European financial institutions are forecast to face fines totaling €4.7bn (£4.14bn) in the first three years under incoming General Data Protection Regulation (GDPR).
That is according to a new report from Consult Hyperion, which predicts 384 data breaches by 2021, each incurring fines as high as €260m, with additional regulations potentially bringing further liabilities.
The consultancy firm said that their forecasts were conservative, excluding compensation claims, costs associated with lost customers, damaged reputations, and senior executive resignations.
“Financial institutions are myopically focused on preventative measures, ignoring the importance of the resilience,” Bo Holland, CEO of AllClear ID, which commissioned the report, said.
“History tells us that companies that have dealt with data breaches poorly have seen loss of customers, reduced earnings and board level resignations. GDPR raises the stakes even higher.”
The GDPR comes into force in May next year, and is designed to harmonise data privacy laws across Europe, giving extra protection to citizens’ data privacy, and applies to all firms that do business inside the EU.
Breaches can hit institutions with fines of up to 2% of their previous year’s global annual revenues for a first offence, and 4% for repeat offences, while criminal penalties are also possible.
The report says the most risky feature of the GDPR is a 72-hour breach notification requirement. “Financial institutions that have not invested in response readiness will face the most serious fines and collateral business damage,” Holland added.
In addition, firms in the UK will be under further pressure to protect data after the Queen’s Speech introduced a new Data Protection Bill yesterday, intended to increase privacy and give citizens the right to be forgotten.
“The tech sector shares the government’s ambition of making the UK the safest place to be online,” techUK CEO, Julian David, said. “However, there is a fine line between strengthening protection and over reaching rules that constrain the creativity of businesses and citizens.
“Collaboration, cooperation and trust are key to creating a safe and secure digital world.”
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