1、BOARD OF G OV E R N O R S O F T H E FE DER AL R ES ERVE S YS TEMApril 2024Financial Stability ReportThe Federal Reserve System is the central bank of the United States.It performs five key functions to promote the effective operation of the U.S.economy and,more generally,the public interest.The Fede

2、ral Reserve conducts the nations monetary policy to promote maximum employment and stable prices in the U.S.economy;promotes the stability of the financial system and seeks to minimize and contain systemic risks through active monitoring and engagement in the U.S.and abroad;promotes the safety and s

3、oundness of individual financial institutions and monitors their impact on the financial system as a whole;fosters payment and settlement system safety and efficiency through services to the banking industry and the U.S.government that facilitate U.S.-dollar transactions and payments;and promotes co

4、nsumer protection and community development through consumer-focused supervision and examination,research and analysis of emerging consumer issues and trends,community economic development activities,and administration of consumer laws and regulations.To learn more about us,visit www.federalreserve.

5、gov/aboutthefed.htm.iiiNote:This report generally reflects information that was available as of April 1,2024.ContentsPurpose and Framework.vOverview.11 Asset Valuations.52 Borrowing by Businesses and Households.153 Leverage in the Financial Sector.254 Funding Risks.35Box 4.1.The Bank Term Funding Pr

6、ogram.385 Near-Term Risks to the Financial System.45Box 5.1.Survey of Salient Risks to Financial Stability .47Appendix:Figure Notes.49vThis report presents the Federal Reserve Boards current assessment of the stability of the U.S.financial system.By publishing this report,the Board intends to promot

7、e public understand-ing by increasing transparency around,and creating accountability for,the Federal Reserves views on this topic.Financial stability supports the objectives assigned to the Federal Reserve,including full employment and stable prices,a safe and sound banking system,and an efficient

8、paymentssystem.A financial system is considered stable when banks,other lenders,and financial markets are able to provide households,communities,and businesses with the financing they need to invest,grow,and participate in a well-functioning economyand can do so even when hit by adverse events,or“sh

9、ocks.”Consistent with this view of financial stabil-ity,the Federal Reserve Boards monitoring framework distinguishes between shocks to,and vulnerabilities of,the financial system.Shocks are inherently difficult to predict,while vulnerabilities,which are the aspects of the financial system that woul

10、d exacerbate stress,can be monitored as they build up or recede over time.As a result,the framework focuses primarily on assessing vulnerabilities,with an emphasis on four broad categories and how those categories might interact to amplify stress in the financial system.11 For a review of the resear

11、ch literature in this area,see Tobias Adrian,Daniel Covitz,and Nellie Liang(2015),“Finan-cial Stability Monitoring,”Annual Review of Financial Economics,vol.7(December),pp.35795.1.Valuation pressures arise when asset prices are high relative to economic fundamentals or historical norms.These develop

12、ments are often driven by an increased willingness of investors to take on risk.As such,elevated valuation pressures may increase the possibility of outsized drops in asset prices(see Section 1,Asset Valuations).Purpose and FrameworkMore on the Federal Reserves Monitoring EffortsSee the Financial St

13、ability section of the Federal Reserve Boards website for more information on how the Federal Reserve monitors the stability of the U.S.and world financial systems.The website includes:a more detailed look at our monitoring framework for assessing risk in each category;more data and research on rela

14、ted topics;information on how we coordinate,cooper-ate,and otherwise take action on financial system issues;and public education resources describing the importance of our efforts.vi Financial Stability Report2.Excessive borrowing by businesses and households exposes the borrowers to distress if the

15、ir incomes decline or the assets they own fall in value.In these cases,businesses and households with high debt burdens may need to cut back spending,affecting economic activity and causing losses for investors(see Section 2,Borrowing by Businesses and Households).3.Excessive leverage within the fin

16、ancial sector increases the risk that financial institutions will not have the ability to absorb losses without disruptions to their normal business operations when hit by adverse shocks.In those situations,institutions will be forced to cut back lending,sell their assets,or even shut down.Such resp

17、onses can impair credit access for households and businesses,further weakening economic activity(see Section 3,Leverage in the Financial Sector).4.Funding risks expose the financial system to the possibility that investors will rapidly withdraw their funds from a particular institution or sector,cre

18、ating strains across markets or institutions.Many financial institutions raise funds from the public with a commitment to return their investors money on short notice,but those institutions then invest much of those funds in assets that are hard to sell quickly or have a long maturity.This liquidity

19、 and maturity transformation can create an incentive for investors to withdraw funds quickly in adverse situations.Facing such withdrawals,financial institutions may need to sell assets quickly at“fire sale”prices,thereby incurring losses and potentially becoming insolvent,as well as causing additio

20、nal price declines that can create stress across markets and at other institutions(see Section 4,Funding Risks).The Federal Reserves monitoring framework also tracks domestic and international develop-ments to identify near-term risksthat is,plausible adverse developments or shocks that could stress

21、 the U.S.financial system.The analysis of these risks focuses on assessing how such potential shocks may spread through the U.S.financial system,given our current assessment of vulnerabilities.While this framework provides a systematic way to assess financial stability,some potential risks may be no

22、vel or difficult to quantify and therefore are not captured by the current approach.Given these complications,we rely on ongoing research by the Federal Reserve staff,academ-ics,and other experts to improve our measurement of existing vulnerabilities and to keep pace with changes in the financial sy

23、stem that could create new forms of vulnerabilities or add to existingones.Purpose and Framework viiFederal Reserve actions to promote the resilience of the financialsystemThe assessment of financial vulnerabilities informs Federal Reserve actions to promote the resil-ience of the financial system.T

24、he Federal Reserve works with other domestic agencies directly and through the Financial Stability Oversight Council to monitor risks to financial stability and to undertake supervisory and regulatory efforts to mitigate the risks and consequences of financial instability.Actions taken by the Federa

25、l Reserve to promote the resilience of the financial system include its supervision and regulation of financial institutions.In the aftermath of the 200709 financial crisis,these actions have included requirements for more and higher-quality capital,an innova-tive stress-testing regime,and new liqui

26、dity regulations applied to the largest banks in the United States.In addition,the Federal Reserves assessment of financial vulnerabilities informs deci-sions regarding the countercyclical capital buffer(CCyB).The CCyB is designed to increase the resilience of large banking organizations when there

27、is an elevated risk of above-normal losses and to promote a more sustainable supply of credit over the economic cycle.1OverviewThis report reviews vulnerabilities affecting the stability of the U.S.financial system related to valuation pressures,borrowing by businesses and households,financial-secto

28、r leverage,and funding risks.It also highlights several near-term risks that,if realized,could interact with these vulnerabilities.A summary of the developments in the four broad categories of vulnerabilities since the October2023 Financial Stability Report is as follows:Overview of financial system

29、 vulnerabilitiesLeverage in the financial sectorFunding risksBorrowing by businesses and householdsAsset valuations Equity price-to-earnings ratios moved to the upper end of their historical distributions.Corporate bond spreads fell to levels that are low relative to their historical averages.Prices

30、 of residential real estate remained high relative to fundamentals.Prices of commercial real estate declined amid deteriorating fundamentals.The ratio of total private debt to gross domestic product(GDP)declined further,approaching its historical average.The business debt-to-GDP ratio remained high,

31、but business debt continued to decline in real terms amid subdued risky debt issuance.Firms ability to service their debt remained robust.Household debt was at modest levels relative to GDP and concentrated among prime-rated borrowers.The banking system remained sound and resilient,with risk-based c

32、apital ratios well above regulatory requirements.Nonetheless,some banks continued to face sizable fair value losses on some fixed-rate assets held on their balance sheets.Leverage increased from already elevated levels at the largest hedge funds.Broker-dealer leverage remained near historically low

33、levels.Most domestic banks maintained high levels of liquid assets and stable funding.However,concerns over uninsured deposits and other factors continued to generate funding pressures for a subset of banks.Structural vulnerabilities persisted at money market funds,some other mutual funds,and stable

34、coins.Life insurers continued to hold a high share of illiquid and risky assets.2 Financial Stability Report1.Asset valuations.Valuations rose further to levels that were high relative to fundamentals across major asset classes.Equity prices grew faster than expected earnings,pushing the forward pri

35、ce-to-earnings ratio to the upper end of its historical distribution.Corporate bond spreads narrowed and currently stand at levels that are low relative to their long-run averages.Residential property prices remained high relative to fundamentals and prices continued to rise in recent months.Prices

36、of commercial real estate(CRE)declined amid weak demand for office properties(see Section 1,Asset Valuations).2.Borrowing by businesses and households.The balance sheets of nonfinancial businesses and households remained solid,as the ratio of total private debt to gross domestic product(GDP)declined

37、 further,approaching its historical average.Although business debt remained high when measured relative to GDP(or to business assets for publicly traded corporations),business debt declined in real terms throughout last year.Firms ability to service their debt remained robust owing to strong earning

38、s and low borrowing costs on existing debt.Household debt remained at modest levels relative to GDP,and most of that debt is owed by households with strong credit histories or considerable home equity(see Section 2,Borrowing by Businesses and Households).3.Leverage in the financial sector.The bankin

39、g sector remained sound and resilient overall,and most banks continued to report capital levels well above regulatory requirements.Nevertheless,fair value losses on fixed-rate assets remained sizable for some banks,and some banks with concentrated exposure to loans backed by commercial real estate p

40、roperties experienced stress.Outside the banking sector,available data suggest that hedge fund leverage grew to historic highs,driven primarily by borrowing by the largest hedge funds.Leverage at life insurance companies remained around its median,while they continued to take on credit and liquidity

41、 risk.Broker-dealer leverage remained near historical lows(see Section 3,Leverage in the Financial Sector).4.Funding risks.Liquidity at most domestic banks remained ample,with limited reliance on short-term wholesale funding.Nevertheless,some banks continued to face funding strains,likely owing to v

42、ulnerabilities associated with high levels of uninsured deposits,declines in the fair value of assets,and elevated exposure to CRE.Structural vulnerabilities remained in other short-term funding markets.Prime and tax-exempt money market funds(MMFs),as well as other cash-investment vehicles and stabl

43、ecoins,remained vulnerable to runs.Bond and loan funds that hold assets that can become illiquid during periods of stress remained susceptible to large redemptions.In addition,life insurers continued to rely on a higher-than-average share of nontraditional liabilities(see Section 4,Funding Risks).Ov

44、erview 3This report also discusses potential near-term risks,based in part on the most frequently cited risks to U.S.financial stability as gathered from outreach to a wide range of researchers,aca-demics,and market contacts conducted from late January through the end of March(discussed in the box“S

45、urvey of Salient Risks to Financial Stability”).The risk of persistent inflationary pressures leading to a more restrictive than expected monetary policy stance remained the most frequently cited risk,mentioned by nearly three-fourths of survey participants.The share of survey participants mentionin

46、g policy uncertainty as a risk to the financial system stood at just under two-thirds,significantly higher than in the October report.Over half of all survey participants men-tioned the potential effect of large realized losses on CRE and residential real estate,down from three-fourths of all partic

