Banks with more IT experts on their board experience significantly less cyberattacks and critical IT downtime, a European Central Bank (ECB) report shows.
Major financial institutions have long struggled to negotiate the risk relationship between cybersecurity and financial planning. Chief information security officers (CISOs) often find it hard to communicate cyber risks in forms which banks’ boards can understand.
Which is why copious data – including ECB’s latest report – points to banks needing to appoint IT experts to their boards.
This become ever more important as the number of reported cyber incidents continues to increase year on year, says the ECB.
The central bank dubs those banks which prioritise cybersecurity from the board down as houses of more IT innovation and better IT risk monitoring.
The report found that banks with two or less IT-savvy board members experienced the highest number of cyberattacks across 2018.
The highest bracket of successful attacks – which ranged between 50 and 90 – happened solely to firms with two or less IT experts on their board.
Banks with three or more IT experts on their board all experienced 15 or less successful cyberattacks over 2018. That’s a significant way from the heady heights of 90.
A similar pattern can be seen for bank’s downtime. Banks with two or less IT-savvy board members experienced an average of three hours critical downtime in 2018.
But those banks with three or more IT experts on their board only experienced an average 1.5 hours of downtime the same year. A whole 50% less.
The most downtime a more IT-led bank had over 2018 was 6.5 hours. Whereas the most downtime a less IT-focused bank experienced was a staggering 22 hours. That’s nearly four times the number of hours.
The ECB highlights “data quality management” – alongside IT risk management – as a major area lacking adequate risk controls in many banks.
“This is despite the experience of the global financial crisis,” says the ECB. “Which showed that many institutions lacked the ability to correctly aggregate risk exposures and to identify concentration risks quickly and accurately.”
The global data quality tools market stood at $505.65 million in 2016, according to Zion Market Research.
But by 2022, this market is predicted to grow to $1.283 billion. This signals a burgeoning need for solutions which manage data-based products and services in both finance and other industries.
The ECB also found “a number of cases” where data was “wrongly submitted to supervisors” in banks during 2018.
IT outsourcing expenditure increased by 10% in 2018 compared to 2017. Cloud outsourcing is “becoming noteworthy”, the ECB says. Around 3% of all IT outsourcing expenditure is spent on the cloud, according to the report.
Zooming out, the ECB reveals that IT expenses accounted for around 21% of total annual expenditure in banks.
The central bank thinks this is “relatively stable” when compared to the 20% reported in 2017.
The most a bank spent on its IT infrastructure was 41% of its expenditure. The least a bank spent on this was 7% of its outflow.
But despite the increase in IT spending, there were still “a significant number of institutions” relying on end-of-life (EOL) systems for their critical processes in 2018.
Venture capital helps ‘buy now, pay later’ fintech business Affirm to $500m investment round
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Here’s how Nasdaq-listed MicroStrategy went about buying $175m in Bitcoin
MicroStrategy has become the poster child of mainstream Bitcoin adoption amongst corporations. It is the only publicly listed company to turn towards BTC as a reserve asset to store their capital in.
Their announcement last month regarding their decision to ditch the US Dollar in favor of BTC to store their capital was a big one, because it showed that the benchmark digital asset is gaining utility as a store of value.
For a company with hundreds of millions of dollars in cash, the decision makes sense, as the crypto’s scarcity allows them to avoid the massive losses that would otherwise be incurred due to inflation.
Acquiring this much BTC without going through over the counter (OTC) venues is no easy task, however, and the company’s CEO explained in a recent tweet how they went about doing this.
MicroStrategy now holds 38,250 Bitcoin
Earlier this week, Microstrategy CEO Michael Saylor announced that his company had doubled down on their Bitcoin bet, adding $175m worth of the digital asset to their holdings.
This massive purchase came about just weeks after the company had revealed its plans to switch to an alternative Bitcoin-focused financial strategy. They now intend to hold their entire capital reserves in BTC to avoid inflation and devaluation of the US Dollar, which is being printed at unprecedented rates.
This strategy is unprecedented and was kicked off by the purchase of a whopping $250m worth of the digital asset.
The company revealed on September 15th that they were buying even more BTC, conducting a $175 million purchase via the spot retail markets. This may have caused Bitcoin’s price to rally to $10,900 while the rest of the market trended lower.
Their total holdings now stack up to 38,250 Bitcoin, with an aggregated purchase price of $425 million.
Here’s how MicroStrategy market-bought 16,796 BTC
During their latest bout of purchasing, MicroStrategy used the retail market to acquire their crypto, with the company’s CEO explaining that they purchased 16,796 BTC throughout 74 hours of continuous trading.
“To acquire 16,796 BTC (disclosed 9/14/20), we traded continuously 74 hours, executing 88,617 trades ~0.19 BTC each 3 seconds. ~$39,414 in BTC per minute, but at all times we were ready to purchase $30-50 million in a few seconds if we got lucky with a 1-2% downward spike.”
The massive amount of capital that was introduced into the market as a result of these 74 hours of continuous trading likely had lasting impacts that may still be influencing Bitcoin.
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EU to see comprehensive crypto regulation by 2024
The European Union, or EU, plans to incorporate crypto and blockchain technology into its main processes by 2024.
Over the next four years, the economic union aims to firm up fresh regulations that will promote blockchain and digital asset usage for international money transfers, according to internal documents that Reuters reported on Friday.
The documents detailed:
“By 2024, the EU should put in place a comprehensive framework enabling the uptake of distributed ledger technology (DLT) and crypto-assets in the financial sector […] It should also address the risks associated with these technologies.”
Finding that almost 80% of its population transacts in paper money, the European Commission, the union’s governing entity, wants to see digital payments become more common, while aiming for immediate transaction times, Reuters explained.
The commission’s reported aims include a desire for increased data access, financial activities availability — all while aiming for increased efficiency. “By 2024, the principle of passporting and a one-stop shop licensing should apply in all areas which hold strong potential for digital finance,” the documents noted. Over the next year, fast transaction avenues will likely take over, Reuters added.
Although the COVID-19 pandemic may have expedited the desire for digital payments across the globe, blockchain and crypto assets have been the talk of the regulatory town, with many countries looking toward central bank digital currencies to streamline their payments infrastructures.
UPDATE Sept. 18, 21:00 UTC: This article has been updated.
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