What’s the biggest risk facing the banking system? If you answered regulating the complex financial derivatives that torpedoed the world financial system in 2008, you’d be wrong!
According to the Chair of the Securities and Exchange Commission, Mary Jo White, cybersecurity is really the greatest danger to the world financial system. She made this startling announcement at a conference held in Washington earlier this week.
In referring to the data security of brokerage firms, White said the SEC has found “a lot of preparedness, a lot of awareness but also their policies and procedures are not tailored to their particular risks”.
Her remarks were likely based on the security audits of broker dealers that her agency has been conducting over the last two years, as well as the SEC’s increased enforcement of cyber security regulations.
In 2015, the SEC reached a settlement with a large Midwestern advisory firm that was found to not have implemented adequate data safeguards, even after being badly hacked.
We don’t know more about what the auditors discovered in their sweeps. However, it’s troubling that the head of the agency charged with ensuring our capital markets keep humming along has now concluded that cyber gangs and hackers can bring our financial system to its knees.
Let’s hope Michael “The Big Short” Lewis doesn’t have enough material in the coming years to write a bestseller about this.