OFR Identifies Common Measures To Determine Banks' Systemic Risk

The Office of Financial Research ("OFR") identified several common measures to determine systemic risk originating from large banks.

The OFR reported on:

• Basel Scores, which designate global systemically important banks ("G‑SIBs") whose failure could threaten the international finance system. The G‑SIBs' capital add-on is determined by averaging the banks' (i) sizes, (ii) interconnectedness, (iii) substitutability, (iv) complexity and (v) cross-jurisdictional activity.
• U.S. G-SIB Surcharges, which involve banks whose failure could threaten the financial system, and are determined by using the higher surcharge of either (i) the Basel Committee framework or (ii) replacing the measure of suitability from the Basel Committee framework with a measure of short-term wholesale funding.