Strengthening operational resilience - BCBS proposed principles for managing third-party risks in banking

Article

In response to the growing dependence of banks on third-party service providers and the increased risks associated with digital transformation, the Basel Committee on Banking Supervision (BCBS) has introduced a set of principles to guide the sound management of these external relationships.

Aug 23, 2024

Rosalyn Aryee, Executive Director, TPRM and Operational Resilience, Santander Corporate & Investment Bank

Strengthening operational resilience - BCBS proposed principles for managing third-party risks in banking

The Basel Committee’s new principles for third-party risk management offer a standardized framework to help banks manage the complexities and risks associated with their growing dependence on external service providers.
The principles are designed to be flexible and technology-agnostic, applicable across various technologies like AI, machine learning, and blockchain, and adaptable to the size and complexity of different banks.
Despite the BCBS’s efforts to unify third-party risk management practices, banks face challenges due to the evolving and fragmented regulatory landscape across different jurisdictions, such as the EU’s DORA and the UK’s CTP regime.
Effective third-party risk management requires continuous oversight and periodic contract reviews to ensure compliance with regulations and alignment with organizational needs, emphasizing the importance of robust governance processes.