October 25, 2017

OFR introduced two new monitoring tools, the Financial System Vulnerabilities Monitor (FSVM) and the Financial Stress Index (FSI). FSVM and FSI, which are part of the quantitative monitoring toolkit of OFR, signal where the OFR needs to investigate potential stresses and vulnerabilities. OFR conducts such investigations using a broader set of data, qualitative information, and expert analysis.

The OFR FSI is a daily market-based snapshot of stress in global financial markets. It is constructed from 33 financial market variables, such as yield spreads, valuation measures, and interest rates. The FSI is positive when stress levels are above average and negative when stress levels are below average. The FSI incorporates five categories of indicators: credit, equity valuation, funding, safe assets, and volatility. The FSI shows stress contributions by three regions: United States, other advanced economies, and emerging markets.

The OFR FSVM is a starting point for monitoring the U.S. financial stability. It is a heat map of 58 indicators of potential vulnerabilities in the U.S. financial system, organized into six categories: macroeconomic, market, credit, solvency and leverage, funding and liquidity, and contagion. The monitor is designed to provide early warning signals of potential U.S. financial system vulnerabilities that merit investigation. It does not provide conclusions about financial stability. OFR, however, provides such conclusions in its Financial Stability Report and Annual Report. The monitor improves upon and replaces the OFR Financial Stability Monitor.

 

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Keywords: Americas, US, Monitoring Tools, FSVM, FSI, Financial Stability, OFR

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