Mnuchin targets cybersecurity as key risk facing financial system

Need for sustained attention to cybersecurity risks were emphasized by the Trump administration’s top financial regulator in testimony before a Senate committee Tuesday on key aspects of a report outlining potential risks to the financial system.

Treasury Secretary Steven Mnuchin told the Senate Banking Committee that the financial system’s “heavy and increasing reliance” on technology raises the risk that significant cybersecurity incidents could disrupt the financial sector and potentially impact U.S. financial stability.

“Substantial gains have been made, but I want to emphasize the need for sustained attention to these risks,” Mnuchin said. He noted that the report he was providing testimony on, the Financial Stability Oversight Council’s (FSOC) 2017 annual report, made a number of recommendations, including creation of a private sector council of senior executives in the financial sector to collaborate with regulators in order to mitigate cybersecurity threats.

During questions and answers, Mnuchin — choosing words carefully — indicated there is nothing that he sees of significant concern about cybersecurity today, but he suggested that it is an area that needs to be continually monitored. “We have a process across all agencies to deal with this, and we’ve dedicated a lot of resources to the financial sector,” he said.

The Treasury secretary brightened up when asked about cryptocurrencies, which he called one of his favorite topics. He said he did not consider cryptocurrencies a threat right now, but he did have two concerns. First, to ensure that the electronic money methods are not used by “bad guys; that they don’t become the old Swiss-numbered bank accounts” of the modern world, and that they have the same Bank Secrecy Act (BSA) and anti-money laundering protections that traditional bank accounts have now.

He said the second concern was that that consumers understand the issues around cryptocurrencies.

In response to a question about areas of financial regulation that need to be “right-sized,” the Treasury secretary offered a broad response, saying only that this department will “will look across the board in the financial area.”Mnuchin also agreed that there should be better transparency at FSOC regarding how institutions are designated as systemically important financial institutions (SIFIs).

In other comments, Mnuchin noted that the FSOC report recommends that members of the council (which includes all of the federal financial institution regulators) address regulatory overlap and duplication, modernize outdated regulations, and tailor regulations based on the size and complexity of financial institutions.

The Treasury secretary also commended the committee for sending to the full Senate the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155). He called the legislation “a balanced and thoughtful approach that better aligns our financial system to support economic growth in our communities.”

“Further, the legislation reflects many of Treasury’s recommendations from our Executive Order reports released last year. I encourage the Senate and the House to work together to move legislation as quickly as possible,” he said.

On housing finance, Mnuchin said the status of “indefinite conservatorship for Fannie Mae and Freddie Mac is neither a sustainable nor a lasting solution.” He said the Trump administration looks forward to working with Congress to reform America’s housing finance system “in a manner that helps consumers obtain the housing best suited to their own personal and financial situations while, at the same time, protecting taxpayers.”

Mnuchin statement before Senate Banking Committee, Jan. 30