December 21, 2017

Office of Financial Research Releases 2017 Annual Report to Congress and 2017 Financial Stability Report

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Shearman & Sterling LLP

The US OFR released its 2017 annual report to Congress and 2017 financial stability report. In connection with its release of these reports, the OFR notes that it has developed and implemented new vulnerability monitoring and stress index tools, which were used in preparing the OFR’s findings. The OFR reports outline 3 key threats to financial stability. First, the danger that cybersecurity threats pose not only to the financial industry, but also to the broader economy in general. The financial stability report notes that regulators are continuing to develop more robust cybersecurity standards, but that gaps still remain. The second threat discussed in the reports is the orderly resolution of a systemically important financial institution in the event of failure. The reports note that while the current framework makes orderly resolution more feasible, there are shortcomings in the framework with regard to nonbank financial institutions. The reports also highlight the important role that Orderly Liquidation Authority plays in resolution framework. Finally, the third key threat is the evolving structure of financial markets. Specifically the reports highlight the risks posed by lack of substitutes for essential services, such as settlement of US Treasury securities; market fragmentation, and replacing LIBOR with a new reference rate.

View OFR's 2017 Annual Report to Congress.

View OFR's 2017 FS Report.

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