The banking industry in Sri Lanka will continue to face further challenges, both financially and operationally in 2020 with the COVID-19 pandemic and nationwide lockdown to limit the spread says KPMG Sri Lanka launching their fifth edition of their Sri Lanka Banking Report.
However, in such times, banks, the backbone of the economy, have a fundamentally important role to play as they provide liquidity to support businesses and individuals during this crisis.
The prevailing times stand as a testament to the importance of stress testing of banks as they determine whether the financial institutions have sufficient capital in order to withstand the impact of adverse economic conditions.
Apart from the natural progression of Fintech, banks will need to reflect on the prevailing crisis with a business continuity vision to be able to face such inevitable adversity again. The banks who have adapted and embraced fintech over the recent past is reaping its benefits, as the nationwide lockdown has made consumers compelled to use online banking in order to meet their liquidity requirements. A similar trend is observed globally, on other essential businesses as well, where a 2-year digital transformation is now witnessed in just 2 months.
The banking sector was undergoing a phase of digital transformation over the recent past and this has now been accelerated with the need to be accessible during this crisis.
Banks are providing solutions to customer transactions while operating remotely thus creating opportunity to convert the traditional customer to a modern and digitally enabled one.
The banking sector can remodel their operations where branches will concentrate more on adding value towards selling products rather than dealing with transactions such as cash withdrawals or transfers between accounts.
As the banks now operate in a very fast paced environment and are required to adapt to daily change the banks cannot avoid paying attention to its associated risks. The current economic environment can be the facilitator to increased focus on these areas. The evolving regulatory approach to operational resilience could also bring significant benefits to organizations.
While the banks are putting strategies in place to keep resilient during crisis times, the regulators have played a vital role in providing the necessary guidelines to aid businesses and individuals affected by COVID-19.
The sail off will not be smooth in the coming months of the year as many businesses will continue to face severe difficulties. The ripple effects of this will be reflected on the loan books when businesses are unable to repay loans. Looking forward, two key trends Re expected to arise out of this COVID 19 experience. Firstly, with levels of remote working likely to remain higher than they were pre-COVID-19, banks may need to ‘reset’ some of their protocols and policies around access management, finding ways to increase flexibility without compromising security.
Secondly, an increase in banks moving parts of their IT operations to public cloud environments is anticipated. Most banks use their own private clouds at present. But in a lockdown and other emergency situations, these can be challenging to maintain. Alongside all the other pressing issues of supporting customers and providing liquidity, cyber security will remain a top priority for banks for the future.
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