The Bank of Lithuania has published the Review on the attitude of the Lithuanian financial system participants regarding stability and possible challenges for sustainable future of the financial market. The Review also contains financial market participant`s assessment of risks and their likelihood. The survey showed that in the first half of 2021, the main risks to the Lithuanian financial system were unsustainable real estate (RE) market development and cybercrime. According to financial institutions, the risk of cybercrime is the highest since 2016.
The main insights from the Review:
- The COVID-19 impact on financial institutions is decreasing. 10 % of survey participants indicated that during these six months there was no impact on their operations.
- The risk appetite during the first 6 months of 2021 of financial institutions remains the same. In 2020, the risk appetite of financial institutions was dropping off. However, now it looks that the appetite is almost the same as it was during 2019.
- More than half of survey participants specified that currently, the likelihood of the event with negative impact has not changed. One-third of participants indicated that such probability has increased. Nevertheless, 14 % of participants noted the decrease of the likelihood. According to the participants, the most shocking event for the Lithuanian financial system shall be the following development of COVID-19 pandemic and its direct impact (deteriorating financial stability of the companies and households, quarantine restrictions). The participants also noted possible escalation of inflation and its consequences, tension of the geopolitical situation.
- According to the respondents, the possibility to decrease the impact of the aforementioned risks is medium or lower than medium. The best-rated possibilities are the fall off of the cybercrimes and unsustainable credit risks and their impact. However, even the possibility to decrease cybercrimes was indicated, 24 % of respondents noted that during these six months they were faced cyber-attacks. It shall be noted that this number is more than 3 times bigger than before the pandemic (2019). The risk of cybercrimes currently is considered as one the most important and serious risks.
This shows that cyber resilience becomes increasingly important nowadays. Cyber resilience, on the other hand, encompasses cybersecurity’s aim to defend against threats but takes things a few steps further. Cyber resilience can be defined as an entity’s ability to prepare for, respond to, and recover from a cyber attack. In fintech, losing customer confidence is much more damaging than in other industries as we are dealing with financial information. To that end, having a solid cyber resilience plan in place is essential. That plan should cover all the bases, from getting prepared to financially recovering and mitigating reputational losses – the more detailed and in-depth, the better.
The Bank of Lithuania twice a year conducts a survey on risks to the Lithuanian financial system. Banks, insurance companies and lenders, credit unions, investment management companies, and other financial institutions assess key risks to the Lithuanian financial system, the probability of adverse events and their possible impact on the country`s financial system over the next 6 months.
Attacks can and will occur, so having a proper cyber resilience strategy in place is critical, especially in an industry where clients entrust us with their most sensitive information. If your fintech company needs a cyber resilience plan, please do not hesitate to contact ECOVIS ProventusLaw fintech team.
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