OFR published a paper describing the purpose, construction, interpretation, and use of its Financial System Vulnerabilities Monitor. The monitor, a heat map of 58 quantitative indicators, is a starting point for assessing vulnerabilities in the U.S. financial system. OFR launched the monitor in 2017 to help fulfill its mandate to measure and monitor risks to U.S. financial stability.
The paper is designed to provide early warning signals of potential financial system vulnerabilities that merit investigation. It begins by describing the motivation for creating a heat map and comparing this heatmap to other financial stability heat maps. It then describes how the heat map is constructed, explaining how indicators are selected and scored. The paper explains how the indicator scores are combined to create aggregate scores for each of the six risk categories; the six risk categories are macroeconomic risk, market risk, credit risk, solvency/leverage risk, funding/liquidity risk, and contagion risk. Next, the paper describes the performance of the heat map and describes some limitations of the Monitor. That it cannot cover all potential vulnerabilities is one limitation of the monitor. Another limitation is that, as a quantitative tool, it does not incorporate qualitative information that can be essential to financial stability analysis. Finally, the paper describes how the monitor should be interpreted and used.
Related Link: Paper on Vulnerabilities Monitor
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EBA published phase 2 of the technical package on the reporting framework 2.10, providing the technical tools and specifications for implementation of EBA reporting requirements.
APRA updated the lists of the Direct to APRA (D2A) validation rules for authorized deposit-taking institutions, insurers, and superannuation entities.
PRA updated the statement that provides guidance to regulated firms on implementation of the EBA guidelines on reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis.
EBA updated the 2019 list of closely correlated currencies that was originally published in December 2013.
ESMA published the final report on the guidelines on securitization repository data completeness and consistency thresholds.
FASB issued a proposed Accounting Standards Update that would grant insurance companies, adversely affected by the COVID-19 pandemic, an additional year to implement the Accounting Standards Update No. 2018-12 on targeted improvements to accounting for long-duration insurance contracts, or LDTI (Topic 944).
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