Industry News

Federal Reserve Steps Up Scrutiny of Tech Firms That Serve Banks

Financial services, digital banking, federal reserve, park avenue group, wsj, best banking recruiters, banking regulations

The Federal Reserve is looking at ways to step up supervision of technology firms that serve the banking industry

By Kristin Broughton

Shoring Up Security Vulnerabilities in the Financial Sector

The Federal Reserve is looking at ways to step up supervision of technology firms that serve the banking industry, amid ongoing concerns about the threat of cybersecurity breaches, a senior official said.

The central bank is looking at whether to examine the compliance programs and governance structures at tech firms that provide data storage and services to the industry, Richard Ashton, deputy general counsel for litigation, enforcement and system matters, said Thursday at a conference in New York.

Financial regulators are allowed under the Bank Service Company Act to examine third-party vendors that provide core banking services, according to Mr. Ashton. As more banks outsource data management and other services to technology firms, regulators may be justified in strengthening their oversight, Mr. Ashton said.

“How far the authority goes to conduct examinations, I think, is something we are closely looking at,” Mr. Ashton said, speaking broadly about Fed enforcement priorities. “Is it something that we can look at the governance structure at these third-party providers? Can we look at their overall compliance management program?”

Mr. Ashton didn’t provide additional details about the central bank’s examination plans. His comments come four months after a hacker accessed personal information of 106 million credit-card customers that Capital One Financial Corp. had stored on Amazon.com Inc. ’s cloud service.

Banks are ultimately responsible for managing the risks associated with vendor relationships, but in cases where several banks rely on the same third-party provider, regulators may have a bigger role to play, Mr. Ashton said.

Write to Kristin Broughton at kristin.broughton@wsj.com

Source: Federal Reserve Steps Up Scrutiny of Tech Firms That Serve Banks

More About Park Avenue Group

Discover how Park Avenue Group rises above the competition, delivering unparalleled solutions and top-tier candidates that allow your business to succeed.