Banks’ tech risks intensifies as digitization ramps up: Fitch

Tech failures will have significant reputational and regulatory consequences for banks.

The increased digitalisation of Asia Pacific banks is giving rise to technology-related operational risks, reports Fitch Ratings.

Several APAC banks recently suffered technology-related service disruptions in the past year. Notably, Japan’s Mizuho Bank saw a widespread glitch that caused a breakdown in its ATM network in 2021, and disruptions to its corporate banking services in January 2022. Singapore’s DBS bank also suffered a major IT outage in November 2021 that saw customers unable to access their mobile and PayNow accounts.

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Fitch Ratings believes that tech risks will intensify for banks as stakeholders–including regulators–demand higher standards for efficient, reliable and secure services.

“Incidents of technological failure, whether brought about by internal system lapses or external cyberattacks, impose not only direct monetary losses but may also have significant reputational and regulatory consequences for banks,” Fitch warned.

The impact of technological risks on banks’ credit ratings are likely to be more severe if they recur or persist over a protracted period, or if they reflect broader weaknesses in their non-financial risk management, the ratings agency added.

Fitch also warned that these risks may even influence its assessment and lead to downward pressure in banks’ credit profiles. This is especially true for banks with limited rating headroom to withstand additional weaknesses, Fitch said.