ECB To Stress Test 109 Banks To Gauge Cyberattack Reaction

The European Central Bank- ECB has gone on to reveal plans in order to carry out cyber resilience stress tests when it comes to the 109 of the banks that it directly supervises in 2024 in order to evaluate as to how they both respond to and also recover from a cyberattack.

It is well to be noted that the stress testing of the banks is not going to analyze their ability to safeguard it in the first place, the European Central Bank said, rather in the stress test scenario, a cyberattack goes on to succeed in disrupting a bank’s regular business operations. Under such conditions, the banks must thereby test their response as well as recovery measures, such as activating emergency procedures and also contingency plans, along with restoring normal operations. The fact is that it will be the supervisors who are going to subsequently assess the extent to which the banks can cope in such a scenario.

EU law at present requires the ECB to apply stress tests to supervised banks for a minimum of once per year. The inferences from annual stress tests go on to provide significant input for the SREP in the test year.

As part of the exercise, 28 banks are going to undergo an elevated assessment, for which they will have to submit additional information on how they went on to cope with the cyberattack. This sample goes on to cover varied business models as well as geographies in order to provide a meaningful reflection of the euro area banking system as well as also ensure there is efficient coordination with other supervisory functions.

It is worth noting that the supervisors plan to discuss the inferences as well as the lessons learned with each bank as a major part of the 2024 Supervisory Review and Evaluation Process, which goes on to assess a bank’s individual risk profile. Interestingly, the exercise’s main findings will be communicated in the summer of 2024.

Continuity of stress tests

In 2023, 57 of the euro area’s biggest banks happened to be part of an EU-wide stress test that was coordinated by the European Banking Authority- EBA which went on to publish results for the individual banks in July 2023.

Apart from this, in the same year, the ECB went on to conduct stress tests concerning 41 smaller banks that it happens to supervise directly. The aggregate results, along with the selected bank-specific information, happened to get published by the ECB in July 2023. Together, the stress-tested banks majorly cover 80% of the euro area’s banking spectrum.

Occasionally, in order to assess major institutions’ resilience to external developments that are not expected during years wherein there is no EU-wide EBA stress test, the ECB goes on to carry out forward-looking vulnerability analyses of significant institutions that are solvency-based under its direct supervision.