## Rising Cyber Threats Pose Serious Concerns for Financial Stability

_IMF Blog, April 9, 2024_

## Source details

**Canonical URL:** [Rising Cyber Threats Pose Serious Concerns for Financial Stability](https://www.imf.org/en/blogs/articles/2024/04/09/rising-cyber-threats-pose-serious-concerns-for-financial-stability)

## Other formats

- [Markdown version](/en/blogs/articles/2024/04/09/rising-cyber-threats-pose-serious-concerns-for-financial-stability/index.md)
- [Structured JSON version](/en/blogs/articles/2024/04/09/rising-cyber-threats-pose-serious-concerns-for-financial-stability/index.json)
- [Bundle manifest](/en/blogs/articles/2024/04/09/rising-cyber-threats-pose-serious-concerns-for-financial-stability/bundle-manifest.json)

## Bibliographic details
- Authors: Fabio Natalucci, Mahvash S Qureshi, Felix Suntheim
- Published: April 9, 2024

---

### Key findings
- Cyberattacks have more than doubled since the pandemic.
- Some firms have incurred very large direct losses; US credit reporting agency Equifax paid more than $1 billion in penalties after a major data breach in 2017 that affected about 150 million consumers.
- The size of extreme losses from cyber incidents has more than quadrupled since 2017 to $2.5 billion.
- Indirect losses such as reputational damage or security upgrades are substantially higher than direct losses.
- Attacks on financial firms account for nearly one-fifth of the total, with banks the most exposed.

### Financial sector exposure and mechanisms of harm
- Financial firms are uniquely exposed because they handle large amounts of sensitive data and transactions and are targets for criminals seeking to steal money or disrupt economic activity.
- Cyber incidents can:
  - Erode confidence in the financial system.
  - Disrupt critical services (for example, payment networks).
  - Cause spillovers to other institutions and funding problems that could jeopardize solvency.
- Analysis suggests modest and somewhat persistent deposit outflows have occurred at smaller US banks after a cyberattack (no significant “cyber runs” have occurred thus far).

### Illustrative incidents and channels of contagion
- A December attack at the Central Bank of Lesotho disrupted the national payment system, preventing transactions by domestic banks.
- A 2023 ransomware attack on a cloud IT service provider caused simultaneous outages at 60 US credit unions.
- Attacks often originate outside a firm’s home country and proceeds can be routed across borders, increasing the need for international cooperation.

### Drivers and trends increasing systemic risk
- Greater digitalization and heightened geopolitical tensions imply that the risk of a cyberattack with systemic consequences has risen.
- Financial firms’ increasing reliance on third-party IT service providers, and potentially more so with the emerging role of artificial intelligence, can improve operational resilience but also increase exposure to systemwide shocks.

### Policy recommendations and governance priorities
- Public intervention may be necessary because private incentives can be insufficient to address systemwide cyber risks.
- Authorities should develop an adequate national cybersecurity strategy accompanied by effective regulation and supervisory capacity that should encompass:
  - 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; the chapter’s analysis suggests that better cyber-related governance may reduce cyber risk.
  - Improving cyber hygiene of firms (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.
- Financial firms should develop and test response and recovery procedures; national authorities should have effective response protocols and crisis management frameworks in place.
- International cooperation is imperative to address cross-border aspects of cyber risk.

### Gaps in current frameworks
- According to an IMF survey of central banks and supervisory authorities, cybersecurity policy frameworks often remain insufficient, especially in emerging market and developing economies.
  - For example, only about half of countries surveyed had a national, financial sector-focused cybersecurity strategy or dedicated cybersecurity regulations.

### IMF engagement
- The IMF helps member countries strengthen cybersecurity frameworks through policy advice (for example as part of the Financial Sector Assessment Program) and through capacity-building activities.

*Fabio Natalucci, Mahvash S. Qureshi, Felix Suntheim; April 9, 2024.*

---

## Content in this bundle

- **Chapter 3**
  - [Chapter 3 (Markdown version)](/-/media/files/publications/gfsr/2024/april/english/ch3.pdf.md){rel="alternate" type="text/markdown"}
  - [Chapter 3 (PDF)](/-/media/files/publications/gfsr/2024/april/english/ch3.pdf){rel="external" type="application/pdf"}

---

## References

- [Global Financial Stability Report](https://www.imf.org/en/Publications/GFSR/Issues/2024/04/16/global-financial-stability-report-april-2024?cid=bl-com-SM2024-GFSREA2024001)
- [strengthen resilience](https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2020/12/04/Cyber-Risk-and-Financial-Stability-Its-a-Small-World-After-All-48622)
- [Financial Sector Assessment Program](https://www.imf.org/en/Publications/fssa)
- [capacity-building](https://www.imf.org/en/Capacity-Development)

_Source: https://www.imf.org/en/blogs/articles/2024/04/09/rising-cyber-threats-pose-serious-concerns-for-financial-stability_