A Macroprudential Perspective on the Regulatory Boundaries of U.S. Financial Assets

Arseneau, David M.; Brang, Grace; Darst, Matt; Faber, Jacob M. M.; Rappoport, David E.; Vardoulakis, Alexandros

doi:10.17016/FEDS.2022.002

Working Paper

A Macroprudential Perspective on the Regulatory Boundaries of U.S. Financial Assets

Abstract: This paper uses data from the Financial Accounts of the United States to map out the regulatory boundaries of assets held by U.S. financial institutions from a macroprudential perspective. We provide a quantitative measure of the regulatory perimeter—the boundary between the part of the financial sector that is subject to some form of prudential regulatory oversight and that which is not—and show how it has evolved over the past forty years. Additionally, we measure the boundaries between different regulatory agencies and financial institutions that operate within the regulatory perimeter and illustrate how these boundaries potentially become blurred in the face of regulatory overlap. Quantifying the regulatory perimeter and the boundaries for macroprudential regulators within the perimeter is informative for assessing financial stability risks over the credit cycle.

Keywords: Regulation; Regulatory reach; Boundary problem; Financial institutions;

JEL Classification: E58; G18; G28;

https://doi.org/10.17016/FEDS.2022.002