Digitization: BoG has intensified risk mg’t framework for banks and SDIs – Addo Awadzi

Google search engine

The 2nd Deputy Governor of the Bank of Ghana (BoG), Madam Elsie Addo Awadzi has said that all around the world, technology is fast disrupting traditional business models for delivering finance all around the world and is redefining financial services as known with immense benefits.

Digitization, she said, is changing the way financial institutions store and analyse data, relying on cloud-based infrastructure which offers among others, cost reduction, processing speed, integrated security, improved scalability, flexibility, and improved risk management.

She explained that the growth of digital financial services has been accelerated in the last couple of years due to the implementation of the mobile money interoperability framework and the Covid-19 pandemic, and the pace of growth will be higher going forward. Universal banks in Ghana have rolled out impressive digital financial services that reach the rank and file of our population some of whom were traditionally clients of the Savings and Loans (S&L) industry.

In this context, she added, financial institutions that have not already designed, adopted, and implemented a digital transformation strategy are already behind the curve.

“The S&L sector risks becoming a dinosaur as more banks reach the informal sector and MSME sector with their innovative digital financial services. There is therefore, the urgent need for the S&L sector to take steps to reposition itself by leveraging emerging technologies to modernise their business models to meet the fast-changing needs of their customers’ needs and to remain relevant to the segment of the economy that was traditionally served by the sector.

“Digitalisation comes along with its own complexities and risks, including cyber security risks, third and fourth party/outsourcing risk, data privacy breaches, technology failure risk, increased AML/CFT risks, and consumer protection risk among others. Needless to say, a lot is required by way of strong governance and risk management systems to help mitigate these risks as financial institutions exploit the benefits of digitalisation. S&Ls will therefore need to augment their capital base in order to digitise and deploy more sophisticated systems to help mitigate attendant risks.

“Over the last five years, BoG has augmented the risk management framework for banks and SDIs in tandem with increased digitization. These include the Cyber and Information Security Directive issued in 2018 which is currently under review, enhanced anti-money
laundering and countering of financing (AML/CFT) rules, and consumer protection rules. The Corporate Governance Directive requires that the Board of each covered regulated institution sets up a Risk Committee that advises the full Board on the overall risk framework, and the appointment of a Chief Risk Officer who helps to manage overall risks.

“Risk management requirements are in place for payment service providers like fintechs, including minimum technical, governance, data protection, and transaction monitoring and fraud detection and mitigation tools.

“We will continue to monitor the rapid evolution of risks in the digital financial services ecosystem and recalibrate our rules and supervisory approaches and tools to help mitigate them, while ensuring that regulated institutions effectively manage the risks that their businesses and actions or inactions pose to the entire system.”

By Laud Nartey|3news.com|Ghana

Google search engine