47、ipants in the previous survey.Rounding out the top five,risks associated with the reemergence of banking-sector stress and with fiscal debt sustainability in advanced economies continued to feature prominently.In addition,the report also contains the box“The Bank Term Funding Program,”which describe

48、s the role the program played in providing funding to the banking system beginning with its incep-tion in response to the March2023 banking-sector stresses up until it ceased extending new loans on March11,2024.Survey of salient risks to the financial systemSurvey respondents cited several emerging

49、and existing events or conditions as presenting risks to the U.S.financial system and the broader global economy.For more information,see the box“Survey of Salient Risks to Financial Stability.”October2023April202472%of contactssurveyed72%of contactssurveyedPersistent inflation;monetary tightening56

50、%of contactssurveyedFiscal debtsustainability72%of contactssurveyed44%of contactssurveyed40%of contactssurveyedBanking-sector stress56%of contactssurveyed44%of contactssurveyedPolicyuncertainty60%of contactssurveyedCommercial andresidential real estate24%of contactssurveyed5Asset Valuations1Asset va

51、luations increased to elevated levels relative to fundamentalsSince the October report,equity valuations increased further.Valuations in corporate bond markets also appeared stretched as corporate credit spreads,the difference in yields on corpo-rate bond and yields on similar-maturity Treasury secu

52、rities,narrowed since the previous report,falling to levels in the lower range of their historical distributions.Liquidity in short-term Treasury markets remained low by historical standards,although market liquidity was consistent with ele-vated measures of interest rate volatility.Nonetheless,Trea

53、sury market liquidity conditions could amplify the impact of shocks on asset valuations.Residential real estate valuations remained near the peak levels seen in the mid-2000s.CREmarket conditions continued to deteriorate,especially for the office sector,and prices con-tinued to decline against a bac

54、kdrop of high vacancy rates and weakening rents.Farmland prices were historically elevated relative to rents,reflecting limited inventories of land.Table 1.1 shows the sizes of the asset markets discussed in this section.The largest asset mar-kets are those for equities,residential real estate,Treas

55、ury securities,and CRE.Treasury yields decreased slightly and remain high relative to the past 15yearsYields on Treasury securities decreased slightly since the October report but remained close to their highest levels over the past decade and a half(figure1.1).A model-based estimate of the nominal

56、Treasury term premiuma measure of the compensation that investors require to hold longer-term Treasury securities rather than shorter-term onesremained low relative to its long-run history despite edging up through March(figure1.2).While interest rate volatility implied by options declined a touch,i

57、t remained elevated by historical norms(figure1.3).This volatility reflected,in part,uncertainty about the economic outlook and the associated path of monetary policy,which likely heightened the sensitivity of Treasury yields to news about output growth,infla-tion,and the supply of Treasury securiti

58、es.6 Financial Stability ReportTable 1.1.Size of selected asset marketsItemOutstanding(billions of dollars)Growth,2022:Q42023:Q4(percent)Average annual growth,19972023:Q4(percent)Equities57,175 22.2 9.2 Residential real estate56,415 3.6 6.2 Treasury securities26,227 10.0 8.2 Commercial real estate22

59、,518 6.3 6.4 Investment-grade corporate bonds7,533 5.4 8.1 Farmland3,420 7.7 5.8 High-yield and unrated corporate bonds1,631 2.6 6.2 Leveraged loans11,397 1.1 13.2 Price growth(real)Commercial real estate21.3 3.1 Residential real estate32.1 2.7Note:The data extend through 2023:Q4.Growth rates are me

60、asured from Q4 of the year immediately preceding the period through Q4 of thefinal year of the period.Equities,real estate,and farmland are at nominal market value;bonds and loans are at nominal book value.1The amount outstanding shows institutional leveraged loans and generally excludes loan commit

61、ments held by banks.For example,lines ofcredit are generally excluded from this measure.Average annual growth of leveraged loans is from 2000 to 2023:Q4,as this market wasfairly small before then.2One-year growth of commercial real estate prices is from December 2022 to December 2023,and average ann

62、ual growth is fromDecember 1999 to December 2023.Both growth rates are calculated from equal-weighted nominal prices deflated using the consumerprice index(CPI).3One-year growth of residential real estate prices is from December 2022 to December 2023,and average annual growth is fromDecember 1998 to

63、 December 2023.Nominal prices are deflated using the CPI.Source:For leveraged loans,PitchBook Data,Leveraged Commentary&Data;for corporate bonds,Mergent,Inc.,Fixed Income Securities Data-base;for farmland,Department of Agriculture;for residential real estate price growth,CoreLogic,Inc.;for commercia

64、l real estate price growth,CoStar Group,Inc.,CoStar Commercial Repeat Sale Indices;for all other items,Federal Reserve Board,Statistical Release Z.1,“FinancialAccounts of the United States.”Figure 1.1.Nominal Treasury yields remained close to the highest levels in the past 15years2-year10-year199920

65、0420092012345678Mar.MonthlyPercent,annual rateSource:Federal Reserve Board,Statistical Release H.15,“Selected Interest Rates.”Asset Valuations 7Measures of equity market valuations rose further from already highlevelsThe ratio of prices to expected 12-month earnings,or the P/E ratio,incre

66、ased since the October report and currently sits in the upper end of its historical distribution since 1989(figure1.4).The difference between the forward P/E ratio and the real 10-year Treasury yielda measure of the additional return that investors require for holding stocks relative to risk-free bo

67、nds(the equity premium)declined,on net,since the October report and currently stands well below its historical median(figure1.5).2 Equity market volatility was subdued,and option-implied volatility 2 This estimate is constructed based on expected corporate earnings for 12 months ahead.Alternative me

68、asures of the equity premium that incorporate longer-term earnings forecasts suggest more elevated equity valuation pressures.Figure 1.2.An estimate of the nominal Treasury term premium remained relatively low920.51.00.50.00.51.01.52.02.5Mar.MonthlyPercentage pointsSource:Depar

69、tment of the Treasury;Wolters Kluwer,Blue Chip Financial Forecasts;Federal Reserve Bank of New York;Federal Reserve Board staff estimates.Figure 1.3.Interest rate volatility fell slightly but continued to be elevated by historical norms200620092002150200250Mar.MonthlyBasis poin

70、tsMedian=80.22Source:For data through July13,2022,Barclays and S&P Global;for data from July14,2022,onward,ICAP,Swaptions and Interest Rate Caps and Floors Data.Figure 1.4.The price-to-earnings ratio of S&P500 firms increased to levels further above its historical median3209121

71、51821242730Mar.MonthlyRatioMedian=15.64Source:Refinitiv,Institutional Brokers Estimate System,North American Summary&Detail Estimates,Level 2,Current&History Data,Adjusted and Unadjusted,https:/ 1.5.An estimate of the equity premium fell further below its historical median62002

72、46810Mar.MonthlyPercentage pointsMedian=4.71Source:Refinitiv,Institutional Brokers Estimate System,North American Summary&Detail Estimates,Level 2,Current&History Data,Adjusted and Unadjusted,https:/ Financial Stability Reportremained in the lower quarter of its historical distribution(figure1.6).Sp

73、reads in corporate debt markets narrowed to low levelsYields for both investment-and speculative-grade bonds fell a bit since the October report and currently stand near the median of their respective historical distributions(figure1.7).While the decline in corporate bond yields was modest,it nevert

74、heless outpaced that of comparable-maturity Treasury securities,and,as a result,corporate bond spreads narrowed to levels that are low relative to their historical distributions(figure1.8).The excess bond premiuma risk premium mea-sure that captures the gap between corporate bond spreads and expecte

75、d credit lossesremained near its historical mean(figure1.9).Market-based forecasts of credit quality (one-year-ahead default probabilities)of nonfinancial firms have mildly improved since the October report but remain somewhat ele-vated by historical standards for speculative-grade issuers.Figure 1.

76、7.Corporate bond yields fell slightly to levels near their historical mediansTriple-BHigh-yield920246802224Mar.MonthlyPercentSource:ICE Data Indices,LLC,used with permission.Figure 1.6.Volatility in equity markets decreased to levels slightly below the historical med

77、ianOption-implied volatilityRealized volatility1996 2000 2004 2008 2012 2016 2020 2024007080Mar.MonthlyPercentMedian=19.12Source:Cboe Volatility Index(VIX)accessed via Bloomberg Finance L.P.;Federal Reserve Board staff estimates.Figure 1.8.Corporate bond spreads narrowed to low levels rel

78、ative to their historical distributionsTriple-B(left scale)High-yield(right scale)920224Mar.MonthlyPercentage pointsPercentage pointsSource:ICE Data Indices,LLC,used with permission.Asset Valuations 9The average spread on leveraged loans in the

79、secondary market fell a touch since the October report but remained roughly in line with its average over the past decade(figure1.10).The trailing 12-month loan default rate moved up,on net,since the last report,and the year-ahead expected default rate remained somewhat elevated relative to its hist

80、orical trend.Market liquidity stayed near the lower end of its historical rangeMarket liquidity refers to the ease and cost of buying and selling an asset.Low liquidity can amplify the volatility of asset prices and result in larger price moves in response to shocks.In extreme cases,low liquidity ca

81、n threaten market functioning,leading to a situation in which par-ticipants are unable to trade without incurring a significant cost.Figure 1.10.Spreads on leveraged loans declined modestlyBBB92051015202530Mar.29Percentage pointsFrequency changeSource:PitchBook Data,Leveraged C

82、ommentary&Data.Figure 1.9.The excess bond premium fell slightly but remained near the middle of the historical range920101234Feb.MonthlyPercentage pointsSource:Federal Reserve Board staff calculations based on Lehman Brothers Fixed Income Database(Warga);Intercontinental Exchan

83、ge,Inc.,ICE Data Services;Center for Research in Security Prices,CRSP/Compustat Merged Database,Wharton Research Data Services;S&P Global,Compustat.10 Financial Stability ReportTreasury market liquidity is important because of the key role these securities play in the financial system.Various measur

84、es of market liquidity,such as market depth,suggest that liquidity in the Treasury cash market remained low(figures 1.11 and 1.12),although at levels that reflect ele-vated measures of interest rate volatility.The effect of low levels of market depth on price impact has been limited because market p

85、articipants split trades into smaller quantities,and liquidity providers have been able to replenish the limited volume of quotes rapidly enough to meet incom-ing order flow without large moves in prices.Nevertheless,conditions in the Treasury cash market appear challenged and could amplify shocks.I

86、n other markets,liquidity conditions present a mixed picture.Liquidity in corporate bond markets remained in line with the average level observed in recent years,and bid-ask spreads were close to their lowest levels since the 200709 financial crisis.In contrast,liquidity conditions in equity markets

87、 remained low by longer-term historical standards and deteriorated somewhat despite lower equity volatility(figure1.13).Figure 1.11.Treasury market depth increased but remained below historical norms5-year(right scale)10-year(right scale)30-year(left scale)Mar.June Sept.Dec.Mar.June Sept.Dec.Mar.Jun

