Attacks – and regulatory change – threaten system stability, Coleman says

Systemic stability is a key concern, but it could be at risk from regulatory reform as well as direct attack, NY Fed op risk chief warns

Stacy Coleman, head of operational risk at the Federal Reserve Bank of New York, has warned that systemic stability could be under threat from regulatory reforms.

"The changes the firms will be going through to enhance their reporting and improve data collection will entail major changes to IT infrastructure – which could affect how those systems will work in the event of some sort of disruption," Coleman says, adding that regulatory reforms such as the Dodd-Frank Act could have unintended side-effects that would weaken system resilience. The biggest operational risk issues were those related to current or impending regulatory changes, she adds.

She also warns that the system is still at threat from deliberate attack. While resilience has improved markedly since the September 11, 2001 terrorist attacks, the new threat comes from online attacks. "The level of sophistication of the attacks that occur is amazing. It's an ever-increasing threat and we have to remain vigilant, because it affects the safety and soundness of individual firms and of the financial system broadly."

The full interview appears in the July issue of Operational Risk & Regulation, which is available online now.