OFR_2016_Financial-Stability-Report

Stress Test
Supplemental Leverage
Ratio
Swap
Swap Data Repository
(SDR)
Swap Execution Facility
SWIFT
Systemic Risk Indicators
Tail Risk
Tier 1 Capital Ratio and
Tier 1 Common Capital
Ratio
Total Loss Absorbing
Capacity (TLAC)
Triparty Repo
An exercise that shocks asset prices by a prespecified amount, sometimes along with
other financial and economic variables, to observe the effect on financial institutions
or markets. Under the Dodd-Frank Act, banking regulators run annual stress tests of
the biggest U.S. bank holding companies.
Under Basel III, the ratio of a bank’s Tier 1 (high quality) capital to its total leverage
exposure, which includes all on-balance-sheet assets and many off-balance-sheet
exposures. U.S. regulators require a 3 percent ratio for most banks with $250 billion
or more in consolidated assets or $10 billion or more in foreign exposures. The eight
large U.S. banks designated as global systemically important banks by the Financial
Stability Board must maintain a ratio of 5 percent
An exchange of cash flows agreed by two parties with defined terms over a fixed
period.
A central recordkeeping facility that collects and maintains a database of swap
transaction terms, conditions, and other information. In some countries, SDRs are
referred to as trade repositories
Under the Dodd-Frank Act, a trading platform market participants use to execute
and trade swaps by accepting bids and offers made by other participants.
The Society for Worldwide Interbank Financial Telecommunications (SWIFT) provides
messaging services and interface software between wholesale financial institutions.
SWIFT is organized as a cooperative owned by its members.
Cross-sectional measures of the risks financial firms may pose to the financial system.
The low-probability risk of an extreme event moving an asset price.
Two measurements comparing a bank’s capital to its risk-weighted assets to show its
ability to absorb unexpected losses. Tier 1 capital includes common stock, preferred
stock, and retained earnings. Tier 1 common capital excludes preferred stock.
A mix of long-term debt and equity that global systemically important bank holding
companies would be required under recent proposals to hold sufficient to absorb
losses and implement an orderly resolution without resorting to taxpayer-funded
bailouts or extraordinary government measures.
A repurchase agreement in which a third party, such as a clearing bank, acts as an
intermediary for the exchange of cash and collateral between two counterparties. In
addition to providing operational services to participants, agents in the U.S. triparty
repo market extend intraday credit to facilitate settlement of triparty repos.
Glossary 103