The Nigeria Deposit Insurance Corporation (NDIC) has disclosed that increased national debt, rising non-performing loans (NPLs), threat of recession and potential financial crisis are putting pressure on regulators to reassess their supervisory activities on the financial sector .
Speaking yesterday at the ongoing NDIC workshop for financial journalists in Kaduna State, NDIC Managing Director, Umaru Ibrahim said such reassessment would strengthen their capabilities to address these challenges and forestall financial crisis.
Ibrahim who spoke on the theme: “COVID-19 & FinTech Disruption: Opportunities & Challenges for Banking System Stability and Deposit Insurance”, called on stakeholders to analyze and tackle the risks, implications and opportunities created by the COVID-19 pandemic and FinTech on the financial sector.
He said the topic aptly captures the current concerns of all stakeholders within the local and global economic and financial landscape.
READ ALSO: NDIC Intervention In Fortis Microfinance Bank
According to him, the impact of the COVID-19 pandemic and the resultant disruptions to social and economic activities had negative consequences on all nations across the world.
He explained that FinTech is simply the common term used to describe the technology (internet, mobile devices, software app, cloud services and many more) that are used in delivering important financial services that were exclusive to traditional financial institutions. Despite promising innovation and economic growth through disruption of traditional finance, Fintech disruptive financial services such as chip-based debit/credit cards, mobile and web-based payments cloud computing also poses a major challenge to the regulatory paradigm.
Ibrahim insisted that managing financial system risks requires collaboration.
“Financial system instability increases the volatility of asset prices and investor behaviour, leading to deteriorating credit conditions, increased costs to firms and households and potentially the collapse of the payment system. There is increasing evidence that Fintech innovations have many advantages for businesses and customers. The World Economic Forum, 2017, suggests Fintech is “disruptive”, “revolutionary”, and armed with “digital weapons”, that will “tear down” traditional financial institutions.,” he said.
According to him, Fintech will enhance market competition and financial inclusion. However, the increasing sophistication and proliferation of technology in banking operations also ushered in unintended consequences like operational and legal risks, as well as the security of consumer personal data. The recent experiences of technology giants selling consumer data without consent or authority is cause for concern.
Managing the risks associated with emerging technology without stifling innovation has become a major theme amongst regulators and policy makers.
He said the Central Bank recently released a draft framework for regulatory sandbox operations to encourage innovation, especially for Startups. The NDIC equally established an ‘Innovation and Fintech Unit’ to drive its agenda for emerging technology and provide solutions to improve the safety of depositors and the banking system.
“There are two main concerns for the Corporation on Fintech: these are how to identify and insure non-bank deposit taking institutions licenced by CBN and other Agencies such as Securities and Exchange Commission (SEC). Currently, there is an ongoing engagement with the relevant regulatory agencies on how to actualise that within the limits of legal provision.
The second is how to tap into the potentials of Fintechs to effectively execute its business processes easily, speedily and reliably. Consequently, we look forward to modernising our data collection and analysis through the use of Fintech solutions/tools (Regtech and SupTech) to handle the following business processes better than currently being done: Risk Based Supervision (RBS), Monitoring Compliance, Premium Administration, Early Warning Signals, Stress Testing, Analysis of insured institutions’ performance etc.
 has disclosed that increased national debt, rising non-performing loans (NPLs), threat of){kind=link}