Why is it in the news?

• Rising Cyber Threats pose serious concerns for Macro-Financial Stability, warns International Monetary Fund (IMF).
• The number of cyberattacks has nearly doubled since the COVID-19 pandemic, with financial firms accounting for nearly one-fifth of the total, particularly banks.

Causes of Rising Cyber Incidents in the Financial Sector

• Increased digital financial services provide a target-rich environment for hackers.
• Insider threats, where authorized users misuse their privileges for monetary gain, are a significant concern.
• A cybersecurity skills gap leaves financial firms vulnerable to cyber threats.
• Geopolitical tensions, such as the surge in cyber-attacks following Russia’s invasion of Ukraine, contribute to the threat landscape.

Impact of Cyber Attacks on Macro-financial Stability

• Data breaches erode confidence in the viability of targeted institutions, leading to high deposit outflows.
• Cyber-attacks on payment networks can disrupt trading and online banking, undermining a country’s financial stability.
• Cyber-attacks propagate rapidly within financial systems through linkages, affecting market stability.

Policy Recommendations

• Strengthen reporting of cyber incidents by financial firms to supervisory agencies.
• Financial firms should develop and test response and recovery procedures to remain operational in the face of cyber incidents.