Cybersecurity issues and lending bubbles top the list of potential risks to today’s financial system, according to comments offered by bank and credit union regulators during a hearing Tuesday on implementation of this year’s financial regulatory reform law.
The answers came in response to a question from Sen. Jack Reed (D-R.I.) in a hearing of the Senate Banking Committee. Reed, looking back on the 10 years since the last financial crisis, asked regulators for their take on where system dangers are now.
Noting that previous crises were preceded by signals that regulators missed in the lead-up to each, credit union regulator J. Mark McWatters, chairman of the National Credit Union Administration (NCUA) Board, said improper loans and regulators overlooking them would be a likely threat. “What causes the bubble to inflate?” he posed. If money is chasing a particular type of lending, he said that’s where to focus attention.
Jelena McWilliams, chairman of the Federal Deposit Insurance Corp. (FDIC), generally agreed but said cybersecurity is also key. “We need to be cognizant of potential exposure” to cyber risks to the system, she said, as well as the more general matter of technology and how companies manage tech issues. Witnesses for the Federal Reserve and Office of the Comptroller of the Currency (OCC) echoed similar comments.
The comments came up during Tuesday’s hearing on implementation of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA, S. 2155).