Explanation:
Systemic risk refers to the risk of collapse of an entire financial system or entire market, as opposed to risk associated with any one individual entity. In this context, GlobalBank's disruption directly spilling over and causing operational disruptions at other interconnected financial institutions is a primary example of operational risk translating into systemic risk through interconnectivity.
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Q.32 GlobalBank, a large multinational bank, experiences a significant cyber attack that disrupts its real-time electronic payment system. This disruption leads to widespread delays in processing transactions across the globe. GlobalBank is interconnected with various financial institutions through digital platforms used for transactions and trade settlements. In this scenario, what is a direct systemic risk resulting from the cyber attack on GlobalBank?
A
Reduced consumer confidence in digital banking, leading to an increased preference for cash transactions.
B
A rapid increase in short-selling of stocks of financial institutions interconnected with GlobalBank.
C
Other financial institutions facing disruptions in their transaction processing due to their interconnectivity with GlobalBank.
D
Stricter regulatory measures imposed on electronic payment systems across the financial sector.