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
Previous ArticleEIOPA Publishes Second Annual European Insurance Overview
In a letter addressed to the industry, the Australian Prudential Regulation Authority (APRA) set out an updated schedule of policy priorities for the banking, insurance, and superannuation industries.
The European Commission (EC) adopted a comprehensive review package of Solvency II rules in the European Union.
The Office of the Comptroller of the Currency (OCC) issued Versions 1.0 of the "Earnings" and "Regulatory Reporting" booklets of the Comptroller's Handbook.
The European Central Bank (ECB) published results of its economy-wide climate stress test, which aimed to assess the resilience of non-financial corporates and euro area banks to climate risks.
The European Banking Authority (EBA) published a report on the use of digital platforms in the banking and payments sector in European Union.
The Hong Kong Monetary Authority (HKMA) published updates on the policy measures that were announced in context of the ongoing pandemic.
The International Swaps and Derivatives Association (ISDA), along with several other associations, submitted a joint response to the Basel Committee on Banking Supervision (BCBS) consultation on preliminary proposals for the prudential treatment of cryptoasset exposures.
BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.
The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards
The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.