United States: Financial Sector Assessment Program-Technical Note-Systemic Risk Oversight and Systemic Liquidity

IMF Staff Country Reports, August 10, 2020

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Canonical URL: United States: Financial Sector Assessment Program-Technical Note-Systemic Risk Oversight and Systemic Liquidity

Purpose: Review processes in the United States for systemic risk oversight and examine issues of systemic liquidity.
Rationale: The heterogeneity of the United States (U.S.) financial markets and complex regulatory and supervisory institutional setup underscore the importance of enhancing systemic risk oversight and building effective macroprudential tools.
Framework elements emphasized:
- Identification and prioritization of system-wide risks and vulnerabilities to spur timely policy action.
- Interagency sharing of information.
- Identification of possible emerging regulatory gaps.
- Obtaining a good overview of systemic risks.
- Developing a cooperative framework to address identified threats to financial stability.

The heterogeneity and institutional complexity of the U.S. financial system create challenges for comprehensive systemic risk oversight.
Effective macroprudential frameworks should:
- Enable timely identification and prioritization of system-wide risks and vulnerabilities.
- Support interagency mechanisms for information sharing and gap identification.
- Provide a consolidated overview of systemic risks to inform coordinated policy responses.
The Technical Note includes an examination of systemic liquidity issues in U.S. markets.

The Technical Note explicitly examines issues of systemic liquidity and relevant market functioning concerns.
Keywords reflecting liquidity focus include: liquidity, money markets, repo market, FX liquidity provision protocol, liquidity support, support option, discount window, fed funds rate, Fed's FX liquidity swap lines.

Strengthen mechanisms for interagency cooperation and information sharing to detect emerging systemic risks and regulatory gaps.
Develop and enhance macroprudential tools to address prioritized system-wide vulnerabilities.
Ensure cooperative frameworks are in place to coordinate policy actions to mitigate threats to financial stability, including measures addressing systemic liquidity.