UK and US Bankers fear cyber attack more than economic crisis

The survey found that criminality is now ranked second globally, because of the alarming rise in cybercrime and fraud.

Police, banks and official bodies will never ask for personal details over the phone (Rex Features)

UK bankers fear cyber attacks more than faltering economy or political interference, according to a new survey.

US and UK bankers said organised cyber attacks are the biggest threat to the safety of banks.

The Banking Banana Skins survey of 627 bankers, observers and risk regulators conducted by PricewaterhouseCoopers (PwC) showed that other bankers in the rest of the world list economic crisis as their biggest fear.

Commissioned by the Study of Financial Innovation (CSFI), the survey found that criminality is now ranked second globally, because of the alarming rise in cybercrime and fraud.

“We may at some point see a cyber-attack so powerful on an individual bank that it has the power to bring down the institution, necessitating a state bailout,” said Simon Samuels, a banking consultant in the UK.

Many respondents worried that banks have little power to prevent attacks because cybercrime comes in many different guises, from opportunistic hackers stealing private data to organised criminals.

For Ashley Dowson chairman of Sepa Consultancy in the UK there is a potential for an even greater threat as financial institutions are experimenting with new technologies such as crypto currencies or real-time payments, which makes them more vulnerable.

Banks have reasons to be worried. Data from 83 million customers was stolen from JP Morgan in 2014, while a security flaw left the details of an undisclosed number of customers of HSBC in the US exposed to hackers early this year, highlighting the risks that banks are facing.

According to the CSFI, bank’s underinvestment in “creaking technology systems” means they are one step behind at a time when criminals are becoming more sophisticated.

Even if banks do rise to the challenge, criminals will target the weakest links of a heavily interconnected financial system, the survey said.

The Top Ten risk on a global scale in 2015 (2014)

1. Macro-economic environment (3)

The risk that economic conditions could damage banks, for example through uncertain recovery or the growth of asset bubbles

2. Criminality (9)

The risk to banks in areas such as money laundering, tax evasion and cyber attack

3. Regulation (1)

The risk that the current wave of regulation will have a damaging effect on banks

4. Technology risk (4)

The risk that banks will fail to keep up with technological change (4)

5. Political interference (2)

The risk of political interference in management and lending policies, or the imposition of new mandates, taxes and costs

6. Quality of risk management (11)

The risk that banks will incur losses because of inadequate risk management

7. Credit risk (7)

The risk that banks will suffer losses from lending to sovereign borrowers, businesses and consumers

8. Conduct practices (16)

The risk that banks will be damaged by poor sales, customer servicing and other conduct of business practices

9. Pricing of risk (6)

The risk that banks will misprice risk due to competitive and other pressures

10. Business model (-)

The risk that banks will fail to produce business models which meet new business, social and regulatory requirements

11. Social media (19)

The risk that a bank’s brand could be harmed by social media

12. Reputation (-)

The risks that the industry will suffer a poor reputation or lack of public trust

13 Capital availability (10)

The risk that banks will not be able to raise affordable capital

14. Interest rates (12)

The risk banks from the “normalisation” of interest rates

15. Emerging markets (17)

The risk to banks from volatility in emerging markets

16. Shadow banking (20)

The risk to banks from hedge funds and other “shadow”banking institutions, for example as competition or sources of volatility

17. Currency (22)

The risk to banks from volatility in the foreign exchange markets

18. Liquidity (15)

The risk that banks will encounter liquidity problems

19. Corporate governance (8)

The risk that weakness at board level will lead to poor oversight and control of banks

20. Management incentives (21)

The risk to banking soundness and reputation from poorly designed incentive structures

21. Derivatives (18)

The risk that banks will suffer losses through their dealings in derivatives and structured products

22. Human resources (23)

The risk that banks will have difficulty attracting and retaining talent in the present environment

23. Reliance on third parties (24)

The risk from outsourcing or off-shoring activities

24. Sustainability (25)

The risk to banks from climate change and other environmental