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 ArticleRBNZ Seeks Assurance About Prudent Operating of ANZ New Zealand
The European Banking Authority (EBA) published version 5.1 of the filing rules for supervisory reporting.
The European Banking Authority (EBA) published the final draft regulatory technical standards on disclosure of investment policy by investment firms, under the Investment Firms Regulation (IFR).
The Australian Prudential Regulation Authority (APRA) published the prudential practice guide CPG 511 to assist banks, insurers, and superannuation licensees in meeting requirements of CPS 511, the new prudential standard on remuneration.
The Office of the Comptroller of the Currency (OCC) published a bulletin that provides an updated self-assessment tool for banks to evaluate their preparedness for cessation of the London Interbank Offered Rate (LIBOR).
The Financial Stability Board (FSB) published a report that examines the progress made toward disclosures aligned with recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
The Basel Committee on Banking Supervision (BCBS) published the progress report on adoption of the Basel III regulatory framework in member jurisdictions.
The French Prudential Supervisory Authority (ACPR) has implemented, in its information system, updates linked to the Data Point Model (DPM) version 3.1.
The European Banking Authority (EBA) published a thematic note that aims to identify and raise awareness of the transition risks of benchmark rates, as the London Interbank Offered Rate (LIBOR) and the Euro Overnight Index Average (EONIA) are close to being phased out.