US banking regulators have issued a joint statement on bank-fintech risks and practices, requesting more information on these arrangements.
The Federal Deposit Insurance Corporation, Board of Governors of the Federal Reserve System, and Office of the Comptroller of the Currency released a joint statement highlighting potential risks in bank partnerships with third parties for delivering financial products and services.
In the statement, regulators emphasised that it “does not alter existing legal or regulatory requirements or establish new supervisory expectations”. However, the release should be a reminder of good practice.
The agencies have identified several risks in bank-fintech relationships, including significant third-party operations, limited access to records, third-party handling of compliance functions, and inadequate risk management that may fail to protect consumers.
Alongside reaffirming existing guidance, the agencies have issued a request for information (RFI) in the Federal Register. This RFI seeks input on bank-fintech arrangements, focusing on risk management practices and their potential implications.
This move responds to the growing trend of these types of relationships, in particular third-parties being used to deliver deposit products and services, such as checking and savings accounts.
The agencies highlighted that the increasing reliance on third-parties for deposit products and services does not lessen a bank’s responsibility to comply with all applicable laws and regulations.
Regulators warn: “A bank’s use of third parties to perform certain activities does not diminish its responsibility to comply with all applicable laws and regulations.”
In a related note, the Consumer Financial Protection Bureau (CFPB) recently took action against Chime Financial for failing to issue timely refunds when accounts were closed.