Impact of coronavirus on operational risk: ORX News round-up

  • 2 July 2020

As the effects of coronavirus (Covid-19) spread across the globe, ORX has decided to provide a round-up of the operational risk impacts of coronavirus on financial institutions worldwide to help you manage this risk.

These summaries and stories are sourced by the ORX News service, and cover significant new developments and media stories. Follow the links to read the articles in full.

Latest coronavirus & op risk news:

Updates, 1 July

Actions to help clients

Credit fintech grow 120 percent in Brazil as small and medium-sized firms seek credit to face economic crisis

Cointelegraph, 29 June

Heightened risk

Brazilian regulator Febraban reports a 70 percent rise in bank fraud due to increase of digital banking during the pandemic

Cointelegraph, 29 June

Caixa, Brazil, loses BRL60m through fraud in its coronavirus emergency fund 

According to Estado de Minas on 27 June, flaws in digital savings and the "Caixa Tem" application, among other loopholes, have allowed criminals to access beneficiaries' accounts and use money that does not belong to them.  The institution detected that some accounts were being accessed inappropriately, by people who were not the beneficiaries of the aid. Caixa has reimbursed the beneficiaries who were victims of the fraud but will have to bear the loss. Caixa is also accumulating losses due to a processing error that led the bank to double the amount of the aid for some beneficiaries. Even those who indicated an account at another bank to receive the benefit received the second instalment in a digital savings created automatically by Caixa.

Financial stability & regulatory

Brazilian government approves temporary measure to protect banks against FX volatility during the pandemic

Poliarquia, 30 June

Half of Ugandan banks fail pandemic liquidity test

A stress test conducted on Uganda's 25 banks showed most would not have survived the cash crunch since loan interest income accounts for 60 percent of their revenue. Results of the stress test informed the decision to spread customer loan restructuring over a 12-month period instead of offering an outright repayment holiday, allAfrica reports on 29 June.

Updates, 24 June

Impact on operations

Pandemic delays rollout of new payment system in Tanzania

The Bank of Tanzania (BoT) has delayed the launch of the Tanzania Instant Payment System (TIPS) until the end of the year due to the coronavirus crisis. Work on the project first began in June 2018 and the system was due to be rolled out by June of this year. BoT director of the National Payment System, Bernard Dadi, stated that the delay was due to a need to dissolve the team and recruit a new one, although did not comment as to why, according to The Citizen on 19 June.

Actions to help clients

Ugandan banks restructure UGX2.08 trn worth of loans

According to allAfrica on 22 June, at the end of April (the first month of restructuring) 99.6% of applications made to Ugandan banks for loan restructuring had been approved. Exceptional permission was granted to banks on 6 April to restructure corporate and personal loans, including a moratorium on loan repayment for customers affected by the pandemic. A maximum of 2 loan restructurings will be permitted in a 12-month period for any one credit facility.

Heightened risk

UK private medical insurers under pressure to refund payments

Despite restrictions on non-critical private medical care throughout the pandemic, customers have continued to pay insurance premiums averaging £600 a year, reported the Financial Times on 23 June. The reduction in capacity for private medical care is partly due to the NHS requisitioning capacity to help combat the effects of the pandemic. While most insurers have not suspended payments or offered rebates, many have committed to reviewing the issue once the impact of the crisis is clearer. The Association of British Insurers has said that private medical insurance will prove particularly valuable later in the year as NHS waitlists grow due to delays caused by the pandemic.

Saga refunds £44m to customers due to coronavirus travel disruption

According to Insurance Journal on 22 June, UK based travel insurer Saga has refunded £44m of advance payments to customers affected by the pandemic. The company has cancelled all departures up to and including August, but expects travel to resume later in the year.

Financial stability & regulatory

African insurers face higher capital buffer in view of coronavirus

The Insurance Regulatory Authority said it will release details of firms yet to comply with the risk-based capital requirements ahead of the July 1 deadline. Failure to meet the minimum capital required will see the regulator issue a 30-day remedial notice after which the company’s licence will be withdrawn, Business Daily reports on 24 June.

Central Bank of Seychelles cuts interest rate to 3% due to pandemic

Seychelles News Agency, 23 June

US federal and state regulatory agencies issue examiner guidance for assessing safety and soundness considering the effect of the coronavirus pandemic on financial institutions

Federal Reserve, 23 June

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ORX News coronavirus operational risk news round-up 1 July 2020

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