Basel Committee Consults on Principles for the Sound Management of Third-Party Risk

The Basel Committee on Banking Standards has published a consultation on principles for the sound management of third-party risk in the banking sector. The principles address banks' increasing reliance on third-party service providers due to the ongoing digitalization and rapid growth in financial technology, establishing a common baseline for banks and supervisors for the risk management of these arrangements. The consultation consists of 12 high-level principles offering guidance to banks and supervisors on effectively managing and supervising risks from third-party arrangements. The principles introduce the concept of a third-party life cycle and emphasise overarching concepts such as criticality and proportionality. They also address supply chain risk and concentration risk and highlight the importance of supervisory coordination and dialogue across sectors and borders.

While primarily directed at large internationally active banks and their prudential supervisors, the principles also offer benefits to smaller banks and authorities in all jurisdictions. They establish a common baseline for banks and supervisors for the risk management of third parties, while providing the necessary flexibility to accommodate evolving practices and regulatory frameworks across jurisdictions. The deadline for comments is October 9, 2024.

Return to main website.