The Office of Financial Research ("OFR") identified several common measures to determine systemic risk originating from large banks.
The OFR reported on:
- Basel Scores, which designate global systemically important banks ("G‑SIBs") whose failure could threaten the international finance system. The G‑SIBs' capital add-on is determined by averaging the banks' (i) sizes, (ii) interconnectedness, (iii) substitutability, (iv) complexity and (v) cross-jurisdictional activity.
- U.S. G-SIB Surcharges, which involve banks whose failure could threaten the financial system, and are determined by using the higher surcharge of either (i) the Basel Committee framework or (ii) replacing the measure of suitability from the Basel Committee framework with a measure of short-term wholesale funding.
- The Contagion Index, which measures the potential loss that could be inflicted on the financial system if a bank were to default, and is determined by multiplying Connectivity by Net Worth (and Outside Leverage -1).
- The Leverage Ratio, which measures total assets, total equity and leverage to determine a bank's equity capital relative to its assets.
- Short-Term Wholesale Funding, which could increase a bank's exposure to liquidity and funding risk. The measures that a bank uses include the (i) Short-Term Funding Metric (or "STF-RWA"), (ii) Short-Term Funding Dependence (or "STF-Dependence") and (iii) Short-Term Funding Coverage (or "STF-Coverage").
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