(Jun 21)
The Financial Stability Oversight Council unanimously approved its 2016 annual report, in which they
examined a number of potential emerging threats and vulnerabilities in recent months including cyber security, market structure and market instability in Europe and and global markets.
- Cyber attacks were the first threat flagged by the panel's annual report, with the panel of regulators recommending more information sharing and a 'common, risk-based approach' for protections at regulated firms
- 'Malware attacks represent a unique threat in that they are both infrequent and yet potentially catastrophic,' according to the report
- In online marketplace lending, regulators 'need to be attentive to signs of erosion in lending standards' as the industry continues to grow, the report says
- Advances in the speed and volume of automated trading should be matched with more coordination among regulators, as similar products such as Treasuries and Treasury futures are traded in different markets watched by different agencies, FSOC said
- Distributed-ledger systems are so new that 'it is possible that operational vulnerabilities associated with such systems may not become apparent until they are deployed at scale'
- FSOC also flagged risks in the ongoing reliance on Libor, need for more data on repo markets and the pressure that a flat yield curve is putting on large banks
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