Lack of adequate logical security may be prone to technical exposure to unauthorized implementation or modification of data and program at either the network, platform, database or application level. A classic example of this type of controls is the use of user ID and password. Supervisor should be able to analyze and evaluate the effectiveness of both physical and logical access control in accomplishing financial institution's information security objectives. Integrity Supervisory objective An objective of IT supervision in an integrity area is to ensure reliability and completeness of system functionality in order to verify that data is processed in an accurate and timely manner. Supervisory areas Therefore, supervisors need to review and assess whether financial institutions have sound application control in place. In this regard, they should have control built in the procedure and programmed in the system to ensure the integrity of input, process and output. In a large financial institution using various applications, a sample of applications including core banking applications and management information system (MIS) would be examined for control adequacy. Data and system integrity can reflect the effectiveness of system development, acquisition and change control procedure. Therefore, it is necessary to cover those areas in the scope of supervision. Availability Supervisory objective An objective of IT supervision in an availability area is to ensure financial institutions' readiness for being able to run business without interruption during an occurrence of disruption.

There should be a policy and procedure in place to manage the risks. Internal control: The financial institutions should set up preventive, detective and corrective control mechanisms that may be built in the operating procedure or programmed in the system involving new product and service delivery. Contingency plan: The financial institutions should formulate the contingency plan to carry on the business under unexpected events. Staff development: The financial institutions should establish a staff development plan to enhance personnel capabilities to conduct new product and service operations. Last topic of presentation is new challenges for BOT supervision and ways to overcome. 5. New challenges for BOT's IT supervision and ways to overcome  (1)  While the financial industry is moving fast with innovations and new developments, supervision needs to ensure the stability of the financial system. Supervisors need to encourage financial institutions to operate their businesses in a safe and sound manner as new delivery channels or services could exacerbate some of the same risks inherent in traditional banking. However, the prudential regulatory framework has to be congruent to the evolution of the e-banking business. Therefore, we need to strike a balance between the need to maintain the stability of the financial system and to foster developments, competition, and a level playing field. There are ways to overcome this challenge. BIS Review 35/2005  7  -  Regulators need to keep up with the development of the market while being proactive in formulating the regulatory framework.