The European Central Bank said on Wednesday that banks in the eurozone are losing millions of euros as a result of tech contractors failing them, and it also issued a warning about flaws in lenders’ general approach to cyber risks.
In order to assess how ready banks are to handle risks like hacking, aging systems, and contractors not living up to expectations, the European Central Bank (ECB) conducted a survey among the banks it oversees this year and has conducted 22 inspections since 2020.
The “unavailability or poor quality of outsourced services” in this particular area cost banks 148 million euros ($160.59 million) in 2022—a 360% increase from the previous year.
“These losses were related to a small number of high-volume events and further highlight the need to properly manage risks arising from reliance on service providers,” the European Central Bank stated in its newsletter.
The European Central Bank (ECB) observed that banks’ “outsourcing arrangements often failed to sufficiently address IT security requirements” notwithstanding its caution that these losses were “concentrated within a few significant institutions and therefore not indicating a sectoral trend”.
As banks move from storing information on their own computers to cloud-based services, they are outsourcing more and more.
According to the ECB, their cloud costs increased by 56% in 2022 and accounted for 3.1% of all bank IT spending.
In general, the European Central Bank (ECB) discovered that banks’ approaches to cybersecurity were “more severe and widespread than expected” due to basic deficiencies.
According to the report, several lenders even neglected to recognize all possible hazards or lacked the necessary mechanisms in place to recognize and handle crises.
“The ECB expects all banks under its direct supervision to take immediate and concrete steps to make sure that their IT and cybersecurity risk management is aligned with supervisory expectations,” the European Central Bank stated.
Specific suggestions have already been given to the institutions that were the focus of the inspections, it continued.
