Banks in the Gulf Cooperation Council (GCC) region are managing their exposure to cyber risk effectively, including through investment in digital security, according to a recent S&P Global Ratings report.
The region’s top 19 banks would suffer an average 7.5 percent fall in net income and a 0.6 percent decline in equity, based on figures from the end of 2021, cyber security specialist, Guidewire estimated.
At the same time, the banks’ average operational risk capital charge was 3.6 percent of total equity.
“We believe the data suggests that GCC banks appear to have sufficient operational risk capital to cover losses related to cyber risk,” the S&P Global Ratings report stated.
Banks in the GCC have reported only a handful of minor cyber-attacks over the past decade. Yet management of cyber risk has taken on greater importance as the region’s banks moved activities to online platforms during the pandemic.
That shift has been conducted with minimal disruption, thanks to years of investment in infrastructure and systems.
“At the same time, the banks’ strong profitability, capitalisation, and liquidity provide a financial buffer against potential incidents,” the S&P Global Ratings report said.
The risk of cyber-attacks appears even higher for banks with greater geographic diversification, particularly those with operations in regions more prone to cyber-attacks than the GCC.
The same applies to banks with extensive retail operations, which have proven more likely to attract the interest of hackers.
Guidewire’s findings suggest that the cyber risk profile of GCC banks is comparable to developed markets, rather than emerging market banks.
It is notable that emerging markets are significantly more prone than the GCC to indirect business interruption issues, which stem from problems at third-party service providers.
That could be explained by GCC countries’ significant investment in infrastructure, which appears to have reduced indirect business interruption risks, the S&P Global Ratings report concluded.
