Cyber attack could hurt confidence, spark run on banks: MAS report
MAS report says this is because such incidents may hurt confidence in financial institutions, making them vulnerable
A cyber attack on financial institutions could undermine consumer confidence and spark a run on the banks, warned a new report.
It noted the level of confidence in the financial system is a key factor in determining whether such an attack would lead to wider systemic problems.
"Because data integrity is key in the financial sector, the loss of confidence in the damage scenario could be very severe... especially if data manipulation has gone undetected for a prolonged period," said the report by the Monetary Authority of Singapore (MAS).
It added that while banks can mitigate the impact of a cyber attack by ensuring they are underpinned by healthy levels of capital, "the impact of a loss of confidence in a bank can be hard to estimate or predict".
The report said: "A loss of confidence is likely to render the bank more vulnerable, with knock-on effects to the wider financial system. For instance, a loss of confidence in a bank could lead to a run on deposits."
It comes on the back of guidelines the Association of Banks in Singapore released this month that aim to strengthen the financial sector's cyber resilience.
Cyberthreats are constantly changing and the perpetrators' motivations will continue to evolve, the MAS noted in the review released last Friday.
"The relationship between cyber attacks and financial stability is increasingly important to understand," it said, warning that no one is immune.
The MAS study considered a range of scenarios, including theft of money and data from a bank and corruption of its database.
It said attacks can be prevented from causing systemic problems if the Government works with banks to coordinate crisis communication to ensure consistent messages.
Another avenue is to impose temporary market closures or bank holidays to stop panic spreading into the wider financial system.
Most attacks could have been prevented if institutions practised basic cyber hygiene, the MAS said.