Explanation:
Systemic risk refers to the risk that a failure or disruption in one entity or market will cause widespread difficulties or cascading failures across the financial system. In the scenario of a cyber attack on a highly interconnected multinational bank, the most direct systemic risk is the contagion effect: other financial institutions that depend on GlobalBank's digital platforms for transactions and trade settlements will also face processing disruptions due to their interconnectedness.
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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.
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