The EACB welcomes the opportunity to comment on the BCBS Consultative Document on Principles for the sound management of third-party risk. We welcome the centrality ascribed to the principle of proportionality, considering that the approach took into consideration both the banks’ size, complexity and risk profile as well as the nature and duration of the third-party service provided arrangements.
The 12 draft principles for the sound management of third-party risk remain mainly directed at large internationally active banks and their supervisors, and further development and refinement might be required for an adequate application to banks of different sizes and business models, as it may be the wish/approach in different jurisdictions. It remains fundamental considering the specificities of the intragroup arrangements, the socio-economic context in which a bank operates, access to the market, the possibility to develop internal competencies to handle the process, contractual power and (information) asymmetry between third-party service providers and banks. It is important to stress that these would be general principles, and level plain-field interpretation and application issues may arise if the expectations are calibrated in a way that is not fit for purpose.
It might also be complex to convert them into action. In practice, it might be difficult to obtain all the information indicated during the so-called risk assessment and due diligence phases. In addition, this could restrict competition among service providers, as some third-party service providers may decide to withdraw from the financial market to avoid disclosing such information or excessive intermediary costs. From the banks’ perspective, it might reduce the market supply, increase costs or discourage access to key services and competencies, having the opposite effects of the intended ones by these principles, increasing the risk to which banks are exposed.