Increasing transaction volumes of non-bank financial firms threatens system stability- Cardoso

“We reiterate the importance of monitoring trends, risks and
innovations of NBFIs/OFIs as their increasing transaction volumes pose major
financial system stability risk,” Cardoso said.

“Fintech loans are one of the most commonly reported
innovations.

 “While overall, this
may appear small in relation to the size of credit by Deposit Money Banks
(DMBs), some jurisdictions, globally, have noted a growing trend in the volume
of these loans.”

Cardoso said fintech credit is typically offered through
electronic platforms that link lenders with borrowers, making the platform act
as a financial intermediary.

The economist said in some instances, loans are recorded on
the balance sheets of these platforms — even if they are short-term — making
them similar to new types of financial intermediaries.

He urged NBFIs in the West African monetary zone (WAMZ) to
strengthen anti-money laundering and cybersecurity measures.

 “We must continue to
push forward the agenda of strengthening the anti-money laundering practices;
deepening supervisory capacity on cybersecurity and fintech regulation, and the
implementation of risk-based supervisory approach,” he said.

The CBN governor commended the college for focusing on
climate risk regulation during the meeting’s technical sessions.

Olorunsola Olowofeso, director-general of the West African
Monetary Institute (WAMI), identified funding squeeze as a major financial
issue in West Africa.

He further emphasised the need to bolster the financial
sector’s resilience against emerging risks like climate-related issues,
internet disruptions, cyber threats, and social media-driven instability.

 “As we all continue
to anticipate the soft landing of global inflation to pre-pandemic levels, let
us continue to monitor policy actions and spillovers to ensure the financial
system is resilient,” Olowofeso said.

“In the WAMZ, after turbulent years, the outlook is
gradually improving.

 “However, the funding
squeeze persists as governments continue to grapple with financing shortages,
high borrowing costs and impending debt repayments.

“Emerging risks to the financial system include
climate-related risks, internet disruption, cyber and social media threats
arising from the digitisation of financial services.”

To strengthen the resilience of the financial sector, he
said member states need to develop comprehensive national cybersecurity
strategies and establish appropriate regulatory and supervisory frameworks.