The Legal Framework for Managing Cybersecurity Risks in Financial Institutions

Abstract

Cybersecurity risks in financial institutions have become an increasingly significant concern as the sector continues to embrace digital technologies. With the rise of online banking, mobile payments, and cloud computing, financial services are more vulnerable than ever to a wide array of cyber threats, including hacking, phishing, ransomware, and data breaches. This narrative review examines the current legal frameworks in place to manage cybersecurity risks within the financial sector, analyzing both international and national regulations, as well as sector-specific guidelines. The article explores the challenges financial institutions face in maintaining robust cybersecurity practices, including the complexity of governance, the tension between innovation and security, the shortage of skilled cybersecurity professionals, and the jurisdictional issues arising from cross-border operations. It also discusses the vital role of financial supervisory bodies in guiding institutions through these challenges, fostering collaboration, and ensuring compliance with cybersecurity standards. As the threat landscape evolves, the review suggests several future directions for enhancing cybersecurity legal frameworks, including the integration of AI-based security systems, blockchain applications, and real-time risk monitoring. Recommendations are provided for improving legal structures by strengthening enforcement mechanisms, harmonizing international regulations, and ensuring the continuous adaptation of frameworks to address emerging threats. The article concludes by emphasizing the need for ongoing collaboration between financial institutions, regulators, and industry bodies to ensure the cybersecurity resilience of the financial sector, stressing the importance of a proactive and adaptive legal approach.