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FSOC studies data needed to spot systemic risk

Bloomberg has obtained a copy of a confidential Feb. 3 study by the Financial Stability Oversight Council that discusses data the council needs in order to be able to determine when a financial institution poses systemic risk to the financial markets.

The Bloomberg story doesn’t mention repos.

From Bloomberg today:

Hedge funds, broker-dealers and mortgage companies may face unprecedented demands for data on everything from risk exposure to trading partners as U.S. regulators seek to identify firms that pose a potential threat to the financial system, a confidential government report says.

The staff of the Financial Stability Oversight Council identified dozens of “potential metrics” to decide which non- bank financial firms should be designated “systemically important” and subject to Federal Reserve supervision, according to an 80-page study obtained by Bloomberg News.

The Dodd-Frank Act instructed the Financial Stability Oversight Council to identify non-bank companies that pose a risk to the financial markets. It created an Office of Financial Research to gather data that would help the council better understand today’s financial markets, especially shadow banking.

Data on repurchase agreements is spotty, because regulators do not require that companies divulge it, even though repos were the source of much of the systemic risk during the financial crisis and most of the leverage in the shadow banking system.

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