Similarly, the health of the financial sector hinges on the strength of the balance sheets of households, businesses, and financial institutions, as financial institutions' assets are the liabilities of these sectors. The Federal Reserve monitors and assesses potential vulnerabilities that may develop because of interactions among key participants.
We do that by focusing on the safety and soundness of individual supervised institutions and by looking across the entire  1/4  BIS - Central bankers' speeches  financial and nonfinancial system for potential risks and vulnerabilities. These risks and vulnerabilities can include elevated valuation pressures, excessive borrowing by households and businesses, excessive leverage in the financial system, and elevated funding risks.