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Papers in this series are designed for a broader audience than OFR working papers. These papers analyze the financial stability implications of financial and regulatory policy, and recent developments in the financial system. Comments and suggestions for improvements to these papers are welcome and should be directed to the authors. OFR publications may be quoted without additional permission. Views and opinions expressed in the OFR Brief Series are those of the authors and do not necessarily represent official positions or policy of the OFR or Treasury.

November 14, 2024 | By Robert Mann, Mark Paddrik, Samuel Hempel, and R. Jay Kahn

Repo Market Intermediation

This brief examines how dealers manage cash and collateral across the U.S. repurchase agreement market (Brief no. 24-07).

November 13, 2024 | By Neth Karunamuni and Dasol Kim

A Spread-Based Measure of Household Financial Stress

This brief proposes a novel spread-based household financial stress measure called the Household Financial Stress Measure (Brief no. 24-06).

November 13, 2024 | By Arthur Fliegelman and Daniel Stemp

The Cyberattack on Change Healthcare: Lessons for Financial Stability

This brief examines the cyberattack on Change Healthcare and how the U.S. financial system can improve the cyber defenses of a systemically important firm (Brief no. 24-05).

July 11, 2024 | By Tom Doolittle, H. Peyton Young, Hashim Hamandi, and Nick Schwartz

Bank Health and Future Commercial Real Estate Losses

Future defaults on commercial real estate (CRE) loans could generate losses that exceed shareholders’ equity for hundreds of smaller banks (Brief no. 24-04).

July 10, 2024 | By Dasol Kim and Nick Schwartz

Household Liquidity Measurement: A New Approach

This brief describes a new way to measure household liquidity that can better inform policymakers on household financial conditions (Brief no. 24-03).

April 2, 2024 | By Paul Glasserman and H. Peyton Young

Liquidity Coverage Ratios of Large U.S. Banks During and After the COVID-19 Shock

This brief reviews components of large U.S. bank Liquidity Coverage Ratios since 2017, with emphasis on the effects of the market turbulence in early 2020 (Brief no. 24-02).

February 28, 2024 | By John Heilbron and Kevin Zhao

The Uneven Distribution of Climate Risks and Discounts

This brief documents the uneven distribution of climate risk and risk pricing in real estate at the property-level (Brief no. 24-01).

December 27, 2023 | By H. Peyton Young and Tom Doolittle

Some U.S. Banks May Remain Vulnerable to Losses in Their Securities Portfolios: Introducing Two New Forward-looking Metrics to Assess Future Risk

This brief introduces two new forward-looking metrics which could enable regulators to assess the future risk of fair-value losses in bank securities portfolios (Brief no. 23-04).

August 24, 2023 | By Tom Doolittle and Arthur Fliegelman

Work-from-Home and the Future Consolidation of the U.S. Commercial Real Estate Office Sector: The Decline of Regional Malls May Provide Insight

To assess the likelihood and potential extent of a U.S. commercial real estate (CRE) office sector consolidation, this brief examines another CRE sector that has suffered decline and restructuring due to changes in user preferences: regional malls. (Brief no. 23-03).

May 30, 2023 | By Francisco E. Ilabaca and Vy Nguyen

An Early Look into Digital-Assets Regulatory Data

Digital-asset platforms and other intermediaries play important roles in the cryptocurrency ecosystem. They facilitate trading between buyers and sellers, engage in large volumes of daily transactions, and have recently expanded to provide more complex financial services. However, the extent of their activities and the potential risks they pose to financial stability are still largely opaque to regulators (Brief no. 23-02).

May 12, 2023 | By Samuel J. Hempel, R. Jay Kahn, Robert Mann, and Mark Paddrik

Key Finding on Non-centrally Cleared Repo

The Office of Financial Research (OFR) conducted a pilot collection of data on non-centrally cleared bilateral repurchase agreement (NCCBR) trades spanning nine dealers over three reporting dates in June 2022. Using data from this pilot collection, we document basic facts about volumes, rates, counterparty types, collateral, and haircuts in this relatively opaque segment of the repurchase (repo) market. We find that on three dimensions—rates, counterparty types, and collateral—pilot participants’ activity in the NCCBR segment roughly mirrors their activity in the centrally cleared bilateral segment, the DVP Repo Service of the Fixed Income Clearing Corporation (FICC). However, we find that haircuts in NCCBR materially differ from those in tri-party repo, with over 70% of Treasury repo in NCCBR transacted with zero haircut. Our findings suggest that differences in haircut, margining, and netting are primary factors that drive dealers’ use of NCCBR over other segments of the repo market (Brief no. 23-01).

