“Let’s face it, this is a war, but it’s on a new front. They’re a hidden enemy, operating behind the scenes and inside our organisations, our devices, and they’re incredibly difficult to detect and to punish,” said Barclays‘ Chairman John McFarlane.
There’s absolutely no doubt that cyber security is a huge issue right now. While digital technology has dramatically changed our lives and brought many benefits, it has also introduced a whole new world of potential for criminals, intent on stealing our personal details and money, or causing large-scale chaos. With cyber threats becoming more frequent and more advanced, the issue is at the top of the agenda for both governments and business executives.
Financial institutions around the world are clearly in the firing line and are prominent targets for hackers. Mary Jo White, the current chair of the Securities and Exchange Commission (SEC) in the US, recently warned that cyber crime is the most pressing threat to global financial systems.
And there’s plenty of recent evidence to suggest that this is the case.
Just look
HSBC was the subject of a cyber attack back in January, leaving thousands of customers unable to access their bank accounts for the the best part of a day. Thankfully, the bank stated that it had successfully defended against the attack, and that customer transactions weren’t affected.
In February, attackers targeted SWIFT (the system used by thousands of financial institutions around the world to move large amounts of cash) and successfully stole $81m from the central bank of Bangladesh. A more recent attack just last month on an unnamed bank also targeted SWIFT with the attackers possessing a “deep and sophisticated knowledge of specific operational controls,” according to SWIFT.
Clearly, cyber crime is a problem for financial institutions, many of which aren’t adequately prepared. The implications of being hacked successfully could be disastrous for a bank, both in terms of clients having personal details or funds stolen, and the institution losing its reputation and trust.
Is Lloyds safe?
With financial institutions being hacked with increasing frequency, many UK investors will be asking whether Lloyds Banking Group (LSE: LLOY) is at risk of a cyber attack. Lloyds made the news last year when thieves stole the personal details of thousands of Lloyds Bank customers after a data storage device was removed from a data centre.
Are further attacks on the horizon?
The good news for Lloyds’ shareholders is that according to Lloyds’ digital boss Miguel-Angel Rodriguez-Sola, cyber attacks at the bank have dropped 80% to 90% since late last year.
Mr Rodriguez-Sola stated recently that as a result of greater coordination with law enforcement agencies and the implementation of extra layers of defences, cyber attacks at Lloyds were decreasing as online criminals switched their attention to other less-well-protected industries.
Lloyds is clearly taking cyber security very seriously and both shareholders and customers of Lloyds will be happy to hear that attacks at the banking giant have decreased.
Having said that, cyber threats are becoming increasingly more complex, and for that reason we can’t rule out future attacks at Lloyds or the other UK banks.
And that’s why as an investor, it’s critical to ensure that your portfolio is properly diversified and doesn’t contain excessive company-specific risk.
