pc
nid 94724
Aug 25, 2026
ggallwey@vixio.com
South Africa
Reserve Bank of South Africa
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2148 charsSouth Africa's Reserve Bank Prudential Authority Publishes Third-Party Risk Management Observation Report
On August 24, 2026, the Prudential Authority (PA), a division of the Reserve Bank of South Africa (SARB), published its Third-Party Risk Management and Strategic Partnerships Observation Report. The PA selected third-party risk management (TPRM), including strategic partnerships and binder agreements, as its 2025 supervisory focus area, designated as the "flavour-of-the-year" (FOTY) initiative.
The observation report consolidates insights gathered from supervisory engagements and survey responses submitted by regulated financial institutions operating under the PA's oversight. Third-party risk management encompasses the processes and controls that financial institutions implement to identify, assess, monitor, and mitigate risks arising from relationships with external service providers, strategic partners, and other third parties. This includes risks related to operational resilience, data security, regulatory compliance, and business continuity. The PA's focus on TPRM reflects the increasing reliance of financial institutions on third-party service providers and the associated vulnerabilities this creates within the financial system. Strategic partnerships and binder agreements—contractual arrangements between insurers and reinsurers or other financial entities—present particular supervisory interest given their potential impact on capital adequacy, liquidity, and systemic stability.
The report provides regulated institutions with consolidated findings from the PA's supervisory work and industry responses, offering guidance on best practices and expectations for third-party risk governance. Financial institutions should review the report to assess their own TPRM frameworks against the PA's observations and ensure alignment with supervisory expectations. The publication supports the PA's broader objective of promoting financial stability and protecting depositors and policyholders within South Africa's financial system.
REFERENCES:
Reserve Bank of South Africa Prudential Authority. (2026, August 24). Third-Party Risk Management and Strategic Partnerships Observation Report. Retrieved from SARB Publications.
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2298 charsSouth Africa's Prudential Authority Publishes Third-Party Risk Management Observation Report
On August 24, 2026, the South African Reserve Bank Prudential Authority (PA) published its Third-Party Risk Management and Strategic Partnerships Observation Report, consolidating supervisory insights and survey findings from its 2025 "flavour-of-the-year" supervisory focus area. The report evaluates how regulated financial institutions manage third-party risk management (TPRM), strategic partnerships, and insurance binder agreements, aiming to strengthen enterprise risk capabilities and enhance operational resilience across the financial sector.
The report outlines critical systemic risks facing the market, including concentration risk stemming from heavy reliance on a limited group of major service providers (such as cloud hyperscalers), evolving cybersecurity threats, complex operational interdependencies, and weak exit or contingency planning. Larger banking groups demonstrated relatively mature, integrated TPRM frameworks; however, medium-to-smaller banks, foreign bank branches, and market infrastructures exhibited persistent gaps in governance, due diligence rigor, contractual access, audit provisions, and fourth-party risk oversight.
Regarding strategic partnerships (such as joint ventures and Banking-as-a-Service models), the PA observed heightened operational complexity and deep financial interdependencies that create vendor lock-in and continuity risks during failure scenarios. The PA emphasised that governance across strategic alliances remains inconsistent, requiring greater clarity around accountability, risk ownership, and regulatory treatment.
The report aligns with international standards, including the Financial Stability Board (FSB) TPRM toolkit and the Basel Committee on Banking Supervision (BCBS) Principles for the Sound Management of Third-Party Risk . The report also notes that the PA and the Financial Sector Conduct Authority (FSCA) are actively working to enhance and harmonise existing regulatory instruments on TPRM.
While the observation report is provided for informational purposes and does not impose formal compliance obligations, it establishes clear supervisory expectations, signals future regulatory harmonisation, and firmly reiterates that regulatory accountability remains non-delegable regardless of third-party delegation.