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Alberto Partida
- 5 May 2026
- WORKING PAPER SERIES - No. 3222Details
- Abstract
- Investment in cybersecurity in an interconnected banking system has public-good proper- ties: positive externalities can generate systemic underinvestment. Using confidential supervi- sory data from the European Central Bank, we first identify “laggard” European banks that underinvest relative to their cyber-risk profiles, and then examine how supervisory scrutiny af- fects their incentives to invest. We exploit the 2024 ECB Cyber Resilience Stress Test (CyRST) as a quasi-natural experiment. In a difference-in-differences design, we find that following the CyRST announcement, laggard banks increased cybersecurity investment by about 80% rel- ative to their peers. The response is stronger among laggards subject to high-intensity su- pervisory oversight, consistent with scrutiny exerting a disciplining effect. Overall, the results suggest that targeted supervisory scrutiny may help mitigate underinvestment incentives and strengthen banks’ operational risk management.
- JEL Code
- G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill
L86 : Industrial Organization→Industry Studies: Services→Information and Internet Services, Computer Software
K23 : Law and Economics→Regulation and Business Law→Regulated Industries and Administrative Law