UK BANKING SYSTEM ADDRESSES DATA THEFT ISSUESvnunet.com Banks to open up on data security threats
Basel II rules will force greater transparency on computer risks

In years to come, it is possible that historians will see an arcane piece of banking regulation as one of the most significant weapons deployed against the shadowy world of computer crime.
The Basel II accord aims to force financial institutions to produce exact details of the commercial risks they face in the course of their business. It is producing the first gaps in the wall of silence that has often characterised the banks' relationship with computer crime.

IT security expert Professor Neil Barrett, an adviser to the National Hi-Tech Crime Unit (NHTCU), says that companies are still reluctant to reveal the truth about hacker attacks.

'Of the incidents that I dealt with in computer security that involved sums of between £250,000 and £750,000, only one in 25 were reported to the NHTCU,' he said.

Basel II is designed to allow organisations such as insurance providers to better understand the risks they are underwriting. The accord specifically mentions computer security and hacking incidents as operational risks that must be quantified.

Failure to do so will mean banks setting aside 20 per cent of their turnover to cover any unforeseen eventuality - meaning financiers have to be completely open or face the prospect of holding on to money that is not doing anything.

'It's all part of the governance movement that has arrived in the wake of Enron and WorldCom,' said Jay Heiser, principal analyst for computer security company TruSecure.

'The implications of this are practically infinite.'

Heiser says that behind Basel II is a loss of patience by regulatory authorities with the way banks carry out their affairs.

'The significance of Basel II is that it forces financial institutions to describe exactly how risky they are,' he said.

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