Patrick Solomon, Inspector of Financial Institutions. –
INSPECTOR of Financial Institutions Patrick Solomon has said TT’s financial system has weathered the covid19 pandemic.
He made this observation in the Central Bank’s Financial Stability Report (FSR) 2021.
Solomon said, “TT’s financial system remained resilient over the course of 2021, despite the challenges posed by the covid19 pandemic and an uncertain global environment. Signs of improvement were seen in certain financial soundness indicators.”
Judicious application of regulatory forbearance and loan-deferral programmes helped cushion the adverse effects of the pandemic, enabling households and businesses to adjust their debt-servicing schedules without unduly weakening the asset quality of financial institutions.
But Solomon warned, “There are clouds gathering on the horizon.”
Weaker than anticipated global economic conditions on account of rising inflation, due to energy and food price shocks, have resulted in a firming of the interest rate environment.
Solomon said, “Rising interest rates can affect the financial sector through various channels, such as credit and valuations.”
He added that increasing vigilance is required in relation to this andother risks to a regulated domestic financial sector such as cyber attacks, which “may pose a significant systemic threat going forward.”
A cyber attack is an attempt by hackers to damage or destroy a computer network or system.
In the FSR, the bank said, “Cyber events could give rise to the loss of confidential data or funds, creating reputational damage and liquidity risk to institutions.”
Domestic data suggests the uptake of information and communications technology has been increasing and financial institutions are expanding their digital footprint.
This increases their susceptibility to an attack.
The bank said mobile internet and voice penetration grew by 6.6 per cent and 0.3 per cent, respectively last year. There was also a marginal decline in fixed internet penetration by 1.2 per cent in 2021
But the bank said, “While cyber crime has not severely disrupted the domestic financial system, the increasing incidence of cyber attacks domestically is on the radar of the relevant authorities.”
The bank is in the final stages of completing its review of cyber risk in the banking sector. Several reports have already been issued to individual commercial banks. On completion and issuance of the remaining reports to other entities, an industry report will be generated.
The bank described the overall risk posed by cyber attacks to domestic financial stability as moderate.
Solomon said the Central Bank’s financial institutions supervision department will intensify its focus on ensuring that regulated institutions adhere to robust cyber security and risk-management procedures.
He added that the bank’s monetary policy committee will continue to determine the most appropriate policy response to minimise the impact of rising international interest rates.