Some risks due to the advent of the novel coronavirus pandemic, according to the Governor of the Bank of Ghana (BoG), Dr Ernest Addison, have been introduced into the country’s banking sector.
Giving a keynote address in a webinar organized by the Ghana Association of Bankers (GAB) on the topic “Managing Banking Risks in Uncertain Times”, Dr Addison noted banks in the country are currently facing cyber security, credit and operational risks.
According to the Governor, although the pandemic boosted the move towards digital transactions and financial inclusion, it also brought in its wake a heightened sense of cyber-attacks within the financial sector.
Since the outbreak of the Covid-19 pandemic, the use of digital and mobile banking platforms to conduct banking transactions has increased. This is evidenced by peer-to-peer, bank-to-wallet, wallet-to-bank and wallet-to-bank transactions across all platforms.
Welcoming the increased use of digital banking transactions as it broadly aligns with the overall objective of digitising the Ghanaian economy, and promoting financial
inclusion and economic growth, Dr Addison noted that effective cyber risk management policies and procedures needs to be put in place by banks to curb fraud and other cyber security risks.
“The Bank of Ghana expects all banks to build robust systems to forestall such cyber security incidences. All the successes chalked in the digitisation of banking systems would be eroded if adequate investments are not made for effective protection of the information technology and security infrastructure. In this regard, the Bank has issued directives and guidelines such as the Cyber Security Directive that banks must meet on an on-going basis to effectively manage cyber risk and fraud,” stated Dr Addison.
Speaking further, Dr Addison also pointed out that credits risks to banks have become critical and needs the attention of players in the banking industry.
He therefore called on banks in the country to strengthen credit risk management policies and engage in risk-sharing arrangements through syndications.
“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/ key performance indicators,” he stated.
“For instance, loan loss provisions grew by 28.0 percent, higher than the 23.6 percent a year ago reflecting elevated credit risks in 2020. Also, the Non-Performing Loans (NPL) ratio of the industry increased from 14.3 percent in December 2019 to 15.7 percent in June 2020, arising from the pandemic-induced repayment challenges,” he added.
Operational risks of banks in the country, the Governor further pointed out in his keynote address, has heightened on the back of the pandemic.
According to the Governor, the work-from-home concept which poses some operational risks to the industry, if not well managed can affect the smooth operations of banks.
“Industry data showed that growth in operating expenses moderated from 11.1 percent in 2019 to 8.2 percent in 2020, driven mainly by a slowdown in growth of staff related costs, which recorded a 6.2 percent growth in 2020 compared with 14.7 percent a year ago. Other operating expenses, however, increased by 10.6 percent from 7.2 percent a year earlier. Part of the increase in other operating expenses was related to costs associated with implementing safety protocols and containment measures of COVID-19, as well as activation of Business Continuity Plans (BCPs) by banks.”
“Disruptions in banks’ operations and business continuity concerns, orchestrated by the pandemic, remains critical in these uncertain times, especially with the recent rise in the infection rates. BCPs must focus on end-point and network security measures with robust user authentication protocols to minimise abuse of banks’ systems.”
“Consequently, operational risks need to be effectively managed and banks must continuously test the adequacy of their BCPs to facilitate continuous operations and service delivery,” noted Governor Addison.
