The Monetary Board (MB), the policy-making body of the Bangko Sentral ng Pilipinas (BSP), recently issued a resolution that will enhance the risk management facility of rural banks in the face of the ever-evolving world of technology.
Under Resolution 1286, the MB approved the issuance of the enhanced Information Technology Risk Management (ITRM) framework, which updates existing IT-related Guidelines in Sections X176 and X705 of the Manual of Regulations for Banks (MORB). Apart from all types of banks, the resolution shall likewise cover nonbank financial institutions, electronic money issuers and other nonbank entities that are subject to BSP supervision and/or regulation.
Consistent with international standards and best practices, the enhanced ITRM framework is expected to strengthen management of risks, security of operations and governance on IT-related activities, as well as reinforce regulations on consumer protection on electronic products and service, by tackling the growing number of new and sophisticated technological threats.
In addition, the salient features of the ITRM include adoption of well-structured IT governance model and processes that ensure alignment of IT strategic plan with the institution’s business strategy, IT value delivery and effective IT risk management implementation; maintenance of risk identification and assessment process to continuously evaluate IT environment and potential changes; and establishment of overall IT risk mitigation strategy.
The framework likewise provides direction on the adoption of cloud computing for rural banks. The provision of cloud computing services pertains to the delivery of software, infrastructure and storage over the Internet based on user demand.
The Rural Bankers Association of the Philippines—through its technical arm—the Rural Bankers Research and Development Foundation Inc. (RBRDFI) has been conducting workshops on risk management and financial indicator analysis to assist rural banks in developing comprehensive risk management practices, policies and strategies.
Through these workshops, rural banks are provided with the necessary tools for the evaluation and monitoring of their financial and operational performance on a bank-wide basis.
According to the Philippine Deposit Insurance Corp., 611 rural banks have little or no integrated computerized systems for their core banking processes, 413 have simple systems, 96 have a semi-complex to complex system and 102 have no system at all.
Currently, a Uniform Core Banking System is being eyed for rural banks that would improve their risks management and monitoring of transactions. Regulators see the facility as improving the accuracy and timeliness of bank reports, the coordination among bank branches and long-term cost savings.
Should the initiative pushes through, a more modernized and upgraded rural banking system is soon to rise.