When It Rains, It Pours: Cyber Risk and Financial Conditions

Thomas Eisenbach, Anna Kovner and Michael Lee

No 1022, Staff Reports from Federal Reserve Bank of New York

Abstract: We analyze how systemic cyber risk relates to the financial cycle and show that the potential impact of a cyber attack is systematically greater during stressed financial conditions. This is true over the past two decades and particularly at the onset of the COVID-19 pandemic, when changes in payment activity increased vulnerability by approximately 50 percent relative to the rest of 2020 through more concentration and intraday liquidity stress. We evaluate the effectiveness of policy interventions used to stabilize markets at mitigating cyber vulnerability. We argue that cyber and other financial shocks cannot be treated as uncorrelated vulnerabilities and policy solutions for cyber need to be calibrated for adverse financial conditions.

Keywords: cyber; banks; networks; payments; COVID-19 (search for similar items in EconPapers)
JEL-codes: G12 G21 G28 (search for similar items in EconPapers)
Pages: 25
Date: 2022-06-01
New Economics Papers: this item is included in nep-ban, nep-cba, nep-pay and nep-rmg
Note: Revised August 2023.
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Citations: View citations in EconPapers (1)

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