The FDIC Looks to Establish Standards-Setting Body for Bank-Third Party Partnerships

The Federal Deposit Insurance Corporation (FDIC) is looking to create an independent standards-setting body to help certify whether bank service providers and vendors meet federal regulatory guidelines for third-party risk management. The entity would likely be called the Banking Innovation Standards Development Organization (BISDO). The FDIC is collaborating with bank and financial technology trade groups such as the American Bankers Association (ABA), the Independent Community Bankers of America (ICBA), the Bank Policy Institute, the Financial Technology Association, the American Fintech Council, the Coalition for Financial Ecosystem Standards, and the Consumer Bankers Association. The FDIC is expected to provide seed funding for the body.

Notable Items in the Term Sheet

A draft term sheet dated July 21, 2026 has been circulated among stakeholders, but this term sheet and the terms will likely change. Banks and bank service providers would be wise to monitor changes to the term sheet as it develops. Nonetheless, some key points in the draft term sheet are worth noting:

• BISDO would develop and publish standards that meet federal regulatory expectations for third-party risk management.
• BISDO would have a voluntary certification program for bank third-party service providers, which would be assessed against the BISDO standards.
• BISDO would have independent assessors to evaluate whether a service provider meets the standards.
• BISDO would publish a registry with a list of certified service providers and products offered by those providers that banks could access.
• BISDO would be voluntary for both banks and service providers. A service provider or product not appearing on the BISDO registry would not impact a bank’s ability to use the service provider.
• BISDO would have a wide scope: The term sheet states that framework could apply to “technology and non-technology partners, novel and legacy providers, customer-facing and back-office services, and product-, service-, platform-, model-, or control-domain-specific solutions.”
• BISDO would conduct ongoing monitoring to ensure that certifications are kept up to date and that service providers continue to meet BISDO standards.

Potential Impacts for Banks

This effort seems to be aimed at making third-party risk management easier for community banks. The term sheet specifically notes that community banks would benefit from BISDO. All banks would be able to use the certification as part of their third-party risk management programs, but community banks are in a unique position to benefit. BISDO would streamline the due diligence process for community banks and for banks with limited resources and allow them to focus their resources elsewhere.

Where Federal Banking Regulators Fit In

BISDO could also be a boon to the bank regulatory agencies. BISDO would allow federal banking agencies (i.e., the FDIC, the Office of the Comptroller of the Currency (OCC), and the Federal Reserve) to have more visibility into banks’ third-party service providers. BISDO could ease burdens on front-line examiners with consistent, open standards. Regulators would also gain more insight into banks’ technology or service providers. Regulators might see BISDO certification as a guard against incidents like Synapse’s 2024 failure by allowing regulators more insight into banks’ third-party partners and by assuring that these partners are operating safely and soundly. This proposal does benefit banks and banks’ service providers, but regulators will also benefit.

It is not clear whether all federal banking agencies plan to join the effort. There are reports that the OCC would join the FDIC’s efforts. The FDIC and OCC have generally been in lockstep on regulatory issues during the second Trump administration, partially because the Comptroller of the Currency, Jonathan Gould, also serves on the FDIC board. There has been no indication whether the Federal Reserve will join this effort. The Federal Reserve has generally been behind the OCC and the FDIC in making regulatory changes during the second Trump administration. However, Vice Chair for Supervision Michelle Bowman has a background in community banking and has been supportive of efforts to reduce burdens on community banks—she may push the Federal Reserve to join in developing BISDO. Although most community banks are regulated by the FDIC, BISDO will be more effective if all federal banking agencies join. This is something to monitor as this develops.

Conclusion

There are many open questions with the effort to create and implement BISDO. For example:

• Will BISDO certification become a de facto requirement for third parties to partner with banks, either through regulatory or industry pressure?
• How will BISDO be funded once implemented—will regulatory agencies bear some of the cost, or will private parties foot the bill?
• With technology transforming the banking industry, will BISDO have the expertise and agility to certify cutting-edge technologies?

Answers to these questions will influence BISDO’s success and impact in the industry.

Banks, bank service providers, financial technology companies, or any entity looking to partner with a bank should keep an eye on developments. While the number of stakeholders involved in the project suggests that this effort will take some time, federal banking regulators have been working diligently to reduce burdens on community banks. Expect to hear more about this effort in the coming months.

Clark Hill’s Financial Services Regulatory & Compliance group helps clients navigate changes in an evolving regulatory environment by providing guidance and fractional compliance services in order to meet their needs. Our exceptional team of lawyers and government and regulatory advisors has extensive experience and knowledge of the laws and regulations governing financial products and services. We can assist clients in developing and implementing compliance programs. For more information, please contact Joann Needleman, jneedleman@clarkhill.com.

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