Featured Product

    FED Publishes Financial Stability Report in May 2019

    May 06, 2019

    FED published its financial stability report, which presents the current assessment of the resilience of the U.S. financial system. The report analyzes vulnerabilities related to valuation pressures, borrowing by businesses and households, financial leverage, and funding risk. It also highlights several near-term risks that, if realized, could interact with such vulnerabilities. The assessment of financial vulnerabilities by FED informs the design of stress-test scenarios and decisions regarding the countercyclical capital buffer (CCyB).

    The report reveals that investor appetite for risk appears elevated by several measures and the debt loads of businesses are historically high. However, the financial sector appears resilient, with low leverage and limited funding risk. Despite the volatility in financial markets late last year, the assessment of each of the four vulnerability categories has changed little since the November 2018 financial stability report. The following are the key findings of the report:

    • Asset valuations. Valuation pressures remain elevated in a number of markets, with investors continuing to exhibit high appetite for risk, although some pressures have eased a bit since the November 2018 financial stability report.
    • Borrowing by businesses and households. Borrowing by businesses is historically high relative to the gross domestic product (GDP), with the most rapid increases in debt concentrated among the riskiest firms amid signs of deteriorating credit standards. In contrast, household borrowing remains at a modest level relative to incomes while the debt owed by borrowers with credit scores below prime has remained flat.
    • Leverage in the financial sector. The largest U.S. banks remain strongly capitalized and the leverage of broker-dealers is substantially below the pre-crisis levels. Insurance companies appear to be in relatively strong financial positions. Hedge fund leverage appears to have declined over the past six months.
    • Funding risk. Funding risks in the financial system are low. Estimates of the outstanding total amount of financial system liabilities that are most vulnerable to runs, including those issued by nonbanks, remain modest relative to levels leading up to the financial crisis. Short-term wholesale funding continues to be low compared with other liabilities and the ratio of high-quality liquid assets to total assets remains high at large banks.


    Related Link: Report (PDF)


    Keywords: Americas, US, Banking, Insurance, Securities, Financial Stability Report, Financial Leverage, Financial Stability, CCyB, FED

    Featured Experts
    Related Articles

    APRA Publishes Submission on Fintech and Regtech

    APRA published its submission, to the Senate Select Committee, on financial technology and regulatory technology.

    January 21, 2020 WebPage Regulatory News

    ECB Consults on Guideline on Threshold for Credit Obligations Past Due

    ECB published a draft guideline, along with the frequently asked questions (FAQs), on the definition of the materiality threshold for credit obligations past due for less significant institutions.

    January 20, 2020 WebPage Regulatory News

    BIS Discusses Role of Central Banks in Addressing Climate Change Risks

    BIS published a book that reviews ways of addressing the climate change risks within the financial stability mandate of central banks.

    January 19, 2020 WebPage Regulatory News

    FSB Report Examines Global Nonbank Financial Intermediation Activity

    FSB published the ninth annual report examining the global non-bank financial intermediation activity.

    January 19, 2020 WebPage Regulatory News

    OSFI Publishes Instruction Guide on Solvency Information Return

    OSFI published an instruction guide to assist administrators of pension plans in completing the Solvency Information Return that is required to be filed with OSFI.

    January 17, 2020 WebPage Regulatory News

    EU Amends IFRS 9 Rule, Changes Concern Interest Rate Benchmark Reforms

    EU published Regulation 2020/34 regarding the International Accounting Standard (IAS) 39 and International Financial Reporting Standards (IFRS) 7 and 9.

    January 16, 2020 WebPage Regulatory News

    FDIC and OCC Issue Statement on Heightened Cyber Security Risk

    In response to the heightened cyber-security risk facing the financial services industry and other critical business sectors, FDIC and OCC issued an interagency statement on heightened cyber-security risk.

    January 16, 2020 WebPage Regulatory News

    BCRA Updates Regulation on Capital Requirements and Information Regime

    BCRA updated the rules on minimum capital requirements for financial entities and on certain aspects of the information transparency regime for quarterly and annual supervision.

    January 16, 2020 WebPage Regulatory News

    BoE and FCA Outline Next Steps for LIBOR Transition in 2020

    BoE, FCA, and the Working Group on Sterling Risk-Free Reference Rates (RFRWG) have published a set of documents that outline the LIBOR transition priorities and milestones for 2020.

    January 16, 2020 WebPage Regulatory News

    BIS to Expand Central Bank Membership

    BIS is to expand its central bank membership base and to increase collaboration in its work as a forum for international cooperation and as a hub for central banks and other financial authorities.

    January 14, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 4511