Federal Financial Regulators Propose Updated Guidance for Managing Third-Party Risk in Financial Institutions

The National Credit Union Administration (NCUA) and other federal financial regulators have jointly proposed new guidance aimed at helping financial institutions manage risks associated with third-party relationships. The proposed framework would allow credit unions to tailor due diligence and monitoring based on the actual risk of a vendor, acknowledge limited leverage with large vendors, and clarify that the guidance is non-enforceable, meaning non-compliance will not result in supervisory action. This guidance is intended to replace existing third-party risk management directives.