Banks have important role to play
COMMERCIAL BANKS will play a pivotal role in the financial ecosystem despite changes sweeping the industry.
Michelle Doyle Lowe, acting deputy of Governor of the Central Bank of Barbados, has said so as new technology paves the way for new financial systems to be set up.
She said at a recent Bitt seminar that institutions, including the Canadian banks that are well-known to us, are working hard to test and adopt new technologies and adjust to new trends.
“So while the operations of the banking sector may look different in the future as more Fintech adaptation is filtered to our local banks over time, banks will still play a pivotal role in our financial ecosystem.”
According to her, “There are still several developmental hurdles to be cleared for distributed ledger technology to be more widely applied in being transformative to our system.”
She said that some of these include:
A sound legislative base to provide adequate market guidance and ensure that there is a level playing field for market entrants.
Regulatory support to ensure that the regulatory parameters are adequate to build trust by containing risks, safeguarding financial stability, protecting market integrity through rules that guard against money laundering and terrorism financing, provisioning for liquidity support, financial inclusion, consumer protection, and finally
compliance with domestic and cross-border capital requirements; and.
Cyber security concerns also require that there are sufficient layers to prevent hacking and protect data privacy.
Doyle-Lowe said that to address innovation in financial services, there must be active engagement between authorities and the private sector.
“For example, the Monetary Authority of Singapore engages in official regulatory sandboxes, where for a predetermined period regulatory requirements are relaxed to allow an assessment of the impact and inherent risks of start-up companies,” the Acting Deputy Governor said.
She further stated that this level of experimentation with technology-driven entities is aimed at ensuring that economic opportunities are not foregone by creating the space to explore innovation.
This is something that the Central Bank of Barbados has received a proposal for and is now considering, she noted.
The official added that innovation in Fintech could have a net positive impact on the financial system, provided that risks are adequately managed. Distributed ledger technology has obvious transformative capacity, but there are still important challenges to overcome.