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Enhancing FSB’s toolkit for fintech partnerships

The American Fintech Council calls for broader FSB toolkit inclusion of bank-fintech partnerships, bolstering financial sector security and coordination.

Home » Enhancing FSB’s toolkit for fintech partnerships

The Financial Stability Board (FSB) has been urged by the American Fintech Council (AFC) to broaden the scope of its third-party risk management tools by including real bank-fintech partnerships and banking-as-a-service business models.

The FSB launched a toolkit in June for financial institutions and authorities for public comment with the intention of providing clarification for the sector and regulators as well as creating a more secure financial services environment for customers.

In order to reduce regulatory fragmentation, strengthen institutions’ risk management, and increase the financial system’s resilience by encouraging coordination among stakeholders, its architecture employs a comprehensive approach that goes beyond outsourcing.

The AFC, a trade association for “responsible fintechs and innovative banks,” acknowledged the toolkit’s positive aspects in a letter in response, but emphasized that it was only applicable to third parties with an interest in IT, leaving out lending, some payment relationships, and banking-as-a-service models.

The AFC’s CEO, Phil Goldfeder, emphasizes that in order to have the most efficient third-party risk management, both the industry and regulators must change their perspectives on third-party services to incorporate core banking operations and banking-as-a-service.

“We thank the FSB for the chance to work together and look forward to our ongoing partnership to ensure the scope of their guidance reflects the safe and cutting-edge business models in the modern banking system,” the statement reads.

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The AFC asked the FSB and US financial services regulatory bodies to work together to synchronize the laws and specifications governing third-party risk. The necessity for clear federal leadership in this area is shown by the interagency TPRM (Third-Party Risk Management) guidance that was only recently published in the US.

“AFC recommends that as the FSB completes the Toolkit and any potential associated guidance or rulemaking, it coordinates with US financial services regulatory agencies to ensure that rules and requirements addressing third-party risk fit within the FSB’s global approach and are not redundant with or in conflict with the work done by other regulators,” the letter reads.

“In recent years, the scope and character of contacts between financial institutions and a wide range of third-party service providers have changed and grown. Financial institutions have benefited from these changes while also being exposed to new kinds of hazards. These relationships could endanger the stability of the economy if they are not properly controlled.

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