FSOC Tells Public Why It Worries, Not What It Will Do – If Anything
In this report, we provide our in-depth analysis of FSOC’s annual systemic-risk report, focusing on changes since the 2014 report (see Client Report SYSTEMIC71), and on specific recommendations that could lead to policy-maker action. As always, FSOC sets a measured tone to avoid alarming the markets—it again says that systemic risk is “moderate” even as its in-depth analysis shows several very alarming spikes in possible risk drivers. Some of these—e.g., geopolitical risk—are well outside both FSOC’s control and the specific ambit of regulatory action. Others—e.g., yield-chasing, HFT, CCPs—are very much on regulators’ radar, and could thus be subject to still more substantive financial and monetary-policy intervention given that FSOC’s public report is only a mild version of closed-door discussions.

FSOC16.pdf