Banks are known to be secure and reliable, and that’s how we would like them to remain.
People keep their money in banks and banks lend out of it. Depositors, naturally, would want a safe and trustworthy institution where they can deposit and withdraw their money anytime without the fear of not getting it back. Depositors would also want one that serves without much disruption. Thus, banks are inherently risk managers.
Banks are susceptible to all kinds of risks as other businesses are and they must know how to manage them well. Otherwise, they may succumb to losses and may become complete basket cases. Banks, as crucial financial institutions, may also make or break the country’s economy.
The Bangko Sentral ng Pilipinas (BSP), knowing this very well, has proposed a draft of new set of guidelines on Business Continuity Management (BCM) for all banks. This newly proposed parameters shall issue BCM as a separate circular, recognizing business continuity plan as an enterprise-wide initiative, not as a sole Information Technology concern.
Other salient points of the draft guidelines include policies and standards on pandemic planning, inter-dependency, liquidity risk management and outsourcing; implementation of a cyclical, process-oriented approach that represents continuous cycle that should evolve over time based on changes on potential threats, etc.; comprehensive business impact analysis and risk assessment; and adoption of recovery and resumption strategies.
The Rural Bankers Association of the Philippines fully supports the proposal of BCM guidelines as it recognizes that it was intended to enable the rural banking industry continue its critical operations in the countryside in case of business risks.
Given that the country sits on the typhoon belt, occurrences of tropical storms are recurrent and rural areas are at most risk of being hit, especially those in Northern Luzon and Eastern Luzon, Bicol and Eastern Visayas. It only follows that rural banks are also most exposed to risks caused by typhoons, floods and landslides–and need most protection from these natural isasters.
Although BCM cannot fully protect the banks from natural hazards, the guidelines once implemented will help banks prepare to at least mitigate damages in an orderly manner and to ensure timely resumption of normal operations after.
Further, in order to maintain public trust and confidence in the financial system, BCM guidelines also include planning on cyber resilience. This is a response to cyber attacks that have become increasingly widespread, sophisticated and coordinated, which may intimidate depositors and bank clienteles.
There are other risks such as credit, market and liquidity risks, which may greatly disrupt banking operations and that rural banks should be aware of. These risks are also discussed in the proposed guidelines as well as the policies that should be adopted accordingly.
The BSP’s initiative to improve business continuity plan for banks only shows that the banking industry is being fortified to respond to the call of a global, stable financial landscape.
The rural banking industry, in return, assures that it will comply with the central bank’s guidelines once fully implemented and, heeding BSP Governor Amando Tetangco Jr., will keep BCM “a mindset and a patriotic duty.”