Given the reliance of financial institutions on third-party service providers and the benefits and risks of this reliance, including financial stability risks, the Financial Stability Board (FSB) released a report on third-party risk management tools for financial institutions and oversight approaches for financial authorities.
The report focuses primarily on the provision of critical services, i.e. those whose disruption could significantly compromise the operations of a financial institution. Taking into account evolving industry practices and recent regulatory and supervisory approaches to operational resilience, the toolkit takes a broader approach than that for traditional types of outsourcing.
The primary purposes of the toolkit are: (i) to reduce the fragmentation of regulatory and supervisory approaches to third-party risk management, both between jurisdictions and between financial sectors; (ii) to strengthen the ability of financial institutions to manage risks from third-party service providers and from the supply chain as a whole; and (iii) to facilitate coordination, including at international level, among all stakeholders.
