For example, based on public data, we develop and monitor measures of systemic importance that reflect firms’ interconnectedness and their provision of critical services. Unfortunately, data on the shadow banking sector, by its nature, can be more difficult to obtain. Thus, we have to be more creative to monitor risk in this important area.
We look at broad indicators of risk to the financial system, such as measures of risk premiums, asset valuations, and market functioning. We try to gauge the risk of runs by looking at indicators of leverage (both on and off balance sheet) and tracking short-term wholesale funding markets, especially for evidence of maturity mismatches between assets and liabilities.