bankers ’ speeches 2. recovery capabilities 3. effective governance 1. defensive capabilities yesterday ’ s financial stability report ( fsr ) describes defensive capabilities as capabilities that “ enable firms to identify and withstand attack. ” this is important from a financial stability point of view not only for those firms that, as part of the cyber programme, we have identified as ‘ core ’ to the sector, but also relevant to their suppliers and other firms they trade with. it implies a level of resilience that goes beyond basic cyber hygiene but aims instead to ensure that firms are in a position to manage advanced persistent threats ( apt ). while not wanting to go into too much detail on the cyber work programme 5, three key themes are relevant here. • the first is that cyber is not just about technology. people matter. more often than not attackers may seek to exploit potential weaknesses in personnel, to establish a bridgehead for attacks. it is therefore essential that firms have the right arrangements in place so that all staff understand cyber risk and their responsibilities for information assurance. • the second is that cyber requires investment. in people and in systems. underinvestment in cyber defences may mean that firms are behind the game in terms of their ability to respond to crystallised threats. for example, they could risk misdiagnosing a cyber attack as an internal it failure rather than a deliberate attack. • the third is the importance of regular vulnerability testing. we launched cbest, a controlled, bespoke, voluntary cyber security testing framework which aims to bring to bear the best available intelligence on potential threats to test directly a firm ’ s ability to protect, detect and respond to cyber attacks. 2. recovery capabilities but even with improved ex ante resilience, no network is impenetrable. hence why firms ’ recovery capabilities are equally important. we still need firms to work to be able to resume vital services quickly and reliably in the event of operational disruption. we are keen to see firms adapt their approaches to business continuity planning to take account of cyber. one possibility raised in the fsr is seeking more segregation between primary and backup systems. 3. effective governance i mentioned earlier it is for firms in the first place to be responsible for their cyber resilience. i ’ ve also noted that cyber is about people as much as it is about technology. and let me be clear, the responsibility for understanding this risk extends beyond technology specialists ; firms ’ boards need to view cyber risk as a core

mr. george gives an address on recent changes in the international financial and economic environment speech given by mr e a j george, governor of the bank of england, at a dinner with the lord mayor for bankers and merchants of the city of london on 10 june 1999. my lord mayor, mr chancellor, my lords, aldermen, mr recorder, sheriffs, ladies and gentlemen. when we were last here for this splendid occasion i suggested that we were living in a dangerous international financial and economic environment. these were strong words for a central banker – but perhaps not strong enough. that environment rapidly became worse through the autumn, so that by around the time of the imf annual meetings in october there was a good deal of talk about global financial meltdown and impending world recession – which was not simply journalistic hyperbole. since that low point things have certainly improved. the hectic scramble for financial asset quality and liquidity following russia ’ s default and the near collapse of ltcm – an exceptionally highly geared hedge fund – failed to uncover fatal weaknesses elsewhere in the financial system, and lenders and investors have gradually regained some of their appetite for risk. fears of a general credit crunch in major industrial countries quickly receded ; and sentiment towards the emerging markets has improved, with growing evidence of recovery in the original asian crisis countries and a better than expected outcome in brazil. among the industrial countries, japan made stronger efforts to bring its long recession to an end – through macro - economic stimulus and by strengthening its domestic banking system – and there are now signs that those efforts are beginning to be rewarded. meanwhile the world economy has been effectively underpinned by continuing abnormally strong domestic demand growth in the united states. but despite these developments we still have a long way to go. if the immediate danger of global financial instability has receded, we are still stuck with slow growth in the world economy, currently at around 2½ %, which is not much more than half the estimated trend growth rate. and we are stuck, too, with massive international imbalances, both between the emerging and industrial countries, on the one hand, and among the major industrial countries, on the other. without a stronger resumption of capital inflows to the emerging markets, the industrial countries will need to accommodate an export - led recovery in those markets. that implies stronger domestic demand, and hence import, growth in the g7 countries, if the world economy as a whole is to get back on trend