88、e Sept.Dec.Mar.June Sept.Dec.Mar.June Sept.Dec.Mar.0550500300350Mar.285-day moving averageMillions of dollarsMillions of dollars2002220232024Source:Inter Dealer Broker Community.Figure 1.12.On-the-run market depth improved in recent months but remained below historic

89、al norms2-year OTR market depth(right scale)10-year OTR market depth(left scale)Sept.Dec.Mar.June Sept.Dec.Mar.June Sept.Dec.Mar.June Sept.Dec.Mar.June Sept.Dec.Mar.000500300Mar.285-day moving averageMillions of dollarsMillions of dollars2002220232024Source:BrokerTec

90、;Federal Reserve Board staff calculations.Asset Valuations 11Commercial real estate prices declined but remained high relative torentsAggregate CRE prices measured in inflation-adjusted terms continued to decline over the second half of last year(figure1.14),with declines in these price measures bro

91、ad based across all CRE sectors.These transaction-based price measures likely do not yet fully reflect the deterioration in CRE market prices because,rather than realizing losses,many owners wait for more favor-able conditions to put their properties on the market.Capitalization rates at the time of

92、 property purchase,which measure the annual income of commercial properties relative to their prices,moved modestly higher but remained at historically low levels,suggesting that prices remain high relative to fundamentals(figure1.15).The CRE office sector has faced strains resulting from an Figure

93、1.13.A measure of liquidity in equity markets remained below averageSept.Dec.Mar.June Sept.Dec.Mar.June Sept.Dec.Mar.June Sept.Dec.Mar.June Sept.Dec.Mar.0500300Mar.285-day moving averageMarket depth(number of contracts)2002220232024Source:Refinitiv,DataScope Tick History;Federa

94、l Reserve Board staff calculations.Figure 1.14.Commercial real estate prices,adjusted for inflation,continued to decline200420082002460800180Feb.MonthlyJan.2001=100Source:Real Capital Analytics;consumer price index,Bureau of Labor Statistics via Haver Analytics.Figure 1.15.Inco

95、me of commercial properties relative to prices continued to grow but remained well below historical norms20042008200245.05.56.06.57.07.58.08.59.09.510.0Feb.MonthlyPercentSource:Real Capital Analytics;Andrew C.Florance,Norm G.Miller,Ruijue Peng,and Jay Spivey(2010),“Slicing,Dicing,and Scop

96、ing the Size of the U.S.Commercial Real Estate Market,”Journal of Real Estate Portfolio Management,vol.16(MayAugust),pp.10118.12 Financial Stability Reportongoing post-pandemic adjustment,and these strains could contribute to additional weakness in prices and rents going forward.Vacancy rates for of

97、fices located in central business districts and coastal cities increased further,and rents continued to decline since the October report.In the October2023 and January2024 Senior Loan Officer Opinion Survey on Bank Lending Practices(SLOOS),banks reported weaker demand and tighter standards for all C

98、RE loan categories during the second half of 2023(figure1.16).Residential real estate valuations remainedhigh relative to rents as house prices continued to increaseValuations in the residential real estate sector remained at elevated levels relative to historical standards and moved higher since th

99、e October report.House prices continued to rise through the first two months of the year(figure1.17).A model of house price valuation based on prices Figure 1.16.Banks reported tightening lending standards for commercial real estate loans8200080604020020406080100Q4QuarterlyNet

100、percentage of banks reportingEasingTighteningSource:Federal Reserve Board,Senior Loan Officer Opinion Survey on Bank Lending Practices;Federal Reserve Board staff calculations.Figure 1.17.House prices continued to increase in recent monthsZillowCoreLogicCase-Shiller20032006200920021202425

101、202025Monthly12-month percent changeSource:Zillow,Inc.,Real Estate Data;CoreLogic,Inc.,Real Estate Data;S&P Case-Shiller Home Price Indices.Asset Valuations 13relative to market rents and the real 10-year Treasury yield suggests that valuations in housing markets were increasingly stretch

102、ed.Moreover,an alternative measure of valuation pressures(which uses owners equivalent rent instead of market rents and,therefore,has a longer history)also suggested elevated valuations(figure1.18).Moreover,the median price-to-rent ratio mea-sured across a wide distribution of geographic areas remai

103、ned close to its previous peak in the mid-2000s(figure1.19).That said,credit conditions for borrowers remained tighter relative to the early 2000s,suggesting that weak credit standards are not driving house price growth.Farmland valuations remained high relative to farm incomeFarmland valuations rem

104、ained elevated,as farmland prices increased to near-historical highs(figure1.20).Farmland price-to-rent ratios diverged further from their historical norms,reaching a level more than twice the median of their historical distribution(figure1.21).Prices continued to be sustained in the short run by li

105、mited farmland inventory despite declining farm income,ele-vated interest rates,and higher operating costs.Figure 1.18.Model-based measures of house price valuations rose to historically high levelsOwners equivalent rentMarket-based rents6200320020QuarterlyPercentSou

106、rce:For house prices,Zillow,Inc.,Real Estate Data;for rent data,Bureau of Labor Statistics.Figure 1.19.House price-to-rent ratios remained elevated across geographic areasMedianMiddle 80 percent of markets4200820024600Feb.MonthlyJan.2010=100Source:For house prices,Zi

107、llow,Inc.,Real Estate Data;for rent data,Bureau of Labor Statistics.14 Financial Stability ReportFigure 1.20.Farmland prices increased to near-historical highsMidwest indexU.S.838200002000300040005000600070008000Annual2022 dollars per acreMedian=$3,433.33S

108、ource:Department of Agriculture;Federal Reserve Bank of Minneapolis staff calculations.Figure 1.21.Farmland prices grew faster than rentsMidwest indexU.S.83820540AnnualRatioMedian=18.18Source:Department of Agriculture;Federal Reserve Bank of Min

109、neapolis staff calculations.15Borrowing by Businesses and Households2Vulnerabilities from business and household debt remained moderateHouseholds and businesses continued to improve their financial condition,on net,reducing outstanding debts relative to GDP.Business debt-to-GDP and gross leverage of

110、 public corpora-tions remained at levels near the top of their respective historical ranges but significantly lower than record highs seen at the onset of the pandemic.Interest coverage ratios(ICRs)defined as the ratio of earnings before interest and tax to interest expenseremained flat at a level t

111、hat pointed to robust debt-servicing capacity,reflecting resilient earnings.In addition,the prevalence of fixed-rate borrowing among many businesses has attenuated the effect of higher interest rates on debt-servicing costs.The household debt-to-GDP ratio continued to decline,while the aggregate hou

112、sehold debt service ratio remained flat.Homeowners have solid equity cushions,and many households continued to benefit from lower interest rate payments associated with refinancing or home purchases several years ago.That said,some borrowers continued to be financially stretched,and auto loan and cr

113、edit card delinquencies for nonprime borrowers increased.While balance sheets in the nonfinancial business and household sectors remained sound,a sharp downturn in economic activity would depress business earnings and household incomes and could reduce the debt-servicing capacity of smaller,riskier

114、businesses with already low ICRs as well as particularly financially stretched households.Table 2.1 shows the amounts outstanding and recent historical growth rates of different forms of debt owed by nonfinancial businesses and households as of the fourth quarter of 2023.The overall debt-to-GDP rati

115、o declined further and now stands somewhat below the level prevailing over the past decade(figure2.1).This gradual decline of the debt-to-GDP ratio is due to slower growth in combined total nonfinancial debt relative to the growth rate of nominal GDP over the past three years.Taken separately,both t

116、he household and business debt-to-GDP ratios decreased,in line with the decline in the overall debt-to-GDP ratio(figure2.2).Business debt vulnerabilities remain moderate relative to historical levelsNonfinancial business debt adjusted for inflation declined over the past year(figure2.3),and net issu

117、ance of risky debtdefined as the difference between issuance of speculative-grade bonds,unrated bonds,and leveraged loans minus retirements and repaymentswas negative in the 16 Financial Stability ReportTable 2.1.Outstanding amounts of nonfinancial business and household creditItemOutstanding(billio

118、ns of dollars)Growth,2022:Q42023:Q4(percent)Average annual growth,19972023:Q4(percent)Total private nonfinancial credit41,081 2.2 5.5 Total nonfinancial business credit21,126 1.8 5.9 Corporate business credit13,637 1.5 5.5 Bonds and commercial paper8,249 3.0 5.7 Bank lending2,211 1.9 4.2 Leveraged l

119、oans11,359 1.3 13.4 Noncorporate business credit7,489 2.3 6.9 Commercial real estate credit3,220 2.7 6.2 Total household credit19,955 2.7 5.1 Mortgages13,053 2.8 5.1 Consumer credit5,020 2.6 5.3 Student loans1,727 2.1 7.4 Auto loans1,556 3.8 5.3 Credit cards1,319 8.8 3.6 Nominal GDP27,945 5.8 4.6 No

120、te:The data extend through 2023:Q4.Outstanding amounts are in nominal terms.Growth rates are measured from Q4 of the year immedi-ately preceding the period through Q4 of the final year of the period.The table reports the main components of corporate business credit,totalhousehold credit,and consumer

121、 credit.Other,smaller components are not reported.The commercial real estate(CRE)row shows CRE debtowed by both nonfinancial corporate and noncorporate businesses as defined in Table L.220:Commercial Mortgages in the“FinancialAccounts of the United States.”Total household-sector credit includes debt

122、 owed by other entities,such as nonprofit organizations.GDP isgross domestic product.1Leveraged loans included in this table are an estimate of the leveraged loans that are made to nonfinancial businesses only and do notinclude the small amount of leveraged loans outstanding for financial businesses

123、.The amount outstanding shows institutional leveragedloans and generally excludes loan commitments held by banks.For example,lines of credit are generally excluded from this measure.Average annual growth of leveraged loans is from 2000 to 2023:Q4,as this market was fairly small before then.Source:Fo

124、r leveraged loans,PitchBook Data,Leveraged Commentary&Data;for GDP,Bureau of Economic Analysis,national income andproduct accounts;for all other items,Federal Reserve Board,Statistical Release Z.1,“Financial Accounts of the United States.”Figure 2.1.The total debt of businesses and households relati

125、ve to GDP declined further31201720230.81.11.41.72.0Q4QuarterlyRatioSource:Federal Reserve Board staff calculations based on Bureau of Economic Analysis,national income and product accounts,and Federal Reserve Board,Statistical Release Z.1,“Financial Accounts of the United State

126、s.”Borrowing by Businesses and Households 17fourth quarter of 2023 and subdued in the first quarter of 2024(figure2.4).Similarly,the net issuance of institutional leveraged loans has been tepid for much of the past year.Gross leveragethe ratio of debt to assetsof all publicly traded nonfinancial fir

127、ms edged down slightly in the third quarter of 2023 but stayed high by historical standards(figure2.5).Net leveragethe ratio of debt less cash to total assetsalso inched down among all large publicly traded businesses,although it remained at an elevated level.Figure 2.2.Both business and household d

