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A regulator's explanation of expectations or recommended practices that does not itself have the force of a binding rule.
Guidance can give examples, outline priorities and help institutions understand existing requirements. A bank may use different practices suited to its risks while still complying with applicable law. In the US supervisory framework, enforcement cannot be based merely on a failure to follow supervisory guidance; an underlying legal violation or unsafe practice is a different matter.
Suppose a supervisor describes several ways banks can monitor an outside technology provider. One bank uses a different monitoring process that addresses its actual risks. The existence of the guidance alone does not make that alternative unlawful. If the bank violates a separate binding requirement, however, describing the suggested monitoring method as optional does not remove the legal issue.
U.S. agencies propose tailored guidance on banks’ outside providers