collects and analyzes information to determine whether third-party relationships would support its strategic and financial goals and whether the relationship can be implemented in a safe and sound manner.”