"I think we [
Cloud computing is a system wherein institutions such as banks are allowed to channel, access and manipulate data through a network of servers on the Internet.
"It's a cost-effective way for them to be able to better manage data without having to invest heavily in infrastructure. Actually, it's a solution that increases or potentially upgrades the competitiveness of smaller institutions. It's a potential game changer, as well,' Espenilla said.
"Many jurisdictions now are just studying their regulations on how to accommodate cloud computing. How do we know?
Just this month, the BSP approved Resolution 1286, providing guidelines on the use of cloud computing in the financial service industry. According to Espenilla, only
"We did not allow [cloud computing] before. That was for IT [information- technology] security reasons. Now, we are actually going to allow, explicitly under certain conditions, to ensure a secure environment,' Espenilla said.
Along with mitigating risks on cloud computing through the implementation of new regulations, the BSP is now also requiring banks to upgrade their automated teller machine (ATM) system to avoid the risks of fraud.
"First of all, it is, in fact, a global standard that has been around for sometime. And the reality is the magnetic stripe [in ATM cards] is more vulnerable to cloning particularly. Even skimming. And, of course, financial syndicates go to locations where they are likelier to succeed. Based on studies, they used to target other countries; now those countries have already upgraded to chip [replacing magnetic stripes in ATM cards] so they are looking for weaker targets, so we have to upgrade the whole standard so we don't become that weaker target,' he said.
The BSP deputy governor also said that while the BSP allowed a window period of until 2017 to change ATM machines, they expect banks to comply sooner than the deadline. He also said
As to who would shoulder the cost of changing the banks' ATM technology, Espenilla said it would be a business decision on the part of the banks to own the expense or pass it on to their clients.
The BSP has no data yet on the number of ATM cardholders in the country. On credit cards, however, the central bank is formulating a new reporting system to further monitor credit-card activities in the country.
"We are launching in the next few months a new reporting system that is called a 'credit-card business activity report.' So all banks credit-card providers will be required to complete this and one of the pieces of information are the number of cards,' Espenilla said.
As of now, the BSP requires all banks to take operational measures to protect their clients from the risk of fraud, especially involving IT bank operations.
"Although we allow an interval of time to for them to comply with the EMV and triple DES [data encryption standard], that does not mean they don't have to take measures now. They are required today, immediately, to take operational control measures. Examples? That is why today, it's hard to use the ATM; you still have to put your hand in a hole-like structure [to enter your pin and other information]. Those are forms of operational controls,' Espenilla said. "It's a bit crude. But once we shift to EMV, you won't have to do that anymore because the data encryption of EMV is what they call dynamic. At each transaction the codes change. Magnetic stripes are static, so once they capture the information of the magnetic stripe'"that is what they clone. That's it. You won't capture information like that on EMV chip,' he added.
The BSP's new regulation requires banks to adopt triple DES by 2015 and shift from the magnetic-tripe technology in ATM cards to more secure EMV chip-enabled cards by 2017.
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