252 posts on "Financial Institutions"
November 6, 2023
Banking System Vulnerability: 2023 Update
The bank failures that occurred in March 2023 highlighted how unrealized losses on securities can make banks vulnerable to a sudden loss of funding. This risk, which materialized following the rapid rise in interest rates that began in early 2022, underscores the importance of monitoring the vulnerabilities of the banking system. In this post, as in previous years, we provide an update of four analytical models aimed at capturing different aspects of vulnerability of the U.S. banking system, with data through the second quarter of 2023. In addition, we discuss changes made to the methodology based on the lessons from March 2023 and assess how the system-level vulnerability has evolved.
Posted at 7:00 am in Banks, Financial Institutions, Liquidity, Systemic Risk | Permalink | Comments (2)
July 10, 2023
How Exposed Are U.S. Banks’ Loan Portfolios to Climate Transition Risks?
Much of the work on climate risk has focused on the physical effects of climate change, with less attention devoted to “transition risks” related to negative economic effects of enacting climate-related policies and phasing out high-emitting technologies. Further, most of the work in this area has measured transition risks using backward-looking metrics, such as carbon emissions, which does not allow us to compare how different policy options will affect the economy. In a recent Staff Report, we capitalize on a new measure to study the extent to which banks’ loan portfolios are exposed to specific climate transition policies. The results show that while banks’ exposures are meaningful, they are manageable.
June 23, 2023
2nd Annual International Roles of the U.S. Dollar Conference
The U.S. dollar plays a central role in the global economy. In addition to being the most widely used currency in foreign exchange transactions, it represents the largest share in official reserves, international debt securities and loans, cross-border payments, and trade invoicing. The ubiquity of the U.S. dollar in global transactions reflects several key factors, including the depth and liquidity of U.S. capital markets, the size of the U.S. economy, the relatively low cost of converting dollars into other currencies, and an enduring confidence in the U.S. legal system and its institutions.
June 16, 2023
2023 State‑of‑the‑Field Conference on Cyber Risk to Financial Stability
The Federal Reserve Bank of New York and Columbia University’s School of International and Public Affairs (SIPA) co-organized the fourth annual State-of-the-Field Conferences on Cyber Risk to Financial Stability, on April 14, 2023. The conference builds on joint activity by the New York Fed and SIPA since 2017. Each year, the conference convenes panels to confront the same three questions: What are we learning about cyber risk to financial stability? What are we doing to improve resilience and stability? And what’s next? This blog post reviews some of these conversations from the 2023 conference.
May 18, 2023
Banks’ Balance‑Sheet Costs and ON RRP Investment
Daily investment at the Federal Reserve’s Overnight Reverse Repo (ON RRP) facility increased from a few billion dollars in March 2021 to more than $2.3 trillion in June 2022 and has stayed above $2 trillion since then. In this post, which is based on a recent staff report, we discuss two channels—a deposit channel and a wholesale short-term debt channel—through which banks’ balance-sheet costs have increased investment by money market mutual funds (MMFs) in the ON RRP facility.
May 12, 2023
Banks Runs and Information
The collapse of Silicon Valley Bank (SVB) and Signature Bank (SB) has raised questions about the fragility of the banking system. One striking aspect of these bank failures is how the runs that preceded them reflect risks and trade-offs that bankers and regulators have grappled with for many years. In this post, we highlight how these banks, with their concentrated and uninsured deposit bases, look quite similar to the small rural banks of the 1930s, before the creation of deposit insurance. We argue that, as with those small banks in the early 1930s, managing the information around SVB and SB’s balance sheets is of first-order importance.
May 11, 2023
Bank Funding during the Current Monetary Policy Tightening Cycle
Recent events have highlighted the importance of understanding the distribution and composition of funding across banks. Market participants have been paying particular attention to the overall decline of deposit funding in the U.S. banking system as well as the reallocation of deposits within the banking sector. In this post, we describe changes in bank funding structure since the onset of monetary policy tightening, with a particular focus on developments through March 2023.
Posted at 7:00 am in Bank Capital, Banks, Federal Reserve, Financial Institutions | Permalink | Comments (1)
April 20, 2023
CRISK: Measuring the Climate Risk Exposure of the Financial System
A growing number of climate-related policies have been adopted globally in the past thirty years (see chart below). The risk to economic activity from changes in policies in response to climate risks, such as carbon taxes and green subsidies, is often referred to as transition risk. Transition risk can adversely affect the real economy through […]
Posted at 7:00 am in Climate Change, Financial Institutions, Financial Markets, Systemic Risk | Permalink
April 18, 2023
Enhancing Monitoring of NBFI Exposure: The Case of Open‑End Funds
Non-bank financial institutions (NBFIs) have grown steadily over the last two decades, becoming important providers of financial intermediation services. As NBFIs naturally interact with banking institutions in many markets and provide a wide range of services, banks may develop significant direct exposures stemming from these counterparty relationships. However, banks may be also exposed to NBFIs indirectly, simply by virtue of commonality in asset holdings. This post and its companion piece focus on this indirect form of exposure and propose ways to identify and quantify such vulnerabilities.
April 7, 2023
How Do Interest Rates (and Depositors) Impact Measures of Bank Value?
The rapid rise in interest rates across the yield curve has increased the broader public’s interest in the exposure embedded in bank balance sheets and in depositor behavior more generally. In this post, we consider a simple illustration of the potential impact of higher interest rates on measures of bank franchise value.
Posted at 10:00 am in Bank Capital, Banks, Financial Institutions, Financial Intermediation | Permalink | Comments (1)
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