Supervision of Foreign-Based TSP Program

Advances in technology enable financial institutions to provide customers with an array of products, services, and delivery channels. One result of these changes is that financial institutions are entering into contractual obligations with, and outsourcing banking activities to, foreign-based TSPs (FBTSP). Outsourcing or subcontracting (by domestic TSPs) to FBTSPs raises country risk, in addition to other risks presented by the use of domestic TSPs. Country risk is the exposure to social, economic, and political conditions in a foreign country that could adversely affect the ability of a FBTSP to meet its contractual obligations.

The Agencies' supervisory approach to cross-border outsourcing emphasizes the responsibility of the serviced financial institution to conduct adequate due diligence, manage risks appropriately, comply with applicable U.S. and foreign laws and regulations, and ensure access to critical information with respect to the services being provided by the FBTSP. If circumstances warrant, the Agencies arrange, through the appropriate foreign regulatory agencies, to obtain information related to the services provided to U.S. regulated financial institutions. If significant risks and concerns warrant on-site supervision of the FBTSP, the Agencies secure approval of their representatives at the Task Force on Supervision (TFOS) The FFIEC TFOS coordinates and oversees matters relating to safety and soundness supervision and examination of depository institutions. It provides a forum for the member agencies that supervise banks, thrifts, and credit unions to promote quality, consistency, and effectiveness in examination and supervisory practices and to reduce unnecessary regulatory burden on those institutions. The TFOS has one standing subcommittee, the Information Technology (IT) Subcommittee. before conducting the examination. For these examinations, the Agencies use the same interagency process defined in this TSP booklet and described throughout the IT Handbook.


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