Finance and Treasury Minister Harry Kuma outlined the risks in the country’s current payments system that require the Payments System Bill to be passed through Parliament.
These risks are heightened by the fact that advances in technology have given people many choices as to how payments are made and that as technology continues to evolve, security and efficiency issues become increasingly important to consider in the context of various elements of risk.
As Minister Kuma pointed out, first in the list of risks is credit risk, where lenders offer lines of credit to borrowers (or counterparties) as borrowers request credit and respond to credit policy requirements of lenders. In the absence of appropriate legal parameters, a default in a payment obligation can have ripple effects on payment services and the overall financial stability of the country.
Second on the list is the legal risks that the CBSI Act of 2012 is insufficient to provide the Bank with mandates to implement the necessary functions to ensure that there are sufficient oversight powers to administer the payment system.
The third is liquidity risk, which means that in real time during the payment settlement process, urgent payments can have negative effects on how credit is made available to cash-strapped institutions.
Fourth, cross-border transactions, which means that the abolition of exchange and capital controls in many countries in recent years has increased the movement of funds across borders and in the absence of careful measures, catastrophic results could have a negative effect on a country’s economy.
Fifth, operational risks and sixth, anti-money laundering requirements for proper monitoring of the payments landscape.
These risks, according to Kuma, necessitate strengthening the oversight and operational roles of the CBSI to prevent the country from falling behind in payment systems.