The Future of Financial Stability and Cyber Risk. Brookings Institution. Jason Healey et al. October 10, 2018
The financial sector has long been at the forefront of cybersecurity and industry-wide information sharing and cooperation. Even so, cyber attacks on financial institutions and financial market infrastructures have become more frequent and sophisticated, prompting ever-larger security investments and increased focus on mitigating and managing cyber risk. Parallel to these efforts, the financial sector, regulators, and national governments have been working to improve overall resiliency and stability in the hopes of preventing a repeat of panics such as the financial crisis a decade ago.
This paper takes the critical next step: examining the intersection of these two efforts. How might cyber risks and financial risks interact to cause systemic crises? Is there anything fundamentally new or different about cyber risks? How should economists, regulators, policymakers, and central bankers focused on financial stability incorporate cyber risks into their models and thinking? [Note: contains copyrighted material].
[PDF format, 18 pages].
Making the Best of Brexit for the EU-27 Financial System. Peterson Institute for International Economics. Policy Brief 17-8. André Sapir, Dirk Schoenmaker and Nicolas Véron. February 2017
As a consequence of Britain’s exit from the European Union, UK-based financial firms are expected to lose their regulatory passport to do direct business with their clients in the EU-27. Brexit will lead to a partial migration of financial services activities from London to locations in the EU-27 to continue serving their customers there. Other London-based activities might also be relocated to non-European jurisdictions, primarily the United States. This Policy Brief focuses on the implications of Brexit for the EU-27 financial system. The authors estimate that about €1.8 trillion (or 17 percent) of all UK banking assets might be on the move as a direct consequence of Brexit. Market fragmentation—if the EU-27 receives the UK business as 27 separate jurisdictions as opposed to one single financial space—would increase borrowing costs for corporations and households, compared with an integrated market for the EU-27. Different countries and cities will naturally compete for business moving out of London. EU-27 leaders need to set clear objectives for reshaping the post-Brexit financial system. The authors recommend enhancing the role of the European Securities and Markets Authority, strengthening the banking union, and improving oversight of the EU-27’s financial system infrastructure. [Note: contains copyrighted material].
[PDF format, 8 pages, 160.31 KB].
What do financial markets think of the 2016 election? Brookings Institution. Justin Wolfers and Eric Zitzewitz. October 21, 2016
In “What do financial markets think of the 2016 election,” the University of Michigan’s Justin Wolfers and Dartmouth College’s Eric Zitzewitz conduct an event study analyzing the response of financial and prediction markets to the most consequential single event (so far!) during the 2016 general election campaign: the first Presidential debate, which occurred on September 26, 2016. Polls taken immediately after the debate found that voters thought Clinton had won the debate by a clear margin. The debate created an abrupt shift in the dynamics of the race, increasing the chances of a Clinton presidency, and reducing the chance of a Trump presidency. [Note: contains copyrighted material].
[PDF format, 42 pages, 1.11 MB].