128、ebt-to-GDP ratios decreasedNonfinancial business(right scale)Household(left scale)31201720230.30.40.50.60.70.80.91.01.10.40.50.60.70.80.91.0Q4QuarterlyRatioRatioSource:Federal Reserve Board staff calculations based on Bureau of Economic Analysis,national income and product acco

129、unts,and Federal Reserve Board,Statistical Release Z.1,“Financial Accounts of the United States.”Figure 2.3.Business debt adjusted for inflation continued to decline8200505101520Q4QuarterlyPercent change,annual rateSource:Federal Reserve Board,Statistical ReleaseZ.1,“Financial

130、Accounts of the United States.”Figure 2.4.Net issuance of risky debt remained subduedInstitutional leveraged loansHigh-yield and unrated bonds2004200820024604020020406080100120Q1QuarterlyBillions of dollarsSource:Mergent,Inc.,Fixed Income Securities Database;PitchBook Data,Leveraged Comme

131、ntary&Data.18 Financial Stability ReportOverall,firms remained well placed to service their debt,despite some emerging signs of weakness among riskier firms.After declining from its peak reached post-pandemic,the median ICR stayed largely flat through the first three quarters of 2023 owing to resili

132、ent earnings(figure2.6).In addition,the pass-through of higher interest rates to firms borrowing costs remained moderate,reflect-ing record fixed-rate debt issuance by firms during the pandemic when interest rates were low.3 Corporate earnings remained strong through the first three quarters of 2023

133、.However,signs of stress in debt servicing and deterioration in credit quality continued to emerge.For example,the 12-month trailing corporate bond default rate moved up further,on net,since the October report and stood near the median of its historical distribution.Expectations of year-ahead defaul

134、ts remained somewhat elevated relative to their history.Small and middle-market firms that are privately heldwhich have less access to capital markets and primarily borrow from banks,private credit and equity funds,and sophisticated investors(such as insurance companies and brokers,for example)accou

135、nt for roughly 60percent of outstanding U.S.debt.While data for these firms are not as comprehen-sive as those for larger firms,vulnerabilities for these firms appeared to inch up throughout the second half of 2023 as higher interest rates started to reduce earnings and raise the cost of debt servic

136、ing.Although subdued by historical standards,median gross and net leverage of small firms and businesses continued to increase into the fourth quarter of 2023.The ICR for the median firm in this category continued to decline from its peak in 2022,falling notably in the fourth quarter of 2023,but rem

137、ained above pre-pandemic levels.3 Only about 6percent of outstanding bonds rated triple-B and 2percent of outstanding high-yield bonds are due within a yearthat is,up to the first quarter of 2025.Figure 2.5.Gross leverage of large businesses stayed at high levels by historical standards75th percenti

138、leAll firms20032007200232025303540455055Q3QuarterlyPercentSource:Federal Reserve Board staff calculations based on S&P Global,Compustat.Figure 2.6.Firms ability to service their debt,as measured by the interest coverage ratio,remained robustMedian for all firmsMedian for all non-investmen

139、t-grade firms20032007200230123456Q3QuarterlyRatioSource:Federal Reserve Board staff calculations based on S&P Global,Compustat.Borrowing by Businesses and Households 19The credit quality of outstanding and newly issued leveraged loans has shown continued signs of deterioration over the pa

140、st several quarters.ICRs on outstanding leveraged loans declined in the third quarter of 2023 and more recent high-frequency data suggest that rating downgrades con-tinued to outpace upgrades.Meanwhile,the default rate remained around its historical median(figure2.7).The share of newly issued loans

141、to large corporations with debt multiplesdefined as the ratio of debt to earnings before interest,taxes,depreciation,and amortizationgreater than 4 fell in 2023 to its lowest level in the past decade,reflecting a waning willingness of investors to tolerate additional leverage,and only modestly rebou

142、nded in the first quarter of 2024(figure2.8).Delinquencies at small businesses edged upInterest rates on small business loans ticked down in the most recent data but remained at high levels overallnear the top of the range observed since 2008.According to the National Federation of Independent Busin

143、ess Small Business Economic Trends Survey,the share of firms Figure 2.7.The default rate on leveraged loans remained around its historical median92002468101214Feb.MonthlyPercentSource:PitchBook Data,Leveraged Commentary&Data.Figure 2.8.New leveraged loans with debt multiples gr

144、eater than 4 rebounded modestly in early 2024Debt multiples 6xDebt multiples 5x5.99xDebt multiples 4x4.99xDebt multiples 4x2003200620092002080100Q1PercentSource:Mergent,Inc.,Fixed Income Securities Database;PitchBook Data,Leveraged Commentary&Data.20 Financial Stability Reportt

145、hat borrow regularly dropped somewhat and stayed in the lower range of its historical distribu-tion in February2024.4 Credit availability appeared to tighten for small firms in recent months.Data from the Small Business Lending Survey showed that banks continued to tighten standards on small busines

146、ses.5 However,measures of small business loan originations were stable and the share of firms with unmet financing needs remained unchanged at a low level as of Febru-ary2024.Small business credit quality has deteriorated in recent quarters,as longer-term delin-quency rates rose from their historic

147、lows to above their pre-pandemic levels.Vulnerabilities from household debt remained moderateOutstanding household debt adjusted for infla-tion increased marginally in the fourth quarter of 2023,due to slight increases in the prime and subprime categories(figure2.9).Since the October report,the rati

148、o of total required household debt payments to total disposable income(the household debt service ratio)decreased a touch and remained at mod-est levels.As most household debt carries fixed interest rates,the increase in interest rates starting in early 2022 has only par-tially passed through to hou

149、sehold interest expenses.Mortgage credit risk remained generally lowMortgage debt,which accounts for roughly two-thirds of total household debt,grew more slowly than GDP over the past two quarters.An estimate of housing leverage,which measures home values as a function of rents and other market fund

150、amentals,increased modestly but remained significantly lower than its peak levels before 2008(figure2.10,black line).The overall mortgage delinquency rate increased only marginally in the fourth quarter of 2023,continuing to tick up from the historically low levels reached in 2021,while the share of

151、 mortgage balances in loss-mitigation programs ticked down from already low levels(figure2.11).Delinquency rates have been held in check by large home equity cushions and strong underwriting standards(figure2.12).4 This surveys data are available on the National Federation of Independent Businesss w

152、ebsite at https:/ This surveys data are available on the Federal Reserve Bank of Kansas Citys website at https:/www.kansascityfed.org/surveys/small-business-lending-survey.Figure 2.9.Real household debt edged upPrimeNear primeSubprime7200230246810121416Q4QuarterlyTrillions of d

153、ollars(real)Source:Federal Reserve Bank of New York Consumer Credit Panel/Equifax;consumer price index,Bureau of Labor Statistics via Haver Analytics.Borrowing by Businesses and Households 21New mortgage extensions,which have been skewed heavily toward prime borrowers over the past decade,continued

154、to decline sharply in 2023 amid elevated mortgage rates and high housing prices(figure2.13).In the sec-ond quarter of 2023,the early payment delin-quency ratethe share of balances becoming delinquent within one year of mortgage origi-nationcontinued to rise from its 2020 low,possibly reflecting high

155、er interest expenses and the corresponding financial strains on newly originated mortgages.Figure 2.10.A model-based estimate of housing leverage increased modestlyRelative to model-implied valuesRelative to market value72002360800180Q4Quarterly1999:Q1=100Source:Fede

156、ral Reserve Bank of New York Consumer Credit Panel/Equifax;Zillow,Inc.,Real Estate Data;Bureau of Labor Statistics via Haver Analytics.Figure 2.11.Mortgage delinquency rates ticked up from low levelsDelinquentDelinquent/loss mitigation20032007200230246810Q4QuarterlyPercent of mortgagesSou

157、rce:Federal Reserve Bank of New York Consumer Credit Panel/Equifax.Figure 2.12.Very few homeowners had negative equity in their homes200023051015202530Dec.MonthlyPercent of mortgagesSource:CoreLogic,Inc.,Real Estate Data.Figure 2.13.New mortgage extensions declined across all b

158、orrower categoriesSubprimeNear primePrime2002200520082002020230200400600800016001800AnnualBillions of dollars(real)Source:Federal Reserve Bank of New York Consumer Credit Panel/Equifax;consumer price index,Bureau of Labor Statistics via Haver Analytics.22 Financial Stability Re

159、portCredit risk of consumer debt edged up with some signs of stress among borrowers with low credit scoresConsumer debtwhich accounts for the remaining one-third of household debt and consists primarily of student,auto,and credit card loansedged down in real terms since the last report(figure2.14)an

160、d,in nominal terms,increased at a slower pace than nomi-nal GDP.However,delinquency rates for auto loans and credit cards increased,particularly among borrowers with lower credit scores.Real auto loan balances ticked up for prime and subprime borrowers but declined mod-estly for near-prime borrowers

161、(figure2.15).Overall,total real auto loan balances remained below pandemic highs.The share of auto loans in mitigationthat is,when the lender offers relief or repayment options to a borrower struggling to keep up their loan paymentsticked down in the fourth quarter of 2023.That said,this share incre

162、ased modestly over the past several quarters and currently stands roughly in line with its historical median.The share of auto loans in delinquent status increased somewhatalthough the upward trend has moderated recentlyand stayed at a level above its historical median(figure2.16).Behind this modera

163、te increase in the overall delinquency rate was a much sharper rise in auto loan delinquencies for subprime borrowers throughout 2023.Figure 2.14.Real consumer credit edged down since late last yearStudent loansAuto loansCredit cards72002320040060080000Q4Q

164、uarterlyBillions of dollars(real)Source:Federal Reserve Bank of New York Consumer Credit Panel/Equifax;consumer price index,Bureau of Labor Statistics via Haver Analytics.Figure 2.15.Real auto loans outstanding ticked up for prime and subprime borrowersPrimeNear primeSubprime7201120152019

165、20230500600700800900Q4QuarterlyBillions of dollars(real)Source:Federal Reserve Bank of New York Consumer Credit Panel/Equifax;consumer price index,Bureau of Labor Statistics via Haver Analytics.Figure 2.16.Auto loan delinquencies remained at levels above their historical medianDelinquentD

166、elinquent/loss mitigation20032007200230246810Q4QuarterlyPercentSource:Federal Reserve Bank of New York Consumer Credit Panel/Equifax.Borrowing by Businesses and Households 23Aggregate real credit card balances continued to increase over the second half of the year,with broad-based increas

167、es across the credit score distribution(figure2.17).As interest rates on credit card balances are flexible,they increased in line with short-term rates over the past year.Credit card delinquency rates have continued to rise over the same period(figure2.18).After rising rapidly for more than a decade

168、,inflation-adjusted student loan debt began to decline with the onset of the pandemic and has continued to do so through the end of 2023.Figure 2.17.Real credit card balances continued to rise in the second half of 2023PrimeNear primeSubprime72002300500600Q4Quarterly

