SYSTEMIC RISK DASHBOARD

SystemicRiskDashboard.com is a service of Ethics Metrics LLC that identifies risks to the financial stability of the United States that could arise from the danger of default or default, and potential systemic risk, of approximately 100 large, interconnected depository institution holding companies (DIHCs) and potential contagion risk for over 1,100 global equity investors in the large U.S. DIHCs. Bold terms are defined in the Dodd Frank Act (DFA) Sections §§ 112 and 203.

Systemic Risks: DFA Section 203 defines danger of default or default as one of four systemic risk conditions, as noted below:

“(A) a case has been, or likely will promptly be, commenced with respect to the financial company under the Bankruptcy Code;

(B) the financial company has incurred, or is likely to incur, losses that will deplete all or substantially all of its capital, and there is no reasonable prospect for the company to avoid such depletion; (emphasis added)

(C) the assets of the financial company are, or are likely to be, less than its obligations to creditors and others; or

(D) the financial company is, or is likely to be, unable to pay its obligations (other than those subject to a bona fide dispute) in the normal course of business.” (emphasis added)

Capital Adequacy Risks: The potential systemic risks of (B), for 34 DIHCs with total assets above $50 billion, are analyzed by the Federal Reserve’s Stress Tests. The most recent results, as of June 22, 2017, are available here.

Liquidity Risks: The potential systemic risks of (D), for 100 large (total assets above $10 billion) DIHCs are analyzed below in Ethics Metrics’ Charts 2 – 5 for the period of 1Q05 to 2Q2017.

The 100 large DIHCs own about 80% of the $17 trillion of total assets of the U.S. banking Industry.

Ethics Metrics’ analytics bring transparency to Information Asymmetries That Conceal Fraud and Systemic Risk in the U.S. Banking Industry. This is an article that was published on the Harvard Law School Forum on Corporate Governance and Financial Regulation on August 20, 2017.

These risks are classified as confidential information by federal bank regulators and are thus intentionally omitted has they could have a direct bearing on the potential loss of $4.6 trillion of noncore funding, and potential danger of default, default and systemic risk for the large DIHCs and for their investors. These investors include ~1,100 investors that are registered investment advisers (RIAs) with the Securities and Exchange Commission. These RIAs own $1.4 trillion or 74% of the $1.9 trillion of total public equity of the 100 large DIHCs as of 6/30/17.

Consolidated Data for Charts 2 – 5 comes from individual DIHC Reports, by Ethics Metrics, for each of the 100 currently active, large DIHCs.

Paid Subscriptions: Information about paid subscriptions to the portfolio of ~100 DIHC Reports for qualified parties that include RIAs, DIHCs and regulators, is available by contacting Ethics Metrics.

RowSystemic Risk Dashboard for large, interconnected U.S. DIHCsDatesValues: (Millions)
Link, Chart
Link, Article
1.Governance
1.a.G20/OECD Corporate Governance Principles
9/5/2015
Link
Article 1
1.a.1.Disclosure violations by banks & DIHCs
1.a.1.aFailure to disclose supervisory enforcement actions in a timely manner
1.a.1.b.Misleads investors
1.a.1.c.Undermines market integrity
1.b.Financial Stability Board’s (FSB) Thematic Review of Corporate Governance
4/28/2017
Link
Article 1
1.c.SEC: Disclosures by Bank Holding Companies
3/1/2017
Link
Article 1
2.Bank Health Index by Office of Financial Research
1Q05-2Q17

Chart 1
3.Systemic Risk Profiles ~100 large, active DIHCs, Danger of Default, Default, Liquidity Risk, DFA Sec. 203(c)(4)(D)
6/30/2017
Covered DIHCs
3.a.Quarterly Heat Map of DIHC Ratings
1Q05-2Q17
Chart 2
Article 2-c
3.b.Noncore Funding Values at Risk
1Q05-2Q17
$4,624
Chart 3
Article 2-c
3.c.Equity Market Values at Risk
1Q05-2Q17
$1,933
Chart 4
Article 2-c
3.c.1.1,156 Registered Investment Advisers (RIAs)
2Q17
$1,439
Covered RIAs
Article 2-c
3.d.Total Assets of Insured Depository Institutions (IDIs) Owned by Covered DIHCs
1Q05-2Q17
$13,348
Article 2-c
3.e.Total DIHC Asset Values at Risk
2Q17
$15,398
Chart 5
Article 2-c
3.f.Total IDI Assets in U.S. Banking Industry
2Q17
$17,066
Article 2-c
3.g.OTC derivatives cleared through a central counterparty
2Q17
$78,700
Article 2-c
3.h.OTC derivatives settled bilaterally
2Q17
$71,800
Article 2-c
3.i.Total notional amount of OTC derivatives
2Q17
$150,500
Article 2-c
3.j.Total IDI assets of 100 DIHCs as % of Industry’s Total IDI Assets
2Q17
78%
Article 2-c
4.DIHC Systemic Risk Profiles for DIHCs Supervised by State Bank Regulators and by the OCC Based on FR Y-15 Reports
6/30/2017
Table 1
Article 2-c

Chart 1: FSOC’s Quarterly Bank Health Index, 1Q2005 to 2Q2017

Chart 2: Quarterly Heat Map of DIHC Ratings for each of the ~100 Currently Active, Large DIHCs: 1Q2005 to 2Q2017

As a resource for DIHCs, DIHC investors and DIHC regulators, Ethics Metrics evaluated the risk profiles of the 112 largest DIHCs that disclosed Formal Enforcement Actions (FEAs) from 2002 to 2017. The calculated Ethics Metrics Risk Rating for these 112 DIHCs compared closely with the issuance and termination of FEAs, validating Ethics Metrics’ ability to detect levels of non-compliance which have resulted in formal enforcement actions over the past 15 years.

 

Chart 3: Noncore Funding Values at Risk for the 100 Currently Active, Large DHICs: 1Q2005 to 2Q2017

Chart 4: Equity Values at Risk for the 100 Currently Active, Large DHICs: 1Q2005 to 2Q2017

Chart 5: Total Asset Values at Risk for the 100 Currently Active, Large DHICs: 1Q2005 to 2Q2017