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Cyber Pandemic and Financial Stability

COVID-19   is   causing   deep   concern   on   different   interconnected   dimensions,   such   as functionality  of  national  health  systems,  social  and  economic  imbalances.  To  safeguard the  stability  of  the  ‘’Sistema  Paese’’,  attention  must  be  paid  beyond  physical  boundaries of   the   territory,   such   as   the   digital   cathedral   of   the   cyberspace   and   its   derivatives. According  to  Europol  and  Interpol’s  reports 1,  social  distancing  may  lead  to  a  positive correlation  of  cyberattacks  addressed  to  smart  working,  home  banking  and  e-commerce operations.   Final   targets   may   correspond   to   health   infrastructures   (e.g.   Spallanzani’s case),  bank  assets  (e.g.  Intesa  San  Paolo  and  Monte  dei  Paschi)  and  hence  euro-financial

stability.   As   illustrated   in   the   figures   below2,   the   trend   highlights   the   importance   in undertaking  a  risk  assessment  related  to  the  new  challenges  imposed  by  cybercrime.

 

 

 

 

‘’Malicious   use   of   ICT   could   undermine   security   and   confidence   endangering   financial stability’’  was  the  prescient  forecast  stated  by  G20’s  Finance  Ministers  in  2017.  Such  an alarm bell was resumed at the beginning of the pandemic by the President of the European Central  Bank  Christine  Lagarde  stating  that  banks  must  prepare  for  a  significant  growth in   cyber-attacks   related   to   the   coronavirus   financial   support   package,   worth   half-a- trillion  euros3.  COVID-19  will  delineate  a  clear  increase  in  cyber-attacks.
The  consternation  was  also  noted  by  the  report  issued  by  the  Central  Bank  of  Italy  and the  Institute  for  Insurance  Supervision  (IVASS) ,  calling  to  strengthen  the  IT  governance.

  1. 4. Funds’ distribution   network   to   companies   and   citizens   is   at   risk:   51%   of   Italian companies  have  suffered  of  multiple  cyber -attacks  in  early  20205,  and  the  trend  may increase  due  to  lockdown

COVID-19 is tremendously shaking global and national economies. Disruptions  in financial intermediations may drastically increase the  economic impact of the pandemic by striking immediate    responses    issued    by    Governments    through    massive    credit    guarantee s. Policymakers  must  be  susceptible  to  such  digital  incidents:  vulnerabilities  intersecting the  ‘’financial  network’’  and  ‘’cyber  network’’.

 

Cyber  criminals  have  found  innovative  measures  to  exploit  vulnerabilities  posed  by  the information  and  communication  technology  (ICT)  like  phishing,  malspam,  ransomware, remote  desktop  protocol  targeting  and  distributed  denial  of  service  attacks 6   targeting both   citizens   and   financial   organizations   (and   employees ’   personal   devices7).   Cyber threats  may  cause  risk  in  the  financial  sector  leading  to  leakage  of  data  bank,  insecurity of     data’s     cia     trial     (confidentiality,     integrity,     availability)     and     miscarriage     of infrastructure’s  functionality  such  as  transport  and  transactions.

In  a  similar  health  crisis  scenario,  intercepting  failures  in  financial  resources’  allocation within   the   cyber-space   may   prevent   social   turmoil.   In   fact,   efficiency   in   payment transactions,    loan-scheme    programs    and    automatically    in    financial    stability,    is    a fundamental side of human security. Policymaker s must keep in mind that such a financial instability  accompanied  by  the  recent  economic  insecurity,  may  cause  to  certain  extent  a rapid breakdown of trust towards politics and markets. Such a scenario may threaten both Italian  and  European  stability,  in  conjunction  with  the  rise  of  national  populism .  Thus, cyber  hygiene  and  physical  hygiene  must  be  applied  in  conjunction,  in  order  to  prevent dramatic  consequences.

F.Pagano

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Centro Studi Internazionali – Report 14/4/2020
2 CLUSIT – Report 2020 on ICT Security in Italy
3 World Economic Forum Report on COVID-19
4 Note Covid-19 17 Aprile 2020 – GRUPPO DI COORDINAMENTO PER LA SICUREZZA CIBERNETICA BANCA D’ITALIA – IVASS
5 EY Global Information Security Surveys (GISS) 20206 Centre for Internet Security – Resource Guide for Cybersecurity During the COVID-19 Pandemic
7 KPMG Reports 2020