EDITORIAL: SBP (State Bank of Pakistan) must be appreciated for its foresight in voicing concern about the continuity of safe banking in the country “at a time of fast rising geopolitical tensions” since about 20 local financial institutions, including the central bank itself, are using core banking systems of a top global banking company, Temenos, which is operating from a foreign country.
Addressing a conference titled ‘Bank of the Future Forum 2024’, which was hosted by Systems Limited along with Temenos, SBP Governor Jameel Ahmed made the valid point that the European IT firm should also establish a support centre in Pakistan, instead of operating from a foreign country, to “ensure continuity of services in times of geopolitical volatility and stress”.
This is very important, since Temenos runs about 69 offices in 39 countries, including five just across the border in India, yet it does not have an official presence here. The governor added that a support centre in Pakistan was important not just to “ensure the safety and robustness of our financial system” but also to upgrade our human resource base from developing support services to designing entire systems.
SBP first implemented the Temenos banking system and an Enterprise Resource Planning (ERP) system for non-banking transactions in 2002. By 2015, the central bank upgraded its core banking systems to the advanced level, in line with international standards. And today, 20 financial institutions in the country have opted for these solutions, which means a large and growing number of Pakistani professionals have been trained in cutting edge international systems.
There’s no denying that banking is one of the more developed and thriving sectors in the country. And the SBP governor is right that bringing Temenos to Pakistan would not only bolster the financial system in times of constantly rising uncertainty, which the financial markets are inherently allergic to, but it would also necessitate improvement and enhancement in the skillset of Pakistani banking professionals.
SBP is an independent body and has its own jurisdiction, no doubt, but such foresight should also be backed by the government, which should lobby with Temenos in its own capacity. It knows the stress and pressure the financial system is under as the country desperately tries to avoid default, and how the slightest oversight – whether an unforeseen glitch or deliberate sabotage that cannot be ruled out in the present geopolitical environment – can rattle it with very serious consequences.
Right now, with the first tranche of the EFF (Extended Fund Facility) in its vaults, the State Bank is sitting pretty with two-month import cover and a positive outlook for the immediate to medium term. It’s also won praise and precious points for the success of its unprecedented tight monetary policy, despite the cost-push nature of the historic inflation of the last few years. And with expectations of more rate cuts amid talk of energy tariff rationalisation, there are hopes of more production, exports and growth over the next fiscal or two.
These are hard-won gains and must be protected at all costs. Let’s not forget that interest rates will deliver no wonders in isolation. The government will have to do its part, and unless it brings down fixed utility costs that have priced local production out of the international market, there will be no turnaround; hence the focus on taxes and tariffs and all the complications with the IMF.
Yet it is equally, if not more important to safeguard the integrity of the financial system. And that’s where the SBP governor’s concerns about the future of digital banking and the practical need for Temenos’ physical presence in Pakistan are right on the mark.
Copyright Business Recorder, 2024
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