It is clear that the threats and headwinds facing global finance did not disappear with the outbreak of COVID-19. But while Brexit and the US-China trade dispute promise short-term turmoil and long-term geopolitical realignment, it is cybercrime that poses the real existential threat to financial stability.

That’s the bottom line from new research by the International Monetary Fund, which found that many financial institutions are still ill-prepared for the new wave of cybercrime.

“Given strong financial and technological interconnections, a successful attack against a large financial institution or a core system or service used by many people can quickly spread throughout the financial system, causing widespread disruption and loss of trust,” the researcher said of the IMF Jennifer Elliott and Nigel Jenkinson.

“Transactions can fail as liquidity is trapped and households and companies can lose access to deposits and payments. In extreme scenarios, investors and depositors may request their funds or attempt to close their accounts or other services and products they regularly use.

Cyber ​​attacks have more than tripled in the past decade as hacking tools become cheaper and more powerful, allowing unwitting attackers to inflict more damage on financial institutions that are still struggling to offset the risks posed by their own systems.

“Individual company incentives to invest in defense are not enough; regulation and public policy intervention are necessary to guard against underinvestment and to protect the broader financial system from the consequences of an attack. In our view, many national financial systems are not yet ready to manage attacks, while international coordination is still weak," the researchers said.

The researchers also urged institutions to improve their response capacity by ensuring they can resume operations in the event of a successful attack and be more willing to share information with each other, potentially through a globally agreed template.

"The COVID-19 crisis has highlighted the crucial role that connectivity plays in the developing world... As with any virus, the proliferation of cyber threats in any country makes the rest of the world less safe," the researchers said.

The Morrison government has recently signaled an escalation of cyber attacks by an unknown state actor (possibly China), while Australia's biggest financial institutions have already been warned several times that they are slow to deal with the threat.