Brazil’s Finance Sector Under Threat from Cyberattacks

The finance sector in Brazil is facing a surge in cyberattacks, which has more than doubled since the pandemic. According to a recent report by the International Monetary Fund (IMF), the risk of extreme losses from cyber incidents is increasing and could potentially cause funding problems for companies and even jeopardize their solvency.

Growing Cyber Risks

• The size of these extreme losses has more than quadrupled since 2017 to $2.5 billion.
• Indirect losses such as reputational damage or security upgrades are substantially higher.
• Financial firms in Brazil, given the large amounts of sensitive data and transactions they handle, are often targeted by criminals seeking to steal money or disrupt economic activity.

Consequences of Cyber Incidents

• Attacks on financial firms account for nearly one-fifth of the total, with banks being the most exposed.
• Incidents in the financial sector could threaten financial and economic stability if they erode confidence in the financial system, disrupt critical services, or cause spillovers to other institutions.

Examples of Cyber Incidents

• A severe incident at a financial institution could undermine trust and lead to market selloffs or runs on banks.
• Although no significant “cyber runs” have occurred thus far, analysis suggests modest and somewhat persistent deposit outflows have occurred at smaller US banks after a cyberattack.

Reliance on Third-Party IT Service Providers

• The finance sector’s increasing reliance on third-party IT service providers has further exposed it to systemwide shocks.
• A 2023 ransomware attack on a cloud IT service provider caused simultaneous outflows at 60 US credit unions.

Recommendations for Authorities

The IMF is urging authorities in Brazil and other countries to develop adequate national cybersecurity strategies accompanied by effective regulation and supervisory capacity. This includes:

• Periodically assessing the cybersecurity landscape
• Encouraging cyber “maturity” among financial sector firms
• Improving cyber hygiene
• Prioritizing data reporting and collection of cyber incidents

International Cooperation

International cooperation is also crucial to address cyber risk successfully, as attacks often emanate from outside a country’s borders and proceed across borders. The IMF actively helps member countries strengthen their cybersecurity frameworks through policy advice and capacity-building activities.

As the finance sector in Brazil faces significant and growing cyber risks, it is essential for policymakers and regulators to prioritize addressing these threats to maintain economic stability and protect consumers’ interests.