Shares of JPMorgan Chase were down 1% in morning trading Thursday as investors react to reports from U.S. law enforcement officials that the bank and as many as four other financial institutions are victims of recent cyberattacks. After the close of trading last night, the FBI said it was working with the U.S. Secret Service “to determine the scope” of the attacks.
In early trading, JPMorgan shares were down 59 cents, or 1%, to $59.00, after closing at $59.59 Wednesday. Authorities have not released the names of the other U.S. banks whose systems were hacked. However, Citigroup shares were down 0.7% in early trading, Bank of America shares were off 0.9% and Wells Fargo was 0.4% lower.
Cyber-related attacks are emerging as a major risk to financial institutions, according to the New York State Department of Financial Services, which in May issued a “Report on Cyber Security in the Banking Sector.” “Cyberattacks against financial services institutions are becoming more frequent, more sophisticated, and more widespread,” the report said.
The report attributed the rising frequency of cyberattacks to a number of factors:
* Unfriendly nation-states breach systems to seek intelligence or intellectual property.
* Hacktivists aim to make political statements through systems disruptions.
* Organized crime groups, cybergangs, and other criminals breach systems for monetary gain, such as stealing funds via account takeovers, ATM heists, and other mechanisms.
The study, which included 154 financial institutions, also noted that 77% said their budgets for information security has risen in the past three years and 79% said it would rise further in the next three years. JPMorgan CEO Jamie Dimon said his bank spends about $200 million each year to protect it from cyber attacks, according to his April 2013 letter to shareholders. He also told investors that “number will grow dramatically over the next three years.” By the end of 2014, the tab for cyber security will climb to more than $250 million, he said in an April letter to shareholders.
Larry Ponemon, founder of Ponemon Institute, a firm specialzing in cyber security, data protection and privacy, told USA TODAY that the cost of a hack-related disruptions to financial services firms is roughly $22,000 per minute. Shares of Goldman Sachs were also down, falling $1.06, or 0.6%, to $176.75.