To assess the vulnerability of the U.S. financial system, it is important to monitor leverage and funding risks—both individually and in tandem. In this post, we provide an update of four analytical models aimed at capturing different aspects of banking system vulnerability with data through 2022:Q2, assessing how these vulnerabilities have changed since last year. The four models were introduced in a Liberty Street Economics post in 2018 and have been updated annually since then.
Cybercrime is one of the most pressing concerns for firms. Hackers perpetrate frequent but isolated ransomware attacks mostly for financial gains, while state-actors use more sophisticated techniques to obtain strategic information such as intellectual property and, in more extreme cases, to disrupt the operations of critical organizations. Thus, they can damage firms’ productive capacity, thereby potentially affecting their customers and suppliers. In this post, which is based on a related Staff Report, we study a particularly severe cyberattack that inadvertently spread beyond its original target and disrupted the operations of several firms around the world. More recent examples of disruptive cyberattacks include the ransomware attacks on Colonial Pipeline, the largest pipeline system for refined oil products in the U.S., and JBS, a global beef processing company. In both cases, operations halted for several days, causing protracted supply chain bottlenecks.
New Liberty Street Economics analysis by Asani Sarkar investigates whether the COVID-19 pandemic has led to an increase in implicit TBTF subsidies for large firms.
Once a bank grows beyond a certain size or becomes too complex and interconnected, investors often perceive that it is “too big to fail” (TBTF), meaning that if the bank were to fail, the government would likely bail it out. Following the global financial crisis (GFC) of 2008, the G20 countries agreed on a set of reforms to eliminate the perception of TBTF, as part of a broader package to enhance financial stability. In June 2020, the Financial Stability Board (FSB; a 68-member international advisory body set up in 2009) published the results of a year-long evaluation of the effectiveness of TBTF reforms. In this post, I discuss the main conclusions of the report—in particular, the finding that implicit funding subsidies to global banks have decreased since the implementation of reforms but remain at levels comparable to the pre-crisis period.
On March 17, 2020, the Federal Reserve announced that it would re-establish the Primary Dealer Credit Facility (PDCF) to allow primary dealers to support smooth market functioning and facilitate the availability of credit to businesses and households. The PDCF started offering overnight and term funding with maturities of up to ninety days on March 20. It will be in place for at least six months and may be extended as conditions warrant. In this post, we provide an overview of the PDCF and its usage to date.
Tobias Adrian is leaving the New York Fed to become the Financial Counselor and Director of the Monetary and Capital Markets Department at the International Monetary Fund (IMF). In announcing Adrian’s appointment, Christine Lagarde, managing director of the IMF, described Tobias as “internationally highly regarded for his insightful analytical work.” Until he starts his new position at the beginning of 2017, Adrian will be winding down his service as Senior Vice President of the New York Fed and Associate Director of the Bank’s Research and Statistics Group. Before he moves on to the IMF, Adrian shared some insight on his time at the Bank.
According to conventional wisdom, an open-ended investment fund that has a floating net asset value (NAV) and no leverage will never experience a run and hence never have to fire-sell assets.
In a recently released New York Fed staff report, we present a forward-looking monitoring program to identify and track time-varying sources of systemic risk.
One of the most innovative and potentially far-reaching consequences of regulatory reform since the financial crisis has been the development of liquidity regulations for the banking system.
During the 2007-09 financial crisis, banks experienced widespread funding shortages, with shortfalls even hindering adequately capitalized banks.