Appearing before the House Financial Services Committee, Powell said that while the Fed has not yet seen any "notable" cyber incidents, it has been watching closely for them and is working to make sure that the banks it oversees are on guard for the possibility.
"Everything that we can do to protect ourselves against cyber, we're doing it," Powell said. "The private, large financial institutions are doing it, and they have been for some time."
"It's very hard to say what's possible to happen. But we're certainly on high alert, and we will continue to be," he added.
Powell's comments came during a regularly scheduled hearing of the House committee, its first since Russia launched a military invasion of Ukraine last week that has provoked international outrage and led to multiple rounds of sanctions from the U.S. and other Western governments.
Those measures have dealt a tremendous shock to the Russian economy and financial system, which has seen a number of its major banks banned from key markets and cut off from international transactions through SWIFT.
The escalating situation has fueled speculation that Russia might try to retaliate with cyberattacks, a scenario that New York's Department of Financial Services has also warned of in recent guidance issued to banks and other financial firms it regulates.
Powell said Wednesday that the Fed's Board of Governors and regional reserve banks have been at a "very highly elevated level of oversight on cyber issues" for several months now as Russia's aggression toward Ukraine has unfolded.
"We haven't seen any troubling incidents yet, but we remain on high alert," Powell reiterated.
Powell also addressed questions from lawmakers about whether the U.S. financial system can handle any fallout that might result from the punitive measures being imposed on Russia.
The decision to expel Russian banks from SWIFT, for example, has raised questions about the potential for a liquidity crunch, while other sanctions are already driving up certain commodity prices and could lead to further inflation.
Although Powell acknowledged Wednesday that a sanctions response of this magnitude could cause "unintended and unexpected" economic effects over time, he said that U.S. banks have strong capital levels and do not have "large interactions with the Russian economy." He added that he doesn't anticipate a need for additional liquidity-boosting actions by the Fed, either.
"We always appreciate looking at different risk scenarios," Powell said. "But again, given the relatively modest exposure that our banks have to directly to Russia and given the existing tools we have to provide liquidity, I don't see that as a likely outcome."
--Editing by Alanna Weissman.
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