Fitch warns of systemic cyber threat to US banking

Although US banks are generally well positioned to handle average modelled cyber risk losses, tail events from a systemic cyber risk event can be material, according to rating agency Fitch.

The Fitch report, Quantifying US Bank Systemic Cybersecurity Risk, says that the financial impact of a cyber event often centres around the reported remediation, or in the case of ransomware, the requested ransom payment.

However, it adds, the financial cost from a cyber event is likely to extend well beyond just headline figures. Additional costs from these tail events can include data restoration, investigation and response, regulatory legal fines, and brand damage.

Fitch collaborated with CyberCube to model the impact of systemic cyber events on the US banking sector under various cyber risk scenarios. CyberCube’s model focuses on ‘single points of failure’ (SPoF) for cyber incidents that could impact parts of the US banking system.

SPoFs are technologies (eg operating systems, cloud service providers etc) for which connectivity and dependencies are identified by bank. A cyber-attack on a particular SPoF may have a cascading impact on the identified connected banks.

“Systemic cyber risks are as important to analyse as idiosyncratic cyber risks,” said Fitch managing director Christopher Wolfe. “Cyber risk is evolving into broader aggregations and concentrations within the vendor management and supply chain. An incident at a single critical third- or fourth-party vendor could lead to significant business interruption losses.”

For the purpose of this research, Fitch and CyberCube analyzed the entire US banking sector of approximately 4,900 banks with over $1.1 trillion in total revenues. This portfolio went through CyberCube’s proprietary model to quantify the potential impact of cybersecurity incidents on the US banking industry over a one-year period.

“Our work with Fitch has identified the top threat scenarios for the U.S. banking, and the repercussions a cyber risk might have on an individual bank,” said Souki Chahid, CyberCube principal product advisor. “A greater understanding of the inherent risks faced by the banking sector will support banks in their decision-making with regards to their insurance purchasing and their operational risk.”

To access the report click here.

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