With the rapid development of financial technologies, operational risk remains an area of concern for 55 per cent of EU banks, according to a new EBA report.

This number has increased from 43 per cent in December 2016 and 35 per cent in December 2015. Most EU banks are still taking steps to address their weaknesses that are stemming from technology-driven evolution.

Cyber risks and data security issues were identified as the key drivers of operational risk, with a greater reliance on IT platforms, digitalised product channels for banking services, outsourcing to third-party providers and communication networks rendering banks vulnerable to operational risk.

Some 42 per cent of respondents identified cyber risk and data security as the main drivers for increasing operational risk, while 16 per cent named IT failures as an additional driver.

The EBA study stated: “With the increased digitalisation of banking, services moving online and financial institutions becoming more interconnected and dependent on computer networks, an insufficient level of protection against cyber incidents and a failure of critical IT infrastructure could lead to major damages into individual financial institutions and potentially to the entire financial system.

“There has been rising interest from banks in operational risk insurance products covering cyber risk, partially driven by a number of major cyber attacks, such as the so called ‘WannaCry’.”

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