On January 27, 2016, the US Office of Financial Research issued its 2015 Annual Report to Congress. Among other things, the report states that threats to US financial stability have “edged higher” since last year’s report, but remain in the moderate range.
According to the OFR, that assessment has not changed since the Federal Reserve Board incrementally increased short-term interest rates in December. Additional OFR findings highlighted in the report include how policymakers have taken important steps to eliminate implied taxpayer support for large, complex financial institutions whose serious distress could threaten financial stability. Furthermore, the report notes that while clearing derivatives trades through central counterparties has significant benefits in reducing the risks to counterparties of default, a CCP can also be a single point of vulnerability for failure and creates the potential for propagation of risks.
The OFR Annual Report to Congress is available at: https://financialresearch.gov/annual-reports/files/office-of-financialresearch-annual-report-2015.pdf.