IMF Paper Discusses Emerging Practices for Supervision of Cyber Risk
IMF published a paper that discusses the emerging supervisory practices that contribute to effective cyber-security risk supervision. This paper highlights emerging supervisory approaches with the intention of promoting good practices. The focus is on how these practices can be adopted by the agencies that are at an early stage of developing a supervisory approach to strengthen cyber resilience. The paper notes that regulatory requirements ensuring that good cyber-security risk management practices are in place are critical.
The paper discusses the importance of addressing cyber risk and points out that financial sector supervisory authorities worldwide are working to establish and implement a framework for cyber risk supervision. Progress, however, is uneven, particularly for lower-income countries and lower-capacity supervisors, which face a number of challenges developing an effective regulatory and supervisory framework for cyber risk supervision. The goal of cyber-security risk supervision should be to influence, incentivize, and shape cyber-security capabilities of firms. Supervision activities to build resilience should include the following:
- Identify the threat landscape
- Map the cyber and financial network
- Create coherent regulation
- Conduct supervisory assessment
- Establish formal information-sharing and reporting mechanisms
- Provide adequate response and recovery
- Ensure preparedness of supervisory agencies
The experience from IMF technical assistance shows that establishing a framework for cyber-security risk supervision involves many challenges, with the dearth of specialist skills being one of the biggest challenges. Notwithstanding these, all supervisors can take action to build information-gathering and sharing systems, improve basic security practices, and identify and deploy resources toward key assets and carry out basic cyber exercises. The report highlights that the transfer of knowledge across the community of supervisors, especially lower-income and lower-capacity supervisors, will help raise resilience globally. Regulations should leverage established approaches, including those developed by industry, which will help with a convergence of standards. Although all firms face cyber-security risk, smaller- and lower-capacity firms should focus on strengthening cyber hygiene while the largest and most globally connected firms and key system nodes should be subject to heightened standards.
The report notes that authorities should work together to promote a more consistent and coordinated approach that promotes consistency and convergence. A strong regulatory and supervisory framework should allow supervisors to substantially improve the resilience of financial sector to cyber attack. Whether the regulatory framework is based on principles or rules, the framework must grant supervisors sufficient authority to address cyber-security risk and allow supervisors to be sufficiently adaptive to the dynamics of the risk.
Related Link: Report on Cyber Risk Supervision
Keywords: International, Banking, Insurance, Securities, Cyber Risk, Cyber Resilience Framework, Supervisory Practices, Operational Risk, IMF
Previous Article
RBNZ Seeks Assurance About Prudent Operating of ANZ New ZealandRelated Articles
EU Agencies Update LCR Rule and Macro-Prudential Policy Recommendation
The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR).
EBA Publishes Regulatory Standards to Identify Shadow Banking Entities
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures.
OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities
The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.
EBA Proposes Standards to Support Secondary NPL Markets
The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.
EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution
The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).
EBA Issues Standards for Crowdfunding Service Providers Under ECSPR
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.
EU to Amend Credit Risk Adjustment Rules; ESAs Submit Queries on SFDR
The European Council published a draft Commission Delegated Regulation to amend the regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution
The European Securities and Markets Authority (ESMA) published a paper that examines the systemic risk posed by increasing use of cloud services, along with the potential policy options to mitigate this risk.
MAS Amends Notice 635 and Issues Second Proposal on Green Taxonomy
The Monetary Authority of Singapore (MAS) published amendments to Notice 635, which sets out requirements that a bank in Singapore has to comply with when granting an unsecured non-card credit facility to individuals.
EC Consults on PSD2 and Open Finance; EU Reaches Agreement on DORA
The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.