Title 12

SECTION 703.107

703.107 External service providers.

§ 703.107 External service providers.

(a) General. A Federal credit union with derivatives authority may use external service providers to support or conduct aspects of its derivatives program, provided:

(1) The external service provider, including affiliates, does not:

(i) Act as a counterparty to any derivatives transactions that involve the Federal credit union;

(ii) Act as a principal or agent in any derivatives transactions that involve the Federal credit union; or

(iii) Have discretionary authority to execute any of the Federal credit union's derivatives transactions.

(2) The Federal credit union has the internal capacity, experience, and skills to oversee and manage any external service providers it uses; and

(3) The Federal credit union documents the specific uses of external service providers in its process and responsibility framework, as described in § 703.106(b)(1) of this subpart and the application.

(b) Support functions. A Federal credit union must perform the following functions internally and independently. A Federal credit union may have assistance and input from an external service provider, provided the external service provider does not conduct the following functions in lieu of the Federal credit union:

(1) Asset/liability risk management; and

(2) Liquidity risk management.

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