Cyber risks and climate risks require deeper understanding and are appropriately receiving increased focus. While risk management is the day-to-day activity of financial institutions, understanding how these risks can cumulate at the system level or be under-priced due to implicit government guarantees is appropriately a focus for the central bank. Without further analysis, we don’t know how serious these risks are to system stability.
Important as it is to keep alert to new or emerging risks, as these two are, at the same time we need to maintain our constant watch around market, credit, liquidity, or operational risks that will inevitably raise their head in the years ahead. For the Reserve Bank, oversight of climate and cyber risks needs to be an ’and’, not an ’or’.