23/1/17: Regulating for Cybersecurity: A Hacking-Based Mechanism

Our second paper on systemic nature (and regulatory response to) cyber security risks is now available in a working paper format here: Corbet, Shaen and Gurdgiev, Constantin, Regulatory Cybercrime: A Hacking-Based Mechanism to Regulate and Supervise Corporate Cyber Governance? (January 23, 2017): https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2904749.

Abstract: This paper examines the impact of cybercrime and hacking events on equity market volatility across publicly traded corporations. The volatility influence of these cybercrime events is shown to be dependent on the number of clients exposed across all sectors and the type of the cyber security breach event, with significantly large volatility effects presented for companies who find themselves exposed to cybercrime in the form of hacking. Evidence is presented to suggest that corporations with large data breaches are punished substantially in the form of stock market volatility and significantly reduced abnormal stock returns. Companies with lower levels of market capitalisation are found to be most susceptible. In an environment where corporate data protection should be paramount, minor breaches appear to be relatively unpunished by the stock market. We also show that there is a growing importance in the contagion channel from cyber security breaches to markets volatility. Overall, our results support the proposition that acting in a controlled capacity from within a ring-fenced incentives system, hackers may in fact provide the appropriate mechanism for discovery and deterrence of weak corporate cyber security practices. This mechanism can help alleviate the systemic weaknesses in the existent mechanisms for cyber security oversight and enforcement.

19/6/16: Irish Regulators: Betrayed or Betrayers?..

As I have noted here few weeks ago, Irish Financial Regulator, Central Bank of Ireland and other relevant players had full access to information regarding all contraventions by the Irish banks prior to the Global Financial Crisis. I testified on this matter in a court case in Ireland earlier this year.

Now, belatedly, years after the events took place, Irish media is waking up to the fact that our regulatory authorities have actively participated in creating the conditions that led to the crisis and that have cost lives of people, losses of pensions, savings, homes, health, marriages and so on. And yet, as ever, these regulators and supervisors of the Irish financial system:

1. Remain outside the force of law and beyond the reach of civil lawsuits and damages awards; and
2. Continue to present themselves as competent and able enforcers of regulation capable of preventing and rectifying any future banking crises.

You can read about the latest Irish media 'discoveries' - known previously to all who bothered to look into the system functioning: http://www.breakingnews.ie/business/report-alleges-central-bank-knew-of-fraudulent-transactions-between-anglo-and-ilp-740684.html.

And should you think anything has changed, why here is the so-called 'independent' and 'reformed' Irish Regulator - the Central Bank of Ireland - being silenced by the state organization, the Department of Finance, that is supposed to have no say (except in a consulting role) on regulation of the Irish Financial Services: http://www.independent.ie/business/finance-ignored-central-banks-plea-to-regulate-vulture-funds-34812798.html. 

Please, note: the hedge funds, vulture funds, private equity firms and other shadow banking institutions today constitute a larger share of the financial services markets than traditional banks and lenders.  

Yep. Reforms, new values, vigilance, commitments... we all know they are real, meaningful and... ah, what the hell... it'll be Grand.