Rising cybersecurity risks could undermine financial stability, South African Reserve Bank (SARB) deputy governor Francois Groepe warns.
Speaking in Cape Town at the thirteenth Basel Committee on Banking Supervision – Financial Stability Institute high-level meeting for Africa, Groepe said the rapid adoption of new and emerging technologies increased the possibility of technology and systems failure.
“Customers are demanding real-time and remote access to financial services while institutions are sharing data more freely and more frequently; this consequently creates additional opportunities for cybercriminals.”
Widespread access, along with the rise in blockchain technologies, also increased the number of entry points for cyberattackers.
As interconnectivity increased, so did the “attack surface” for cyberhackers into financial systems. Institutions, therefore, needed to develop a more detailed understanding of mobile, cloud, big data, and security technologies.
“Authorities should persist in increasing collaboration with industry players to ensure that integrity, security, and privacy are all part of the design, operation, and development process of innovations,” Groepe said.
His comments came as the World Economic Forum (WEF) unveiled its new Global Centre for Cybersecurity and listed cubersecurity as one of the world’s most critical risks in 2018. Some experts are even cautioning that the yearly cost of cybercrime to the global economy could rise to $500-billion.
The centre would be based in Geneva, Switzerland, and aims to become a global platform for governments, businesses, experts and law enforcement agencies to collaborate on cybersecurity challenges.
“If we want to prevent a digital dark age, we need to work harder to make sure the benefits and potential of the Fourth Industrial Revolution are secure and safe for society,” WEF MD and centre head Alois Zwinggi said at the launch in Davos.
Meanwhile, Groepe said the SARB was also monitoring developments in financial technology, or Fintech, and reported that he was heading a Fintech Unit within the bank, which comprised three full-time staff members.
The unit was reviewing the emergence of Fintech and was expected to facilitate the development of appropriate policy frameworks for the bank across the Fintech domain.
“Regulators across the globe are grappling with understanding these technological developments and assessing the regulatory implications,” he said.
However, the SARB favoured a risk-based, rather than a rules-based, regulatory response. “For example, financial regulators do not regulate the Internet, biometric technology, or mobile devices.”
The bank also believed that regulatory interventions should be appropriate and should be applied to the underlying economic function. “In the case of most central banks, the regulated activities should fall within the ambit of their regulatory mandate and would typically include deposit taking, payments, lending, insurance, and investments,” Groepe explained.
Besides collaborating locally, the bank is also actively participating in international regulatory and standard-setting bodies.
“Work undertaken by the various working groups at the Financial Stability Board and the Bank for International Settlements has been proactive in trying to understand Fintech developments and robustly exploring its benefits, risks, and appropriate regulatory frameworks.”