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FDIC looks to make it easier for banks to partner with fintech

The Federal Deposit Insurance Corp. hopes a new process will make it easier for community banks to partner with technology companies.

The agency on July 20 issued a request for information on a voluntary certification program for financial technology companies, which would reduce banks' need to secure regulatory approval of third-party systems. The agency is exploring a public/private standard-setting partnership that would promote the adoption of innovative technologies at FDIC-supervised financial institutions, according to the press release.

The potential program would allow third-party service providers to voluntarily undertake a certification process with the FDIC to ensure their models meet regulatory standards. Banks interested in partnering with certified providers would not be required to complete a third-party approval process with the FDIC, according to a senior official.

With the request for information, the agency wants to learn about the unique elements or challenges of assessing third-party service providers in order to potentially standardize the due diligence process for community banks with fewer resources.

Many community banks have indicated to the FDIC that the costs and resources associated with evaluating models or third-party providers of models limit financial institutions' efforts to effectively onboard service providers and implement up-to-date models and technology. The FDIC hopes to encourage more community banks to engage with third-party service providers and fintechs, allow FDIC supervision to be more effective and reduce costs associated with doing business with these providers.

"Fostering innovation in the financial sector is a top priority for the FDIC," Chairman Jelena McWilliams said in the press release. "We have to remove unnecessary regulatory impediments that banks must overcome when developing or deploying new technologies."