Part 7/10:
The Federal Reserve’s recent analysis employs four key metrics to gauge systemic risk: capital vulnerability, fire sale vulnerability, liquidity stress ratio, and run vulnerability. Charts based on these indicators reveal a troubling trend—since late 2022, all four measurements have sharply increased, signaling mounting stress within the banking system.
While the overall vulnerability remains moderate compared to crisis levels, the upward trajectory indicates that the financial system is less resilient than it was a year ago. Depositor cash withdrawals continue to rise, reflecting eroding confidence that adds fuel to the fire.