The Industrial and Commercial Bank of China (ICBC), the largest lender globally in terms of assets, encountered a ransomware attack that caused disruptions in the trading of Treasury securities through its US financial services division.
ICBC disclosed the occurrence of the cyberattack on Thursday, stating that its financial services division encountered the cyber assault, which resulted in system disruptions. ICBC promptly implemented system isolation as a preventive measure against the breach, as per a CNBC report.
The prevalence of ransomware attacks, in which hackers acquire control of systems and demand a ransom in exchange for their unavailability, has escalated. ICBC did not reveal the identities of the perpetrators, but the financial institution has launched a thorough investigation and is currently working on recovery efforts with the aid of information security experts.
ICBC affirmed the successful clearance of US Treasury trades executed on Wednesday and repo financing transactions conducted on Thursday, notwithstanding the cyberattack. Repo, or repurchase agreement, is a prevalent method of short-term financing utilized by merchants in government bonds.
ICBC Cyberattack Under Investigation
The US Financial Industry Regulatory Authority (FINRA) and other government entities are investigating how the ICBC ransomware attack affects firms and consumers. Despite not providing information, the US Securities and Exchange Commission (SEC) continues to ensure fair and efficient markets. The New York Fed has not yet commented on the matter, as of present reporting.
Trades that traversed ICBC reportedly encountered settlement difficulties, which could have had an effect on market liquidity. The potential influence of the cyber incident's repercussions on the performance of a 30-year bond auction on Thursday cannot be ruled out.
According to a Reuters report, the ICBC ransomware attack's complete magnitude proved to be challenging for market participants to evaluate, especially considering that bond markets were already undergoing a decline in value due to remarks made by Federal Reserve Chair Jerome Powell.
The Impact of the Cyberattack
Despite ICBC's assurance that the affected transactions had been successfully cleared, market liquidity remained a source of concern in the aftermath. According to Jan Nevruzi, US rates strategist at NatWest Markets, the temporary drying up of market liquidity had an impact on inter-dealer broker volumes and auction outcomes. Even if contingencies and alternatives are identified in the days that follow, market liquidity impairments may persist.
ICBC's Hong Kong-listed shares closed on Friday with a decrease of 0.8%, in contrast to a Hong Kong index of mainland Chinese banks that declined by 1.13%. ICBC's Shanghai-traded shares closed unchanged.
China maintains a substantial presence in the international Treasury market, as evidenced by its recent data revealing Treasury securities worth $805.4 billion as of August, according to CNN.
Ransomware attacks, exemplified by the one encountered by ICBC, have emerged as a matter of international significance, affecting businesses and public services alike while also bringing to the attention of the Biden administration national and economic security concerns.
