Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/251605 
Year of Publication: 
2022
Series/Report no.: 
Deutsche Bundesbank Discussion Paper No. 08/2022
Publisher: 
Deutsche Bundesbank, Frankfurt a. M.
Abstract: 
Cyber attacks can impair banks operations and precipitate bank runs. When digital infrastructure is shared, banks defend themselves by investing in cybersecurity but can free-ride on the security measures of others. Ex ante free-riding by banks interacts with the ex post coordination frictions underpinning bank runs. While the temptation to free-ride induces underinvestment in cybersecurity, the prospect of a run encourages greater investment. System-wide cybersecurity is suboptimal and sensitive to rollover risk and bank heterogeneity. Regulatory measures, including negligence rules, liquidity regulation and cyber hygiene notices, facilitate constrained efficient cybersecurity investment. We suggest testable hypotheses to inform empirical work in this area.
Subjects: 
cyber attacks
bank runs
global games
weaker-link public goods
JEL: 
G01
G21
G28
H41
ISBN: 
978-3-95729-876-8
Document Type: 
Working Paper

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