Op ed

NIGERIA: Technology poses risk to soundness of financial system – CBN Director

The increasing adoption and use of technologies for banking operations poses risk to the safety and soundness of the financial system.

Director, Banking Supervision, Central Bank of Nigeria (CBN), Mrs Tokunbo Martins made this assertion in Lagos at the 1st Annual conference on audit and regulatory banking organised by the Audit Committee Institute (ACI).

She said, “Today, information technology has evidently impacted banking tremendously, even redefining the nature of banking and banking relationships. Banks are truly enjoying all the technological novelities with potential of expanding their products, services, customer base and responding to regulation, and above all improve their profitability. However it is important not to lose sight of the fact that technology comes with great risk.

As a leading mind in IT governance industry has repeatedly said, technology makes banking operations and banking errors/crimes equally efficiency. One immediately sees what the issue is: if technology makes errors and crimes equally efficiency, then it means that the entire assets of the banks are at risk. In other words, technology poses risk to the safety of and soundness of the financial institutions, to the public interest, and to the larger economy”.

Tokunbo listed the risks technology poses to banks to include bank computer crimes, indeterminate privacy issues, and complexified reputational risks and cross boarder customer risks. “Each of the technologies a bank adopts presents unique risks that raise safety and soundness concerns.

Take internet banking as an example, the following risks are presented: hacking, web-jacking, spoofing, viruses and unauthorised access. Others are theft of information, denial of service, fraud, slow access to website and rerouted connections. Because the bank is put at risk by these technologies, and because public interest is at risk as technologies are adapted, it behoves the regulator to extend regulatory coverage to the regime of use of these technologies,” she said.

She advised regulators to increase focus on IT systems of organisations under the supervision, stressing that, the age of chasing electronic transactions with manual examination methods are gone.

Explaining the rationale for the conference, Chairman, Audit Committee Institute (ACI), Mr. Christian Ekeigwe, noted that the inevitable increase in the adoption of technologies in banking creates legitimate audit and regulatory concerns about how these technologies amplify and complexify banking operations risks and impact the safety and soundness of banks and other financial institutions.

The aim of the conference is to focus attention on the key issues of banking technology risks, how auditors must audit them so assurance, and the proposition that technology risks contributed, insidiously, to the distress in the industry”.

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