Working paper

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Abstract:

Our analysis of a sample of twelve systemically important U.S. financial institutions suggests that these firms have sufficient stocks of high quality liquid assets to cover wholesale funding runoffs in a relatively extreme cyber run. Beyond their own stocks of liquid assets, these institutions have access to substantial additional emergency liquidity from Federal Reserve banks. The resiliency of the largest banks to cyber runs does not, however, ensure that the payment system would continue to process payments sufficiently rapidly to avoid damage to the real economy. During a severe cyber event, especially one whose reach into the banking system is uncertain, nonbanks may be reluctant to send funds through customary bank payment nodes. As a potential safeguard, we raise the idea of an “emergency payment node,” a narrow payment-bank utility that could be activated during operational emergencies to process payments between a key set of non-bank financial firms. We end with an overview of other forms of preparedness, including cyber-run stress tests.

Publication Details
Issue: 
Hutchins Center Working Paper 51
Language: 
English
License Type: 
All Rights Reserved
Published year only: 
2019
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