OFR released its 2018 Annual Report to Congress, which examines risks to the financial stability in the United States. The report states that risks to the U.S. financial stability remain in the medium range, reflecting a mix of high, moderate, and low risks to the financial system.
The report assesses the state of the U.S. financial system, including an analysis of potential emerging threats to the financial stability of the United States, key findings from the OFR research and analysis, and the status of the efforts of OFR in meeting its statutory obligations and fulfilling its mission. The report fulfills the statutory requirement of OFR to assess potential threats to the stability of the U.S. financial system, describe key OFR findings, and discuss the status of the efforts of the OFR in meeting its mission. The report also includes the following
- A spotlight on financial markets
- A discussion of OFR data initiatives
- Information about the initiative to refocus the OFR mission on primarily supporting the Financial Stability Oversight Council and its member agencies
- Updates on the work of OFR to improve financial data standards, including by advancing the Legal Entity Identifier (LEI), a data standard similar to a bar code that identifies parties to financial transactions
The assessment concludes that macroeconomic risks remain moderate, market risks remain high, and contagion and credit risks are moderate while solvency and leverage risks remain low under most conditions. Non-financial corporate credit growth is robust, credit quality shows signs of weakening, and credit risk is rising with growth in leveraged lending. However, consumer credit remains a lesser concern. Additionally, solvency and leverage risks remain low under most conditions. Large banks and insurers hold capital well above regulatory minimum requirements, but a few U.S. global systemically important banks could fall below those minimums under severely adverse conditions. Funding and liquidity conditions are generally good and continue to support corporate borrowing. For large banks, funding and liquidity risks appear low. Market liquidity risks also appear low, but can change rapidly. The assessment also highlights that cybersecurity remains a key risk. Digital assets, commonly known as cryptocurrencies, are not a concern at this point, but are worth monitoring because their use is rapidly growing and evolving.
Keywords: Americas, US, Banking, Insurance, Financial Stability, Credit Risk, Market Risk, Liquidity Risk, OFR
Previous ArticlePRA Issues Systemic Risk Buffer Rates for Ring-Fenced Banks
The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.
The European Banking Authority (EBA) recently published a report that recommends enhancements to the Pillar 1 framework, under the prudential rules, to capture environmental and social risks.
As a follow on from its prudential standard on the treatment of crypto-asset exposures, the Basel Committee on Banking Supervision (BCBS) proposed disclosure requirements for crypto-asset exposures of banks.
The Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA) have published results of the Basel III monitoring exercise.
The Prudential Regulation Authority (PRA) recently issued a few regulatory updates for banks, with the updated Basel implementation timelines being the key among them.
The U.S. Department of the Treasury has recently set out the principles for net-zero financing and investment.
The European Commission (EC) launched a stakeholder survey on the draft International Guiding Principles for organizations developing advanced artificial intelligence (AI) systems.
The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.
Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.
The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.