ECB is Conducting First Cyber Risk Stress Test for Banks
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.
Related Links
Keywords: Europe, EU, Banking, Cyber Risk, Operational Resilience, RegTech, ECB
Related Articles
OSFI Issues Phase2 Consultation on Climate Scenario Exercise for Banks
The Office of the Superintendent of Financial Institutions (OSFI) recently announced a consultation on the second phase of the Standardized Climate Scenario Exercise (SCSE) for banks and other financial institutions it regulates in Canada.
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