July 19, 2022 | By Tom Doolittle and Arthur Fliegelman

U.S. Commercial Real Estate Has Proven Resilient, but Emerging Risks Could Generate Losses for Lenders

Despite the 2020 economic downturn and uptick in remote work, the U.S. commercial real estate market held strong, particularly compared to its performance in previous recessions. Relatively small changes in economic and financial conditions, however, could have a detrimental impact on CRE loan performance. In a brief published today, the OFR explored the conditions and policy decisions that supported CRE after the 2020 recession and analyzed the emerging risks that could pressure its performance. (Brief no. 22-02)

June 9, 2022 | By R. Jay Kahn and Vy Nguyen

Treasury Market Stress: Lessons from 1958 and Today

While the stress Treasury markets experienced in March 2020 took many by surprise, it was not unprecedented. This brief examines a similar episode of Treasury market stress that took place in the summer of 1958. Although different events triggered these episodes, the brief shows that they have many similarities in terms of the vulnerabilities they exposed: a high level of outstanding debt, dealers overloaded with Treasury securities, large positions (sometimes with minimal haircuts) funded using leverage in the repo market, a prevalence of carry trades, and sudden increases in margins. The discussion in the brief covers the expansion of market-based financing in the Treasury market over the 1950s, including how it was driven by demands for short-term and highly liquid investment mediums from outside the financial sector. Finally, it reviews the challenges for reform policymakers faced in the wake of the crisis. (Brief no. 22-01)

September 27, 2021 | By Samuel J. Hempel and R. Jay Kahn

Negative Rates in Bilateral Repo Markets

Interest rates on repurchase agreements (repo) are crucial indicators of conditions in financial markets. This brief discusses negative rates in bilateral repo markets during 2021, and shows that they stemmed from two key sources: (1) broad factors that pushed down general collateral repo rates, and (2) narrower factors that pushed bilateral repo rates below comparable tri-party general collateral rates. Broad factors include increases in bank reserves and decreases in the supply of close alternatives to repo in early 2021. Narrower factors primarily concern demand for specific collateral in the bilateral market. Finally, the brief examines the effects of negative rates on the Secured Overnight Financing Rate (SOFR) and shows the existing construction of the SOFR successfully limits the impact of specific collateral demand on the reference rate. (Brief no. 21-03)

July 22, 2021 | By Mark Paddrik, Carlos A. Ramírez, and Matthew J. McCormick

The Dynamics of the U.S. Overnight Triparty Repo Market

The triparty repurchase agreement (repo) market is pivotal in the daily function of the U.S. financial system by acting as an important source of secured short-term funding. Despite the market’s role, little analysis has been undertaken on its intraday trading and pricing. Using supervisory transaction-level data, this brief aims to fill this gap by providing an overview of the pricing and clearing process for the overnight segment, which regularly provides over $1 trillion in daily funding. Besides highlighting the relevance of the overnight segment within the greater U.S. repo market, we present novel facts about how it behaves, emphasizing the role that participants, collateral, and trading relationships play in the market’s pricing and clearing process. (Brief no. 21-02)

July 8, 2021 | By R. Jay Kahn and Luke M. Olson

Who Participates in Cleared Repo?

The U.S. repo market, which is split among four markets, links a wide range of banks and nonbanks who lend and borrow short-term against securities pledged as collateral. This brief uses the OFR’s collection of repo market data to highlight some basic facts about the two cleared repo markets. The broadness of cleared repo market participants underscores two increasingly important trends in U.S. financial markets. First, the rising importance of market-based finance among hedge funds and money market funds. Second, the global scope of U.S. financial markets, as a significant portion of net repo borrowing in cleared markets is by foreign banks. The diversity of institution types also means reference rates based on repo transactions represent a broad range of financial market participants. (Brief no. 21-01)

July 16, 2020 | By Daniel Barth and Jay Kahn

Basis Trades and Treasury Market Illiquidity

The Treasury basis trade exploits the price difference between Treasury bonds and futures. The trade is exposed to financing and liquidity risks that can affect market liquidity. This brief summarizes evidence on the size and extent of basis trading by hedge funds, and on whether these trades contributed to Treasury market illiquidity in March 2020. Timely intervention by the Federal Reserve in the Treasury and repurchase agreement markets may have limited the extent of spillovers that could affect financial stability. (Brief no. 20-01)

