Caution: CyberWars in Banking Ahead!
Speaking in Germany, Atlanta Fed head Dennis Lockhart opined on some sources of financial instability that may be off the radar for some people. One key area he highlighted was cybercrime. Most folks reading this have probably at some point been the victim of identity theft ([hand raised], three or four times). But Lockhart is thinking bigger.
From his speech:
"A real financial stability concern, however, is the potential for malicious disruptions to the payments system in the form of broadly targeted cyberattacks. Just in the last few months, the United States has experienced an escalating incidence of distributed denial of service attacks aimed at our largest banks. The attacks came simultaneously or in rapid succession. They appear to have been executed by sophisticated, well-organized hacking groups who flood bank web servers with junk data, allowing the hackers to target certain web applications and disrupt online services. Nearly all the perpetrators are external to the targeted organizations, and they appear to be operating from all over the globe. Their motives are not always clear. Some are in it for money, while others are in it for what you might call ideological or political reasons."
Those attacks hit Bank of America (NYSE: BAC), JPMorgan (NYSE: JPM), and Ally Financial (among others).
Lockhart's got a good point here and this will be a particularly important theme as banks push further into online operations and, in particular, mobile. Of course it's notable that the bigger banks, which are the most logical targets for organizations that want to make a big splash, also have the most money to spend on defense. Smaller banks could be easier targets -- or could be hurt more by having to spend more on cyber defense -- but there's also less to gain by knocking out The Bank of Jim (entirely fictional bank).
Here's a link to Lockhart's full speech.