The Propagation of Cyberattacks through the Financial System: Evidence from an Actual Event

Abstract

This article quantifies the effects of a multiday cyberattack that forced offline a technology service provider (TSP) to the banking sector. The attack impaired customers’ ability to send payments through the TSP, but the business continuity plans of banks and the TSP reduced the effect by more than half. Large banks performed better. Through contagion, banks not directly exposed to the attack experienced a liquidity shortfall, causing them to borrow funds or tap reserves. The ability to send payments after hours helped avoid further contagion. These results highlight the importance of preparedness by the private and official sector for cyberattacks.