TLDR:
- OCC proposal shifts third-party oversight from blanket rules to risk-based bank standards.
- Comptroller Jonathan Gould says the plan cuts regulatory friction for community banks nationwide.
- New guidance clarifies exactly how the OCC supervises core service providers used by small banks.
- Banks gain more flexibility to tailor vendor risk management to their size and complexity.
The Office of the Comptroller of the Currency moved to ease compliance pressure on community banks this week. The agency proposed new guidance on third-party risk management.
Besides, the plan ties oversight requirements to actual risk rather than broad process rules. Regulators say the change gives smaller lenders room to grow.
OCC Proposal Targets Third-Party Risk Management
The OCC published the proposal on its website, framing it as part of a broader push to cut regulatory friction. Under the plan, banks would size their oversight of vendors to the harm a given relationship could actually cause.
A bank’s own scale, complexity, and risk profile would shape how much scrutiny each vendor relationship gets.
The current approach, the agency said, leans on rigid, process-heavy checklists that treat every vendor the same way. That model forces small banks to spend resources on low-risk contracts the same way they do on high-risk ones. The new guidance would drop that uniform standard in favor of a risk-based one.
The OCC also addressed how it monitors core service providers, the firms that supply banks with technology and back-office systems.
Many community banks rely on a small pool of these providers for core banking functions. The agency said clearer supervision standards would help banks handle due diligence and contract negotiations with these vendors.
Comptroller of the Currency Jonathan V. Gould linked the move to a wider policy agenda. He said the proposal cuts unnecessary friction while tailoring supervision to real risk.
Gould added that the changes aim to strengthen banks’ ability to manage vendor relationships without added burden.
Community Banks Get More Flexibility Under New Rules
Gould tied the announcement to remarks from the U.S. Comptroller’s account, which credited President Trump and Treasury Secretary Scott Bessent for prioritizing community banks.
The account said both officials view strong community banks as central to stronger local economies. That framing positions the proposal as one piece of a larger effort touching bank regulation this year.
The OCC said the combined changes give banks more room to manage risk while offering new products and services. Community banks often serve as primary lenders to small businesses and local residents.
Vendor oversight costs have been a recurring complaint from smaller banks. Larger competitors often carry bigger compliance staffs to absorb the same burden.
The agency framed the proposal as part of a continuing effort rather than a single fix. It said it has taken a series of actions already aimed at rightsizing supervisory burden for community banks.
The OCC did not set a specific timeline for when the guidance would take final effect.
Industry watchers will likely track how the proposal moves through public comment. Third-party risk management has drawn scrutiny across the banking sector since several high-profile vendor failures in recent years.
How the OCC balances flexibility with adequate oversight will shape the rule’s final form.
Lighter third-party rules could make banks more open to working with crypto firms. Exchanges and stablecoin issuers often struggle to get banking partners due to strict vendor risk checks.
A risk-based approach might let banks evaluate crypto relationships on their actual risk profile instead of blanket restrictions. That shift could ease a longstanding bottleneck in crypto’s access to traditional banking services.
The post OCC Proposes Lighter Third-Party Rules for US Community Banks appeared first on Blockonomi.
Source: https://blockonomi.com/occ-proposes-lighter-third-party-rules-for-us-community-banks/
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