On October 25, Acting Comptroller of the Currency, Michael J. Hsu, delivered a speech to nonprofit council committed to addressing global systemic risks. In his prepared remarks, Hsu explained how he categorizes systemic risks into three groups:

1. “Known knowns” which include familiar risks such as interest rate risks, liquidity risks, commercial real estate exposures, geopolitical risks, regulatory arbitrages and the recent growth of synthetic risk transfers.
2. “Known unknowns” which are less familiar and carry more uncertainty, such as cyber risks, operational resilience of critical banking services, and crowded trades. Hsu also discussed systemic risks emerging when “the line between banking and commerce blurs,” pointing to current concerns in private credit, banking supply chains and mortgage servicing.
3. “Unknown unknowns” are risks that are largely unanticipated or seem improbable, such as disruptions to undersea internet cables and the beginning of quantum computing (the latter of which could render current encryption algorithms moot).

Hsu advocated for a systematic approach to risk identification, emphasizing the importance of frameworks like the one used by the Treasury’s Financial Stability Oversight Council.