169、Billions of dollars(real)Source:Federal Reserve Bank of New York Consumer Credit Panel/Equifax;consumer price index,Bureau of Labor Statistics via Haver Analytics.Figure 2.18.Credit card delinquencies increased further in the second half of 2023200320072002302468Q4QuarterlyPercentSource:F

170、ederal Reserve Bank of New York Consumer Credit Panel/Equifax.253Leverage in the Financial SectorVulnerabilities associated with financial leverage remained notable,reflecting fair value losses on fixed-rate assets for some banks and elevated leverage at some nonbanksThe banking system,overall,remai

171、ned sound and resilient.Measures of regulatory capital for banks increased over the second half of 2023 and point to the resilience of the banking sector as a whole.Nevertheless,fair value losses on fixed-rate assets remained sizable for some banks,and some banks have concentrated exposures to loans

172、 backed by CRE.Outside the banking sector,leverage at broker-dealers stayed near historically low levels,but limited capacity or willingness of broker-dealers to intermediate in Treasury markets during market stress remained a structural vulnerability.Life insurers continued to take on liquidity and

173、 credit risk,while their leverage increased and stood around its median.Measures of hedge fund lever-age increased in the third quarter of 2023 to the highest level observed since the beginning of data availability,with the increase driven primarily by the largest hedge funds.Table 3.1 shows the siz

174、es and growth rates of the assets of financial institutions discussed in thissection.Bank profitability remained robustAmid the considerable increase in interest rates over the past two years,the profitability of the banking sector stayed solid.Banks average rates on interest-earning assets remained

175、 well above the average interest expense rates on liabilities(figure3.1).That said,interest expenses increased somewhat faster than interest income,reflecting a higher share of interest-bearing deposits on banks balance sheets and somewhat higher deposit rates.As a result,net interest margins,which

176、measure banks yield ontheir interest-earning assets after netting out interest expenses,declined a notch in the aggregate in 2023.Measures of banks capital increased,while fair value losses in fixed-rate assets remained sizable for some banksThe common equity Tier1(CET1)ratioa regulatory risk-based

177、measure of bank capital adequacyincreased during the fourth quarter of 2023 across all bank categories(figure3.2).CET1ratios for global systemically important banks(G-SIBs)reached the highest levels recorded in the past decade,while CET1 ratios for large nonG-SIBs and other bank holding companies we

178、re close to pre-pandemic levels.26 Financial Stability ReportTable 3.1.Size of selected sectors of the financial system,by types of institutions and vehiclesItemTotal assets(billions of dollars)Growth,2022:Q42023:Q4(percent)Average annual growth,19972023:Q4(percent)Banks and credit unions26,159 2.1

179、5.9 Mutual funds19,600 13.1 9.0 Insurance companies13,126 9.1 5.6 Life 9,820 8.5 5.7 Property and casualty3,306 11.0 5.6 Hedge funds110,127 11.5 7.5 Broker-dealers25,569 13.0 5.1 Outstanding(billions of dollars)Securitization13,446 2.4 5.5 Agency 11,940 2.4 5.9 Non-agency31,506 2.5 3.6Note:The data

180、extend through 2023:Q4 unless otherwise noted.Outstanding amounts are in nominal terms.Growth rates are measured fromQ4 of the year immediately preceding the period through Q4 of the final year of the period.Life insurance companies assets include both gen-eral and separate account assets.1Hedge fun

181、d data start in 2012:Q4 and are updated through 2023:Q3.Growth rates for the hedge fund data are measured from Q3 of theyear immediately preceding the period through Q3 of the final year of the period.2Broker-dealer assets are calculated as unnetted values.3Non-agency securitization excludes securit

182、ized credit held on balance sheets of banks and finance companies.Source:Federal Reserve Board,Statistical Release Z.1,“Financial Accounts of the United States”;Federal Reserve Board,“Enhanced FinancialAccounts of the United States.”Figure 3.1.Banks average interest rate on interest-earning assets r

183、emained significantly above the average expense rate on liabilitiesAverage interest rate on interest-earning assetsAverage interest expense rate on liabilities200267Q4QuarterlyPercentSource:Federal Reserve Board,Form FR Y-9C,Consolidated Financial Statements for Holding Compani

184、es.Leverage in the Financial Sector 27Higher interest rates continued to affect the fair value of banks holdings of fixed-rate assets.As interest rates rose from pandemic lows over the past two years,the fair value of these securities declined,but these declines started to moderate somewhat toward t

185、he end of 2023.At the end of the fourth quarter of 2023,banks had declines in fair value of$204billion in available-for-sale(AFS)portfolios and$274billion in held-to-maturity portfolios(figure3.3).An alternative measure of bank capital is the ratio of tangible common equity to total tangible assets.

186、The tangible common equity ratio has similarities to the CET1 ratio in that both exclude intangible items such as goodwill from the measurement of capital,but there are also important differences between the two.In contrast with CET1,the tangible common equity ratio does not account for the riskines

187、s of assets but does include fair value declines on AFS securities for all Figure 3.3.The fair value losses of banks securities portfolios declined through the end of 2023 but remained sizableAvailable-for-sale securitiesHeld-to-maturity securities200202020700600500400300200100

188、0100200Q4QuarterlyBillions of dollarsSource:Federal Financial Institutions Examination Council,Call Report Form FFIEC 031,Consolidated Reports of Condition and Income(Call Report);Federal Reserve Board,Form FR Y-9C,Consolidated Financial Statements for Holding Companies.Figure 3.2.Banks risk-based c

189、apital ratio increased to or beyond pre-pandemic levelsG-SIBsLarge nonG-SIBsOther BHCs20022005200820020202302468101214Q4QuarterlyPercent of risk-weighted assetsSource:Federal Reserve Board,Form FR Y-9C,Consolidated Financial Statements for Holding Companies.28 Financial Stability Reportba

190、nks.The tangible common equity ratio moved upacross all bank categories in thesecond half of the year(figure3.4).Nonetheless,this ratio remained at a level below its average over the pastdecade.Credit quality at banks remained sound overall,despite rising delinquencies in some consumer and commercia

191、l real estate loansegmentsAs of the fourth quarter of 2023,aggregate credit quality in the nonfinancial sector remained sound overall.That said,the quality of outstanding loans worsened in some sectors,as the delinquency rates for credit card,auto,and CRE loansespecially those backed by office prope

192、rtiesincreased in the second half of 2023.Exposures in auto and credit card loans remained concentrated in a few large banks.As interest rates increased over the past two years,banks continued to build their allowances for loan losses on credit card and CRE port-folios in anticipation of rising deli

193、nquencies.Nevertheless,risks on loans backed by CRE prop-erties remained elevated,and banks with concentrated exposure to this sector are particularly vulnerable.Borrower leverage for bank commercial and industrial(C&I)loans decreased somewhat since the October report(figure3.5).Recent SLOOS survey

194、responses indicated that lending standards continued to tighten across most loan categories during the second half of 2023,suggesting that banks were limiting their exposure to this risk.That said,the pace at which standards were tightened has reportedly slowed,especially for C&I loans,as the percen

195、tage of banks reporting tightening standards declined relative to the first half of 2023(figure3.6).Figure 3.4.The ratio of tangible common equity to tangible assets increased for banks of all categoriesG-SIBsLarge nonG-SIBsOther BHCs920052024681012Q4QuarterlyPercent of tangibl

196、e assetsSource:For data through 1996,Federal Financial Institutions Examination Council,Call Report Form FFIEC 031,Consolidated Reports of Condition and Income(Call Report).For data from 1997 onward,Federal Reserve Board,Form FR Y-9C,Consolidated Financial Statements for Holding Companies;Federal Fi

197、nancial Institutions Examination Council,Call Report Form FFIEC 031,Consolidated Reports of Condition and Income(Call Report).Leverage in the Financial Sector 29Leverage at broker-dealers remained lowRisks posed to the financial system by broker-dealer leverage remained low.Despite a small uptick in

198、 the fourth quarter of 2023,the leverage ratio stood near historically low levels(figure3.7),as dealer equity kept up with the continued expansion in assets.Reflecting seasonal trends,end-of-year profits declined,dropping below typical pre-pandemic levels(figure3.8).The share of fixed income,rates,a

199、nd credit in trading profits decreased in the most recent data,while the share of equity increased(figure3.9).Since the October report,net secured borrowing of primary dealers declined somewhat but remained elevated overall and in line with net positions.Dealers intermediation activity remained broa

200、dly stable at elevated levels.That said,insufficient intermediation capacity during periods of stress remained a structural vulnerability in the sector.Figure 3.5.Borrower leverage for bank commercial and industrial loans inched downNon-publicly-traded firmsPublicly traded firms2001920212

201、02324262830323436Q4QuarterlyDebt as percentage of assetsSource:Federal Reserve Board,Form FR Y-14Q(Schedule H.1),Capital Assessments and Stress Testing.Figure 3.6.The percentage of banks reporting tightening standards for commercial and industrial loans declined in the second half of 2023

202、8200080604020020406080100Q4QuarterlyNet percentage of banks reportingEasingTighteningSource:Federal Reserve Board,Senior Loan Officer Opinion Survey on Bank Lending Practices;Federal Reserve Board staff calculations.30 Financial Stability ReportIn the March2024 Senior Credit Officer Opini

203、on Survey on Dealer Financing Terms(SCOOS),dealers reported that terms on securities financing transactions and over-the-counter derivatives remained about unchanged.6 Use of financial leverage was also reported to have changed little on net.Additionally,the special questions in the March SCOOS aske

204、d about changes in financing terms and market conditions for selected segments of the market for commercial mortgage-backed securities(CMBS)collateralized by office properties.Overall,answers to the special questions point to a tightening of financing terms and weakening of liquidity in the office C

205、MBS market,as collateral quality has weakened and demand for funding has increased.6 The SCOOS is available on the Federal Reserve Boards website at https:/www.federalreserve.gov/data/scoos.htm.Figure 3.8.Trading profits in December declined below their average20020020030040050

206、06007008009001000Dec.Monthly averageMillions of dollarsSource:Federal Reserve Board,Reporting,Recordkeeping,and Disclosure Requirements Associated with Regulation VV(Proprietary Trading and Certain Interests in and Relationships with Covered Funds,12 C.F.R.pt.248).Figure 3.7.Leverage at broker-deale

207、rs remained near historical lows1995 1999 2003 2007 2011 2015 2019 202301020304050Q4QuarterlyRatio of assets to equitySource:Federal Reserve Board,Statistical ReleaseZ.1,“Financial Accounts of the UnitedStates.”Figure 3.9.Equities increased further as a share of trading profits in the most recent da

208、taEquityFixed income,rates,and creditOther20020406080100Dec.Monthly averagePercentSource:Federal Reserve Board,Reporting,Recordkeeping,and Disclosure Requirements Associated with RegulationVV(Proprietary Trading and Certain Interests in and Relationships with Covered Funds,12 C

209、.F.R.pt.248).Leverage in the Financial Sector 31Life insurers continued to take on liquidity and credit risk,while their leverage remained in the middle of its historical rangeIn the fourth quarter of 2023,leverage at property and casualty insurers remained near the bottom of its historical distribu

