Cybersecurity and Financial Stability; 2019 Financial Stability Conference – Financial Stability: Risks, Resilience, and Policy, 11.21.19; Federal Reserve Bank of Cleveland and the Office of Financial Research, Cleveland, OH

Loretta Mester

No 112, Speech from Federal Reserve Bank of Cleveland

Abstract: Advances in research, data collection, and risk-monitoring have given us all a better appreciation of the interlinkages underlying the global financial system and the ability of a disturbance in one part of the system to propagate across the system. The horizontal approach to risk-monitoring, including stress testing, has been an important advance in the supervisory tool kit. Policymakers are gaining a better sense of how macroprudential policy and monetary policy interact, the appropriate role of liquidity and capital regulations, and the importance of taking a balanced approach to supervision and regulation, which supports both financial system resilience and the ability of financial firms to offer sound credit, liquidity, and payments services throughout the business cycle. Regulatory changes and the steps bankers themselves have taken to shore up their risk-management practices have led to a stronger and safer financial system. But as much as we have learned and accomplished, there is still more to do. The financial system is dynamic: it is constantly evolving. In a financial system that is rapidly adopting new technologies, our knowledge can rapidly become obsolete, as can the constructs we use to monitor and manage risks to financial stability. When the nature of the risks is changing, we need to ensure that our methods of assessing risks are nimble enough to adapt to the changing landscape. In my limited time this morning, I will focus on one area of rapid change pertinent to financial stability: namely, the risks to cybersecurity and our ability to handle these risks.

Pages: 13 pages
Date: 2019-11-21
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