The International Monetary Fund (IMF) has warned that severe cyber attacks against financial institutions could lead to major bank runs and market selloffs. While this hasn’t happened yet, the IMF has observed these effects on a smaller scale after a cyber attack hits a bank.
“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,” the IMF says. “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.”
Security awareness training can give organizations an essential layer of defense against social engineering attacks. The IMF offers the following recommendations to help financial institutions avoid falling victim to cyberattacks:
- “Periodically assessing the cybersecurity landscape and identifying potential systemic risks from interconnectedness and concentrations, including from third-party service providers.
- “Encouraging cyber ‘maturity’ among financial sector firms, including board-level access to cybersecurity expertise, as supported by the chapter’s analysis which suggests that better cyber-related governance may reduce cyber risk.
- “Improving cyber hygiene of firms—that is, their online security and system health (such as antimalware and multifactor authentication)—and training and awareness.
- “Prioritizing data reporting and collection of cyber incidents, and sharing information among financial sector participants to enhance their collective preparedness.”
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The IMF has the story.
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