Rising cyber threats pose serious concerns for financial stability
Source: Middle East Insurance Review | Jun 2024
Cyber attacks have more than doubled since the pandemic and while companies have historically suffered relatively modest direct losses from cyber attacks, some have experienced a much heavier toll.
A new blog by IMF, based on the April 2024 Global Financial Stability Report, said the risk of extreme losses from cyber incidents is increasing. Such losses could potentially cause funding problems for companies and even jeopardise their solvency. The size of these extreme losses has more than quadrupled since 2017 to $2.5bn and indirect losses like reputational damage or security upgrades are substantially higher.
The blog said that the global financial sector is uniquely exposed to cyber risk. Financial firms - given the large amounts of sensitive data and transactions they handle - are often targeted by criminals seeking to steal money or disrupt economic activity. Attacks on financial firms account for nearly one-fifth of the total, of which banks are the most exposed.
Incidents in the financial sector could threaten financial and economic stability if they erode confidence in the financial system, disrupt critical services or cause spillovers to other institutions.
Cyber incidents that disrupt critical services like payment networks could also severely affect economic activity.
Another consideration is that financial firms increasingly rely on third-party IT service providers and probably even more with the emerging role of AI. Such external providers can improve operational resilience but also expose the financial industry to systemwide shocks.
With the global financial system facing significant and growing cyber risks from increasing digitalisation and geopolitical tensions, policies and governance frameworks must keep pace. M