82nd International Atlantic Economic Conference

October 13 - 16, 2016 | Washington, USA

Financial stability assessment at the Office of Financial Research (OFR)

Friday, October 14, 2016: 9:20 AM
Greg Feldberg, Ph.D. , Financial Research, U.S. Treasury Office of Financial Research, Washington, DC
The financial crisis revealed gaps in the analysis of financial stability and in the financial regulatory framework. It also revealed deficiencies in the data available to monitor the financial system. Today, the financial system is more resilient by a number of measures, but pockets of vulnerability remain.

The Dodd‐Frank Wall Street Reform and Consumer Protection Act (Dodd‐Frank Act) established the Office of Financial Research (OFR) within the Treasury Department to improve the quality of financial data available to policymakers and facilitate more robust and sophisticated analysis of the financial system. The OFR has been given an important role to assess and monitor threats to financial stability. It also has a mandate to improve the scope, quality, and accessibility of financial data. To execute these functions, the OFR has two primary operational centers: a Data Center to standardize, validate, and maintain the data necessary to help regulators identify vulnerabilities in the system as a whole, and a Research and Analysis Center to conduct, coordinate, and sponsor research to support and improve regulation of financial firms and markets.

This discussion will describe lessons learned from the crisis. It will also describe how the OFR and others have implemented those lessons in the now prevalent macroprudential approach to financial system monitoring. A major focus is on vulnerabilities that can emerge from within the financial system, such as excessive leverage, run risk, and risk concentration. The OFR and others have responded with new data collections, risk metrics, and monitoring tools. A key challenge is the ever-changing nature of financial markets. Multiple approaches are needed to increase our ability to identify complex emerging vulnerabilities that may lie hidden in our existing data.