The branch, responsible for facilitating the settlement of Treasury bond trades, fell victim to a ransomware assault.
A Shanghai-based ICBC building. The bank stands as China’s largest.
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This week, a U.S. subsidiary of China’s largest bank fell victim to a cyber attack, posing a temporary hurdle for certain transactions in the Treasury bond market.
ICBC Financial Services, based in New York and owned by the Industrial and Commercial Bank of China, encountered a ransomware attack on Wednesday. The unit primarily focuses on clearing, ensuring that previously agreed-upon transactions by traders are completed, involving the exchange of money and securities.
Following the attack, the company had to disconnect and isolate some of its I.T. systems. However, it reported successfully clearing all trades related to U.S. Treasurys executed on Wednesday and repo financing occurring on Thursday.
This incident highlights the financial ties between China and the U.S., which persist despite political and economic tensions. Chinese institutions still hold over $800 billion in Treasury bonds, despite a gradual reduction in holdings over the years. Additionally, major Chinese banks actively participate in the U.S. government-bond market.
The ransomware attack occurred just before a Thursday meeting between U.S. Treasury Secretary Janet Yellen and Chinese Vice Premier He Lifeng in San Francisco, preceding a meeting next week between President Biden and Chinese President Xi Jinping – their first meeting in a year.
The attack utilized ransomware developed by the Russian hacking group LockBit, as indicated by Marcus Murray, the founder of Truesec, a cybersecurity company. He suggested that it’s likely an affiliate of LockBit carried out the attack.
Ransomware is a type of software that can paralyze computers or entire networks, promising to end the attack upon receiving payment. Payments are often made in cryptocurrency, making it harder for authorities to trace.
“This marks a new development. While previous cyberattacks against major banks have occurred, this is the first time hackers have employed ransomware. The impact on banks or the broader financial system remains uncertain,” stated Murray.
“Banks are often ideal targets. Hacking a bank is typically challenging due to their complexity and numerous vulnerabilities. They handle a massive volume of transactions, making it difficult to secure everything,” he mentioned.
LockBit’s ransomware was the most widely utilized globally last year and remains popular in 2023, as per the U.S. government’s Cybersecurity and Infrastructure Security Agency.
The incident occurred a day before an auction for long-dated U.S. Treasurys experienced weaker demand than usual.
ICBC, with $5.7 trillion in assets at the end of the previous year, holds the title of the world’s largest bank, according to S&P Global Ratings. This surpasses JPMorgan Chase, the largest U.S. bank, with $3.7 trillion in assets.
ICBC Financial Services clarified that the computer systems in the Chinese bank’s Beijing head office and its New York branch were unaffected.
As of August, China’s U.S. Treasurys holdings amounted to $805 billion, the lowest in over 14 years, based on Treasury Department data. China’s ownership of U.S. government debt has been decreasing for five consecutive months since April. Japan has now become the largest foreign holder of U.S. government bonds.
ICBC Financial Services is a major subsidiary of ICBC in the U.S. Other subsidiaries include ICBC’s New York branch, which serves as the bank’s U.S. dollar clearing center, and ICBC USA, providing retail and commercial banking services.
According to the bank’s website, ICBC FS serves clients such as hedge funds, broker-dealers, and global banks.
Contributions to this article were made by Weilun Soon.
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