Banks expect technology-driven risks to play an increasingly important role, survey finds

A risk survey conducted by the Central Bank of Malta found that domestic banks expect technology-driven risks to play an increasingly important role.

The Central Bank of Malta conducted its first edition of its Systemic Risk Perceptions Survey among 11 domestic banks between April and May 2026. The banks surveyed consist of the six core domestic banks and five of the non-core domestic banks. Responses were provided primarily by Chief Risk Officers and other senior risk professionals in the banking sector.

The results of the survey show that, rather than traditional balance sheet risks, banks’ risk perceptions are increasingly shaped by operational and external factors.

The report found that cybersecurity and operational factors were the top risks identified by almost two-thirds of banks.

“Respondents highlighted the increasing sophistication of cyber threats, reliance on third-party infrastructure, and the potentially severe operational and reputational consequences of a major incident,” the Central Bank of Malta said.

It found that regulatory and compliance risks were cited by just under half of the banks, saying that this reflects the continued expansion in supervisory expectations, reporting requirements, and capital constraints. “Several institutions emphasised the growing operational burden and resource intensity associated with compliance.”

Geopolitical risks were reported by five out of 11 banks, primarily due to their indirect macro-financial effects, including weaker external demand, supply chain disruptions, and financial market volatility. It said that inflationary pressures (four banks), market risks (four banks) and interest rate risks (three banks) were also highlighted as key transmission channels affecting borrowers’ affordability, funding conditions, and asset valuations.

Traditional risks such as real estate and liquidity risk were generally of secondary importance in banks’ current risk assessments.

“Overall, results point to a risk environment increasingly driven by external macro-financial shocks and rising operational complexity.”

Looking ahead

Looking ahead, banks expect structural and technology-driven risks to play an increasingly important role, the report found.

“Cybersecurity risks and operational resilience were identified as a key and intensifying concern by almost all respondents, underscoring their systemic relevance and expected persistence.”

Banks identified a number of related technology-driven risks, including AI-related risks (four banks), “reflecting growing awareness of model risk, governance challenges, and data integrity concerns, as well as third-party and technology provider risk (three banks), pointing to increasing reliance on external service providers.”

The report read that regulatory and compliance risks were cited by around four-fifths of banks, which the report said reflects expectations of continued regulatory tightening and increasing complexity.

In terms of profitability outlook, the banks’ profitability expectations for the next 12 months are generally stable to moderately positive, the report found. “Slightly less than half expect a broadly unchanged return on assets. Meanwhile, four banks anticipate an increase in profitability,” the report said, adding that two banks expect a decline in profitability, “including one anticipating a pronounced reduction.”

Sources of credit risk

The report underlined that credit risk perceptions are strongly concentrated in the construction and real estate sector, which was identified by around four-fifths of banks as one of the most vulnerable sectors.

“This reflects both the significant exposure of banks to property-related lending and concerns regarding sensitivity to interest rate increases, costs escalation, and potential corrections in property valuations. The next most common sector identified was the wholesale and retail trade sector (five banks).”

Risk landscape increasingly shaped by external, operational, and structural factors

“The survey results suggest that the risk landscape for Maltese banks is increasingly shaped by external, operational, and structural factors, with cybersecurity and operational resilience emerging as the most prominent concerns, alongside regulatory and compliance changes.”

It said that geopolitical developments continue to be viewed mainly through their macro-financial effects.

“At the same time, more traditional vulnerabilities remain concentrated in specific areas, particularly in the construction and real estate sectors reflecting banks’ significant exposure. Notwithstanding, overall risk levels are perceived as broadly stable.”

Looking forward, the Central Bank said that the growing importance of technology-driven and system-wide risks underline the need for continued adaptation of risk management frameworks and supervisory approaches.