Financial sector faces rising cyber threats – IMF

The IMF in its April 2024 Global Financial Stability Report has noted that while companies have historically suffered relatively modest direct losses from cyberattacks, some have experienced a much heavier toll.

US credit reporting agency Equifax, for example, paid more than $1 billion in penalties after a major data breach in 2017 that affected about 150 million consumers.

The report showed that the risk of extreme losses from cyber incidents is increasing and could potentially cause funding problems for companies and even jeopardize their solvency.

The size of these extreme losses has quadrupled since 2017 to $2.5 billion and indirect losses like reputational damage or security upgrades are substantially higher.

The 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.

For example, a severe incident at a financial institution could undermine trust and, in extreme cases, lead to market selloffs or runs on banks. Although no significant “cyber runs” have occurred thus far, our analysis suggests modest and somewhat persistent deposit outflows have occurred at smaller US banks after a cyberattack.

Cyber incidents that disrupt critical services like payment networks could also severely affect economic activity. For example, a December attack at the Central Bank of Lesotho disrupted the national payment system, preventing transactions by domestic banks.