The risk of a cyber war hangs over the financial system

Is the financial sector sufficiently equipped to deal with cyberattacks? For two years, the Banque de France has warned about the “structural risk What does the rise of business digitization represent for banks and insurers?. With the invasion of Ukraine last February, this risk went up a notch, going from “resurrected “to” very high in the risk assessment of the financial system published this Thursday, June 30 by the supervisor.

“After the Covid-19 pandemic, the war in Ukraine has only increased the likelihood of cyber attacks. “, emphasizes Emmanuelle Assouan, Deputy Director General of Financial Stability and Operations. To date, no systemic attack has yet occurred. But ” the occurrence of large-scale incidents are on the rise “, indicates the Bank of France. This is proven by the cost represented by these cyberattacks: 1,000 billion dollars in all sectors in the world in 2021.

Insufficient data collection

The financial sector is at the forefront: 22% of global attacks are against banks and insurers, according to IBM data, making it the second sector most exposed to this risk behind the manufacturing industry. And in France? Financial supervisory authorities are reaching their limits here. ” It is difficult for us to measure the attacks of which the sector is the victim because the degree of collection is not satisfactory and the reporting obligations of banks and insurers are still being developed.”recognizes Emmanuelle Aswan.

The Prudential Supervision and Resolution Authority (ACPR) currently has only “individual data reported by banks and insurers. These statistical requirements are ” to perfect “, says Emmanuelle Aswan. ” There is a problem of taxonomy but also of perceptions of the degree of criticality of these attacks by banks and insurers “, he adds. This is precisely the objective of the Dora regulation, which has just been adopted by European legislators: it should allow to harmonize and strengthen this supervision on a European scale, extending it to external service providers of financial actors, including cloud service providers. .

Less well protected insurers

At this stage, however, the Banque de France wants to be reassuring. She didn’t notice no data corruption or attack harmful enough to prevent the operation of French banks”. Insured on a real mine of data, insurers are more vulnerable and must also strengthen their cyber security, as illustrated by the recent attacks suffered by MMA and the Mutuelle nationale hospitalière (MNH). The ACPR published a notice last summer to encourage them to strengthen their defense and says it is ready to strengthen its controls if its recommendations are not followed.

In addition to cyber risk, the war in Ukraine has also increased market risks due to the deterioration of macroeconomic conditions. If it is ” very high However, the Banque de France considers that this risk is under control in the short term. On the one hand, the direct exposure of the French financial sector to Russia is limited: less than one billion euros for insurers and 29 billion euros for French banks in the first quarter of 2022. number that has been decreasing ever since Société Générale sold its Rosbank. subsidiary On the other hand, the Banque de France highlights the good level of solvency and liquidity of financial players.

The increase in taxes,
a controlled risk

While a deterioration in the cost of risk cannot be ruled out in the event of another severe geopolitical shock, such as a cut in gas access for Europeans, the Banque de France considers that the pressures on the profitability of the sector remains moderate. Banks will benefit from the “orderly” rise in interest rates, he said. A 200-basis-point shock to all-maturity rates should lead to a 15% increase in its net interest margins, according to its calculations. These represent 45% of banking revenues.

For insurers, the rate hike carries the risk of adverse arbitrage on the part of savers and refunds on their life insurance contracts. At the moment, ” redemptions are at their long-term average,” but this risk should not be neglected in the event of a too sudden rise in rates. In the short term, it is mainly on non-life insurers that weigh inflation. While damage insurers highlight the increase in the cost of repairs, the Banque de France notes the vulnerability of ” long branches ”, that is, prevention and liability insurance for which insurers pay long-term annuities without being able to regularly review their rates.

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