CLEVELAND (Reuters) - Cleveland Federal Reserve President Loretta Mester said on Thursday that financial firms and regulators should be more agile and share information to better combat cybersecurity threats.
Financial firms should be stress-tested to evaluate their ability to handle a cyber attack, Mester recommended during a conference on financial stability hosted by the Cleveland Fed.
“Such a test could help evaluate the financial system’s plans for data and core systems recovery and its reliance on third parties to implement that plan,” she said.
As part of the testing, firms should have a plan for how they will ensure data is protected and make sure it has not been altered.
Regulators could consider using simulations to test how firms would recover from an attack, based on tactics used during real attacks, Mester said. The examinations could also look at firms’ ability to resume business after an attack that corrupts data and affects multiple institutions, modeling an approach used by the Bank of England.
Mester also said that financial firms, government agencies and regulators need to collaborate better and share information when it comes to facing cybersecurity risks. When sharing data about trends in cyber threats, financial supervisors should also partner with universities and other groups to learn how to identify problematic patterns, she said.
In a conversation with reporters after the speech, Mester reiterated her view that monetary policy is in a “good spot.”
While she did not support the three rate cuts passed this year, she said she understood the argument for how lower rates could address the potential risks from weak business investment, a global slowdown and uncertainty over trade policy.
“It was a close call,” Mester said, adding that she thinks interest rates can remain at current levels “for a while” because inflation is low.
The policymaker said she would reassess her stance on monetary policy if she saw evidence that businesses were starting to reduce hiring or if consumers were cutting back on spending. But so far, the labor market and consumer spending are strong, she said. Mester still expects the economy to grow by 2% on average this year.
Mester does not vote in monetary policy decisions this year but she does participate in deliberations. The Fed voted 8-2 to cut interest rates in October for the third time this year, bringing the target level to a range of 1.5% to 1.75%.
Reporting by Jonnelle MarteEditing by Chizu Nomiyama and Cynthia Osterman