Finance

What is the EU’s Digital Operational Resilience Act? DORA, explained

Published

10 months ago

August 8, 2024

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Financial services companies and their digital technology suppliers are under intense pressure to achieve compliance with strict new rules from the EU that require them to boost their cyber resilience.

By the start of next year, financial services firms and their technology suppliers will have to make sure that they’re in compliance with a new incoming law from the European Union known as DORA, or the Digital Operational Resilience Act.

CNBC runs through what you need to know about DORA — including what it is, why it matters, and what banks are doing to make sure they’re prepared for it.

What is DORA?

DORA requires banks, insurance companies and investment to strengthen their IT security. The EU regulation also seeks to ensure the financial services industry is resilient in the event of a severe disruption to operations.

Such disruptions could include a ransomware attack that causes a financial company’s computers to shut down, or a DDOS (distributed denial of service) attack that forces a firm’s website to go offline.

The regulation also seeks to help firms avoid major outage events, such as the historic IT meltdown last month caused by cyber firm CrowdStrike when a simple software update issued by the company forced Microsoft’s Windows operating system to crash.

Multiple banks, payment firms and investment companies — from JPMorgan Chase and Santander, to Visa and Charles Schwab — were unable to provide service due to the outage. It took these firms several hours to restore service to consumers.

In the future, such an event would fall under the type of service disruption that would face scrutiny under the EU’s incoming rules.

Mike Sleightholme, president of fintech firm Broadridge International, notes that a standout factor of DORA is that it doesn’t just focus on what banks do to ensure resiliency — it also takes a close look at firms’ tech suppliers.

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Under DORA, banks will be required to undertake rigorous IT risk management, incident management, classification and reporting, digital operational resilience testing, information and intelligence sharing in relation to cyber threats and vulnerabilities, and measures to manage third-party risks.

Firms will be required to conduct assessments of “concentration risk” related to the outsourcing of critical or important operational functions to external companies.

These IT providers often deliver “critical digital services to customers,” said Joe Vaccaro, general manager of Cisco-owned internet quality monitoring firm ThousandEyes.

“These third-party providers must now be part of the testing and reporting process, meaning financial services companies need to adopt solutions that help them uncover and map these sometimes hidden dependencies with providers,” he told CNBC.

Banks will also have to “expand their ability to assure the delivery and performance of digital experiences across not just the infrastructure they own, but also the one they don’t,” Vaccaro added.

When does the law apply?

DORA entered into force on Jan. 16, 2023, but the rules won’t be enforced by EU member states until Jan. 17, 2025.

The EU has prioritised these reforms because of how the financial sector is increasingly dependent on technology and tech companies to deliver vital services. This has made banks and other financial services providers more vulnerable to cyberattacks and other incidents.

“There’s a lot of focus on third-party risk management” now, Sleightholme told CNBC. “Banks use third-party service providers for important parts of their technology infrastructure.”

“Enhanced recovery time objectives is an important part of it. It really is about security around technology, with a particular focus on cybersecurity recoveries from cyber events,” he added.

Many EU digital policy reforms from the last few years tend to focus on the obligations of companies themselves to make sure their systems and frameworks are robust enough to protect against damaging events like the loss of data to hackers or unauthorized individuals and entities.

The EU’s General Data Protection Regulation, or GDPR, for example, requires companies to ensure the way they process personally identifiable information is done with consent, and that it’s handled with sufficient protections to minimize the potential of such data being exposed in a breach or leak.

DORA will focus more on banks’ digital supply chain — which represents a new, potentially less comfortable legal dynamic for financial firms.

What if a firm fails to comply?

For financial firms that fall foul of the new rules, EU authorities will have the power to levy fines of up to 2% of their annual global revenues.

Individual managers can also be held responsible for breaches. Sanctions on individuals within financial entities could come in as high a 1 million euros ($1.1 million).

For IT providers, regulators can levy fines of as high as 1% of average daily global revenues in the previous business year. Firms can also be fined every day for up to six months until they achieve compliance.

Third-party IT firms deemed “critical” by EU regulators could face fines of up to 5 million euros — or, in the case of an individual manager, a maximum of 500,000 euros.

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That’s slightly less severe than a law such as GDPR, under which firms can be fined up to 10 million euros ($10.9 million), or 4% of their annual global revenues — whichever is the higher amount.

Carl Leonard, EMEA cybersecurity strategist at security software firm Proofpoint, stresses that criminal sanctions may vary from member state to member state depending on how each EU country applies the rules in their respective markets.

DORA also calls for a “principle of proportionality” when it comes to penalties in response to breaches of the legislation, Leonard added.

That means any response to legal failings would have to balance the time, effort and money firms spend on enhancing their internal processes and security technologies against how critical the service they’re offering is and what data they’re trying to protect.

Are banks and their suppliers ready?

Stephen McDermid, EMEA chief security officer for cybersecurity firm Okta, told CNBC that many financial services firms have prioritized using existing internal operational resilience and third-party risk programs to get into compliance with DORA and “identify any gaps they may have.”

“This is the intention of DORA, to create alignment of many existing governance programs under a single supervisory authority and harmonise them across the EU,” he added.

Fredrik Forslund vice president and general manager of international at data sanitization firm Blancco, warned that though banks and tech vendors have been making progress toward compliance with DORA, there’s still “work to be done.”

On a scale from one to 10 — with a value of one representing noncompliance and 10 representing full compliance — Forslund said, “We’re at 6 and we’re scrambling to get to 7.”

“We know that we have to be at a 10 by January,” he said, adding that “not everyone will be there by January.”

Finance

UK’s FCA teams up with Nvidia to let banks experiment with AI

Published

2 hours ago

June 9, 2025

Business Finance News

Jakub Porzycki | Nurphoto | Getty Images

LONDON — Britain’s financial services watchdog on Monday announced a new tie-up with U.S. chipmaker Nvidia to let banks safely experiment with artificial intelligence.

The Financial Conduct Authority said it will launch a so-called Supercharged Sandbox that will “give firms access to better data, technical expertise and regulatory support to speed up innovation.”

Starting from October, financial services institutions in the U.K. will be allowed to experiment with AI using Nvidia’s accelerated computing and AI Enterprise Software products, the watchdog said in a press release.

The initiative is designed for firms in the “discovery and experiment phase” with AI, the FCA noted, adding that a separate live testing service exists for firms further along in AI development.

“This collaboration will help those that want to test AI ideas but who lack the capabilities to do so,” Jessica Rusu, the FCA’s chief data, intelligence and information officer, said in a statement. “We’ll help firms harness AI to benefit our markets and consumers, while supporting economic growth.”

The FCA’s new sandbox addresses a key issue for banks, which have faced challenges shipping advanced new AI tools to their customers amid concerns over risks around privacy and fraud.

Large language models from the likes of OpenAI and Google send data back to overseas facilities — and privacy regulators have raised the alarm over how this information is stored and processed. There have meanwhile been several instances of malicious actors using generative AI to scam people.

Nvidia is behind the graphics processing units, or GPUs, used to train and run powerful AI models. The company’s CEO, Jensen Huang, is expected to give a keynote talk at a tech conference in London on Monday morning.

Last year, HSBC’s generative AI lead, Edward Achtner, told a London tech conference he sees “a lot of success theater” in finance when it comes to artificial intelligence — hinting that some financial services firms are touting advances in AI without tangible product innovations to show for it.

He added that, while banks like HSBC have used AI for many years, new generative AI tools like OpenAI’s ChatGPT come with their own unique compliance risks.