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Cyber risk has emerged as a key threat to financial stability, following recent attacks on financial institutions. This paper presents a novel documentation of cyber risk around the world for financial institutions by analyzing the different types of cyber incidents (data breaches, fraud and business disruption) and identifying patterns using a variety of datasets. The other novel contribution that is outlined is a quantitative framework to assess cyber risk for the financial sector. The framework draws on a standard VaR type framework used to assess various types of stability risk and can be easily applied at the individual country level. The framework is applied in this paper to the available cross-country data and yields illustrative aggregated losses for the financial sector in the sample across a variety of scenarios ranging from 10 to 30 percent of net income.
Banks and Banking --- Industries: Financial Services --- Online Safety & Privacy --- Financial Markets and the Macroeconomy --- Portfolio Choice --- Investment Decisions --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Insurance --- Insurance Companies --- Actuarial Studies --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Financial Institutions and Services: General --- Computer security --- Banking --- Financial services law & regulation --- Cyber risk --- Financial sector --- Operational risk --- Technology --- Economic sectors --- Financial regulation and supervision --- Information technology --- Security measures --- Banks and banking --- Financial services industry --- Financial risk management --- United States
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This paper outlines a framework to perform liquidity stress tests for investment funds. Practical aspects related to the calibration of the redemption shock, the measurement of liquidity buffers and the assessment of the resilience of investment funds are discussed. The integration of liquidity stress tests with banking sector stress tests and possible bank-fund interlinkages are also covered.
Banks and Banking --- Finance: General --- Investments: General --- Industries: Financial Services --- Investments: Bonds --- Financial Markets and the Macroeconomy --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Financial Institutions and Services: Government Policy and Regulation --- General Financial Markets: General (includes Measurement and Data) --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Finance --- Financial services law & regulation --- Investment & securities --- Banking --- Liquidity stress testing --- Mutual funds --- Liquidity requirements --- Securities --- Financial sector policy and analysis --- Financial institutions --- Bonds --- Financial regulation and supervision --- Banks and banking --- State supervision --- Financial instruments --- Luxembourg
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Cyber risk has emerged as a key threat to financial stability, following recent attacks on financial institutions. This paper presents a novel documentation of cyber risk around the world for financial institutions by analyzing the different types of cyber incidents (data breaches, fraud and business disruption) and identifying patterns using a variety of datasets. The other novel contribution that is outlined is a quantitative framework to assess cyber risk for the financial sector. The framework draws on a standard VaR type framework used to assess various types of stability risk and can be easily applied at the individual country level. The framework is applied in this paper to the available cross-country data and yields illustrative aggregated losses for the financial sector in the sample across a variety of scenarios ranging from 10 to 30 percent of net income.
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Cyber Risk for the Financial Sector: A Framework for Quantitative Assessment.
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This paper assesses liquidity risk for the United States (U.S.) bond mutual funds industry and performs a range of analyses to identify which fund categories are more vulnerable to distress than others, and how sales from funds can impact financial stability. We develop a new measure to identify vulnerable categories based on expected outflows labelled ‘Flows in Distress’. Overall, most U.S. mutual funds are resilient yet high yield (HY) and loan funds would face a liquidity shortfall when faced with severe redemption shocks. Combined sales from funds can have a sizeable price impact. Finally, our contagion analysis using data on fund flows and returns shows that Investment Grade (IG) corporate bonds funds, municipal bond funds and government bond funds are more likely to spread distress to other fund categories than HY, EM and loan funds. When the first type of funds experiences stress, other funds categories are likely to experience stress as well.
Macroeconomics --- Economics: General --- International Economics --- Investments: Bonds --- Industries: Financial Services --- Finance: General --- Foreign Exchange --- Informal Economy --- Underground Econom --- General Financial Markets: General (includes Measurement and Data) --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Financial Institutions and Services: Government Policy and Regulation --- Economic & financial crises & disasters --- Economics of specific sectors --- Investment & securities --- Finance --- Mutual funds --- Financial institutions --- Bonds --- Corporate bonds --- Sovereign bonds --- Municipal bonds --- Currency crises --- Informal sector --- Economics --- Banks and banking --- China, People's Republic of
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This paper assesses liquidity risk for the United States (U.S.) bond mutual funds industry and performs a range of analyses to identify which fund categories are more vulnerable to distress than others, and how sales from funds can impact financial stability. We develop a new measure to identify vulnerable categories based on expected outflows labelled ‘Flows in Distress’. Overall, most U.S. mutual funds are resilient yet high yield (HY) and loan funds would face a liquidity shortfall when faced with severe redemption shocks. Combined sales from funds can have a sizeable price impact. Finally, our contagion analysis using data on fund flows and returns shows that Investment Grade (IG) corporate bonds funds, municipal bond funds and government bond funds are more likely to spread distress to other fund categories than HY, EM and loan funds. When the first type of funds experiences stress, other funds categories are likely to experience stress as well.
China, People's Republic of --- Macroeconomics --- Economics: General --- International Economics --- Investments: Bonds --- Industries: Financial Services --- Finance: General --- Foreign Exchange --- Informal Economy --- Underground Econom --- General Financial Markets: General (includes Measurement and Data) --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Financial Institutions and Services: Government Policy and Regulation --- Economic & financial crises & disasters --- Economics of specific sectors --- Investment & securities --- Finance --- Mutual funds --- Financial institutions --- Bonds --- Corporate bonds --- Sovereign bonds --- Municipal bonds --- Currency crises --- Informal sector --- Economics --- Banks and banking
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Changes in the structure of the U.S. Treasury market over recent years may have increased risks to financial stability. Traditional market makers have changed their liquidity provision by increasingly switching from risk warehousing to risk distribution, and a new breed of market maker has emerged with the rise of electronic trading. The “flash rally” of October 15, 2014 provides a clear example of how those risks can materialize. Based on an in-depth analysis of the event—complementing the authorities’ work—we suggest i) providing incentives for liquidity provision, ii) improving market safeguards, and iii) enhancing the regulation of the Treasury market.
Finance: General --- Investments: General --- Investments: Futures --- Financial Markets and the Macroeconomy --- Information and Market Efficiency --- Event Studies --- Capital Budgeting --- Fixed Investment and Inventory Studies --- Corporate Finance and Governance: Government Policy and Regulation --- General Financial Markets: General (includes Measurement and Data) --- Portfolio Choice --- Investment Decisions --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Finance --- Investment & securities --- Liquidity --- High frequency trading --- Futures markets --- Futures --- Treasury bills and bonds --- Asset and liability management --- Financial markets --- Financial institutions --- Economics --- Electronic trading of securities --- Derivative securities --- Government securities --- United States
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