FDIC Issues Consent Order to Thread Bank: Key Points
- 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.
- 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.
- Thread Bank must develop a strategic plan with specific goals to enhance:
- 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.
- 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).
- 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.
