The Basel Committee on Banking Supervision (BCBS) has issued a consultative document proposing ‘Principles for the sound management of third-party risk in the banking sector’. This will replace the 2005 Joint Forum paper ‘Outsourcing in Financial Services’ for the banking sector.
Through the ‘Principles for the sound management of third-party risk’ document, the BCBS seeks to ‘promote a principles-based approach to improving banks’ operational risk management and operational resilience through effective third-party risk management (TPRM). The approach builds on the Principles for operational resilience (POR)’.
The document will address banks’ increasing reliance on third-party service providers due to the ongoing digitalisation and rapid growth in financial technology. They establish a common baseline for banks and supervisors for the risk management of these arrangements.
While primarily directed at large internationally active banks and their prudential supervisors, these Principles also offer benefits to smaller banks and authorities in all jurisdictions.
The BCBS seeks comments on the proposed document, which should be submitted by 9 October 2024.
