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The U.S. banking system remains resilient—supported by sound levels of regulatory capital, adequate liquidity buffers, and healthy levels of profitability—but the industry must address emerging vulnerabilities, according to the Financial Stability Oversight Council’s 2024 annual report.
Highlights: The annual report noted:
Cyber incidents have become increasingly frequent, and all financial sector participants should work to reduce risk.
Potential vulnerabilities include weakening credit conditions in commercial real estate and the strong reliance of some banks on non-deposit and uninsured deposit funding.
While third-party service providers can offer benefits, they may also introduce or amplify risks, in part by limiting financial institution oversight of data or systems.
Absent appropriate risk-management standards, stablecoins represent a potential risk to financial stability because of their vulnerability to runs.
Open-end funds with significant liquidity mismatches may face challenges meeting large redemption requests during times of market stress, potentially disrupting market functioning.