Germany's financialregulator BaFin will expand its cybersecurity supervision and expects financialinstitutions to prepare for threats from artificial intelligence and quantumcomputing.London's trading industry is coming home!Speaking at Bitkom'sDigital Finance Conference in Berlin on Tuesday, BaFin President Mark Bransonsaid the regulator was expanding its cybersecurity department and would conductshorter, targeted audits to reach more supervised firms.BaFin received reportsof nearly 900 IT incidents over the past four quarters, with 14% attributed toattacks, Branson said. He warned that frontier AI models and autonomous AIagents could make cyberattacks faster and more sophisticated.Branson also referredto the reported theft of $6.3 billion in cryptocurrenciesfrom Binance. He saidan AI tool had reportedly played a role in the attack, alongside socialengineering.The warnings come asEuropean regulators increase their focus on technology-related risks infinancial services. The FCA recently invited firms to testthe use of quantum computing in identifying money laundering, while the AMF has highlighted AI-drivencybersecurity risks facing retail financial firms.BaFin SetsCybersecurity ExpectationsBranson said financialinstitutions should meet the requirements of the Digital Operational ResilienceAct (DORA) and integrate AI into their ICT risk management frameworks. He alsocalled for risk-based software patching, with priority given to criticalsystems and those accessible from external networks.BaFin is discussingAI-related risks with financial institutions, industry associations and majorEuropean IT service providers. Branson also called for greater Europeantechnological independence to reduce reliance on hyperscalers based outside theEuropean Union.BaFin UrgesQuantum-Resistant EncryptionBranson also warnedthat quantum computing could eventually break encryption methods currentlyconsidered secure. Attackers are already collecting encrypted data to decryptlater using quantum computers, an approach known as "harvest now, decryptlater".BaFin recommends thatparticularly critical systems migrate to quantum-resistant encryptionalgorithms by 2030.Branson also saidBaFin had been the market surveillance authority for AI systems in thefinancial sector since July 2026. Additional requirements for high-risk AIsystems are scheduled to apply from December 2027.This article was written by Tareq Sikder at www.financemagnates.com.