210、tion,while leverage at life insurers rose and stood around the median of its historical distribution(figure3.10).Life insurers continued to take on liquidity and credit risk in their portfolios by allocating an increasing percentage of assets to risky and less liquid instruments,such as leveraged lo

211、ans,high-yield corporate bonds,privately placed corporate bonds,and alterna-tive investments.Further,because insurance companies are large holders of CMBS and have material direct exposures to commercial mortgages,a significant correction in com-mercial property values could put pressure on their ca

212、pital positions.Leverage at hedge funds reached its highest level in available dataComprehensive data collected through the U.S.Securities and Exchange Commissions(SEC)Form PF indicated that measures of leverage averaged across all hedge funds increased further in the third quarter of 2023,reaching

213、the highest level observed since the beginning of data avail-ability.Leverage increased when measured using either average on-balance-sheet leverage(blue line in figure3.11)which captures financial leverage from secured financing transactions,such as repurchase agreements and margin loans,but does n

214、ot capture leverage embedded through derivativesor average gross leverage of hedge funds(black line in figure3.11),a broader mea-sure that also incorporates off-balance-sheet derivatives exposures.Leverage at the largest funds was significantly higher,with the average on-balance-sheet leverage of th

215、e top 15hedge funds by gross asset value rising in the third quarter of 2023 to about 18-to-1(figure3.12).These high levels of leverage were facilitated,in part,by low haircuts on Treasury collateral in some markets where many funds obtain short-term financing.7 More recent data from the March SCOOS

216、 sug-gested that hedge fund leverage flattened out as the use of financial leverage by hedge funds remained largely unchanged between mid-November2023 and mid-February2024(figure3.13).7 See Ayelen Banegas and Phillip Monin(2023),“Hedge Fund Treasury Exposures,Repo,and Margining,”FEDS Notes(Washingto

217、n:Board of Governors of the Federal Reserve System,September8),https:/doi.org/10.17016/2380-7172.3377.Figure 3.10.Leverage at life insurance companies rose and remained around itsmedianLifeProperty and casualty200320072002303691215Q4QuarterlyRatio of assets to equitySource:Generally accep

218、ted accounting principles data from 10-Q and 10-K filings accessed via S&P Global,Capital IQ Pro.32 Financial Stability ReportAs of the third quarter of 2023,data from Form PF showed that net repurchase agreement bor-rowing,one measure of the Treasury cash-futures basis trade,grew to near historic h

219、ighs,while data from the Commodity Futures Trading Commission(CFTC)Traders in Financial Futures report also showed leveraged funds short Treasury futures positions were near historical highs.8 Mean-while,indicators based on data from the first quarter of 2024,including leveraged funds short Treasury

220、 futures positions and a basis trade proxy from Treasury TRACE,suggested the basis trade might have declined from its levels at the end of 2023 but remained elevated.This highly leveraged trade,which involves shorting a Treasury futures contract and purchasing a Treasury note deliverable into that c

221、ontract,with the note typically financed in bilateral repurchase agree-ment markets,was popular among hedge funds between mid-2018 and February2020,and its subsequent unwinding contributed to the Treasury market turmoil in March2020.8 CFTC data and reports are available on the CFTCs website at https

222、:/www.cftc.gov/MarketReports/CommitmentsofTraders/index.htm.Figure 3.13.Dealers indicated that the use of leverage by hedge funds remained largely unchangedHedge fundsTrading REITsInsurance companiesMutual funds2000248060402002040Q1QuarterlyNet percentageSource:Federal Reserve

223、Board,Senior Credit Officer Opinion Survey on Dealer Financing Terms.Figure 3.12.Leverage at the largest hedge funds increasedTop 15,by GAV1650,by GAV51+,by GAV20051015202530Q3QuarterlyRatioSource:Securities and Exchange Commission,FormPF,Reporting Form for Investment Advisers

224、to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors.Figure 3.11.Leverage at hedge funds reached its highest level since data became availableMean gross leverageMean balance sheet leverage200Q3QuarterlyRatioSource:Securities and Exchan

225、ge Commission,FormPF,Reporting Form for Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors.Leverage in the Financial Sector 33Issuance of non-agency securities by securitization vehicles started recovering in 2024 despite ongoing concerns about c

226、ommercial realestateNon-agency securitization issuancewhich increases the amount of leverage in the financial systemstarted to recover in the first three months of 2024 from subdued levels experienced throughout 2023(figure3.14).9 Credit spreads on most major securitized products generally narrowed

227、since the October report.In the CMBS segment,lower-rated tranche spreads did not decline as much as senior-tranche spreads,likely reflecting ongoing investor concerns on credit risks in CRE loans underlying CMBS deals.Credit performance across securitized products backed by riskier loan collateral c

228、ontinued to show signs of deterioration,indicated by increasing loan delinquency rates or default rates compared with their respective historical averages.This deterioration in credit performance was especially pronounced in CRE-related securitization deals involving office loans as well as certain

229、segments of multifamily loans.Delinquency rates in cer-tain CRE collateralized loan obligations also increased notably.Bank lending to nonbank financial institutions increasedBank lending to nonbank financial institutions(NBFIs)can be informative about the amount of leverage used by NBFIs and shed l

230、ight on their interconnectedness with the rest of the financial system.After remaining flat in the third quarter of 2023,bank credit commitments to NBFIs9 Securitization allows financial institutions to bundle loans or other financial assets and sell claims on the cash flows generated by these asset

231、s as tradable securities,much like bonds.By funding assets with debt issued by invest-ment funds known as special purpose entities(SPEs),securitization can add leverage to the financial system,in part because SPEs are generally subject to regulatory regimes,such as risk retention rules,that are less

232、 stringent than banks regulatory capital requirements.Examples of the resulting securities include collateralized loan obligations(predominantly backed by leveraged loans),asset-backed securities(often backed by credit card and auto debt),CMBS,and residential mortgage-backed securities.Figure 3.14.I

233、ssuance of non-agency securitized products increased in early 2024 from the subdued levels of 2023OtherPrivate-label RMBSNon-agency CMBSAuto loan/lease ABSCDOs(including CLOs and ABS CDOs)200320062009200200240028003200AnnualBillions of dollars(real)Source:Green Stree

234、t,Commercial Mortgage Alerts CMBS Database and Asset-Backed Alerts ABS Database;consumer price index,Bureau of Labor Statistics via Haver Analytics.34 Financial Stability Reportresumed growing in the fourth quarter(figure3.15).The year-over-year growth rate in commit-ted amounts was largely due to l

235、oans to open-end investment funds and special purpose enti-ties and securitization vehicles,both of which grew about 15percent over the course of 2023(figure3.16).This growth was partially offset by declines in bank credit commitments to real estate investment trusts.Utilization rates on credit line

236、s to NBFIs,which averaged close to 50percent of total committed amounts,decreased.Delinquency rates on banks lending to NBFIs continued to decline for nearly all counterparties in the fourth quarter of 2023.Figure 3.15.Bank credit commitments to nonbank financial institutions grew1.Financial transac

237、tions processing2.Private equity,BDCs,and credit funds3.Broker-dealers4.Insurance companies5.REITs6.Open-end investment funds7.Special purpose entities,CLOs,and ABS8.Other financial vehicles9.Real estate lenders and lessors20025050075000Q4QuarterlyBillions

238、 of dollars10.Consumer lenders,other lenders,and lessorsSource:Federal Reserve Board,Form FR Y-14Q(Schedule H.1),Capital Assessments and Stress Testing.Figure 3.16.Aggregate credit commitments to nonbank financial institutions increased in 2023 for most sectors except real estate investme

239、nt trusts,broker-dealers,and real estate lenders andlessorsCommitted amountsUtilized amountsREITsTotal403020100102030PercentFinancialtransactionsprocessingConsumer,leasing,&otherlendersInsurancecompaniesPE,BDCs,&creditfundsBroker-dealersOpen-endinvestmentfundsSPEs,CLOs,&ABSRealestatelenders&lessorsO

240、therfinancialvehiclesSource:Federal Reserve Board,Form FR Y-14Q(Schedule H.1),Capital Assessments and Stress Testing.35Funding Risks4Vulnerabilities from funding risks remained notable,reflecting challenges at some banks and structural vulnerabilities in other sectors engaged in liquidity transforma

241、tion The banking industry maintained a high level of liquidity since the October report.Funding risks for most banks remained low,and large banks that are subject to the liquidity coverage ratio(LCR)continued to maintain ample levels of high-quality liquid assets(HQLA).Deposit outflows stabilized ov

242、er the second half of last year following the March2023 banking-sector stresses and turned into inflows by the fourth quarter of 2023.Nevertheless,some banks continued to face funding challenges,including higher costs for funding and relatively high reliance on uninsured deposits.The Bank Term Fundi

243、ng Program(BTFP)ceased extending new loans on March11,2024.Prime MMFs and similar cash-management vehicles remained a prominent source of vulnerability given their susceptibility to runs and the significant role they play in short-term funding markets.In addition,some cash-management vehicles,includ

244、ing retail prime MMFs,government MMFs,and short-term investment funds,maintained stable net asset values(NAVs)but may face diffi-culties doing so because they hold assets in their portfolios whose valuations are vulnerable to sharp movements in interest rates.Stablecoins are also prone to run risks

245、like those of MMFs and other cash-management vehicles.However,the combined market capitalization of all stable-coins(roughly$150billion currently)remained small relative to the broader funding markets,and stablecoins are not widely used as cash-management vehicles.Some open-end bond mutual funds rem

246、ained susceptible to large redemptions because they must allow shareholders to redeem every day even though the funds hold assets that can face losses and become illiquid amid stress.Life insurers continued to face funding risk owing to their reliance on a higher-than-average share of nontraditional

247、 liabilities in combination with an increas-ing share of illiquid and risky assets on their balance sheets.Overall,estimated runnable money-like financial liabilities grew 8.8percent to$21.3trillion(75percent of nominal GDP)over the past year,as a decline in uninsured deposits was more than offset b

248、y an increase in assets under management at MMFs.As a share of GDP,runnable liabilities remained above their historical median(table4.1 and figure4.1).36 Financial Stability ReportTable 4.1.Size of selected instruments and institutionsItemOutstanding/total assets(billions of dollars)Growth,2022:Q420

249、23:Q4(percent)Average annual growth,19972023:Q4(percent)Total runnable money-like liabilities121,348 9.0 4.8 Uninsured deposits 6,692 10.7 11.0 Domestic money market funds25,822 24.3 6.0 Government 4,763 20.3 15.2 Prime 937 52.1 2.5 Tax exempt 123 11.2 1.3 Repurchase agreements 4,843 33.1 5.8 Commer

250、cial paper1,235.6 2.6 Securities lending3811.8 6.8 Bond mutual funds4,525 6.2 8.0 Note:The data extend through 2023:Q4 unless otherwise noted.Outstanding amounts are in nominal terms.Growth rates are measured fromQ4 of the year immediately preceding the period through Q4 of the final year of the per

