Financial stability is increasingly being tested by emerging Cyber, Fintech and Climate Change risks. These come amidst increased technological innovations in the financial sector to provide financial services efficiently, especially to the financially excluded.
Moreover, the entry of non-financial firms into the financial space is increasing competition in the financial sector, reducing the market share of financial institutions and is introducing viability risks.
In response, the COMESA Monetary Institute has embarked on a capacity building initiative to help the regional apex banks navigate through the risks by organizing trainings. The latest was on 29 July – 2 August 2024 conducted virtually, themed: “Impact of Fintech, Cyber and Climate Change Risks on Financial Stability.”
Eighty delegates from 10 COMESA member countries’ Central Banks, namely Burundi, Comoros, Egypt, Eswatini, Ethiopia, Kenya, Malawi, Somalia, Zambia and Zimbabwe attended. COMESA Cleaning House was also represented.
In his address, the Director of CMI, Dr. Lucas Njoroge, observed that the gains in enhanced financial inclusion have predisposed financial services providers to fraud and cyber-attacks.
“This has increasingly exposed consumers of financial services to fraud and predatory services, undermining their income growth and ability to meet their financial obligations,” he noted.
At the same time, climate change has increased physical and transition risks, and financial institutions are increasingly being held accountable for the consequences of their financial intermediation activities on the environment.
The main motivation for conducting the training, the director noted, was to impact knowledge required to provide advice on the formulation of financial sector policies to mitigate and enhance the resilience of the financial system, given its vulnerability to these emerging risks.
At the training, participants were equipped with the necessary tools and skills to assess the impact that Fintech, Cyber and Climate Change Risks have on financial system stability.
Ultimately, the aim is to enhance their capacities to undertake stress tests on financial systems stability due to these risks. It will inform mitigation measures that could dampen the effect these risks would have on the financial system.