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 1Q2017.
The 100 large DIHCs own about 80% of the $16 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 73% of the $1.9 trillion of total public equity of the 100 large DIHCs as of 3/31/17.
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.
|Row||Systemic Risk Dashboard for large, interconnected U.S. DIHCs||Dates||Values: (Millions)|
|1.a.||G20/OECD Corporate Governance Principles|
|1.a.1.||Disclosure violations by banks & DIHCs|
|1.a.1.a||Failure to disclose supervisory enforcement actions in a timely manner|
|1.a.1.c.||Undermines market integrity|
|1.b.||Financial Stability Board’s (FSB) Thematic Review of Corporate Governance|
|1.c.||SEC: Disclosures by Bank Holding Companies|
|2.||Bank Health Index by Office of Financial Research|
|3.||Systemic Risk Profiles ~100 large, active DIHCs, Danger of Default, Default, Liquidity Risk, DFA Sec. 203(c)(4)(D)|
|3.a.||Quarterly Heat Map of DIHC Ratings|
|3.b.||Noncore Funding Values at Risk|
|3.c.||Equity Market Values at Risk|
|3.c.1.||1,172 Registered Investment Advisers (RIAs)|
|3.d.||Total Assets of Insured Depository Institutions (IDIs) Owned by Covered DIHCs|
|3.e.||Total DIHC Asset Values at Risk|
|3.f.||Total IDI Assets in U.S. Banking Industry|
|3.g.||OTC derivatives cleared through a central counterparty|
|3.h.||OTC derivatives settled bilaterally|
|3.i.||Total notional amount of OTC derivatives|
|3.j.||Total IDI assets of 100 DIHCs as % of Industry’s Total IDI Assets|
|4.||DIHC Systemic Risk Profiles for DIHCs Supervised by State Bank Regulators and by the OCC Based on FR Y-15 Reports|
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 1Q2017
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 1Q2017
Chart 4: Equity Values at Risk for the 100 Currently Active, Large DHICs: 1Q2005 to 1Q2017
Chart 5: Total Asset Values at Risk for the 100 Currently Active, Large DHICs: 1Q2005 to 1Q2017