Cybersecurity in the financial sector: details on the Commission’s plans

On 23 June, Valdis Dombrovskis, Executive Vice President of the European Commission responsible for an Economy that Works for People, gave a speech at the closing conference of  the “Digital Finance Outreach 2020”. This series of webinars attracted more than 3 000 participants. In his closing speech, Valdis Dombrovskis gave details on the Commission’s plans to foster innovation and strengthen the cyber-resilience of the financial sector.

Valdis Dombrovskis mentioned the main pillars of the new digital finance strategy to be unveiled by the end of the year. A public consultation on this strategy is ongoing. Eurosmart is about to submit an answer to  the consultation, including on the section dedicated to digital financial identities.

The Executive Vice President also addressed the issue of cyber-resilience in the financial sector, including the issue of over-reliance on third-party providers, such as cloud services.

Europe at the forefront of digital finance

The Executive Vice President underlined the importance of digital interactions with banks during the COVID-19 crisis. Valdis Dombrovskis sees in digital finance a “good chance for Europe to strengthen its international standing and to become a global standard-setter, with European companies leading new technologies for digital finance.””

He stressed that FinTech is the largest recipient of venture capital investment: 20% of all venture capital in Europe has been invested in Fintech.  This is a higher share than in Asia and the United States.

A new digital finance strategy

The market remains fragmented because of diverging rules. Valdis Dombrovskis wants companies to be able to scale up across borders and make the most out of innovations such as distributed ledger technology, artificial intelligence and data-driven finance. The new digital finance strategy will address these issues. The strategy will cover three areas:

-addressing the barriers to scale up in order to deepen the single market, this will include fostering the use of digital identities.

-to promote a data-driven financial sector (e.g. access to public data)

-to stimulate innovation while remaining technology neutral (crypto-assets and DLT will be the first test case)

Cyber-resilience: supervising third-party ICT providers

Valdis Dombrovskis underlined the importance of digital operational resilience: full confidence in the system is needed. He explained that attacks on financial institutions have risen by 38% and account for more than half of all attacks observed during the lockdown period.

The European Commission will present in Autumn a legislation for all financial institutions to comply with standards of operational resilience. “Among other areas, it will set out effective channels for reporting cyber incidents and identify tools for testing the cyber-resilience of our financial firms.”

Valdis Dombrovskis also addressed the issue of outsourcing to third-party ICT providers, like cloud services. Supervisors must be “properly equipped to keep the risks in check”. As part of the proposed regulation, the European Commission will create a financial oversight mechanism for third-party ICT providers. It will also deal with risks that come from relying on a handful of outside providers.

Next steps:

Q3-Q4 2020: publication of the new digital finance strategy and publication of the proposed regulation on cyber-resilience in the financial sector

For any questions on this issue, please contact Camille Dornier: camille.dornier@eurosmart.com