German Financial Overseer, BaFin, Cites Issues With IT Outsourcing
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BaFin, the German financial watchdog, is paying attention to the dangers of outsourcing IT services, especially cybersecurity.
The company is concerned that this could be a massive problem for the financial sector. In the latest report, BaFin discussed seven main risks that could considerably blow Germany’s financial strength.
One new worry they included in 2024 is that only a few information technology service providers are doing a lot of work for insurers and banks in Germany.
BaFin is concerned that it could be an issue if just a few companies do most of the work. It wants to ensure that various companies share the work so it’s not all in one place.
BaFin’s President Urges Banks To Invest More In Cybersecurity
Mark Branson, the president of BaFin, wants to ensure that companies understand how important it is to be prepared for problems. He said that companies should recognize the need to plan for risks.
Branson is urging them to spend money to keep things secure and stable, mainly because there are more and more cyber threats, and getting support from outside for computer work can be vulnerable.
Branson also talked about how things might become difficult for banks in Germany this year. He’s concerned about the revenue generated, saying it might be less. One major problem he sees is with buildings – like stores and offices, considered as “risk No. 1.”
BaFin has been issuing warnings about real estate problems for a while, but now Branson is sounding even more bothered. He says there are issues because of a significant transaction slowdown. Also, companies are struggling financially and the industry is dealing with higher interest rates.
BaFin expects this challenging situation to affect banks’ profits for a long and require them to set aside more money for potential risks.
BaFin Urges Companies To Be More Proactive When Managing IT Risks
Besides keeping a close eye on the real estate sector, BaFin is watching out for IT risks. He pointed out problems related to cyber issues and when companies outsource services.
Branson recognizes that higher interest rates helped banks in 2023 but thinks that making money for banks might be more challenging in 2024 because of delayed loan costs.
The regulator stresses the importance of being more careful and managing risks well in response to the changing challenges in finance.
BaFin is like the financial supervisor that oversees banks, insurance companies, and securities trading in Germany. It’s a public institution, following Federal Ministry of Finance rules. The money to run BaFin comes from fees paid by the institutions.
The watchdog ensures that Germany’s financial system works well, stays stable, and remains trustworthy. The main goal is to protect customers of banks, insurance, and investors from irregular activities of the companies.
