Page 23 - Annual Report 2022 EN
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Bank and Insurance iv. Disruptive Technology and Cybersecurity Risks: The
rapid pace of technological innovation continued
Supervision to reshape the banking landscape, presenting both
opportunities and risks. Banks faced increasing
The Bank and Insurance Supervision (BIS) team
cybersecurity threats and the need to adapt
is responsible for prudential supervision of 24
their operations to digital transformation while
banks and insurance companies, most of which are
ensuring robust risk management practices.
established as branches or subsidiaries of international
institutions and rely on their parent companies for
v. Climate-related Financial Risks: Environmental
operational support. There are also domestically-
risks gained prominence within the banking
owned institutions regulated by the QFCRA.
sector, with growing recognition of the financial
implications of climate change. Banks faced
Risk and vulnerabilities to the global pressures to assess and disclose climate-related
banking system risks in their portfolios, addressing concerns about
exposure to environmentally sensitive assets.
Similar to the economic outlook in 2022, the financial
sector continued to face ongoing vulnerabilities
In 2023, the QFCRA- supervised institutions
and challenges that demanded heightened
effectively navigated these challenges. Their strong
attention from the QFCRA supervision teams:
fundamentals, including robust capital positions,
i. Increased geopolitical tensions exacerbated the ample liquidity buffers, and low levels of non-
challenges for the financial sector, affecting investor performing loans (NPLs), have enabled them
confidence and capital markets. Uncertainties to navigate challenges such as the COVID-19
surrounding geopolitical developments amplified pandemic, supply chain disruptions, geopolitics, and
market fluctuations, further posing challenges to recent bank failures in the US and Switzerland.
authorised firms’ risk management strategies.
Overall, while the banking sector demonstrated
ii. The rapid increase in interest rates and resilience in navigating various challenges,
heightened volatility in banks’ funding costs. vulnerabilities persisted, necessitating vigilance in risk
management practices, regulatory compliance, and
iii. Asset quality and credit risks: economic uncertainties technological adaptation. Strengthening resilience
and disruptions arising from high inflation and reduced and addressing systemic risks within the banking
debt-servicing capacity of obligors contributed to sector remained imperative for ensuring financial
concerns about non-performing loans and credit risks. stability and sustainable economic growth.
