A global watchdog has warned that the digitalisation of banking is creating new risks for the financial sector. The Basel Committee on Banking Supervision highlighted the potential dangers associated with the increasing reliance on technology in banking operations.
The committee, which sets global standards for banking regulation, emphasized that while digitalisation offers numerous benefits such as improved efficiency and customer experience, it also brings about new challenges that need to be addressed.
One of the key concerns raised by the committee is the heightened cybersecurity risks that come with the adoption of digital banking services. As financial institutions increasingly rely on digital platforms to conduct transactions and interact with customers, they become more vulnerable to cyber attacks and data breaches.
In addition to cybersecurity threats, the Basel Committee also pointed out the potential risks associated with the use of artificial intelligence (AI) and machine learning in banking operations. While these technologies can enhance decision-making processes and streamline operations, they also introduce complexities and uncertainties that could pose risks to financial stability.
The committee urged banks to strengthen their risk management practices and ensure robust cybersecurity measures are in place to mitigate the evolving threats posed by digitalisation. It also emphasized the importance of regulatory oversight and cooperation among international authorities to address the challenges posed by the digital transformation of the banking sector.
Overall, the Basel Committee's warning serves as a reminder to financial institutions and regulators alike of the need to stay vigilant and proactive in managing the risks associated with the digitalisation of banking. As technology continues to reshape the financial industry, it is crucial for stakeholders to work together to safeguard the stability and security of the global banking system.
