Cyber attacks risk triggering bank runs: IMF

Cyber attacks are becoming so frequent, malicious and costly that they risk triggering bank runs, according to the International Monetary Fund. (IMF)

The fund warned that rising cyber threats now posed “serious concerns for financial stability” and could push companies into insolvency.

It has sounded the alarm amid research showing that the number of malicious attacks has doubled since the pandemic.

The IMF’s warning in its latest Financial Stability Report comes just weeks after the Bank of England said it was conducting its own cyber stress test of the UK’s financial system, which has been targeted by criminals seeking to steal money or disrupt economic activity.

The IMF said: “Incidents in the financial sector could threaten financial and economic stability if they erode confidence in the financial system, disrupt critical services, or cause spillovers to other institutions. For example, a severe incident at a financial institution could undermine trust and, in extreme cases, lead to market sell-offs or runs on banks.”

It comes after the UK government blamed Chinese hackers for orchestrating “malicious” cyber campaigns against MPs and the Electoral Commission.

A Bank of England survey found that 80% of firms believe a cyber attack is now the second biggest threat to the UK financial system, just below geopolitical risk.

The IMF said the risk of significant financial losses from cyber incidents had increased dramatically.

It said: “Such losses could potentially cause funding problems for companies and even jeopardise their solvency. The size of these extreme losses has more than quadrupled since 2017 to US$2.5b (NZ$4.1b). And indirect losses like reputational damage or security upgrades are substantially higher.”

While the fund did not call out specific countries for being responsible for attacks, it noted that the number of cyberattacks had surged in the wake of Russia’s invasion of Ukraine in February 2022.

The Washington-based institution added that attacks on financial firms now accounted for nearly a fifth of all attempted hacks, with commercial banks the most exposed.

It noted that JPMorgan, the world’s biggest bank by market value, has spent US$15b on technology to combat attacks and employed 62,000 people to help strengthen its defences. America’s largest bank has reported experiencing 45 billion cyber incidents a day.

While the IMF noted that there had been no significant bank runs so far as a result of cyber attacks, its analysis suggested that “modest and somewhat persistent deposit outflows have occurred at smaller US banks after a cyberattack”.

It said the financial system had suffered more than 20,000 successful cyber attacks over the past two decades, causing $12b in losses. The IMF added: “Cyber incidents that disrupt critical services like payment networks could also severely affect economic activity.”