As you may recall, a correspondent relationship occurs when a financial organization provides another financial organization with services related to lending, or other activities. A correspondent relationship also occurs between a bank and its holding company, subsidiary and affiliates.
The final guidance emphasizes 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 states that it does not supplant or amend applicable regulations such as Limitations on Interbank Liabilities (Regulation F).
Ralph T. Wutscher
Kahrl Wutscher LLP
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