And it applies to small and large banks alike, though for large banks there is not only the question of ensuring access in domestic systems but also ensuring that payment services that are provided on a cross-border basis or require access to financial market infrastructure in other jurisdictions can be maintained. The Bank is considering how best to address these issues both domestically and, alongside Canada and other countries, at an international level. Looking forward, there are three issues around the core payments systems that the Bank is beginning to look at. One relating to risk, specifically cyber risk; one about infrastructure provision, in terms of reviewing the operating hours of the UK’s RTGS system; and one in the field of regulation, which is focused on the changing regulatory landscape for payments in the United Kingdom. Although cyber risks have long existed, over the past year or so in UK circles they have rapidly become a central issue, so much so that, in June the Bank’s Financial Policy Committee made a formal recommendation to put in place a new program of work on cyber security for key UK financial infrastructure1. The Bank of England has set each scheme a specific priority regarding cyber risk and we and the payment schemes need to deepen our resilience to cyber risks. The prompt for this change is probably obvious: the evidence shows that cyber attacks on the financial sector have increased markedly in frequency and sophistication over the past two years or so.
Indeed, after the Global Financial Crisis, the US suffered its worst recession since the Great Depression of the 1930s. In a desperate bid to stave off the recession, the US literally moved mountains, including introducing the unprecedented QE policy and splashing out $ trillion between 2008 and 2010 to cut taxes and implement other fiscal policy measures to prop up the economy. However, as we can see from Chart 1, the current recovery has been the weakest of all the economic cycles in the past 55 years. The average growth rate is just 2.2%, half the average rate of 4.6% in the previous recovery cycles. (Chart 1) 5. As for employment, the US has lost a total of 8.7 million jobs during the financial crisis and recession, with the unemployment rate peaking at 10%. Although employment bottomed out in 2010, and some 13 million jobs have been created since then, this only represents 4.3 million more jobs compared with the peak eight years ago in early 2008, and way behind the 8.8 million people who have been added to the labour force over the same period. In other words, while the US unemployment rate has declined to 5% recently, it does not mean the labour market has fully recovered. One of the main reasons for the faster-thanexpected drop in the unemployment rate is the dwindling labour force participation rate, from an average of 66% in 2007 to the current 62.4%, the lowest since 1977.