What is it about?
We present a forward-looking monitoring program to identify and track the sources of systemic risk over time and to facilitate the development of pre-emptive policies to promote financial stability. We offer a framework that distinguishes between shocks, which are difficult to prevent, and vulnerabilities that amplify shocks. Building on substantial research, we focus on leverage, maturity transformation, interconnectedness, complexity, and the pricing of risk as the primary vulnerabilities in the financial system. The monitoring program tracks these vulnerabilities in four areas: the banking sector, shadow banking, asset markets, and the nonfinancial sector.
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Why is it important?
The framework also highlights the policy trade-off between reducing systemic risk and raising the cost of financial intermediation by taking pre-emptive actions to reduce vulnerabilities.
Perspectives
Tobias Adrian is a Senior Vice President of the Federal Reserve Bank of New York and the Associate Director of Research and Statistics Group. His research covers asset pricing, financial intermediation, and macroeconomics, with a focus on the aggregate implications of capital market developments. He has contributed to the NY Fed's financial stability policy and to its monetary policy briefings. Tobias Adrian holds a Ph.D. from MIT and a MSc from LSE. He has taught at MIT, Princeton University, and NYU.
Tobias Adrian
Federal Reserve Bank of New York
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This page is a summary of: Financial Stability Monitoring, Annual Review of Financial Economics, December 2015, Annual Reviews,
DOI: 10.1146/annurev-financial-111914-042008.
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