Fed’s Lockhart Warns on Cyber-threat Facing Banks

WASHINGTON (MarketWatch) — The U.S. financial system and its regulators need to “update our thinking” about the threat of cyber-attacks given the spike and magnitude of recent events, said Dennis Lockhart, president of the Atlanta Federal Reserve Bank, on Tuesday. “What was previously classified as an unlikely but very damaging event affecting one or a few institutions should now probably be thought of as a persistent threat with potential systemic implications,” Lockhart told a conference in Berlin on financial instability, sponsored by the Levy Economics Institute. Banks have been defending themselves against such attacks for a while, but recent episodes carry up to 20 times more volume of traffic than before, he noted. Lockhart said that another financial-stability concern facing the United States that does not get headlines is the underfunding of public-pension plans. The gap might be as much as $3 trillion to $4 trillion because of losses on investment portfolios during the crisis, according to the Fed president.