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From the Management Team

OFR Brief Examines Data on Systemically Important Bank Holding Companies

OFR Brief Examines Data on Systemically Important Bank Holding Companies

The OFR released a brief today analyzing 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.

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Year In Review: The Office of Financial Research

The Office of Financial Research (OFR) capped a year of progress in promoting financial stability a few weeks ago by releasing its 2014 Annual Report to Congress, a publication that highlights our important work.

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Legal Entity Identifier System Turns a Corner

The global project to assign unique identifiers to parties in financial transactions has turned a corner, bringing the world closer to mapping connections in the financial system and cutting industry costs for cleaning, aggregating, and reporting data.

In the past week, the global Legal Entity Identifier (LEI) system crossed the threshold to move from a start-up initiative to an operational, steady state.

The defining moment was the inaugural meeting of the Board of Directors of the Global Legal Entity Identifier Foundation on June 26 in Zurich, Switzerland. Under the continued oversight of the LEI Regulatory Oversight Committee (ROC), the Foundation will now begin to assume management of LEI operations across the globe.

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Legal Entity Identifier System Gains Global Momentum

As global acceptance continues to spread, governance for the Legal Entity Identifier (LEI) system advanced today. The LEI, like a bar code identifier for entities that engage in financial market transactions, promises to be a linchpin for making connections in the massive volumes of financial data that course through the international economy every day.

​The Financial Stability Board (FSB), an international coordinating body established by the G-20 to promote global financial stability and regulatory coordination, endorsed today the nomination of 16 directors for the Global LEI Foundation (GLEIF), a key element for governance and a critical step forward.

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Year In Review: The Office of Financial Research

This past year, the Office of Financial Research​ (OFR or Office) has advanced substantive work to achieve its mission, building on its progress since being established by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The OFR, led by Director Richard Berner, is ramping up its services to the Financial Stability Oversight Council (Council), Council member agencies, and the public by working to improve the quality and scope of financial data available to policymakers and to conduct and foster sophisticated analysis of the financial system.

Last week, the OFR submitted its 2013 Annual Report to Congress, fulfilling a requirement to annually assess the state of the United States financial system and analyze threats to U.S. financial stability. The report describes a prototype Financial Stability Monitor, a comprehensive new tool developed by the OFR for tracking threats and the interplay among them.

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System Taking Shape to Assign IDs for Financial Market Participants

This is an exciting time for those of us at the Treasury’s Office of Financial Research ​and others around the world who have been working to establish a global system for precisely identifying parties to financial transactions.

The Legal Entity Identifier, or LEI, is like a bar codea unique ID for companies participating in global financial markets. The need for an LEI system has long been recognized. However, the recent financial crisis exposed the critical nature of that need, when government regulators and market participants were unable to quickly assess exposures to failing firms or the network of interconnections among financial companies and markets.

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OFR Working Paper Explores Innovative Models for Analyzing Threats to Financial Stability

How might the dynamics of a flock of birds in flight, a group of drivers in a traffic jam, or a panicked crowd of stampeding people inform our analysis of threats to financial stability?

In the third paper of our Working Paper Series - Using Agent-Based Models for Analyzing Threats to Financial Stability​ - the staff of the Office of Financial Research (OFR) explores these questions as we seek better ways to monitor risk to the financial system.

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The Financial Stability Board (FSB), which brings together global financial regulators and policymakers, reached a critical milestone this week in the initiative to establish a worldwide standard for uniquely identifying parties to financial transactions. This linchpin for financial data, known as the Legal Entity Identifier (LEI), will allow financial companies and financial regulators to better understand true exposures and counterparty risks across the global financial system.

During the financial crisis neither institutions nor regulators were able to accurately assess direct or indirect global exposures to troubled companies, hampering efforts to manage, and to respond to, risks. A major reason was the absence of a consistent way of identifying counterparties in the numerous and disparate databases that financial firms and regulators maintain for tracking global financial instruments and positions. By filling this critical gap, the LEI will be a valuable tool for identifying risks associated with these exposures and helping to prevent such critical failures in the future.

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OFR Working Paper Series Continues with Forging Best Practices in Risk Management

A key part of the mission of the Office of Financial Research (OFR) is to promote best practices in financial risk management. Today, in the second paper of its Working Paper Series, the OFR issued a paper that provides a broad assessment of risk management practices and how risk management can be improved: Forging Best Practices in Risk Management.

The paper approaches risk management from three perspectives: risk measurement by individual firms, governance and incentives, and systemic concerns. Although the paper separately evaluates each approach, it also includes a discussion on the importance of considering these three dimensions of best practices in risk management as interrelated. The paper concludes by defining important areas for continued research and for modifying the role of risk management in financial firms’ business decisions.

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Applauding Progress on the Global LEI Initiative

Key international regulators and policymakers have taken another step forward in the global initiative to increase transparency in financial transactions. The Financial Stability Board (FSB) recently announced progress in making the global financial system more transparent and less vulnerable to excessive risk-taking through the creation of a Legal Entity Identifier (LEI) Expert Group. The formation of the LEI Expert Group will build on the work of Treasury’s Office of Financial Research (OFR) and its global counterparts in advancing the LEI initiative. The OFR has played an active role to help build international consensus and facilitate adoption of a global LEI standard and we are excited to support the Expert Group in its efforts.

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Launching the OFR Working Paper Series with A Survey of Systemic Risk Analytics

The Dodd-Frank Act created the Office of Financial Research (OFR) because policymakers and the public need better data and analysis to help them assess and respond to threats to financial stability. With that goal in mind, the OFR is launching a Working Paper Series that will make available the OFR’s work on the analytics and measurement of such threats in depth. Today, we release our first Working Paper – A Survey of Systemic Risk Analytics, by Dimitrios Bisias (MIT), Mark Flood (OFR), Andrew W. Lo (MIT), and Stavros Valavanis (MIT).

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