Cyber-threats are a vital concern for the supervisors responsible for the safety and soundness of the financial system and for individual risk managers. In the U.S., the Department of Treasury, our intelligence agencies, financial regulators and supervisors, and risk professionals across the financial sector are working to defend against cyber-attacks and to minimize the potential disruption resulting from a successful attack. U.S. authorities are working to finalize objectives-based supervisory expectations for risk management around cyber threats. I’m encouraged that this year’s Forum includes an expert panel on “Technology Risks” that will explore the cyber-threat landscape and approaches to mitigate the associated risks. A second noteworthy omission relates to a specific component of governance. While some governance topics have been remarkably stable, in my view, risks associated with business misconduct at financial institutions have not received adequate attention in these Forums. Through initiatives like the annual conference on “Reforming Culture in the Financial Services Industry,” the New York Fed has been challenging the financial industry to consider the many factors that have contributed to recent, widespread instances of misconduct. In concert with the industry, I believe that supervisors can help the industry improve governance, culture and behavioral outcomes through supporting the development of effective internal governance regimes, prudent risk management policies, incentives, and strong compliance and control structures, all within a framework of effective oversight from the board of directors. In today’s Forum and in the future, I welcome other participants’ thoughts on approaches for developing, measuring, and maintaining a strong, ethical culture within the industry.

Over the period since 2011, we’ve witnessed a number of fundamental changes in the banking sector: The regulatory and supervisory framework has substantially raised requirements and expectations around capital, liquidity and risk management including, for example, more rigorous stress testing and capital surcharges for systemically important firms; The macro/finance environment of sluggish growth and low rates is putting pressure on bank business models. We are now in the eighth year of interest rates near zero in the U.S., which has hurt bank profits and affected risk-taking and business model choices. Ongoing technological innovations have altered both the opportunities and the threats facing financial institutions. Marketplace lending, distributed ledger, and robo-advisers promise great opportunity, while cyber threats, data privacy issues, and IT-related vendor management issues are legitimate concerns. With that idea in mind, I thought it would be useful to look at the last five years of this Forum’s program in order to identify key themes and common topics. I’d like to discuss three specific issues: systemic risk, governance, and regulatory reform. First, systemic risk has been a central topic of discussion at each Global Risk Forum over the past five years. Given the acute trauma of the financial crisis and its systemic nature, that is not surprising. I did find it interesting to see how the discussions of systemic risk have shifted over these five years. Initially, the discussions were primarily focused on defining systemic risk, including the underlying shocks and propagation channels.