FINANCIAL INSTITUTIONS REMAIN VIGILANT AGAINST OPERATIONAL DISRUPTIONS - BNM

KUALA LUMPUR, March 24 (Bernama) -- Financial losses from operational risks reported by financial institutions continued to be small in the second half of 2024 (2H 2024), accounting for only 0.03 per cent of total banking system capital compared to 0.05 per cent in the first six months.

Bank Negara Malaysia (BNM) said financial institutions remain vigilant against operational disruptions, particularly given the rapidly evolving cyber threat landscape.

“Preserving the operational and cyber resilience of financial institutions remained one of the key focus areas for BNM,” the central bank said in its Financial Stability Review (FSR) for 2H 2024 released today.

During the period under review, several cyber incidents were reported by the industry, but most of these were of minimal to low severity, it said.

“The number of distributed denial of service (DDoS) attacks increased slightly, posing a persistent threat to the availability of financial institutions’ online services.

“(However), financial institutions have in place adequate business continuity plans to ensure their readiness to swiftly respond and recover from cyber incidents and minimise operational disruptions,” said BNM.

The central bank also said it continues to monitor the cyber threat landscape proactively and has intensified supervisory measures to combat and address these growing threats, including by updating policy requirements to address emerging risks and conducting targeted reviews to evaluate financial institutions’ incident response capabilities.

On another matter, BNM said the financial institutions’ annual information technology (IT) expenditure has increased over the years, with a compound annual growth rate of 22 per cent for the past three years.

“Notably, IT expenditure continues to represent a growing share of overall annual expenditure (2024: 23.3 per cent of annual expenditure; 2023: 19.1 per cent; 2022: 18.7 per cent), reflecting its increasing strategic importance for financial institutions,” it said.

According to BNM, the increase in annual IT spending was driven by major upgrades of data centre infrastructure to ensure operational resilience during peak periods as well as the rapid pace of product innovation, which has contributed to the heightened complexity of financial institutions’ IT infrastructure operations.

To facilitate a more comprehensive and streamlined surveillance of operational risks within the financial system moving forward, BNM has further enhanced the centralised reporting of operational risks to the Operational Risk Reporting (ORR) system to capture more operational risk-related data.

The ORR system supports the reporting and assessment of operational risk incidents to BNM, as well as monitoring of incident response actions by financial institutions. It covers fraud, conduct and disruptive incidents occurring in financial institutions.

“With the increased interfaces between critical banking operations and payment ecosystems, the recent onboarding of payment system regulatees to the ORR system will also provide a more comprehensive view of the overall exposure and resiliency of the financial sector towards operational risks,” it said.

The Real-time Electronic Transfer of Funds and Securities System (RENTAS) and major retail payment systems continued to maintain a high level of operational resilience and system availability throughout 2H 2024, the report said, adding that there was no major operational or cyber incident during this period.

-- BERNAMA