Cyber security The consequences of cyberattacks can be considerable. What we are now witnessing is probably just the beginning. We must find a suitable way to mitigate risk, without making our systems needlessly expensive. Cyber-security challenges are among the most significant challenges to our payment system. Without an efficient defence system, trust in the system can be undermined over time. For its part, Norges Bank is devoting considerable resources to securing its systems, oversight of activities and implementing measures to protect against cyber attacks. As part of oversight and supervision, we will increase our monitoring of cyber-security risks in the payment system. This requires cooperation, both nationally and internationally, to identify and combat cyberattacks. Nationally, this takes place through, for example NorCERT, part of the Norwegian National Security Authority (NSM), and for the financial sector through the Norwegian Financial Sector Cyber Security Center (FinansCERT) under Bits. The Nordic financial sector has established 3/5  BIS central bankers' speeches  Nordic Financial CERT as an extension of the Norwegian FinansCERT. The need for cooperation does not stop at a Nordic level. The challenges are international, and are shared by private financial undertakings, their service providers and subcontractors and authorities in many countries. Measures to promote cyber security are technically complicated and require specialist expertise. But it is management and boards of directors in institutions and companies that have the final responsibility and decide strategy and resource use. This responsibility cannot be delegated or outsourced to others. Owners and managers must be aware of their ultimate responsibility.

Figure 7 A time-varying capital requirement Tier 1 Capital  Countercyclical capital requirements  M inimum requirements  Upturn  10  Downturn  time  BIS Review 68/2010  When economic activity is strong, the capital requirement is high, and vice versa. This timevarying capital requirement has two functions. The first is to build up the bank’s capital buffer when times are good and then let this buffer decrease during less favourable periods. The second function is to dampen credit growth when times are good by increasing the capital requirement and thereby the bank’s lending costs. This increase in the bank’s lending costs in turn implies an increase in the interest rate margin – and thus the lending rate. In light of the discussion of “just the right level of regulation”, a time-varying capital requirement and other regulations varying across time may have certain advantages. Their more apparent connection with risk build-up may make them less costly than the alternative of introducing a constant higher “minimum requirement”. One objective of varying regulations across time is to affect credit growth through the interest rate margin. This creates an additional source of variation in the interest rate margin, which can be illustrated in the lending rate equation by adding an additional time index for the regulations:  itlending  it   t ( zt ) . An interest rate margin with time-varying regulations also implies another dynamic for the transmission mechanism and is more complicated than a one-off shift.