A study by the Fed, the US central bank, reveals that a cyber attack on a major US bank could affect over 40% of the US banking system, and cause banks to lose the equivalent of 2.7 times the country's gross domestic product. Such a cyberattack would create a panic effect and could lead to a massive flight of customers, fearing the fallout.
Growing cyber risks linked to increasing digitalization
The rise of digitalization in retail and commercial banking is increasing exposure to the risk of cyber attacks. Against this backdrop, the Fed, the U.S. Federal Reserve, has published a report entitled "Cyber Risk and the U.S. Financial System: A Pre-Mortem Analysis", in which it examines the consequences of a potential cyber attack on a major U.S. bank.
A total of 40% of the US banking system could be affected by liquidity imbalances and the concentration of payments between institutions. Although the potential consequences differ depending on the time and place of the cyber attack, the most worrying scenario suggests that US banks could lose up to 2.7 times the equivalent of the country's gross domestic product (GDP).
The risk of a race for liquidity
According to the report's conclusions, "a cyber attack could trigger a run on liquidity and lead to solvency problems." A disastrous consequence that would be linked to a panic movement and mass flight of customers. "Cyberattacks are particularly dangerous for financial institutions, as they can impair the bank's ability to serve its creditors, if accounts are no longer accessible, for example," reads the Fed study.
A cyber attack on a major bank is not the only cause for concern. Even a cyber attack on banks with less than 10 billion in assets, but significant payment flows, would considerably weaken the system. The cause? Networking. If several small or medium-sized banks were attacked via a common flaw, the shockwave would spread throughout the entire network. The impact on investors, creditors and other financial market players would be considerable. American institutions are also at risk from cyber attacks, and suffer 300 times more each year than organizations in other sectors.