Board of Governors of the Federal Reserve System

The federal financial regulatory agencies issued final guidance today to address the risks associated with funding and credit concentrations arising from correspondent relationships. 

A correspondent relationship occurs when a financial organization provides another financial organization with services related to deposits, lending, or other activities. 

The guidance highlights the need for institutions to identify, monitor, and manage correspondent concentration risk on a standalone and organization-wide basis. The guidance also reinforces the supervisory view that financial institutions should perform appropriate due diligence on all credit exposures to, and funding transactions with, other financial institutions as part of their risk management policies and procedures. The guidance does not supplant or amend applicable regulations such as Limitations on Interbank Liabilities (Regulation F).

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