Part of this is active engagement with threat intelligence to understand likely adversaries, their motivations and ways of working. For all these reasons, addressing cyber risk in the financial sector is a high priority for the Bank of England. It touches on most of our responsibilities – as prudential supervisor of financial firms, as supervisor of financial market infrastructure – and operator of financial market infrastructure (of real time gross settlement (RTGS)) – and as UK authority responsible for financial stability. Financial stability is the unifying objective in all of these responsibilities. It means that, in the spectrum of cyber attacks, we are much more concerned about those that have the potential to disrupt the UK system by damaging the operations of key firms or financial  1  http://www.bbc.co.uk/news/entertainment-arts-30512032. 2  http://www.theguardian.com/world/2014/dec/22/south-korea-nuclear-power-cyber-attack-hack. BIS central bankers’ speeches  1  market infrastructure and to understand how that damage could transmit through the sector, than to deal with individual cases of cyber fraud. Such cases of consumer detriment are for the Financial Conduct Authority (FCA), law enforcement agencies such as the National Crime Agency, the police and the Home Office to address. In response to the rise in the potential threat to UK financial stability from cyber, the Financial Policy Committee (FPC) in June 2013 recommended that the UK authorities should work with firms at the core of the system to test and improve cyber resilience. I want to spend the rest of this speech outlining what we have done in response.

From the perspective of developed countries, the main risk arises from the possibility the prolonged very low inflation, or the occurrence of deflation, to produce  BIS central bankers’ speeches  3  significant negative effects on the economic activity and public debt sustainability. This risk is particularly pronounced in the euro zone, where the longer underperformance of inflation in comparison with the target would cause a decline in longer-term inflation expectations, which in the absence of room for loosening the monetary policy would lead to higher real interest rates and consequently, to lower economic activity. In the medium run, the risks to the global economy arise from the possibility of lower potential growth of developed economies and developing countries, as well as the possibility of prolonged economic stagnation of the developed countries (the so-called secular stagnation). The risk of secular stagnation is particularly pronounced for the countries of the euro zone, where the constantly low domestic demand due to lower investment and higher private savings would have negative effects on economic growth and productivity in the long run. Yet, the challenges for growth in the forthcoming period are not related only to the external environment. Namely, this is a period in which it appears that the room provided by the macroeconomic policies for supporting further growth is largely exhausted. Macroeconomic policies have played a key role in the post-crisis economic recovery, but they require gradual consolidation in order to prevent the emergence of imbalances in the economy.