Increasing risk of cyber-attacks against financial institutions | Fin24
  • Solly Moeng

    Give business owners a reason to stay in South Africa.

  • Pravin Gordhan

    The minister says SA is paying more for electricity because of theft at Medupi and Kusile.

  • Keep Flying the Flag

    The ANC says the state must keep a 'restructured' SAA as a national airline.


Increasing risk of cyber-attacks against financial institutions

Apr 22 2017 10:00

New York - Cyber-attacks against financial institutions are increasingly significant risks, according to Fitch Ratings.

Cyber risk is a growing threat that can adversely affect credit ratings as attacks can compromise customer data and disrupt websites, with detrimental financial or operational consequences for individual issuers and financial systems.

Related reputational damage may weaken business and access to funding and capital markets.

In one of the latest reported attacks, payday lender Wonga said earlier this month that up to 270 000 customers in the UK and Poland may have been affected by a data breach.

"We believe that institutions with substantial consumer lending businesses and deposit franchises are most at risk of financially motivated attacks due to the scope for theft from customer accounts and the large volume of personal data they hold. However, larger institutions typically have stronger risk controls and regulatory oversight, mitigating some of the risks," says Fitch Ratings in a statement.

"Institutions that provide trade execution, clearing and settlement services are more vulnerable to disruptively motivated attacks, due to their interconnectivity with the financial system."

Regulators have been increasingly vocal on cybersecurity and have urged cyber-attack stress testing. The chair of the US Securities and Exchange Commission stated in 2016 that cybersecurity is the biggest risk to the US financial system.

READ: SA to see a massive cyberattack in 2017, expert

Under the EU's General Data Protection Regulation, which takes effect in May 2018, banks face potentially large fines - up to 4% of their global turnover - for security breaches of personal data. All organisations that use data from EU citizens must comply, regardless of their domicile.

"We believe that industry collaboration that has been in place for years will continue to be beneficial. Organisations such as the Financial Services Sector Coordinating Council and Financial Services Information Sharing and Analysis Centre promote information sharing and security coordination," says Fitch Ratings.

"Furthermore, certain regulatory bodies are taking the view that cyber risk management should be internationally coordinated, as evidenced by committees and working groups such as The International Organisation of Securities Commission's Committee on Payments and Market Infrastructures and G-7 Cyber Risk Expert Group."

According to the European Central Bank, the average lag until a breach is detected was 146 days in 2016, down from 205 days in 2014. As information is shared across firms, cyber risk detection and response plans could improve, but coordination does not ensure that risks can be fully contained.

Insurance against cyber-attacks may cover nominal losses but may not contain reputational damage that could lead to client outflows or loss of investor confidence. Cyber insurance underwriting has increased in recent years.

"We estimate that the US property and casualty insurance industry wrote over $1bn in cyber-related insurance premiums in 2015 and expect these levels to grow in the coming years," says Fitch Ratings.

Read Fin24's top stories trending on Twitter:



Company Snapshot

Voting Booth

How concerned are you about ransomware attacks?

Previous results · Suggest a vote