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Build robust systems to forestall cybersecurity incidences – BoG to banks

The Bank of Ghana (BoG) has urged all banks in the country to build robust systems to forestall cybersecurity incidences in the financial sector amid the COVID-19 pandemic.

Governor of the Bank of Ghana, Dr. Ernest Addison highlighted three major risks that the COVID-19 pandemic has unearthed which must be efficiently managed by banks to avoid any unintended consequences.

Dr. Addisson said these risks include cybersecurity, credit, and operations.

He was speaking at a webinar on managing banking risks in uncertain times organized by the Ghana Association of Bankers (GAB).

Dr. Addison said the pandemic has boosted the move towards digital transactions and financial inclusion; however, it has also brought in its wake a heightened sense of cyber attacks within the financial sector.

“The use of digital and mobile banking platforms to conduct banking transactions has increased since the outbreak of the COVID-19 pandemic. This is evidenced by peer-to-peer, bank-to-wallet, wallet-to-bank and wallet-to-bank transactions across all platforms.”

He added, “Banks have responded positively to this phenomenon and deployed sophisticated, yet user-friendly digital platforms to enhance the delivery of financial services. This trend is indeed welcome, as it broadly aligns with the overall objective of digitizing the Ghanaian economy, and promoting financial inclusion and economic growth.”

He said the drive towards more digitization “has heightened cyber risks and fraud, and therefore calls for effective cyber risk management policies and procedures by banks.”

He said, “The Bank of Ghana expects all banks to build robust systems to forestall such cybersecurity incidences. All the successes chalked in the digitization of banking systems would be eroded if adequate investments are not made for effective protection of the information technology and security infrastructure.”

“The central bank has issued directives and guidelines such as the cybersecurity directive that banks must meet on an on-going basis to effectively manage cyber risk and fraud,” he added.

Reliefs

Dr. Addison said the BoG has introduced regulatory reliefs which have proven to be timely, and banks also responded appropriately with some form of forbearance for customers, in terms of loan reclassification.

“But the challenge going forward is how well banks account for the impact of the reliefs in terms of loan classification, expected credit losses, provisioning, credit risk weightings and the overall impact on their capital ratios or key performance indicators.”

Data from the central bank indicate that loan loss provisions grew by 28.0% in 2020, higher than the 23.6% a year earlier, reflecting higher credit risks.

“In response to these developments, banks may need to strengthen credit risk management policies and engage in risk-sharing arrangements through syndications,” Dr. Addison said.

He indicated that the BoG is continuously monitoring the financial and economic environment to ensure the banking system operates effectively in delivering financial intermediation to support the recovery from the pandemic.

Dr. Addison said industry players must collectively strengthen their operational resilience in these times to further build their defenses against the pandemic.

“From [the] supervisory perspective, I would entreat the various risk managers to continuously stress-test your banks under different extreme but plausible scenarios to enable you to contain possible risks that may emanate from the COVID-induced uncertainties,” he said.

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