251、iod.Total runnable money-like liabilities exceed thesum of listed components.Unlisted components of runnable money-like liabilities include variable-rate demand obligations,federal funds,funding-agreement-backed securities,private liquidity funds,offshore money market funds,short-term investment fun

252、ds,local governmentinvestment pools,and stablecoins.1Average annual growth is from 2003:Q1 to 2023:Q4.2Average annual growth is from 2001:Q1 to 2023:Q4.3Average annual growth is from 2000:Q1 to 2023:Q2.Securities lending includes only lending collateralized by cash.Source:Securities and Exchange Com

253、mission,Private Funds Statistics;iMoneyNet,Inc.,Offshore Money Fund Analyzer;Bloomberg Finance L.P.;Securities Industry and Financial Markets Association:U.S.Municipal Variable-Rate Demand Obligation Update;Risk Management Association,Securities Lending Report;DTCC Solutions LLC,an affiliate of the

254、Depository Trust&Clearing Corporation:commercial paper data;FederalReserve Board staff calculations based on Investment Company Institute data;Federal Reserve Board,Statistical Release Z.1,“FinancialAccounts of the United States”;Federal Financial Institutions Examination Council,Consolidated Report

255、s of Condition and Income(CallReport);Morningstar,Inc.,Morningstar Direct;Llama Corp,DeFiLlama.Figure 4.1.Ratios of runnable money-like liabilities to GDP remained above their historical medians1.Other2.Securities lending3.Commercial paper4.Domestic money market funds5.Repurchase agreements6.Uninsur

256、ed deposits200220052008200202023020406080100120Q4QuarterlyPercent of GDP123456Source:Securities and Exchange Commission,Private Funds Statistics;iMoneyNet,Inc.,Offshore Money Fund Analyzer;Bloomberg Finance L.P.;Securities Industry and Financial Markets Association:U.S.Municipal Variable-

257、Rate Demand Obligation Update;Risk Management Association,Securities Lending Report;DTCC Solutions LLC,an affiliate of the Depository Trust&Clearing Corporation:commercial paper data;Federal Reserve Board staff calculations based on Investment Company Institute data;Federal Reserve Board,Statistical

258、 Release Z.1,“Financial Accounts of the United States”;Federal Financial Institutions Examination Council,Consolidated Reports of Condition and Income(Call Report);gross domestic product,Bureau of Economic Analysis via Haver Analytics;Llama Corp,DeFiLlama.Funding Risks 37Most banks maintained high l

259、evels of liquid assets and stable fundingAggregate liquidity in the banking system appeared ample,as HQLA measured relative to total assets stabilized at most banks in the second half of 2023(figure4.2).Moreover,U.S.G-SIBs continued to hold more HQLA than required by their LCRthe requirement that en

260、sures banks hold sufficient HQLA to fund estimated cash outflows for 30 days during a hypothetical stress event.While banks reliance on short-term wholesale funding increased slightly over the second half of last year,the levels remained low relative to longer-term averages(figure4.3).Deposit flows

261、have stabilized across most bank groups over the past six months,as market sen-timent has improved following the banking-sector stresses in March2023.However,key vulner-abilities that interacted to cause the regional banking crisis last springlarge fair value losses relative to regulatory capital an

262、d elevated reliance on uninsured depositsremained elevated for a subset of banks.The BTFP helped support the stability of the financial system and thereby American businesses and households,providing funding during the acute phase of the banking-sector stresses,and many depository institutions conti

263、nued to rely on it over the past year.The box“The Bank Term Funding Program”summarizes how the BTFP was effective in helping banks to safeguard deposits while continuing to meet the credit needs of the economy over the past year.Figure 4.2.The amount of high-quality liquid assets held by most banks

264、stabilized in the second half of 2023G-SIBsLarge nonG-SIBsOther BHCs20032007200230482Q4QuarterlyPercent of assetsSource:Federal Reserve Board,Form FR Y-9C,Consolidated Financial Statements for Holding Companies.Figure 4.3.Banks reliance on short-term wholesale funding remained

265、low20032007200235540Q4QuarterlyPercent of assetsSource:Federal Reserve Board,Form FR Y-9C,Consolidated Financial Statements for Holding Companies.38 Financial Stability ReportBox 4.1.The Bank Term Funding ProgramThe banking system came under severe stress in March2023.After exp

266、eriencing deposit withdraw-als of unprecedented speed,Silicon Valley Bank and Signature Bank collapsed on March10 and March12,respectively,when it became clear that they did not have suffi cient liquidity to meet per-sistent and increasingly signifi cant deposit outfl ows.The two failures generated

267、broader concerns about destabilizing runs at other commercial banks with similar profi lesthose with heavy reliance on uninsured deposits and large unrealized losses in their securities portfolios.Concerns over broader contagion led some of those banks to face rapid deposit outfl ows.In response to

268、the market turmoil,the Federal Reserve Board,the Federal Deposit Insurance Corpo-ration(FDIC),and the U.S.Department of the Treasury took actions to protect bank depositors,sup-port fi nancial stability,and minimize the effect of stress in the banking system on businesses,house-holds,taxpayers,and t

269、he broader economy.1 The Federal Reserve Board,with approval by the Secre-tary of the Treasury,established the BTFP pursuant to section 13(3)of the Federal Reserve Act.2 The BTFP provided depository institutions an additional source of liquidity against high-quality securi-ties for them to meet the

270、needs of all their depositors.The ability of depository institutions to access funding without selling securities at a loss during stress limited destabilizing runs and the associated potential for further contagion throughout the banking system.While the banking system saw deposit outfl ows of$472b

271、illion in the fi rst quarter of 2023,those outfl ows moderated to$99billion in the second quarter and slowed further to$90billion in the third quarter.Deposits in the banking system experienced infl ows of$260billion in the fourth quarter.Banks with total assets below$250billion experienced the grea

272、test deposit outfl ows in the fi rst quarter;outfl ows fell off rapidly in the second quarter and turned to infl ows in the third and fourth quarters.Eligible BTFP borrowers included federally insured banks,savings associations,and credit unions,as well as U.S.branches and agencies of foreign banks

273、that were eligible for primary credit under the Federal Reserves discount window.The BTFP extended advances of up to one year against the par value of eligible collateral,consisting of securi-ties that are eligible for purchase by the Federal Reserve in open market operations,such as U.S.Treasury se

274、curities,U.S.agency securities,and U.S.agency mortgage-backed securities,and were owned by the borrower as of March12,2023.Under the BTFP,no haircuts were applied to eligible collateral.The rate for advances was fi xed for the duration of the advance at the one-year overnight index swap rate plus 10

275、 basis points on the day the advance was made.The interest rate applicable to new BTFP advances was adjusted on January24,2024,to be no lower than the interest rate on reserve balances on the same day the advance was made.As fi gure A shows,credit extended through the BTFP increased at a rapid pace

276、initially,reaching a level above$60billion by the end of March2023.Credit extended continued to increase in subsequent months,although at a 1 On March12,2023,the Secretary of the Treasury,after receiving a written recommendation from the FDICs board of direc-tors and the Federal Reserve Board,and co

277、nsulting with the President,approved a systemic risk exception,enabling the FDIC to complete the resolution of Silicon Valley Bank and Signature Bank in a manner that fully protected all depositors.2 With approval of the Secretary of the Treasury,the Treasury committed to make available up to$25bill

278、ion from the Exchange Stabilization Fund as a backstop for the BTFP.(continued)Figure A.Outstanding balances of the Bank Term Funding Program declined in early 2024Mar.MayJulySept.Nov.Jan.Mar.0204060800180200Mar.27WeeklyBillions of dollars20232024Source:Federal Reserve Board,Statistical R

279、elease H.4.1,“Factors Affecting Reserve Balances,”accessed via Federal Reserve Economic Data.Funding Risks 39slower pace,surpassing$100billion by the end of August2023.Outstanding balances increased fur-ther in late 2023,surpassing$165billion before gradually declining in early 2024.The BTFP ceased

280、extending new loans,as scheduled,on March11,2024.Since its establishment,the BTFP extended advances to 1,804 depository institutions,of which 1,706,or 95percent,were small institutions with total assets below$10billion.3 Advances taken out on or before March11,2024,will mature,depending on the term

281、requested by the borrower,up to one year from the date the advance was made and need not be repaid before the maturity date.As a result,the BTFP continues to provide liquidity to eligible depository institutions.3 More than 9,000 institutions were eligible to borrow from the BTFP.Box 4.1continued40

282、Financial Stability ReportMoney market funds and other cash-management vehicles remained susceptible to runs owing to structural vulnerabilitiesAssets managed by MMFs increased steadily since the October report,as MMFs continued to provide more attractive yields relative to most bank deposits(figure

283、4.4).On July12,2023,the SEC voted to adopt reforms for MMFs.10 Some key elements of the reformsincreased minimum requirements for funds daily and weekly liquid assets and elimination of tempo-rary gates and fees linked to liquid asset levelsare already in effect.Mandatory dynamic liquidity fees for

284、institutional prime and institutional tax-exempt funds will go into effect later this year.On net,the reforms represent significant progress in making prime and tax-exempt MMFs more resil-ient,although these funds remain vulnerable to runs in periods of significant stress.Other cash-management vehic

285、les,such as dollar-denominated offshore MMFs and short-term investment funds,also invest in money market instruments,engage in liquidity transformation,and are vulnerable to runs.Since the October report,estimated aggregate assets under man-agement(AUM)of these cash-management vehicles remained roug

286、hly at$1.8trillion.Currently,between$0.6trillion and$1.6trillion of these vehicles AUM are in portfolios like those of U.S.prime MMFs,and large redemptions from these vehicles also have the potential to destabilize short-term funding markets.1110 See U.S.Securities and Exchange Commission(2023),“SEC

287、 Adopts Money Market Fund Reforms and Amendments to Form PF Reporting Requirements for Large Liquidity Fund Advisers,”press release,July12,https:/www.sec.gov/news/press-release/2023-129.11 Cash-management vehicles included in this total are dollar-denominated offshore MMFs,short-term investment fund

288、s,private liquidity funds,ultrashort bond mutual funds,and local government investment pools.Figure 4.4.Assets under management at money market funds continued to rise1.Government2.Tax exempt3.Retail prime4.Institutional prime20002004200820024004000500060007000Jan.MonthlyBillio

289、ns of dollars(real)1234Source:Federal Reserve Board staff calculations based on Investment Company Institute data;consumer price index,Bureau of Labor Statistics via Haver Analytics.Funding Risks 41Many cash-management vehiclesincluding retail and government MMFs,offshore MMFs,and short-term investm

290、ent fundsseek to maintain stable NAVs that are typically rounded to$1.00.If short-term interest rates rise sharply or portfolio assets lose value for other reasons,the market values of these funds may fall below their rounded share prices,which can put the funds under strain,particularly if they als

