OFR released its 2019 Annual Report to Congress, which examines risks to financial stability in the United States. The report assesses the state of the U.S. financial system as required by the Dodd-Frank Act, including an analysis of threats to the financial stability of the United States, key findings from the OFR research and analysis, and the status of the OFR efforts in meeting its mission. The report also includes a discussion of OFR data initiatives and information about the initiative to refocus the OFR mission on primarily supporting the Financial Stability Oversight Council and its member agencies.
The report highlights that, during 2019, OFR worked to fulfill its data-related mandates, including issuing a final rule to collect data covering centrally cleared funding regarding transactions in the U.S. repurchase agreement market, which will support a reliable, widely accepted, and transparent alternative to LIBOR. As part of other data initiatives, OFR made significant contributions toward reporting of standardized derivatives data and helped to advance the adoption of the Legal Entity Identifier (LEI), which continues to grow rapidly. OFR also continued to enhance its information technology environment and offerings.
The report states that risks to financial stability remain in the medium range, reflecting a mix of high, moderate, and low risks in the financial system. Risk is moderate in four categories—macroeconomic risk; credit risk; liquidity and funding risk; and contagion risk. Non-financial corporate credit risk has continued to rise, but household credit risk has improved. Liquidity and funding risk rose temporarily at times during the past year, but then moderated. Contagion risk is little changed. Risks associated with solvency and leverage appear relatively low. Market risk remains elevated. Although banks and insurers maintain leverage ratios consistent with low risk, leverage continues to rise among large hedge funds that may be interconnected with systemically important financial firms.
Keywords: Americas, US, Banking, Insurance, Securities, Credit Risk, Market Risk, Liquidity Risk, LIBOR, Annual Report, OTC Derivatives, OFR
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