Third party risk management and M&A: What third party risks did you just buy?
Abstract
Under the Trump Administration, the regulatory priorities of the US federal banking agencies appear to be shifting to a more open stance towards approval of bank mergers and acquisitions (M&A). Notwithstanding that shift, the US federal banking agencies will likely continue to prioritise enhanced third party risk management (TPRM) as an important principle of safe and sound banking policy. Regardless of the winds in Washington, banks engaging in M&A need to effectively integrate vendors into the combined organisation. This paper aims to bridge the gap between bank M&A activity and TPRM by providing practical guidance into TPRM for banks engaging in M&A transactions. The authors have conducted a series of interviews with banking institutions of varying sizes and have surveyed applicable literature and regulatory guidance to discern best practices for TPRM in the context of bank M&A. The authors conclude that even in a regulatory environment friendlier to bank M&A activity, banks should consider third party contractual relationships in the context of each of the following deal-making phases: (1) strategy; (2) due diligence and (3) integration. This article is also included in The Business & Management Collection which can be accessed at https://hstalks.com/business/.
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Author's Biography
James P. Bergin (Jim) was the Acting Co-General Counsel, the Deputy General Counsel and the Chief of Staff of the Federal Reserve Bank of New York, and is a member of the firm’s financial services practice. Jim represents banks, nonbanks and official institutions in connection with banking and other financial regulatory issues. Jim routinely advises on regulatory, applications, supervision, enforcement and compliance matters, often involving the Federal Reserve and other federal and state agencies. He also advises clients on a wide range of banking and other financial market issues, drawing from his long experience as a central bank lawyer. As the Acting Co-General Counsel of the New York Fed, Jim served as part of the executive management team and oversaw the activities of the Legal Group, including the legal, compliance and bank applications functions. He advised senior management on a wide range of matters, including regulation and supervision of financial institutions; monetary policy and implementation; financial services and accounts matters and corporate governance and risk management. In his role as the Deputy General Counsel, Jim was responsible for both markets and regulatory matters. He led the legal team that advised on matters relating to the New York Fed’s implementation of monetary policy, lending, foreign exchange, US Treasury, reference rate and other market-facing activity. Jim was also responsible for the team that advised supervisors and others on matters relating to the New York Fed’s regulation and oversight of financial institutions and oversaw the New York Fed’s bank applications function. At other points in his career, he served as long-time Chief of Staff to New York Fed President William C. Dudley and managed the New York Fed’s compliance risk supervision department. Jim was deeply involved in the New York Fed’s response to the Financial Crisis of 2008 and the COVID-19 pandemic of 2020.
Beate Parra is a New York-qualified lawyer with extensive domestic and international experience in transactional, litigation, regulatory and corporate matters. She currently serves as the Managing Director and the Head of Legal Americas at the New York Branch of a major European bank. There, she oversees a legal team that manages all legal and regulatory aspects arising in the context of a Foreign Banking Organisation operating its business in the USA. Beate is a member of the US Bank Executive Committee. She is also a member of the Institute of International Bankers’s (IIB’s) General Counsel Roundtable, the IIB’s Legislative and Regulatory Policy Committee and the New York City Bar’s Banking Law Committee. Beate began her corporate legal career in private practice as an associate at Cravath, Swaine & Moore LLP, where she worked on a large number of public and private mergers and acquisitions (M&A), including numerous cross-border transactions and joint ventures in Europe and Latin America. She also counselled European and Latin American clients on general corporate and securities law matters. She is a frequent speaker and/or panellist on a variety of matters, including matters related to corporate, cross-border and regulatory practice, as well as corporate governance and law department management best practices. Beate earned her Juris Doctor, cum laude, from Benjamin N. Cardozo School of Law, where she was the Executive Editor of the Cardozo Journal of International and Comparative Law and was inducted into the Order of the Coif. She earned a master’s degree in political science, law and history, summa cum laude, from the Universität Hagen – Die Deutsche FernUniversität. Beate is fluent in English, German and Spanish and conversant in Italian, French and Portuguese.
Trevor Kirby advises bank and nonbank financial services companies in a wide range of regulatory matters, including enforcement and compliance issues before state and federal banking agencies and regulators. Trevor received his JD degree from the University of Pennsylvania Carey Law School, where he served as the Managing Editor of the University of Pennsylvania Journal of Constitutional Law and the Content Editor of The Regulatory Review. During law school, Trevor was a First Generation Professional Fellow, a Law Fellow through the Fellowships at Auschwitz for the Study of Professional Ethics, and a Student Counsellor in the Entrepreneurship Legal Clinic and Legislative Clinic. In his final semester, Trevor clerked for the Democratic Staff of the United States Senate Committee on Banking, Housing, and Urban Affairs.