291、o have large,concurrent redemptions.Stablecoins remained vulnerable to runsStablecoin assetsdigital assets designed to maintain a stable value relative to a national currency or another reference assetgrew steadily since the October report.The total market capitalization of stablecoins grew to aroun

292、d$150billion(figure4.5).While not widely used as a cash-management vehicle or for transactions for real economic activity,stablecoins are important for digital asset investors.Stablecoins remain structurally vulnerable to runs and lack a compre-hensive prudential regulatory framework.Moreover,stable

293、coins could scale quickly,particularly if the stablecoin is supported by access to an existing customer base.Bond mutual funds asset holdings stabilized,but the funds remained exposed to liquidity risksMutual funds that invest substantially in corporate bonds,municipal bonds,and bank loans may be pa

294、rticularly exposed to liquidity transformation risks,given the relative illiquidity of their assets and the requirement that these funds offer redemptions daily.Despite some outflows amid rising interest rates since 2022,the outstanding amount of corporate bonds held by mutual funds remained high at

295、 approximately$1.3trillion as of the fourth quarter of 2023,the latest Figure 4.5.Market capitalization of major stablecoins increased slightly since late last year1.Other2.TerraUSD3.Dai4.Binance USD5.USD Coin6.TetherMar.JuneSept.Dec.Mar.JuneSept.Dec.Mar.JuneSept.Dec.Mar.050100150200Mar.25DailyBilli

296、ons of dollars02220232024Source:Llama Corp,DeFiLlama.42 Financial Stability Reportdata available,representing about 13percent of corporate bonds outstanding(figure4.6).Total AUM of the subcategories of mutual funds holding high-yield bonds and bank loans,which primarily hold riskier and l

297、ess liquid assets,stabilized in recent months(figure4.7).Bond and loan mutual funds also experienced negative returns and notable outflows during most of 2022,but outflows stabilized throughout last year and into early 2024(figure4.8).Figure 4.8.Flows have stabilized for bond and bank loan mutual fu

298、ndsInvestment-grade bond mutual fundsBank loan mutual fundsHigh-yield bond mutual fundsFeb.June Oct.Feb.June Oct.Feb.June Oct.Feb.June Oct.Feb.June Oct.Feb.June Oct.Feb.June Oct.Feb.100150MonthlyBillions of dollars2002020224Source:Investment Company Institute.Figure

299、4.7.Assets held by bank loan and high-yield mutual funds stayed relatively flat through early 2024Bank loan mutual fundsHigh-yield bond mutual funds200020042008200240755450525600Feb.MonthlyBillions of dollars(real)Source:Investment Company Institute;consumer price index,Bureau

300、of Labor Statistics via Haver Analytics.Figure 4.6.Corporate bonds held by bond mutual funds remained stable in the second half of 20232003200720023030060090002100Q4QuarterlyBillions of dollars(real)Source:Federal Reserve Board staff estimates based on Federal Reserve Board,Sta

301、tistical ReleaseZ.1,“Financial Accounts of the United States”;consumer price index,Bureau of Labor Statistics via Haver Analytics.Funding Risks 43Central counterparties initial margin levels and prefunded resources remained high,even as interest rate volatility has moderatedCentral counterparties(CC

302、P)initial margin levels remained high even as market volatility slightly decreased during the second half of 2023.CCPs also maintained high levels of prefunded resources.Elevated initial margins and ample overall prefunded resources work together to imply a relatively low vulnerability at CCPs to a

303、potential default by a clearing member or market par-ticipant.12 These two factors also reduce the possibility of large liquidity demands from a CCP to its credit providers(banks).However,additional liquidity risk remains around the concentration of clients at the largest clearing members,which coul

304、d make transferring client positions to other clearing members challenging if it were ever necessary.Life insurers nontraditional liabilities remained high Over the past decade,the share of less liquid assets held on life insurers balance sheetsincluding CRE loans,less liquid corporate debt,and alte

305、rnative instrumentshas gradually increased(figure4.9).Over this same period,life insurers have continued to increase their nontraditional liabilitiesincluding funding-agreement-backed securities and cash received through repurchase agreements and securities lending transactions(figure4.10).These lia

306、bilities can create liquidity risk through withdrawals or the inability to roll over funding if invested pro-ceeds are not appropriately matched.The steady decline in the liquidity of life insurers assets in conjunction with growing nontraditional liabilities makes it potentially more difficult for

307、life insur-ers to meet a sudden rise in withdrawals and otherclaims.12 Prefunded resources represent financial assets,including cash and securities,transferred by the clearing members to the CCP to cover that CCPs potential credit exposure in case of default by one or more clearing members.These pre

308、funded resources are held as initial margin and prefunded mutualized resources,which builds the resilience of CCPs to the possible default of a clearing member or market participant.Figure 4.9.Life insurers continued to hold more risky,illiquid assets on their balance sheets1.Other ABS2.CRE loans3.C

309、RE loans,securitized4.Alternative investments5.Illiquid corporate debt6.Illiquid corporate debt,Share of life insurer assets(left scale)Share of P&C insurer assets(left scale)20062008200022000500025003000Billions of dollarsPercent sharesecuritizedSource:Co

310、nsumer price index,Bureau of Labor Statistics via Haver Analytics;Federal Reserve Board staff estimates based on data from Bloomberg Finance L.P.and National Association of Insurance Commissioners Annual Statutory Filings.44 Financial Stability ReportFigure 4.10.Life insurers continued to use nontra

311、ditional liabilities for fundingRepurchase agreementsSecurities lending cash collateralFHLB advancesFunding-agreement-backed securities200720092000230500300350400450500550Q4Billions of dollars(real)Source:Consumer price index,Bureau of Labor Statistics via Haver Anal

312、ytics;Moodys Analytics,Inc.,CreditView,Asset-Backed Commercial Paper Program Index;Securities and Exchange Commission,Forms 10-Q and 10-K;National Association of Insurance Commissioners,quarterly and annual statutory filings accessed via S&P Global,Capital IQ Pro;Bloomberg Finance L.P.45Near-Term Ri

313、sks to the Financial System5The Federal Reserve routinely engages in discussions with domestic and international policy-makers,academics,community groups,and others to gauge the set of risks of greatest concern to these groups.As noted in the box“Survey of Salient Risks to Financial Stability,”in re

314、cent outreach,contacts were particularly focused on the risk of persistent inflationary pressures leading to a more restrictive than expected monetary policy stance,risks to the financial sector from increased policy uncertainty,and the potential effect of large losses on CRE and residential real es

315、tate.Risks associated with the reemergence of banking-sector stress and with fiscal debt sustainability in advanced economies also featured prominently.The following discussion considers possible interactions of existing domestic vulnerabilities with several potential near-term risks,including inter

316、national risks.Higher-for-longer interest rates in the U.S.and other advanced economies could create strains in the global financial systemInterest rates may stay higher for longer than markets currently expect for a range of reasons.The neutral level of interest rates is uncertain.Inflation could p

317、ersist for longer than expected,which could result in more restrictive monetary policy,heightened volatility in financial markets,and corrections in asset prices.In the U.S.,higher-for-longer interest rates could strain the bal-ance sheets and debt-servicing capacity of households and businesses,wea

318、kening the economic outlook.Financial intermediaries,including lenders with high exposures to CRE and consumer loans,could encounter greater losses as a result of higher interest rates,leading to a further tightening in financing conditions.In foreign economies,persistently high interest rates could

319、 challenge the debt-servicing capacity of households,businesses,and governments,including in emerging market economies(EMEs)that borrow externally.This stress could transmit to the U.S.through strains in dollar funding markets,rapid rebalancing of portfolios,and reduced credit from foreign lenders t

320、o U.S.borrowers.A worsening of global geopolitical tensions could lead to broad adverse spilloversConflict in the Middle East and Russias ongoing war against Ukraine pose risks to global eco-nomic activity,including the possibility of sustained disruptions to energy and commodity markets and global

321、value chains.Further escalation of geopolitical tensions or policy uncertainty could reduce economic activity,boost inflation,and heighten volatility in financial markets.The global 46 Financial Stability Reportfinancial system could be affected by a pullback from risk-taking,declines in asset price

322、s,and losses for exposed U.S.and foreign businesses and investors.Weakness in economic activity could compound existing strains in real estate markets,both domestically and abroad,and could amplify risks to the global financial systemIn the U.S.,unexpectedly weak economic growth could lead to a redu

323、ction in investor risk appetite and additional strains in CRE,especially in the office building sector,where vulnerabilities have mounted in the post-pandemic period.A more pronounced correction in commercial property prices could result in significant losses for banks and nonbank investors with con

324、centrated expo-sures to the sector.Such losses may reduce the willingness of financial intermediaries to supply credit to the economy,which would further weigh on economic activity.Slower global growth and higher interest rates could also put pressure on real estate markets abroad.In China,residenti

325、al real estate prices continue to fall,potentially putting further pressure on the highly indebted property sector.Stresses in China could spill over to other EMEs that rely on trade with China or credit from Chinese entities.Given the importance of EMEs,particularly China,to world trade and activit

326、y,such stresses could exacerbate adverse spillovers to global asset markets and economic activity,weighing on economic and financial conditions in the U.S.Near-Term Risks to the Financial System 47Box 5.1.Survey of Salient Risks to Financial StabilityAs part of its market intelligence gathering,staf

327、f from the Federal Reserve Bank of New York solic-ited views from a wide range of contacts on risks to U.S.fi nancial stability.From late January to late March2024,the staff surveyed 25 contacts,including professionals at broker-dealers,investment funds,research and advisory fi rms,and academics.The

328、 risk of persistent infl ationary pressures leading to a more restrictive than expected monetary policy stance remained the most frequently cited risk(fi gure A).While the share of survey participants mentioning policy uncertainty as a risk to the fi nancial system increased notably,the share mentio

329、n-ing the potential for large CRE losses,the reemergence of banking-sector stress,concerns over fi scal debt sustainability,and market volatility remained high,albeit down relative to results reported in the previous survey(fi gure B).Other risks highlighted in the current survey include potential m

330、arket liquid-ity strains in the U.S.Treasury market,with particular attention on the(cash-futures)basis trade,a correction in risky asset prices,and a potential cyberattack.This discussion summarizes the most cited risks from this round of outreach.Persistent inflation and monetary tighteningElevate

331、d infl ation and the implications of tighter monetary policy remained the top-cited risk.Many of these respondents continued to note that a reacceleration of infl ation could keep rates higher for longer than previously expected.However,several contacts cited the potential lagged effects of prior po

332、licy tightening as a key watchpoint and suggested that the FOMC may fall behind the curve in lower-ing rates or may not act quickly enough in the event of a sudden economic downturn.Policy uncertaintyRespondents fl agged policy uncertainty as a potentially signifi cant source of shocks that could im

333、pact the fi nancial sector.Contacts noted several areas of uncertainty including trade policy and other foreign policy issues possibly related to escalating geopolitical tensions.They also noted policy uncer-tainty associated with the U.S.elections in November.Commercial real estateReal estate market stress,particularly in CRE,was again frequently cited.Survey respondents con-tinued to fl ag highe