sarah dahlgren : the importance of addressing cybersecurity risks in the financial sector remarks by ms sarah dahlgren, executive vice president of the financial institution supervision group of the federal reserve bank of new york, at the oprisk north america annual conference, new york city, 24 march 2015. * * * introduction i would like to thank operational risk & regulation for inviting me to speak here today. i appreciate the opportunity to address this group and kick off what looks like a very interesting and comprehensive few days of dialogue around current and future risks facing the industry. as always, my remarks today reflect my own views and not necessarily those of the federal reserve bank of new york or the federal reserve system. i will begin my remarks with a high - level overview of the progress made in recent years in addressing some of the most significant risks facing the industry following the financial crisis. i will then go on to discuss one of the areas where i see some of the biggest challenges in the road ahead. as the industry continues to adapt to and implement necessary regulatory changes, it is also adapting to and leveraging technology changes : technology changes that offer both exciting opportunities and more complex risks than – i think – we are prepared for. progress coming out of the financial crisis, we all knew that we needed to be better prepared for future crisis events, whatever their character, source or timing. we needed financial firms, and a financial system, that was better prepared to weather all storms. in 2011, we developed the framework for supervision – a framework designed to ensure we had firms and a system that were less complex, more resilient and better managed. collectively, we have made a lot of progress since 2011 – and the industry is in much better condition relative to the pre - crisis period. but, as you all know, business does not stand still and this constant evolution results in new risks and new challenges. before turning to one of the biggest risks or challenges i see, i want to pause and recognize two things : • first, it ’ s clear that progress has been made across the industry in a number of areas – particularly in making firms and the system more resilient through improvements in capital and liquidity, as well as enhancements in risk management, including capital planning and stress testing across the range of risks firms face. but, in the remaining two areas of the framework – less complex and better managed – i think it ’ s safe to say that despite the fact that firms are addressing a number

mr mcdonough focuses on issues related to his responsibilities as chairman of the basel committee on banking supervision remarks by mr william j mcdonough, president and chief executive officer of the federal reserve bank of new york, before the foreign policy association conference on global capital markets and a new international financial architecture, held in new york on 17 november 1999. * * * i am delighted to take part this afternoon in the foreign policy association ’ s conference on global capital markets and a new international financial architecture. it is a special pleasure to be here among so many old friends and colleagues. in my remarks today, i will focus primarily on issues related to my responsibilities as chairman of the basel committee on banking supervision. first, i ’ d like to give you a brief update on the committee ’ s efforts to implement globally an agreement reached initially in september 1997 on core principles for effective banking supervision. second, i ’ ll describe the committee ’ s work to promote improvements in risk management, including some related lessons drawn from the ltcm episode. third, i will discuss the committee ’ s proposal for a new capital adequacy framework to replace the 1988 capital accord and give you some idea of what on our timetable is going forward. many of these efforts were initiated prior to the russian financial collapse in the summer of 1998. there is no doubt, however, that all went into significantly higher gear thereafter. let me turn first to updating you on the status of the core principles for effective banking supervision. this is an initiative the basel committee embarked on in the mid - 1990s in the belief that there was a need to foster more effective banking supervision throughout the global financial markets. in developing the core principles, the committee sought to craft a document that would have the legitimacy, quality, and flexibility to meet the needs of bank supervisors around the world. to this end, the committee made it a key point to consult broadly with other supervisors throughout the various stages of the project, particularly those from emerging market countries. the core principles document that resulted from this process brings together concisely in one place all of the fundamental elements needed to carry out effective banking supervision - a remarkable achievement in its own right. equally important, in my view, the document also balances the desire to set high standards for supervisory practices with a pragmatic recognition that not all countries are in the same stage of financial market development. as such, the core principles document is of particular importance for emerging market countries because it establishes a clear set of standards