August 1, 2018 | By Stacey Schreft and Simpson Zhang

Network Analysis: Defending Financial Stability by Design

The financial system operates through complex networks that operational failures can disrupt. Some network structures are more resilient to random failures, for example, from natural disasters. Others are more resilient to targeted incidents, such as hacks. This brief illustrates how network analysis can be used to better understand possible risks to financial stability from such disruptions, and possible defenses. (Brief no. 18-02)

June 14, 2018 | By David C. Johnson and Francis A. Martinez

Form PF Insights on Private Equity Funds and Their Portfolio Companies

This brief describes data from the Securities and Exchange Commission's Form PF that give insights not previously available about the activities of private equity funds. The data allow regulators to monitor trends such as increased borrowing by the companies in which private equity funds invest or shifts in funds' investments. These trends may signal broader changes in the financial system. (Brief no. 18-01)

March 9, 2017 | By Viktoria Baklanova, Ocean Dalton, and Stathis Tompaidis

Benefits and Risks of Central Clearing in the Repo Market

The repurchase agreement (repo) market is a major source of short-term funding in the financial system. Many repo transactions between dealers are centrally cleared. This brief, using data from the OFR’s interagency bilateral repo data collection pilot, finds economic benefits for dealers in expanding central clearing to transactions between dealers and nondealer clients, but increased risks to the central counterparty. (Brief no. 17-04)

February 22, 2017 | By Stathis Tompaidis

Measuring Systemwide Resilience of Central Counterparties

This brief proposes a novel way to conduct a U.S. systemwide stress test of central counterparties, or CCPs. The approach takes into account the impacts of losses and defaults at CCPs’ member banks. It would require little extra effort by companies because regulators can use the results of existing stress tests of CCPs. (Brief no. 17-03)

February 7, 2017 | By Jill Cetina, Bert Loudis, and Charles Taylor

Capital Buffers and the Future of Bank Stress Tests

U.S. bank regulators are phasing in new capital buffers to cushion against shocks. Systemically important banks will hold three buffers, while most banks will hold one. The Federal Reserve may integrate the buffers into stress tests. As a result, some banks would hold more capital. Without the change, stress tests could have a bigger impact on less systemic banks. Another proposal could make stress tests less effective. (Brief no. 17-02)

February 2, 2017 | By Bertrand Couillault, Jun Mizuguchi, and Matthew Reed

Collective Action: Toward Solving a Vexing Problem to Build a Global Infrastructure for Financial Information

This brief tells the inside story of how partnership and top-level support by government and industry mobilized broad support for creating a worldwide, single identification system for financial data. The development of the global Legal Entity Identifier system reveals important lessons for future efforts to forge consensus and take collective action in finance on a global scale. (Brief no. 17-01)

July 20, 2016 | By Viktoria Baklanova and Daniel Stemp

Reference Guide to the OFR's U.S. Money Market Fund Monitor

This brief describes the U.S. Money Market Fund Monitor, an online charting tool the OFR launched today to help users take a closer look at the portfolios of U.S. money market funds. To develop the tool, the OFR analyzed more than 4 million records of data about the holdings of about 500 funds. (Brief no. 16-07)

July 14, 2016 | By Richard Bookstaber and Dror Y. Kenett

Looking Deeper, Seeing More: A Multilayer Map of the Financial System

This brief introduces a three-layer map to illustrate how the circulation of short-term funding, collateral, and assets may spread financial stability risks throughout the U.S. financial system. Potential vulnerabilities and contagion paths emerge as large banks, hedge funds, central clearinghouses, and other market participants become increasingly interconnected. (Brief no. 16-06)

May 25, 2016 | By Steve Bright, Paul Glasserman, Christopher Gregg, and Hashim Hamandi

What Can We Learn from Publicly Available Data in Banks' Living Wills?

This brief analyzes the public portions of resolution plans, or "living wills," in which large U.S. banks describe how they would manage their own potential failures. The authors found that the public information in the living wills is not sufficient to determine whether these banks could go through bankruptcy without extraordinary government support. (Brief no. 16-05)

April 21, 2016 | By John Soroushian

Credit Ratings in Financial Regulation: What's Changed Since the Dodd-Frank Act?

