Navigating the ECB’s cyber stress tests: a guide for banks

Every two years, the European Banking Authority (EBA) carries out an EU-wide stress test in cooperation with the ECB, the European Systemic Risk Board (ESRB) and the national supervisory authorities. The test covers the largest significant banks directly supervised by the ECB.

In years where these regular tests are not conducted, the ECB conducts thematic stress tests. 2024 is a non-regular test year and as such, the thematic stress test will cover cyber resilience.

The ECB’s cyber stress testing exercise in 2024 will be conducted with two approaches—an in-depth assessment for a limited number of banks and a lighter assessment for other institutions. The in-depth stress test will consist of a detailed questionnaire containing approximately 500 questions, with documentary evidence required for most answers. The lighter assessment will consist of a shortened questionnaire with less evidence required.

Both tests require cross-functional cooperation between the first, second and third lines of defence in the areas of business continuity management, IT service continuity management, information and cybersecurity, business risk and outsourcing management. Any institution taking the test must be able to demonstrate an end-to-end response in preparation for a real-life scenario.

Financial institutions must adopt proactive measures to prepare for this critical exercise.

Understanding the ECB cyber stress testing exercise

As we approach the ECB’s cyber stress testing exercise in 2024, financial institutions are at the forefront of an ever-evolving cybersecurity resilience landscape. The ECB has designed this exercise to comprehensively assess the cyber resilience of banks operating within the eurozone.

The key components of the stress testing assessment  include the following:

Scenario-based testing

The ECB will present participating banks with realistic and challenging cyber threat scenarios to evaluate their ability to withstand and respond to cyberattacks.

Assessment of vulnerabilities

The exercise will focus on identifying and understanding vulnerabilities within banks’ cyber defences, including weaknesses in their technology infrastructure, processes and personnel.

Incident response evaluation

The ECB will assess how well banks can detect, respond to, and recover from simulated cyber incidents. This will include evaluating the efficiency of their incident response plans and coordination with relevant stakeholders.

Information-sharing and communication

Banks will be evaluated on their ability to promptly and effectively share critical information about cyber threats and incidents with the ECB, other financial institutions and relevant authorities.

Key actions businesses can take today

1. Documentary evidence preparation

Given the detailed nature of the ECB’s cyber stress testing exercise, institutions must start compiling documentary evidence for potential questions and assessments. We expect the ECB to share guidance on what to prepare in early January 2024. Before that, institutions should begin to understand their assets, how they support their business and how cybersecurity supports their operations.

2. Cross-functional cooperation

A cohesive approach ensures a holistic response to cyber threats. It is critical to foster collaboration between the first, second and third lines of defence, specifically in the areas mentioned above.

3. Engage external expertise

Leverage external cybersecurity expertise to complement internal capabilities.

4. Collaboration with peers

Establish collaborative relationships with other banks to share threat intelligence and best practices. Participate in industry forums and information-sharing initiatives to strengthen the collective defence against cyber threats.

We are here to help you

We can help you to navigate the ECB’s cyber stress testing exercise. Our seasoned cybersecurity and IT risk experts are ready to tailor strategies, refine incident response plans and ensure seamless compliance. Gain a competitive edge by leveraging our industry-leading insights and experience to fortify your cyber resilience, preparing your institution for the challenges of the evolving financial cybersecurity landscape.