SBP deputy governor calls for review of existing banking models

Highlights increased role of technology as main factor behind changing dynamics

KARACHI: State Bank of Pakistan (SBP) Deputy Governor Jameel Ahmad emphasised the need for a review of the prevailing banking business models to effectively address challenges of the rapidly changing financial and technological landscape.

He said this while speaking at the 29th Annual Convention of Association of Professional Bankers (APB), Sri Lanka held at Cinnamon Grand, Colombo, according to a statement released on Wednesday.

The gathering was attended by scholars, industry practitioners and professionals with ‘Changing Dynamics: Bank of the Future’ as the central theme.



The deputy governor said that shifts in the supervisory approach of regulators and regulatory measures taken after the global financial crisis of 2007-8 as well as rapid technological developments are reshaping the future of banking.

“The reforms undertaken after the crisis were focused on achieving financial stability and did improve the overall resilience of the financial system, however, they have also increased the complexity of the regulatory framework from multiple perspectives,” he added. “This has resulted in contraction of cross border lending, partial scaling back of off shore operations of multinational banks and a decline in the post crisis profitability of banks.”

He said that in the wake of increasing use of internet and social media and availability of low cost mobile and other smart devices, bank customers are demanding enhanced and more customised services.

“If banks fail to address them, they may face extensive competition from non-banks and fintechs who are rapidly making inroads in the domain of financial intermediation.”

Ahmed said that in order to mitigate growing risks to the banking sector, the SBP took certain measures like continuous improvements in regulatory framework, building of financial stability architecture and addressing concerns about systemic risks using macro-prudential actions like developing frameworks for large exposures, domestic systemically important banks (DSIBs) and  consolidated supervision.

“The SBP has issued various guidelines and instructions for the development and strengthening of payment systems infrastructure in the country,” he said.

He also shared SBP’s proactive approach in using the national identity system, NADRA for allowing digital on-boarding of customers, especially the unbanked population, and mitigating the risks relating to money laundering and terrorist financing.

He said that innovations such as cloud computing, block chain technology, artificial intelligence, machine learning and big data analytics are set to transform the financial industry in diverse areas from intelligent customer relationship management systems to proactive risk management, fraud detection and prevention.



He cautioned the financial industry about the aggravated threats to cyber security and emphasised on the adoption of a proactive and cooperative approach to address rising cyber-attacks.

The deputy governor asserted that the financial industry, especially banks and their regulators, should acknowledge that traditional restructuring will not help in these changing times and that banks must reinvent their business models based on cost efficiency, technical innovation and customer orientation.

He also recommended that banks, including central banks, must work towards creating a strong and enabling legal and regulatory environment that is commensurate with the new and emerging realities of future and work towards building capacity and skill set of their staff to adequately respond to these challenges.

Published in The Express Tribune, November 23^rd, 2017.

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