Tuesday, April 27, 2004 | 11:03 a.m.
BLOOMBERG NEWS
U.S. banks need to heighten security and plan for the possibility of more cyber attacks, Federal Reserve Governor Susan Bies said Monday.
The recent Bubear.B virus, which targeted banks, and the SoBig.F worm "demonstrate that cyber security will need to be an ongoing battle," Bies said in a speech to the Bank Administration Institute's ACE 2204 Audit and Fiduciary Risk Management Conference in Las Vegas.
"I believe there is a need for heightened attention to managing this risk," Bies said. "This includes monitoring warnings carefully, acting quickly to apply patches in a controlled environment, and taking other steps necessary to preclude any damage to information systems."
Banks must also take steps to ensure security outside of the computer environment, Bies said. Strengthened audit procedures, oversight and appropriate controls and testing will make banks more secure, she said.
In an interview after her speech, Bies said that corporate governance issues remain after the passage in July 2002 of the Sarbanes-Oxley law. The measure created the most sweeping regulatory changes for the securities and accounting industries since the Securities and Exchange Commission was established in the 1930s.
"Unfortunately, they haven't gone away," Bies said. "You've got Fannie Mae that didn't release a balance sheet with its quarterly earnings. I find that astounding." The largest source of U.S. mortgage money last Monday said it omitted balance sheet data because it needed more time to complete calculations.
Computer Associates International Inc. "just had to replace their management team," Bies said. The Islandia, N.Y.-based software company last week ousted Sanjay Kumar as chief executive amid a two-year U.S. investigation of the company's accounting that led to the firing of 14 other officials.
"Unfortunately, these things are happening," Bies said. "There's lots of companies where this is still an issue. The vast, vast majority of companies do things right. Unfortunately, there's these outliers, where practices clearly still need to be improved."
The central banker in her speech also urged financial institutions "to strengthen their processes and documentation associated with their determination of the adequacy of their allowance for loan and lease losses."
Bies didn't discuss the economy or Fed interest-rate policy in the text of her remarks.
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