On Tuesday, the EU’s systemic risk watchdog urged member countries to enhance their cyber defenses for their financial infrastructure due to increased risks of foreign cyber-attacks, particularly with the ongoing war in Ukraine.

While European states have taken measures to safeguard their energy infrastructure from physical assaults, the European Systemic Risk Board (ESRB) has emphasized the need for further actions to combat cyber warfare that targets financial institutions and their dependent telecommunications networks and power grids.

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According to a report by the ESRB, the cyber threat environment has been considerably intensified by the war in Ukraine, the wider geopolitical situation, and the rising occurrence of cyber-attacks.

“There is an increased risk of cyber-attacks on the EU financial system by states or state-sponsored actors.”

The ESRB urged national authorities to conduct stress tests and impact analyses using tools created by the ESRB to identify vulnerabilities and assess their resistance to cyber-attacks.

In addition, the ESRB will evaluate the most effective operational policy tools to tackle a system-wide cyber incident and pinpoint deficiencies in both operational and financial policy tools.

Although the ESRB primarily concentrates on financial risk and is composed of the central banks and prudential watchdogs of the EU, it extended the extent of its analysis to cover the infrastructure employed by banks and other establishments.

In October, the European Commission recommended intensifying measures to safeguard its vital infrastructure, with particular emphasis on energy, after the suspected sabotage of the Nord Stream gas pipelines a month prior.

The occurrence put the governments on high alert, and some have even deployed their military to secure the perceived increasingly exposed energy systems.