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Financial stability risks still moderate but new vulnerabilities emerge, OFR tells Congress

Overall risks to financial stability are still moderate, the U.S. Office of Financial Research said in its annual reports to Congress on Tuesday.

New vulnerabilities that have emerged since last year's report include elevated market risk, cybersecurity incidents, risk management challenges at systemically important financial institutions, and evolving market structure, according to the two reports, the 2017 Annual Report to Congress and 2017 Financial Stability Report.

Overall financial stability risks remain in a medium range, despite elevated market risks particularly in the stock and bond markets, with the potential for sudden changes in asset prices disrupting economic growth, the financial stability report concludes.

The annual report to Congress assesses threats to financial stability by weighing vulnerabilities against resilience in the financial system. While the overall risk assessment is unchanged from last year, OFR officials did find changes in the balance between vulnerabilities and resilience given the new vulnerabilities.

OFR developed two assessment tools in the past year to help with their annual reports: a heat map that gives early warning of potential financial system disruptions, and a stress index that is a daily snapshot of stress in global financial markets.

The reports and tools are available on the Office of Financial Research website.