Summary of The Future of Financial Stability and Cyber Risk

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The Future of Financial Stability and Cyber Risk summary
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Rating

8

Qualities

  • Overview
  • Important
  • Analytical

Recommendation

Cyberrisks are insidious threats that could accelerate cascading systemic shocks to the global financial system. These attacks seem to come with greater frequency and sophistication, continually raising the learning curve for those who seek to contain them. This noteworthy analysis from financial experts in academia and finance addresses a topic of universal relevance and makes for required reading for policy makers, executives and IT professionals.

About the Authors

Jason HealeyPatricia Mosser and Katheryn Rosen are with the Columbia University School of International and Public Affairs. Adriana Tache is a vice president at the Citi Fraud Fusion Center.

 

Summary

Threats to the financial system extend beyond the three traditional risks that can cause chaos in an economy: “leverage, maturity and risk transformation” and the “procyclicality of the price of risk.” As to the first peril, high levels of indebtedness can hobble financial institutions’ ability to shoulder losses when asset values shrink, magnifying the risk of failure. Regarding the second, an unexpected price drop during the conversion of “risky, illiquid assets” such as subprime mortgages into instruments that offer greater liquidity can weaken banks and the entire financial ecosystem. The third danger...


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