The Roles of Central Banks

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1. Roles of Central Banks

Central Bank, which regulates all the banks in the country, has the power to dictate banks to avoid undertaking risky activities such as outsourcing. That’s because when outsourcing, both sides’ vulnerable points go together bearing the same risk for two companies. Even the side strong and free of risk can fail in secureness, as it will share its information with its partner company that might be less trusty and secure.

In order to maintain the security of the customer’s information and to mitigate the future unexpected risks the Central Banks almost in every country have to inspect the third party’s information security program. Determine whether the third party (Fuji Xerox) has sufficient experience in assessing, identifying and emerging vulnerabilities and threats. Moreover, when technology is essential for maintenance of service delivery, assess the third party’s application security programs and infrastructure, containing the software growth life cycle and results of vulnerability and penetration tests. Estimate the third party’s ability to implement effective and sustainable corrective actions to address deficiencies observed during testing. Which these actions in the following case with Standard Chartered Bank and Fuji Xerox were not performed well and as the consequence there was occurred illegal accessing of Bank’s 647 client’s private statements by hacking with the help of one of the servers of the Fuji Xerox’s IT Company.

In addition, use of third parties reduces management’s direct control of activities and may introduce new or augment existing risks, particularly, reputation, compliance, strategic, operational, as well as credit risks and the interrelationship of all mentioned above risk...

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... at the same time fragile asset.

Reference:

Technical Committee of the International Organization of Securities Commission. (February 2005). Principles on Outsourcing. Available: http://www.cmvm.pt/en/Pages/default.aspx. [Accessed: 5th March 2014.]

Risk management Guidance. [Online] Available at: http://www.occ.gov/news-issuances/bulletins/2013/bulletin-2013-29.html[Accessed 7 March 2014]

Fighting economic crime in the Financial Services sector. [Online] Available at: http://www.pwc.com/et_EE/EE/publications/assets/pub/fighting-economic-crime-in-the-financial-services-sector.pdf [Accessed 7 March 2014]

The cost of cyber crime. [Online] Available at: http://www.iwar.org.uk/ecoespionage/resources/cost-of-cybercrime/full-report.pdf [Accessed 9 March 2014]

Timothy W. Koch, S. Scott MacDonald, Bank management, 2011, Dryden Press [Accessed 1 March 2014]
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