The Dodd-Frank financial reform law required federal regulators to remove credit rating references from their regulations. Regulators have responded by substituting definitions of creditworthiness, requiring regulatory models, and hiring third parties other than rating agencies to set credit standards. Each approach has challenges. (Brief no. 16-04)

April 13, 2016 | By Bert Loudis and Meraj Allahrakha

Systemic Importance Data Shed Light on Global Banking Risks

This brief uses the latest available data to show that U.S. banks remain among the most systemically important, while the systemic importance scores of Chinese banks increased the most. Also with this brief, the OFR introduces an online interactive chart to help users compare the 30 global systemically important banks, or G-SIBs. Regulators will begin phasing in capital surcharges on G-SIBs this year. (Brief no. 16-03)

March 17, 2016 | By Jill Cetina, Arthur Fliegelman, Jonathan Glicoes, and Ruth Leung

Mind the Gaps: What Do New Disclosures Tell Us About Life Insurers' Use of Off-Balance-Sheet Captives?

This brief analyzes recent regulatory reforms to strengthen disclosure and asset quality standards for U.S. life insurers' use of captive reinsurance. Because of limitations and exemptions, disclosure requirements apply to only 35 percent of the captive industry. (Brief no. 16-02)

January 13, 2016 | By Viktoria Baklanova, Cecilia Caglio, Marco Cipriani, and Adam Copeland

The U.S. Bilateral Repo Market: Lessons from a New Survey

This brief provides aggregate statistics on U.S. dealers' bilateral repurchase, or repo, agreements and economically equivalent securities lending activities. The data were collected from the U.S.-affiliated securities dealers of nine bank holding companies under a voluntary pilot program run by the OFR and the Federal Reserve System with input from the Securities and Exchange Commission. (Brief no. 16-01)

August 4, 2015 | By Paul Glasserman and Bert Loudis

A Comparison of U.S. and International Global Systemically Important Banks

Among global systemically important banks (G-SIBs), U.S. banks rank high in systemic importance relative to foreign banks. G-SIBs with higher systemic importance scores do not consistently have higher risk-based capital ratios, despite the importance of capital as a buffer against failure. (Brief no. 15-07)

July 22, 2015 | By Jill Cetina

Incorporating Liquidity Shocks and Feedbacks in Bank Stress Tests

This brief discusses how stress tests could incorporate four types of shocks — to credit, funding, liquidity, and collateral values — and shows that shocks can affect regulatory ratios for capital and liquidity simultaneously. Additionally, in times of stress, a bank's responses to a binding regulatory ratio can spread shocks to other banks. (Brief no. 15-06)

July 9, 2015 | By David C. Johnson

Private Fund Data Shed Light on Liquidity Funds

This brief analyzes for the first time new confidential data on liquidity funds collected by the Securities and Exchange Commission on Form PF. Liquidity funds generally invest in short-term assets and have portfolios structured to meet investors' near-term liquidity needs. Compared with prime money market funds, liquidity funds hold assets with relatively longer maturities, have larger holdings of Treasury securities, and invest in a broader range of asset classes. (Brief no. 15-05)

June 11, 2015 | By Jill Cetina, John McDonough, and Sriram Rajan

More Transparency Needed For Bank Capital Relief Trades

This brief argues that more data are needed to allow investors and counterparties to assess how banks reduce their required regulatory capital by transferring credit risk to third parties. The authors use public regulatory data to show that 18 banks purchased $38 billion in credit protection as of Q4 2014 to obtain regulatory capital relief. They also estimate the impact of these transactions on banks' risk-based capital ratios. (Brief no. 15-04)

April 23, 2015 | By Viktoria Baklanova

Repo and Securities Lending: Improving Transparency with Better Data

This brief focuses on data gaps in U.S. repurchase agreements and securities lending markets. A paucity of data and a limited understanding of the institutional structure of these markets prevented regulators from fully identifying and responding to vulnerabilities during the 2007-09 financial crisis. The OFR and Federal Reserve are conducting a pilot data collection to close these data gaps. (Brief no. 15-03)

March 17, 2015 | By Ted Berg

Quicksilver Markets

This brief argues that U.S. stock prices today appear high by historical standards, using a quantitative threshold to identify potential stock market bubbles. Although the financial stability implications of a market correction could be moderate due to limited liquidity transformation in the U.S. equity market, the brief discusses other financial stability issues that may be more relevant, such as leverage, compressed pricing of risk, interconnectedness, and complexity. (Brief no. 15-02)

February 12, 2015 | By Meraj Allahrakha, Paul Glasserman, and H. Peyton Young

Systemic Importance Indicators for 33 U.S. Bank Holding Companies: An Overview of Recent Data

This brief analyzes new data about the nation's most systemically important bank holding companies — financial institutions whose failure could pose the greatest threat to the international financial system. (Brief no. 15-01)

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Last Updated: August 4, 2024