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OCC Warns Again on IT Concentration Risk

abstract1-1569325007

The US Office of the Comptroller of the Currency, which supervises the federal banking system, has warned again of growing IT risks. “Use of third-party service providers is increasing, and critical operations are increasingly concentrated in a few large service providers,” says the OCC in its latest risk perspective review, published ion December 3. The OCC warned in its previous semi-annual risk perspective that it has seen evidence of increasing IT risk due to the concentration in the vendor marketplace. Now it is repeating the message, saying: “Risks and any resultant operational events, if not properly managed by the service providers and their clients, could have a systemic impact on the financial services industry.” However, the OCC also states that: “While the reliance on third-party service providers is increasing, the control systems at these service providers are generally effective.” The says: “Effective due diligence is essential for banks to improve the management of risks associated with the (1) use of third-party service providers for critical services, (2) increasing interdependencies and interconnectivity, and (3) implementation of new products and services offered through emerging firms that leverage innovative technologies and delivery channels.”