Risks Emerging In The Ghanaian Financial Sector As A Result Of The COVID-19 Pandemic

The Governor of the Bank of Ghana, Dr Ernest Addison has expressed that, the Covid pandemic has acquainted several risk to the banking sector undermining the development of the industry.

As indicated by Dr Addison, cyber, credit, and operational risks were new dangers to the banking sector, which banks should proficiently figure out how to keep away from any unintended outcomes on the industry.

Dr Addison revealed this during a recent online course by the Ghana Association of Bankers (GAB), in Accra on the topic “Overseeing Banking Risks in Uncertain Times – COVID-19 Test Case.”

The program was to set out a freedom for partners to ponder on the dangers arising in the monetary area because of the COVID-19 pandemic and investigate strategy decisions and measures to oversee them.

The Governor clarified that notwithstanding the versatility of the banking industry, the previously mentioned hazards represented a test to the industry.

On cyber risk, Dr Addison clarified that 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.

Dr Addison has along these lines required a successful cyber risk management policies and methods by banks to shield them from cyber risks and attacks.

As indicated by him, the Bank of Ghana anticipates that all banks should assemble strong system to prevent such cyber security instances.

He belives that all the successes achieved 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.

He said the Bank had given mandates and rules, for example, the Cyber Security Directive that banks should meet on an on-going premise to adequately oversee cyber security and fraud.

Regarding credit risk, Dr Addison indicated that the sharp slowdown in economic activity had ramifications for the solvency of some households and businesses.

He said lenders within sectors strongly hit by the impact of the pandemic, particularly those in industry and services sectors were more vulnerable.

He further expressed that, the introduction of the regulatory reliefs has proved timely and banks have responded appropriately with some form of forbearance for customers.

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These include rolling forward interest and principal payments, interest repayment waivers, and offering new loans to enable borrowers with reasonable longer-term prospects stay afloat in these challenging times.

On operational risk, Dr Addison indicated that COVID-19 related partial lockdowns and restrictions to contain the spread instigated the work-from-home concept, which posed some operational risks to the industry, which if not well managed can affect the smooth operations of any bank.

He said engagement of third-parties by some banks to perform some non-core functions could also be threatened by weaknesses in financial and operational resilience.

Dr Addison entreated the risk managers of the various banks to continuously stress-test their banks under different extreme but plausible scenarios to enable them to contain possible risks that might emanate from the COVID-induced uncertainties.

credits: Ghanaian Times