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    OFR Publishes Tool for Monitoring Systemic Risk of Banks

    February 18, 2020

    OFR announced the publication of Bank Systemic Risk Monitor or BSRM. This Risk Monitor is a collection of key measures for monitoring systemic risks posed by the largest banks. These include systemic importance scores for international and US banks, Contagion Index of OFR, and other common measures of systemic risk, including total assets, leverage, and reliance on short-term wholesale funding. BSRM enhances and expands on the OFR G-SIB Scores Interactive Chart.

    The systemic importance scores were derived using a set of 12 financial indicators that have been developed by BCBS to identify the global systemically important banks (G-SIBs). G-SIB scores are calculated by averaging the five categories based on the BCBS assessment methodology: size, interconnectedness, substitutability, complexity, and cross-jurisdictional activity. The calculated G-SIB scores and supervisory judgment determine the size of the capital add-on, or surcharge, that a bank is required to maintain. Banking regulators may require capital surcharges that are calculated using a different methodology.

    Additionally, the Contagion Index of OFR measures the loss that could spill over to the rest of the financial system if a given bank were to default. This measure depends on the size of the bank, its leverage, and how connected it is to other financial institutions. Total assets, total equity, leverage, and the reliance of a bank on short-term wholesale funding are some other measures used to gauge systemic risk. A bank's reliance on short-term wholesale funding increases its exposure to liquidity and funding risk. For foreign banks, the data presented are limited to the activities of the U.S. operations. Three measures of a bank’s use of short-term wholesale funding are:

    • The Short-Term Funding Metric (STF-RWA) is the percentage of a bank’s short-term wholesale funding amount (STFA) to its average risk-weighted assets (RWA).
    • The Short-Term Funding Dependence (STF-Dependence) refers to the percentage of a bank’s STFA to its total liabilities.
    • The Short-Term Funding Coverage (STF-Coverage) compares the percentage of a bank’s STFA amount to its average weighted high-quality liquid assets.

     

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    Keywords: Americas, US, Banking, Bank Systemic Risk Monitoring Tool, BSRM, Systemic Risk, G-SIV, Contagion Risk, G-SIB Score, BCBS, OFR

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