WOCCU advocated proportionality was included in the Financial Stability Board’s (FSB) Toolkit for Enhancing Third-party Risk Management and Oversight. The proportionality language makes it clear that many of the tools are unsuitable for smaller financial institutions and calls for the tailoring of the rules.
This comes on the release by the FSB of the toolkit for financial authorities and financial institutions for their third-party risk management and oversight. The toolkit was developed in response to concerns over the extent and nature of financial institutions’ interactions with a broad and diverse ecosystem of third-party service providers, which could have implications for financial stability. Namely:
- The toolkit was developed in response to concerns over the risks to financial institutions from outsourcing and third-party service relationships.
- The toolkit aims to strengthen financial institutions’ ability to manage third-party risks and financial authorities’ ability to monitor and strengthen the resilience of the financial system.
- The toolkit aims to reduce fragmentation in regulatory and supervisory approaches across jurisdictions and financial services sectors and to facilitate coordination among financial authorities, financial institutions, and third-party services providers.
WOCCU participated in various consultations by the FSB including commenting on the consultation paper back in 2022.
A copy of the toolkit can be viewed here.