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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.

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