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    ESRB Report Assesses Cyber Resilience Across EU

    February 14, 2023

    The European Systemic Risk Board (ESRB) published a report that highlights the need for macro-prudential tools to boost cyber resilience.

    The report builds on the previous work by ESRB to prevent and mitigate risks to financial stability in the event of a cyber incident, highlighting the need to boost cyber resilience. In 2022, ESRB worked within the context of a substantially heightened cyber threat environment across Europe. ESRB published a recommendation for the establishment of a pan-European systemic cyber incident coordination framework and issued an accompanying report on mitigating systemic cyber risk, which describes how this framework would facilitate an effective response to a major cyber incident. The report also complements the work of the Joint Committee of the European Supervisory Authorities (ESAs) undertaken within the framework of the Digital Operational Resilience Act (DORA), which aims to improve cyber resilience at the level of individual entities. Through this report, ESRB encourages authorities across the European Union to focus on three key areas:

    • Cyber Resilience Scenario Testing (CyRST), which is an analytical tool designed to assist authorities in testing the response and recovery capacity of the financial system in severe but plausible scenarios involving a cyber incident, in evaluating the impact of these scenarios on financial and operational stability, and in identifying the areas where further work is required to mitigate cyber risk. ESRB encourages authorities to use the CyRST approach pilot system-wide as soon as possible. Such pilots can complement other analytical tools that the authorities might be using and deepen their understanding of the risks to system-wide cyber resilience.
    • Systemic Impact Tolerance Objective (SITO), which is also an analytical tool developed to identify and measure the impact of cyber incidents on the financial system and to evaluate when such incidents are likely to breach tolerance levels and cause significant disruption. ESRB advocates the use of SITOs and will continue to transition from a conceptual approach to a practical basis for implementing them. ESRB will identify a key economic function where disruptions have cross-border implications and define appropriate SITOs at EU level to ensure consistency across the region/sector and authorities. ESRB recognizes that where disruptions have no or few cross-border implications, SITOs may differ across jurisdictions to reflect national specificities.
    • Review of financial crisis management tools, which investigated whether these tools are sufficient for adequately responding to system-wide cyber incidents. ESRB will consider which operational policy tools are most effective in responding to a system-wide cyber incident and identify gaps across operational and financial policy tools. The report finds that the effectiveness of existing financial crisis management tools in responding to a cyber incident depends on the severity of the impact on the financial system and on how fast it spreads.

    Going forward, ESRB will continue to work on an EU-wide strategy to help mitigate systemic cyber risk. ESRB will act as a hub to share progress reports and good practices and will update the conceptual approach to Cyber Resilience Scenario Testing and Systemic Impact Tolerance Objectives to integrate the experience and insights gained from pilot projects. ESRB will also analyze operational financial crisis management tools for systemic cyber crises.


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    Keywords: Europe, EU, Banking, Cyber Resilience, Cyber Incident, Cyber Risk, Regtech, DORA, Operational Resilience, Systemic Risk, ESRB

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