Hackers disrupt one of world's biggest bank's trades with U.S. Treasury

The Industrial and Commercial Bank of China's (ICBC) U.S. arm was hit by a ransomware attack that disrupted trades in the U.S. Treasury market on Thursday, the latest in a string of victims ransom-demanding hackers have claimed this year.

ICBC Financial Services, the U.S. unit of China's largest commercial lender by assets, said it was investigating the attack that disrupted some of its systems, and making progress toward recovering from it.

China's Foreign Ministry said on Friday the lender is striving to minimize risk impact and losses after the attack.

"ICBC has been closely monitoring the matter and has done its best in emergency response and supervisory communication," ministry spokesperson Wang Wenbin told a regular news conference.

Wang added businesses remained normal at ICBC head office and other branches and subsidiaries across the globe.

Meanwhile, Britain's Financial Conduct Authority said it was "communicating with the relevant U.S. and U.K. authorities and firms to identify any impacts to U.K. financial services."

Hackers lock up a victim organization's systems in such attacks and demand ransom for unlocking it, often also stealing sensitive data for extortion.

Several ransomware experts and analysts said an aggressive cybercrime gang named LockBit was believed to be behind the hack. LockBit confirmed its involvement via chat on Friday.

"We don't often see a bank this large get hit with this disruptive of a ransomware attack," said Allan Liska, a ransomware expert at the cybersecurity firm Recorded Future.

Liska said the attack "continues a trend of increasing brazenness by ransomware groups."

"With no fear of repercussions, ransomware groups feel no target is off-limits," he said.

U.S. authorities have struggled to curb a rash of cybercrime, chiefly ransomware attacks, which hit hundreds of companies in nearly every industry each year. Just last week, U.S. officials said they were working on curtailing the funding routes of ransomware gangs by improving information-sharing on such criminals across a 40-country alliance.

Since Lockbit was discovered in 2020, the group has hit 1,700 U.S. organizations, according to the U.S. Cybersecurity and Infrastructure Security Agency (CISA). Last month, it threatened Boeing with a leak of sensitive data.

A CISA spokesperson referred questions about the ICBC hack to the U.S. Treasury Department.

While market sources said the impact of the hack appeared limited, it signalled how vulnerable systems at large organizations such as the bank continue to be. Thursday's incident is likely to raise questions over market participants' cybersecurity controls and draw regulatory scrutiny.

Trades cleared

ICBC said it had successfully cleared Treasury trades executed on Wednesday and repurchase agreements (repo) financing trades done on Thursday.

"In general, the event had a limited impact on the market," said Scott Skrym, executive vice-president for fixed income and repo at broker-dealer Curvature Securities.

Some market participants said trades going through ICBC were not settled due to the attack and affected market liquidity. It was not clear whether this contributed to the weak outcome of a 30-year bond auction on Thursday.

"There could have been maybe some technical issues with some participants not being able to access the market fully on the day," said Michael Gladchun, associate portfolio manager, core plus fixed income, at Loomis Sayles.

The Financial Times reported earlier on Thursday that the U.S. Securities Industry and Financial Markets Association (SIFMA) told members that ICBC had been hit by ransomware that disrupted the U.S. Treasury market by preventing it from settling trades on behalf of other market players.

"We are aware of the cybersecurity issue and are in regular contact with key financial sector participants, in addition to federal regulators. We continue to monitor the situation," a Treasury spokesperson said in a response to a question about the FT report. SIFMA declined to comment.

Traders and portfolio managers in Europe on Friday said bond markets appeared to be functioning normally.

"Some illiquidity can be blamed on the U.S. Treasury inter dealer broker market around the time of the hack and post-auction," said one fixed income manager at an asset management firm in Europe.

ICBC said it had successfully cleared Treasury trades executed on Wednesday and repurchase agreements (repo) financing trades done on Thursday.