Duane Morris LLP - 2024 regulatory developments for banking partnerships

While we finish 2024, it is logical to return to the year and the most important developments that we have seen with regard to the banks working and partnership with financial technology companies.

During another year, we have seen many speeches and indications of federal banking agencies that they put research, people and time to examine how the banks are better equipped to treat and associate with fintech in a safe and safe manner and solid, and in a way that complies with applicable laws and regulations.

This year, a major objective has been on third party risks and supplier management. This summer, federal banking agencies have published a certain number of important orientations that reiterate and update the previous directives in the field of third -party risk management – a large part of which has focused on -bank -finch partnerships.

In addition to the directives on banks working with fintech companies and third-party risk management, 2024 has also seen significant increase, both at the national and global level, with regard to cryptocurrencies and digital assets.

Although the United States has been slow to adopt advice and certainly regulations in the field of cryptocurrency or digital assets, it remains a subject of burning discussion in the context of the Federal Banking Agency as well as in the regulatory context of financial markets.

Above all, however, on a global scale, the United States seems to be lagging behind to cryptocurrencies and digital assets. We expect more than these subjects in 2025. By focusing on the banking-finch partnerships, when there is too many activity to be discussed in a single article, there are some particularly remarkable updates of 2024 which are essential to revise.

FDIC advertising rule

The Federal Deposit Corp. Begun in 2024 when it is published a final rule in the federal register to modify its regulations which govern the use of the official FDIC logo and the advertising declarations of banks “to reflect the way the depositors lead to business with (banks) Today, including via digital and mobile channels.

The final rule also aimed to clarify “FDIC regulations concerning the false declarations of the insurance insurance coverage by attacking specific scenarios where consumers can be misleading as to whether they make business with business One (assured deposit institution) and if their funds are protected by federal insurance insurance. Line and mobiles to access their money and use financial technologies for alternative means to access banking products and services. With this increased use of financial technology, the FDIC expressed its concern that consumers can be confused or even misleading as to the availability of FDIC insurance in certain contexts.

Thus, the final rule “requires clear disclosure which will better inform consumers as to their funds are protected by FDIC deposits’ insurance”.

Guide Internestitutions

In May, the office of the Monnaie Controller, the Council of Governors of the Federal Reserve System and the FDIC published a guide entitled “Third -party risk management: a guide for community banks”. (2)

The guide is to help community banks to develop and implement appropriate third party management practices and to provide banks in the additional resources community on third -party risk management. Although generally applicable to all banking suppliers, the guide is particularly important in the context of the banking-finch partnership, because third-party risks have been the gateway through which many directives were issued by federal banking agencies on partnerships banking-end.

Interinstitutions declaration

Federal banking agencies followed a short time after publication of the guide by issuing an inter -findings declaration on agreements with third parties to provide filing products to “note the potential risks linked to agreements between banks and third parties to provide products and bank deposit services to end users “. (3)

The inter -institutions declaration does not modify any legal or regulatory requirement established or establishes new expectations, but it rather provides examples of practices that banks are implementing to manage risks – by emphasizing operational, compliance and compliance risks and growth – associated with these arrangements.

As with previous guidelines, the interinningitance declaration reiterates that federal banking agencies “support responsible innovation and support banks in the pursuit of third -party arrangements in a manner in accordance with safe and solid practices and in accordance with applicable laws and regulations”. Federal banking agencies appreciate that banks generally look at these arrangements in order to support income growth and exceed, extend geographic scope or other strategic objectives, such as the execution of new technologies or offer of innovative products and services.

However, federal banking agencies are the first to remind banks that “the use of third parties to carry out certain activities does not decrease its responsibility to comply with all applicable laws and regulations”.

Above all, the inter -institutions declaration calls for consumer protection laws, such as fair loans and prohibitions against unfair, deceptive or abusive acts or practices, as well as laws on financial crimes such as fraud and money laundering money. The call of specific laws and regulations in advice generally follows experiences – that is to say the supervision problems – of agency examination and application staff, and should be used as a tool so that Banks learn gaps from others.

RFI Internestitutions

Third, also in July, federal banking agencies published a request for information in the Federal Register for the search for information and perspectives of stakeholders on the banking-enduch provisions involving banking products and services. (4)

The agencies have indicated that “the supervision experience has highlighted a range of risks with these banking-enduch provisions”, while reiterating the common chorus that “agencies support responsible innovation and support the banks in The continuation of the banking-ending provisions in accordance with the way in which safe and solid practices and applicable laws and regulations, including, but without limiting themselves, the consumer protection requirements and those dealing with financial crimes.

The Request for Information Solicits Input On The Nature of Bank-Fintech Arrangements, The Benefits and Risks, Effective Risk Management Practices, and the Implications of Bank-Fintech Arrangements, Including “Whether Enhancements to Existing Supervisory Guidance May Be Helpful in Addressing Risks Associated with These arrangements. “It will probably be the case that the responses to this request for information will shed light on future guidelines and / or regulatory improvements focused on specific risks in banking provisions.

Take -out

So, what do these developments mean in 2024 for bank partnerships? It seems that there are several key dishes to remember.

Firstly, federal banking agencies include and clearly recognize the growing ecosystem of banking-fine partnerships and the expansion suite of products and services offered by these arrangements.

Secondly, federal banking agencies will continue to apply an in-depth examination to the benches-enduch agreements to guarantee solid and solid compliance and compliance by all parties with applicable laws and regulations. We expect to see this in -depth examination applied in particular in the context of consumer protection and the offer of new products or services.

Finally, these developments indicate that there is more to come and that there is a real opportunity for the ecosystem of the bank and the fintechs to play a significant role in the changing regulatory framework.

Perhaps the following quotation by the government of the Board of Directors of the Federal Reserve Michelle Bowman of a speech in June would be a very useful posture for all the federal banking agencies to do to go ahead:

Financial innovation must be a basic regulatory priority, in the sense that we must devote regulatory and supervision resources and attention to the construction of a framework that allows responsible innovation to flourish. Our approach must go from reactive to active and which facilitates innovation. Regulators must also promote innovation through transparency and open communication, ideally demonstrating a desire to engage during the development process and in a limited environment for experimentation.

The use of financial technology to improve customer acquisition, integration, relationships and surveillance, among other uses, will only grow. Technologies will become smarter, better, faster and stronger regarding the facilitation of banking products and services in all facets of the industry.

The result is a continuous innovation, an in -depth examination and a sustainable regulatory commitment to identify and resolve the risks in the bench agreements.