actors out there, sometimes state - sponsored, who may be motivated to bring systems down and cause harm to the sector. second it is adaptive and changing. attackers do not stand still. attack types are constantly evolving and readily scalable. in the cyber arms race, costs are stacked in favour of the attacker, not the defender. organisations cannot rely on building a hard perimeter. they too need to develop defensive capability that is adaptive and invest in threat intelligence to understand potential attackers and attack types. third detection is not easy. compromise of networks or attacks themselves will not always be obvious. diagnosis may take time. by contrast physical threats to operational resilience – bombs, fires, floods – are immediately apparent. and apparent too to the rest of the sector. fourth capacity to recover may be threatened. standard approaches to achieving continuity – operating with common systems environments between primary and secondary sites and mirroring data between the two, could, in the face of a successful cyber attack, be vulnerable to complete loss of applications or destruction of data, disrupting a firm ’ s capacity to operate and leaving the timeframe and route to recovery uncertain. hence the fpc recommendation in 2013 that relevant authorities should undertake work to test and improve resilience to cyber attack of the firms at the heart of the financial system 2. you will have seen from the fsr published yesterday 3 that interest in and awareness of this risk continues to grow. this is why it is so vital that firms – and authorities – take the necessary action to address their cyber vulnerabilities. in response to the fpc ’ s 2013 recommendation our work has been mostly diagnostic, concentrating on assessing the vulnerability of the uk financial sector to cyber attack. our focus has been twofold : a cross - sector review of current risk management processes via a detailed firm self - assessment questionnaire and bespoke voluntary vulnerability testing, known as cbest 4. the conclusions we have drawn from this work can be broken down into three core areas : 1. defensive capabilities http : / / www. bankofengland. co. uk / publications / documents / records / fpc / pdf / 2013 / record1307. pdf. http : / / www. bankofengland. co. uk / publications / pages / fsr / 2015 / jul. aspx. http : / / www. bankofengland. co. uk / financialstability / fsc / pages / cbest. aspx. bis central

a lack of transparency and clarity in policymaking. in the remainder of my presentation i shall focus on monetary policymaking in a global market. the subject is naturally too vast to be fully covered in my introductory statement. thus, i shall focus my attention on two issues which i think are relevant to our discussion today. first, i shall mention some of the consequences of globalisation for policymakers. second, i shall explain why i think that the monetary policy strategy of the european central bank is well designed to face the challenges stemming from globalisation. some consequences of globalisation for policymakers with regard to the first issue, let me emphasise that i do not believe that globalisation has eliminated policymakers ’ influence over domestic political, social and economic developments, particularly in larger industrialised countries ( or areas ). on the contrary, the fact that people and capital can move more freely and quickly across borders makes the consequences of national policy decisions for the respective economies much more immediate and visible. obviously, this makes national policymaking and its presentation to the public more demanding. naturally, there is a disciplinary effect which comes from globalisation but this does not necessarily run counter to the national interest. the influence of domestic policymakers can be used for good or evil. globalisation improves the incentives for national politicians to implement good policies, such as structural reforms, which increase the flexibility of the economy. this is demanded by the treaty establishing the european community, which requires member states and the escb to “ act in accordance with the principles of an open - market economy with free competition ”. these policies will contribute to improved growth and employment perspectives. i believe in the idea that all nations gain from trade, including trade in financial assets. notwithstanding possible imperfections in the financial markets, international capital market integration can yield considerable benefits. however, it is important to stress that without flexible markets, countries will not be able to reap the full benefits of globalisation. moreover, it is well known that national authorities would face an impossible task if they had to reconcile in a sustained manner the objectives of what has been called the “ inconsistent quartet ” of ( 1 ) free trade, ( 2 ) complete international capital mobility, ( 3 ) fixed or managed exchange rates and ( 4 ) national autonomy in the conduct of monetary policy. the painful lesson to be learned from economic theory and historical experience is that these four elements cannot coexist, and that at least one will have to give way. this is of course one of the