This piece originally appeared in RealClearMarkets.
Hardly a day passes without headlines highlighting a cyber-attack targeting the United States government, its major corporations, or individuals who sometimes lose their life savings with just a mouse click. Protecting this critical infrastructure from hostile adversaries and criminals is crucial for U.S. national security and personal privacy.
Data protection poses significant challenges as the cyber battlefield constantly evolves, making it costly for companies to secure the highly sensitive information of millions of customers. Understanding these challenges, it is baffling to observe the Federal Reserve proposing a policy revision that appears to undermine the ability of financial institutions to safeguard the data of these companies’ vast client base, potentially weakening rather than fortifying their protective capabilities.
Logic would dictate that every government policy—whether local, state, or federal—would consider potential risks to critical infrastructure before implementation, as the consequences of a cyber compromise could be catastrophic. However, Regulation II — a recent proposed rule from the Federal Reserve regarding bank interchange, or “swipe,” fees — will place the processing networks utilized by banks and credit unions at even greater risk, exacerbating a problem of their own making.
