FDIC Orders Banking Institution to Terminate Business Relationships with Key Fintech Partners

The FDIC has recently released a consent order made against a Tennessee banking institution as part of its publication of January 2024 Enforcement Decisions and Orders.

The FDIC said that within 60 days of the effective date of the consent order, the banking institution needs to “submit a general contingency plan to the Regional Director… [regarding] how the bank will administer an effective and orderly termination with significant third-party FinTech partners,” as part of its Third-Party Risk Management program for the bank.

The program has to assess as well as manage the risks posed by Fintech companies that are associated with the banking institution.

It should reportedly include policies that are related to due diligence and risk assessment criteria that are required for the products and services offered by the Fintech-focused partner.

The banking institution needs to also work closely with an independent company for completion of a detailed Banking-as-a-Service risk assessment Report.

The banking institutions has further consented, without admitting or denying the charges of unsafe or unsound banking practices, to board supervision of the bank’s management and approval of the bank’s policies and objectives, qualified management, the Regional Director’s prior consent for new or expanded lines of business that may result in an annual 10 percent growth in total assets or liabilities, and a comprehensive strategic plan.

On February 23, 2024, the Federal Deposit Insurance Corporation (FDIC) had released a list of orders of administrative enforcement actions taken “against banks and individuals in January 2024.”

There are no administrative hearings scheduled for March 2024.

The FDIC issued 15 orders in January 2024.

The administrative enforcement actions in those 15 orders “consisted of six orders to pay civil money penalties (CMPs), two combined prohibition orders and orders to pay CMPs, four consent orders, two prohibition orders, and one order terminating consent order.”

To view orders, adjudicated decisions and notices and the administrative hearing details online, check here.

On March 4, 2024, the FDIC issued its list of state nonmember banks recently “evaluated for compliance with the Community Reinvestment Act (CRA).”

The list covers evaluation ratings that the FDIC assigned to institutions in December 2023.

The CRA is a 1977 law intended to “encourage insured banks and thrifts to meet local credit needs, including those of low- and moderate-income neighborhoods, consistent with safe and sound operations.”

As part of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), Congress mandated the public disclosure of “an evaluation and rating for each bank or thrift that undergoes a CRA examination on or after July 1, 1990.”

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