Supervision and Regulation Letters
SR 13-19 / CA 13-21
Guidance on Managing Outsourcing Risk
SUPERVISION AND REGULATION
AND COMMUNITY AFFAIRS
|SUBJECT:||Guidance on Managing Outsourcing Risk|
The Federal Reserve is issuing the attached Guidance on Managing Outsourcing Risk to assist financial institutions1 in understanding and managing the risks associated with outsourcing a bank activity to a service provider to perform that activity. This Federal Reserve guidance builds upon the FFIEC Outsourcing Technology Services Booklet (2004) that addresses outsourced information technology services and remains in effect.2
The attached guidance addresses the characteristics, governance, and operational effectiveness of a financial institution's service provider risk management program for outsourced activities beyond traditional core bank processing and information technology services. Further, this guidance applies to all service provider relationships regardless of the type of bank activity that is outsourced. In summary, the guidance describes
- Risks from the Use of Service Providers: discusses potential risks arising from service provider relationships.
- Board of Directors and Senior Management Responsibilities: outlines supervisory expectations for a financial institution's board of directors and senior management in managing risks associated with service provider relationships.
- Service Provider Risk Management Programs: describes the broad framework and processes to effectively manage risks associated with service provider relationships.
Reserve Banks are asked to distribute this guidance to supervised financial institutions, as well as to appropriate supervisory and examination staff. Questions on the attached guidance should be addressed to:
- Division of Banking Supervision and Regulation: Adrienne Haden, Assistant Director, Operations and Information Technology Policy, at (202) 452-2058; or Neha Contractor, Supervisory Financial Analyst, Operations and Information Technology Policy, at (202) 973-7399.
- Division of Consumer and Community Affairs: Phyllis L. Harwell, Assistant Director, Consumer Compliance, at (202) 452-3658.
In addition, questions may be sent via the Board's public website.3
Maryann F. Hunter
Division of Banking
Supervision and Regulation
Sandra F. Braunstein
Division of Consumer
and Community Affairs
- For purposes of this guidance, "financial institutions" refers to state member banks, bank and savings and loan holding companies (including their nonbank subsidiaries), and U.S. operations of foreign banking organizations. Return to text
- See FFIEC Outsourcing Technology Services (June 2004) at http://ithandbook.ffiec.gov/it-booklets/outsourcing-technology-services.aspx. Return to text
- See http://www.federalreserve.gov/apps/contactus/feedback.aspx. Return to text