The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
Emanuel Kopp, Lincoln Kaffenberger, and Christopher Wilson
INTERNATIONAL MONETARY FUND
Cyber-attacks on financial institutions and financial market infrastructures are becoming
more common and more sophisticated. Risk awareness has been increasing, firms actively
manage cyber risk and invest in cybersecurity, and to some extent transfer and pool their
risks through cyber liability insurance policies. This paper considers the properties of cyber
risk, discusses why the private market can fail to provide the socially optimal level of
cybersecurity, and explore how systemic cyber risk interacts with other financial stability
risks. Furthermore, this study examines the current regulatory frameworks and supervisory
approaches, and identifies information asymmetries and other inefficiencies that hamper the
detection and management of systemic cyber risk. The paper concludes discussing policy
measures that can increase the resilience of the financial system to systemic cyber risk.