Financial institutions have long relied on outsourcing and other third-party service relationships. However, in recent years, the extent and nature of financial institutions' interactions with a broad and diverse ecosystem of third-party service providers have evolved and increased. These developments have brought both benefits and the introduction of different types of risks to financial institutions. If they are not appropriately managed, these relationships could lead to risks to financial stability.

Against this backdrop, in November 2020 the Financial Stability Board (FSB) published a discussion paper on regulatory and supervisory issues relating to outsourcing and third-party service relationships. As part of the consultation process, in February 2021 the FSB held an outreach meeting, which was attended by a wide range of external stakeholders [See FSB (2020), Regulatory and Supervisory Issues Relating to Outsourcing and Third-Party Relationships: Discussion paper, November, and FSB (2021), Outsourcing and third-party risk - Overview of responses to the public consultation, June.].

Based on feedback to the discussion paper, in September 2021 the FSB's Standing Committee on Supervisory and Regulatory Cooperation (SRC) decided to develop a toolkit for financial regulatory and supervisory authorities (hereafter "financial authorities") focused on their oversight of financial institutions' reliance on critical service providers, including common terms and definitions on third-party risk management [See FSB (2022), FSB Work Programme for 2022, March and also FSB (2023) FSB Work Programme for 2023, March.].