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    ECB is Conducting First Cyber Risk Stress Test for Banks

    January 24, 2024

    As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats. Late last year, the European Union regulator European Central Bank (ECB) announced its intent to conduct its first-ever cyber resilience stress test, which is currently underway. The exercise will assess how banks respond to, and recover from, a cyberattack, rather than just looking at their ability to prevent it.

    The cyber resilience stress test will assess the operational resilience of core banking systems to severe but plausible cyber security events. Banks will test their response and recovery measures, including activating emergency procedures and contingency plans and restoring normal operations. Supervisors will subsequently assess the extent to which banks can cope under such a scenario. The test will be conducted on 109 banks directly supervised by ECB. Furthermore, a selected sample of 28 banks will undergo an enhanced assessment for which they will submit additional information on how they coped with the cyberattack. This sample covers different business models and geographies to provide a meaningful reflection of the euro area banking system and ensure there is efficient coordination with other supervisory activities.

    The test combines information technology, business, and risk management, differs from the previous EU stress tests, and requires institutions to fulfil the ECB requirements for reporting major cyber incidents. The results of the cyber stress testing are expected to be communicated in the summer of 2024. This is a predominantly qualitative exercise that will not have an impact on capital through the Pillar 2 guidance. Rather, the insights gained will be used for wider supervisory assessment and supervisors will discuss the findings and lessons learned with each bank as part of the next supervisory review and evaluation process (SREP) exercise.

     

    Visit Moody’s Analytics Cybersecurity and Data Privacy page to find out more about our Cybersecurity Program.

     

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    Keywords: Europe, EU, Banking, Cyber Risk, Operational Resilience, RegTech, ECB

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