Report: Compliance with Sub-recommendation A(1) of the ESRB Recommendation of 2 December 2021

1.0 Executive Summary

This report provides a formal assessment by the European Systemic Risk Board (ESRB) concerning the level of compliance with sub-recommendation A(1). The sub-recommendation mandates the progressive establishment of a Pan-European Systemic Cyber Incident Coordination Framework (EU-SCICF) by the European Supervisory Authorities (ESAs), the European Central Bank (ECB), the ESRB, and relevant national competent authorities (NCAs).

Based on a final submission from the ESAs in July 2024, this assessment concludes that the addressees have achieved a state of material compliance. The conceptual architecture of the EU-SCICF is substantially developed. However, significant concerns persist regarding the framework's operationalisation and practical readiness ahead of the Digital Operational Resilience Act (DORA) implementation deadline of January 2025. Deficiencies have been identified in the allocation of sufficient resources, the articulation of a clear implementation roadmap, and the proactive engagement of all designated national authorities.

2.0 Analysis of Regulatory Impact on Financial Entities

The development and eventual implementation of the EU-SCICF will have direct and indirect consequences for financial entities operating within the European Union. The framework represents a paradigm shift in the macroprudential oversight of cyber risk, altering regulatory expectations and imposing new operational demands on supervised firms.

2.1 Harmonisation of Supervisory Oversight and Enhanced Scrutiny

The primary objective of the EU-SCICF is to facilitate coordinated action among EU financial authorities. This will invariably lead to a more harmonised regulatory response to significant cyber incidents. Financial entities should anticipate more consistent, and potentially more stringent, supervisory oversight. The framework's unified information-sharing protocols mean that an incident within a single entity could trigger coordinated information requests and supervisory actions across multiple jurisdictions. Firms must therefore be prepared to demonstrate robust cyber resilience capabilities to a consolidated body of regulators.

2.2 Emphasis on Demonstrable Operational Resilience

The EU-SCICF is designed to be congruent with DORA, which codifies the imperative for operational resilience across the financial sector. This requires entities to evolve beyond traditional cybersecurity defence postures towards a comprehensive capability to withstand, respond to, and recover from high-impact cyber events. The framework underscores that regulatory focus will extend beyond preventative measures to scrutinise the efficacy and timeliness with which firms can restore critical business functions, thereby mitigating the potential for systemic contagion.

2.3 Mandate for Rigorous Testing and Preparedness Validation

The assertion within the ESRB report that it is "unacceptable to wait for a crisis to test the ability of the framework to function under stress" signals a clear regulatory expectation for proactive validation. Firms should prepare for an increase in the frequency and rigour of cyber resilience testing, including participation in mandatory cross-jurisdictional simulation exercises. These assessments will evaluate not only technical controls but also the robustness of crisis management frameworks, the effectiveness of internal and external communication protocols, and the demonstrated ability to coordinate with authorities during a simulated crisis.

2.4 Scrutiny of Resource Allocation and Governance

The report's repeated emphasis on the necessity of adequate human and financial capital for the EU-SCICF's operationalisation serves as a proxy for supervisory expectations placed upon firms. Financial entities must be prepared to articulate and defend their resource allocation for cyber and operational resilience programs. Insufficient investment in technology, processes, or skilled personnel will likely be a material weakness in an entity's risk management framework, attracting heightened supervisory scrutiny and potentially being classified as a contributing factor to systemic risk.

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