Privacy and Data Security Litigation in Banking: Implications for Corporate Governance

Abstract

With the proliferation of technology and digital banking, privacy and data security violations have exposed Pakistani banks to increasing litigation risks and reputation damage. However, research examining the litigation trends and governance implications for local banks remains limited. This study aims to address this gap by analyzing major privacy and data-related lawsuits faced by Pakistani banks over the past decade and deriving insights to inform governance reforms. Using a mixed methods approach, the study reviews 15 high-profile litigation cases through case study analysis, along with regression analysis of bank governance metrics and content analysis of policies. Results reveal rising lawsuits around unauthorized data sharing, misleading privacy policies, breaches, and lack of consent - resulting in settlements of hundreds of millions of rupees. Banks with higher board independence and dedicated risk committees demonstrate lower litigation incidence and costs. The analysis shows how litigation has prompted enhanced transparency, stronger data security controls, and greater board and management attention to ethics and compliance. However, Pakistan still lags on regulations compared to developed countries. The study concludes that robust governance and risk management practices focused on customer interests and ethical data usage are imperative for Pakistani banks to navigate the technology-induced litigation landscape. This research provides one of the first comprehensive analyses of emerging litigation threats and governance reforms needed in the high-risk digital banking environment.

Keywords: Banking Litigation, Corporate Governance, Privacy and Data Security