From the perspective of the ECB’s banking supervisor, euro area financial institutions are still not doing enough to protect themselves against hacker attacks and cyber risks. Weaknesses have been identified in all aspects of cybersecurity, the European Central Bank (ECB) said in its latest supervisory newsletter.
“Overall, deficiencies were more serious and widespread than expected,” the report said. Institutions must therefore take immediate and concrete steps to ensure that their handling of IT and cyber risks also meets supervisory expectations. The ECB investigated banks from eleven countries in 22 on-site inspections between 2020 and 2023.
High risk of damage
Cyber attacks can cause significant damage in the financial sector. On Monday, the president of the financial regulator BaFin, Mark Branson, pointed out the increasing danger of such attacks. According to Branson, there is a real race between an organized criminal industry and the defense against it.
According to the ECB, financial institutions examined during on-site inspections have already received specific supervisory recommendations. Management at all other banks should also consider which departments can improve their handling of IT and cybersecurity risks. Further on-site inspections are necessary. Banking regulators want to conduct a major stress test next year to examine financial institutions’ ability to respond to and recover from cyber attacks.
Outdated IT also brings risks
The inspectors also asked banks about IT risks in a general survey. This includes not only cyber risks, but also the dangers of outdated systems or outsourcing, for example if contractors do not provide the services. The ECB concluded that banks’ losses due to non-performance or poor quality of outsourced services increased by 360 percent last year to 148 million euros. However, the losses were concentrated in a few large banks – and therefore did not indicate a trend in the sector, the ECB explained.
According to the regulator, banks’ spending on cloud services increased by 56 percent last year. Outsourcing IT functions to the ‘data cloud’, such as storing data in the cloud instead of on your own servers, has been a trend in the industry for some time as part of the digitalization of the financial sector. Last year, 3.1 percent of banks’ total IT expenditure was spent on cloud services.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
