Digital convergence, operational resilience critical as banks in Jordan gravitate towards sustainable growth — KPMG

AMMAN — KPMG Jordan announced the launch of its First Banking perspectives 2022 publication titled “Banking in an Evolving Landscape,” emphasising the opportunities unlocked for the Kingdom’s banking sector.

KPMG is a global network of professional firms providing Audit, Tax and Advisory services, according to its website.

The first annual edition of this flagship publication focuses on the priorities of the banking sector that will shape up the future, including the theme of sustainable growth, evolving environmental, social and governance considerations, digital convergence, and other perspectives that banks will need to deal with to brace themselves for an evolving financial services landscape, according to a KPMG statement.

The publication covers all the relevant themes in the industry that KPMG has observed segmented into three streams: Future of banking, Regulatory and compliance, and Technology and environment – providing perspectives to address current challenges and opportunities faced by the banking sector during 2021 and 2022.

“The dual forces of the pandemic and global technological advancement have tested banks’ operational resilience against new risks faced by banks. We root managing such risks — with agility and flexibility — hence, allowing banks to reap the benefits of technology without adding significant risk,” commented Rabih Shalabi, Partner & Head of Audit at KPMG in Jordan, on how to convert risks into new opportunities. 

Highlighting the financial performance of 13 Jordanian banks, KPMG said the combined net profit after tax rose 79.87 per cent to JD585.88 million in 2021 from JD325.73 million in 2020, as the one-off increase in expected credit losses in 2020 declined by 28.27 per cent year-on-year to JD589.83 million resulting primarily from improvements in customers’ credit risk and harmonisation of ECL overlays.

The transition of digitalised banking leadership models is a wave on the rise; due to the emergence of a new universal approach that pivots away from the traditional qualities of corporate leadership, banks will be required to adopt timely digital leadership models, according to the statement.

The publication sheds light on the joint role of banks and regulators in the industry’s recovery and how the global authorities enacted extraordinary measures to mitigate the economic impact of the pandemic. 

The Central Bank of Jordan (CBJ) launched a vast programme to stabilise the economy, parts of which have been extended as the pandemic wore on. Through this programme, the CBJ activated soft financing for small businesses and re-lending through commercial and Islamic banks at affordable costs and easily applicable conditions for all sectors. Furthermore, the programme is inclusive to all governorates of the Kingdom.

CBJ’s programme supports professionals, craftsmen, individual institutions, as well as small- and medium-sised enterprises (SMEs) — those which are under a 200-employee count, and total assets or sales not exceeding JD5 million. 

The support programme’s budget amounts to JD700 million with a zero per cent interest rate and to be granted to local banks at a 2per cent interest rate and the loan’s term is 42 months with 12-months grace period.

The report also reveals how broadly the Jordanian banking sector has invested in cybersecurity, however, with much of the banking sector digitalised, it can still be vulnerable to attack. Therefore, their experts further discuss key themes that are shaping cybersecurity in the banking sector, including new developments in open banking, and cyber defence mechanisms like Secure DecOps, penetration testing and red teaming that are brought into the banking domain.

The publication emphasises the continued importance of resilience – best in place in an environment where it is jointly held by banks and regulators – and suggests pathways and how to optimally achieve such resilience.

“When we compare the Jordanian banks with peers in the GCC, a brighter future for the industry looms on the horizon, as long as resilience is continually advanced and sustainable management measures are implemented, new opportunities will stay on the rise,” concluded Ovais Shahab, Head of Financial Services at KPMG in Saudi Arabia and Levant.