The Office of Financial Research (OFR) in its annual report to US Congress stated that the Federal Reserve’s annual check of the banking system’s financial health, stress tests, fell short on several counts.

The annual report, issued five years after the end of the financial crisis of 2007-09, highlights three specific areas of concern:

Go deeper with GlobalData

Premium Insights

The gold standard of business intelligence.

Find out more

  1. Excessive risk-taking during an extended period of low interest rates and low volatility
  2. An increase in market fragility resulting in declining market liquidity and persistent risks of asset fire sales and runs, and
  3. The migration of financial activity away from banks toward less regulated parts of the financial system where threats could be significant, but are more difficult to assess

OFR director Richard Berner said: "Threats to financial stability are moderate, our tools for spotting them are better, and the financial system in many ways is more resilient compared with just before the financial crisis.

"But as the financial system evolves and innovates, we must be especially watchful for important new vulnerabilities that are emerging in dynamic financial companies and markets."

The report says that, in addition to those new vulnerabilities, gaps remain in the analysis, data, and policy tools aimed at spotting and addressing them, despite progress in narrowing those gaps.

Moreover, many new policy tools designed to make the financial system stronger and more transparent are still largely untested and may have unintended side effects, the reported noted.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

Also, the development and implementation of other policy tools to respond to threats to US financial stability remains incomplete.

The OFR was established after the 2007-09 financial crisis to assist regulators gain better insight into the financial system.