On December 5, 2017, the US Office of Financial Research 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 the preparation of the OFR's findings. The OFR reports outline three 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 the Orderly Liquidation Authority plays in the resolution framework. Finally, the third key threat identified by the reports is the evolving structure of financial markets. Specifically the reports highlight the risks posed by the lack of substitutes for essential services, such as the settlement of US Treasury securities; market fragmentation; and replacing LIBOR with a new reference rate.
The OFR's 2017 Annual Report to Congress is available at: https://www.financialresearch.gov/annual-reports/2017-annual-report/ and the OFR's 2017 Financial Stability Report is available at:
https://www.financialresearch.gov/financial-stability-reports/2017-financial-stability-report/ .
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