Next European bank hack is just a matter of time: ECB

Bloomberg

A senior official at the European Central Bank (ECB) warned that banks embracing external data storage and other digital technology need to face an uncomfortable truth: there’s a good chance they’ll get hacked.
“There will be accidents, especially in the cloud,” Korbinian Ibel, a director general at the ECB’s supervisory arm, said in an interview. “It’s not that clouds are more vulnerable, they’re actually often better protected than in-house systems, but they’re seen as juicy targets.”
So far, Europe has been spared the kind of hack that hit Capital One Financial Corp., which said last month that data from about 100 million people in the US was illegally accessed. That may change as the region’s banks face increasing pressure to reduce costs with new technology and make up for the squeeze on revenue from lower interest rates.
European banks already use some services of companies like Microsoft Corp. and Amazon.com Inc. Germany’s Deutsche Bank AG eventually wants to move the majority of its applications to the cloud — giant external data centers — from what it has called “expensive and inflexible physical servers.” For now, European banks tend to avoid putting “highly confidential data” on public clouds, said Ibel.
“We see the benefits” of cloud computing, Ibel said. “The rule is that the banker is always responsible for their data and services.”
Failings can have consequences. The ECB can tell riskier lenders to hold more capital, squeezing their returns, or order potentially costly qualitative measures such as improving how users access computer systems.
Banks have responded to the digital revolution by hiring tech experts, sometimes even naming them to their top management bodies. That’s good, but it doesn’t go far enough, said Ibel.

Operation twist is making comeback
The ECB would get more bang for its buck if it plowed its reinvestment into bonds with a longer maturity rather than restarting quantitative easing, according to Bank of America Merrill Lynch.
An operation twist — as a swap from short-term bonds into longer-dated securities is commonly referred to — would allow policy makers to maintain a “decent” amount of stimulus.
To gain more space, the ECB could lift the current 33% limit on how much it can buy of an individual bond without collective action clauses, Ruben Segura-Cayuela and Sphia Salim wrote.
“We wouldn’t rule out the ECB going for a ‘de facto’ operation twist instead of a small quantitative easing program,” they said in a note.
The policy, which was previously used by the Federal Reserve, has never been tried at the ECB, even though it’s been discussed as an option before.
While Segura-Cayuela and Salim said they are “skeptical more QE will help the economy much, particularly given the type of uncertainty,” they still predict the ECB will announce asset purchases of 30 billion euros ($33 billion) a month for as long as one year.
President Mario Draghi has signaled officials are working on a new stimulus package to jump-start the flagging euro-area economy. Finnish central banker Olli Rehn said last week the response should be significant and overshoot market expectations.