The cyber hack of Industrial and Commercial Bank of China’s U.S. broker-dealer was so extensive on Wednesday that even the corporate email stopped working, forcing employees to switch to Google mail, according to two sources familiar with the situation.
As a result of the blackout, the brokerage temporarily owed BNY Mellon $9 billion, which was significantly larger than its net capital. This raised concerns about the resilience of the $26 trillion Treasury market and served as a wakeup call for the financial sector.
ICBC’s New York-based unit, ICBC Financial Services, received a cash injection from its Chinese parent to help pay back BNY Mellon. It manually processed trades with the custody bank’s assistance.
ICBC informed market participants that it was working with a cybersecurity firm called MoxFive to establish secure systems and resume normal business on Wall Street. However, this process was expected to take until at least Monday.
In the meantime, the firm requested its clients to temporarily suspend business and clear trades elsewhere. Other market participants reviewed their own books to assess exposure and rerouted trades.
ICBC Financial Services and ICBC did not respond to requests for comment. However, the brokerage stated on its website that it was progressing its recovery efforts with the support of information security experts. It confirmed that it had cleared Treasury trades executed on Wednesday and repo financing trades done on Thursday.
MoxFive executives did not provide any comments on the matter.
The ransomware attack, claimed by cybercrime gang Lockbit, has raised concerns about the resiliency of the Treasury market. While the impact on market functioning was deemed limited, the full extent is still unknown. This incident is likely to be a topic of discussion at a major Treasury market conference.
ICBC Financial Services is a mid-sized broker with approximately $24.5 billion in assets and $480.7 million of net capital. It mainly offers settlement and financing services for fixed-income securities.
When ICBC’s trades were stuck, BNY Mellon became involved as the sole settlement agent for Treasury securities. The bank played a crucial role in helping clear trades manually. ICBC’s parent injected capital into the unit to ensure BNY Mellon was paid.
Once ICBC’s new system is operational, other firms are expected to conduct their own reviews for safety, which may further delay the return to normal business.
ICBC informed market participants that they were working on setting up a secondary email system soon.
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