BIS Paper Offers Overview of Cyber Risk in Central Bank Community
The Bank for International Settlements (BIS) published a paper that examines how central banks assess cyber risk and associated macroeconomic costs and how they judge preparedness of the financial sector in their jurisdiction. The paper discusses cyber risk priorities and challenges from the perspective of experts and practitioners in central banks for their own operations, including the critical financial market infrastructures they operate.
The focus of the paper is on the assessment of cyber risk landscape in the central banking community, leveraging a survey conducted in 2021 among 21 participating central banks from advanced and emerging market economies. The survey results show that central banks have increased their cyber-security investments since 2020, with a priority on technical security control and resiliency. Central banks see phishing and social engineering as the most common methods of attack and the potential losses from a systemically relevant cyber-attack are deemed to be large, especially if the target is a big tech providing critical cloud infrastructure. The paper discusses the implications of the increasing cloud adoption by financial institutions, which presents many opportunities for cyber-attacks. One of the challenges of cloud adoption is that, in the absence of a well-defined perimeter, information security is threatened by a lack of consistently applied security controls. Examples include vulnerable application programming interfaces (APIs), incorrect configurations, and weak identity and access management. Another challenge relates to the choice of cloud provider, not least when considering data sovereignty issues. The legal and regulatory framework in place in the country in which the data are hosted and/or processed becomes a key criterion when choosing which critical services to move to the cloud.
The paper notes that, while central banks in most emerging market economies provide a framework for collection of information on cyber-attacks on financial institutions, less than half of those in advanced economies do. Cooperation among public authorities, especially in the international context, could improve the ability of central banks to respond to cyber-attacks. The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (CPMI-IOSCO) guidance on cyber resilience for financial market infrastructures represents an important benchmark for governance, business continuity management, and identification of the sources of operational risk. Much international work has been conducted by standard-setting bodies, the FSB, and the G7. The BIS’s Cyber Resilience Coordination Center provides a structured approach to knowledge-sharing, collaboration, and operational readiness among central banks in the areas of cyber resilience. Finally, by providing a platform for collaboration between central banks, regulatory authorities, financial institutions, technology firms, and cyber-security experts, the BIS Innovation Hub aims to facilitate the development of specific projects to limit cyber threats for central banks and the broader financial sector.
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Keywords: International, Banking, Regtech, Cyber Risk, Cloud Service Providers, Central Banks, Cloud Computing, Suptech, BIS
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