US FDIC issues consent order to Thread Bank

FDIC Issues Consent Order to Thread Bank: Key Points

1. Consent Order Issuance:
   • The US Federal Deposit Insurance Corporation (FDIC) has issued a consent order to Thread Bank, effective May 21.
   • The order mandates operational reforms focused on third-party risk management and business oversight procedures.
2. Strategic Plan Requirements:
   • Thread Bank must develop a strategic plan with specific goals to enhance:
     • Revenues
     • Operational performance
     • Liquidity management
     • Anti-money laundering (AML) controls
   • An annual risk assessment is required to bolster AML controls.
3. Banking-as-a-Service (BaaS) Oversight:
   • The bank must enhance oversight of its BaaS program.
   • Measures include:
     • Reviewing and approving risk tolerance thresholds for individual fintech partners.
     • Conducting enterprise-wide financial analysis of each fintech partner’s projections under various scenarios.
     • Implementing a documented customer due diligence process.
     • Ensuring risks are properly identified, measured, monitored, and controlled.
4. CEO’s Response:
   • Chris Black, CEO of Thread Bancorp, Inc. and Thread Bank, stated the bank is committed to meeting all obligations.
   • The bank has made substantial investments in improving policies, processes, procedures, and controls in collaboration with the FDIC and the Tennessee Department of Financial Institutions (TDFI).
5. Regulatory Context:
   • This action reflects ongoing efforts by US regulators to strengthen relationships between banks and their fintech partners.
   • It follows a similar cease and desist order issued by the Federal Reserve to Evolve Bank & Trust last month for deficiencies in risk management, AML, and compliance practices.