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Mar 26, 2026
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International
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2056 charsBasel Committee on Banking Supervision Issues Principles for Sound Management of Third-Party Risk
On 25 March 2026, the Basel Committee on Banking Supervision (BCBS) issued the Principles for the sound management of third-party risk. These principles supersede the 2005 Joint Forum paper on Outsourcing in financial services and build on recent BCBS publications, including the Principles for operational resilience and the revised Principles for the sound management of operational risk.
The principles address risks arising from banks' arrangements with third-party service providers (TPSPs), including risks to critical services, supply chain disruptions, and concentration risk. Banks engage TPSPs to access specialised expertise, reduce costs, and improve efficiency and operational resilience. However, these arrangements can reduce banks' direct control over operations and assets, including data, and may introduce new risks or increase existing ones.
The BCBS principles follow the lifecycle of a TPSP arrangement across three categories. Principles 1 and 2 provide governance and risk management guidance applicable throughout the lifecycle. Principles 3 through 9 address specific stages: risk assessment, due diligence, contracting, onboarding, ongoing monitoring, business continuity management, and exit planning. Principles 10 through 12 provide guidance for prudential supervisors on evaluating third-party risk management, identifying systemic risks from TPSP concentration, and promoting cross-sector and cross-border coordination.
The principles are designed to accommodate diverse bank risk management practices and promote international consistency whilst reducing regulatory fragmentation. They apply on a proportionate basis depending on the size, complexity, business model and risk profile of the bank, as well as the risks and criticality of TPSP arrangements. Large internationally active banks and their prudential supervisors in BCBS member jurisdictions are the primary targets.
The Executive Summary and related tutorials are available on FSI Connect, the online learning tool of the Bank for International Settlements.
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1131 charsBank for International Settlements Publishes Executive Summary for Sound Management of Third-Party Risk
The Bank for International Settlements (BIS) has published an executive summary on sound third-party risk management for banks, based on the Basel Committee on Banking Supervision's (BCBS) " Principles for the Sound Management of Third-Party Risk ".
The summary outlines the risks banks face when entering into arrangements with third-party service providers (TPSPs), including critical service, supply chain and concentration risks. Therefore, banks need to manage the risks associated with their TPSP arrangements appropriately to enhance their ability to withstand, adapt to, and recover from operational disruption and mitigate the impact of potentially severe disruptive events.
The executive summary sets out the BCBS principles, which fall into three categories: governance, risk management and strategy; management of TPSP risks; and guidance for prudential supervisors. These principles seek to accommodate a diverse range of bank risk management practices and approaches, and aim to promote international engagement, as well as greater collaboration and consistency. This is intended to reduce regulatory fragmentation.