The American Fintech Council, the industry association representing responsible fintech companies, has shown its support for the Financial Stability Board (FSB) following its focus and attention on third-party risk management.
The Financial Stability Board recently released a toolkit for financial institutions and financial authorities that includes important recommendations that can provide important clarity for industry and regulators and create a safer financial services ecosystem for consumers.
In its own report, the FSB explained how “the extent and nature of financial institutions’ interactions with a broad and diverse ecosystem of third-party service providers have evolved and increased” in recent years.
“These developments have brought both benefits and the introduction of different types of risks to financial institutions. If they are not appropriately managed, these relationships could lead to risks to financial stability,” the FSB explained.
Phil Goldfeder, chief executive officer at the American Fintech Council, said: “This toolkit provides a number of recommendations that, if implemented globally, would ensure that financial institutions provide important services to consumers and ensure that they are protected throughout the process.
“I also want to applaud the Financial Stability Board for developing a truly beneficial toolkit for financial institutions engaging in third-party relationships.”
The FSB’s new report
The FSB report also identifies three objectives of the toolkit:
- Reduce fragmentation in regulatory and supervisory approaches to financial institutions’ third-party risk management
- Strengthen financial institutions’ ability to manage third-party risks and financial authorities’ ability to monitor and strengthen the resilience of the financial system
- Facilitate coordination among relevant stakeholders
Goldfeder also discussed the need for enhanced guidance in this area: “In order to have the most effective third-party risk management, both industry and regulators must move beyond the traditional understanding of third-party service towards a new understanding that includes core banking functions, such as lending and payments partnerships.
“We look forward to engaging with the FSB further on this issue to ensure that the scope of their guidance reflects the innovative business models in the modern banking system.”
The American Fintech Council has explained its plans to take advantage of the opportunity provided by the FSB to provide comments on the consultative document.