Featured Product

    RBNZ to Address Cyber Risk Through Risk Management Guidance

    February 25, 2020

    RBNZ announced that it is strengthening its efforts to enhance resilience of the financial system from cyber threats, including developing risk management guidance and promoting information-sharing in collaboration with industry and other public organizations. Additionally, RBNZ published a bulletin/paper that examines the concept of cyber resilience and estimates the potential costs of cyber risk for the financial system in New Zealand. With the frequency and severity of cyber-security incidents on the rise, the paper highlights the importance of the financial sector remaining vigilant and managing cyber risks effectively.

    The paper published by RBNZ draws on two internationally recognized methods to shed more light on the potential cost that cyber risk poses to the banking and insurance sectors in New Zealand. The first method is a bottom-up approach that uses firm-specific data from abroad, which is then extrapolated to New Zealand. The second method uses top-down analysis, linking the cost of cyber incidents to GDP. The two methods produce remarkably similar results for New Zealand. The estimated average cost of cyber incidents is likely to be about NZD 104 million per annum for the banking industry and NZD 38 million for the insurance industry. To put this cost in context, it is the equivalent of 2% to 3% of annual profits for the banking and insurance sectors. According to the value-at-risk method, in any given year there is a 5% chance that the costs could rise beyond NZD 2 billion for the banking sector and more than NZD 300 million for the insurance sector, nearly equivalent to 34% (25%) of the annual net profits for banks and 25% of the annual net profits for insurers.

    The analysis presented in the paper shows that the financial cost from cyber incidents is real and has the potential to be significant. Additional costs that have not been captured by the two approaches used in this paper include the loss of confidence in the financial system, the resulting impact on innovation and the adoption of new technological developments, and the diversion of resources away from productivity enhancing investment. Furthermore the country’s cyber-security agency CERT NZ found that more than 60% of the cyber-attacks on the New Zealand organizations in 2018 targeted firms in the financial and insurance services sector. Therefore, managing cyber risk and building cyber resilience should be of importance to the financial sector as well as its regulators. 

     

    Related Links

    Keywords: Asia Pacific, New Zealand, Banking, Insurance, Cyber Risk, Cyber Resilience, Fintech, Value-at-Risk, Bottom Up Approach, Top Down Analysis, RBNZ

    Related Articles
    News

    PRA Finalizes Supervisory Approach for Non-Systemic Banks in UK

    PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.

    April 15, 2021 WebPage Regulatory News
    News

    EBA Finalizes Standards on Methods of Prudential Consolidation

    EBA published a report that sets out the final draft regulatory technical standards specifying the conditions according to which consolidation shall be carried out in line with Article 18 of the Capital Requirements Regulation (CRR).

    April 15, 2021 WebPage Regulatory News
    News

    EBA Updates List of Other Systemically Important Institutions in EU

    EBA updated the list of other systemically important institutions (O-SIIs) in EU.

    April 15, 2021 WebPage Regulatory News
    News

    BCBS Report Concludes Basel Risk Categories Can Capture Climate Risks

    BCBS published two reports that discuss transmission channels of climate-related risks to the banking system and the measurement methodologies of climate-related financial risks.

    April 14, 2021 WebPage Regulatory News
    News

    UK Authorities Welcome FSB Review of their Remuneration Regime

    UK Authorities (FCA and PRA) welcomed the findings of FSB peer review on the implementation of financial sector remuneration reforms in the UK.

    April 14, 2021 WebPage Regulatory News
    News

    PRA and FCA Letter on Addressing Risks from Use of Deposit Aggregators

    PRA and FCA jointly issued a letter that highlights risks associated with the increasing volumes of deposits that are placed with banks and building societies via deposit aggregators and how to mitigate these risks.

    April 14, 2021 WebPage Regulatory News
    News

    MFSA to Amend Banking Act and Rules in Coming Months to Transpose CRD5

    MFSA announced that amendments to the Banking Act, Subsidiary Legislation, and Banking Rules will be issued in the coming months, to transpose the Capital Requirements Directive (CRD5) into the national regulatory framework.

    April 14, 2021 WebPage Regulatory News
    News

    EC Delegated Regulation on Specialized Lending Exposures Under CRR

    EC finalized the Delegated Regulation 2021/598 that supplements the Capital Requirements Regulation (CRR or 575/2013) and lays out the regulatory technical standards for assigning risk-weights to specialized lending exposures.

    April 14, 2021 WebPage Regulatory News
    News

    OSFI Proposes to Enhance Assurance Expectations for Basel Returns

    OSFI launched a consultation to explore ways to enhance the OSFI assurance over capital, leverage, and liquidity returns for banks and insurers, given the increasing complexity arising from the evolving regulatory reporting framework due to IFRS 17 (Insurance Contracts) standard and Basel III reforms.

    April 13, 2021 WebPage Regulatory News
    News

    ECB Issues Results of Benchmarking Analysis of Recovery Plans of Banks

    ECB published results of the benchmarking analysis of the recovery plan cycle for 2019.

    April 13, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6858