Week InReview

OFR Heat Map & Global Stress Snapshot
The Office of Financial Research introduced two new monitoring tools, the Financial System Vulnerabilities Monitor (FSVM) and the Financial Stress Index (FSI). The FSVM is a heat map of 58 indicators of potential vulnerabilities. It gives early warning signals for further investigation. The FSI, constructed from 33 financial market indicators, is a daily market-based snapshot of stress in global financial markets. 

The FSVM and FSI are part of the OFR's quantitative monitoring toolkit. They signal where the OFR needs to investigate potential stresses and vulnerabilities. They conduct those investigations using a broader set of data, qualitative information, and expert analysis. 

Director Richard Berner describes in this  blog why monitoring financial stability requires tracking both vulnerabilities and stress. 

The FSVM can be found  here
The FSI can be found  here.
The OFR home page is can be found here.
Fri Oct 27, 2017
Let's recap
In case you missed it . . .
The Securities and Exchange Commission said U.S. firms can accept research payments from EU clients; will ask for public comments on market impact of MiFID (Oct 26)

Cybersecurity emerges as focus of SEC enforcement
Landscape has changed markedly in three years (Oct 26)

SEC can't simply take over DOL fiduciary rule: Clayton
"We have a process. They have a process. We have to respect those," SEC chair says (Oct 24)

Swaps clearinghouses push back against worries over their size
National Economic Council Director Gary Cohn says they have become too big and pose a "new systemic risk" to financial stability, a viewpoint supported by policymakers across the government (Oct 24)

As robots invade Wall Street, slow-footed regulators lose ground
Watchdogs face litany of challenges policing automated traders; budget constraints and industry lobbying are among headwinds (Oct 20)
The Cyber Cafe
Cybersecurity news every Friday
Cybersecurity experts warn of impending botnet 'hurricane'
International cybersecurity firms expect a botnet swarm to hit "an estimated million organizations" across the internet.

Federal cybersecurity group issues warning
The US Computer Emergency Readiness Team has warned users of the vulnerability of modern wi-fi networks.

10 social engineering attacks your end users need to know about
It's Cybersecurity Awareness Month. Make sure your users are briefed on these 10 attacker techniques that are often overlooked.
SEC, CFTC to work on issue overlap
Will announce results in next few months
(Oct 24) -- Although he declined to give any specifics, the chair of the Commodity Futures Trading Commission said he and the chair of the Securities and Exchange Commission, Jay Clayton, formed a "chairman-to-chairman" task force to examine jurisdictional overlap. "We have a whole bunch of areas where we have overlapping jurisdiction, a whole bunch of areas where we have outstanding rules that haven't been resolved," J. Christopher Giancarlo said at an industry conference in Washington DC. Clayton and Giancarlo's chiefs of staff will lead the task force and Giancarlo expects to announce results "in the next few months."
Asset managers & insurance
Treasury releases report
(Oct 26) -- A Treasury Department study focuses on four key areas: the proper evaluation of systemic risk, ensuring effective regulation, rationalizing international engagement and promoting economic growth.  "The regulatory framework for both the asset management and insurance industries can be significantly improved," Treasury Secretary Steven Mnuchin said in a statement. Some report highlights:
  • The Financial Stability Oversight Council (FSOC) shouldn't "generally" focus on designating individual insurers and asset managers as systemically risky, should instead focus on "products and activities"
  • The U.S. should take a "leading role" in international regulatory groups, such as FSB and IOSCO, while making the process more transparent
  • Recommends moving forward on rule that lays out approval process for "plain vanilla" ETFs
  • Recommends regulators take action to "reduce the burden" of Volcker Rule on asset managers and investors
  • Congress should eliminate the statutory stress testing requirement for investment advisers and investment companies
Bank size not enough to designate SIFIs
OFR report finds
(Oct 26) --  Since the last financial crisis, policymakers have sought to impose tougher standards on any bank whose failure would pose the greatest risk to financial stability. Where should the line be drawn in identifying banks to subject to those standards?  A report from Treasury's Office of Financial Research says bank size doesn't tell the whole story in measuring systemic important and argues that "a multifactor approach is superior to considering asset size alone to assess a bank's systemic importance."
Binge reading disorder
Hand-curated, chosen with love.
Morningstar's star system was always a bright shiny object
The ratings look backward and give a false sense of comfort.

The first cracks in the market appear
Stocks recently showed signals of a small pullback, but investors needn't worry - at least not yet.

How we all became addicted to cheap debt  
'"The pesky matter of debt has not disappeared: the level of global debt to gross domestic product is now 40 per cent higher than it was in 2008."