The Financial Stability Oversight Council touted strong economic growth over the past two years and the strength of the U.S. financial system in its 2018 annual report, but warned that financial stability risk stemming from international causes is up, particularly with the potential for a disorderly Brexit.
Other FSOC warnings: Cybersecurity is a perennial key financial stability vulnerability, and the growing federal debt could become a problem.
Brexit, the United Kingdom’s exit from the European Union in March 2019, “could have serious implications for the functioning of some global financial markets and firms,” FSOC’s 145-page report, released Wednesday, stated.
However, looking forward in the U.S., the council, chaired by Treasury Secretary Steven Mnuchin, zeroed in on the potential for the government’s increasing debt to cause financial stability issues down the road.
By September, federal government debt held by the public stood at 76% of GDP, similar to the previous September, but the Congressional Budget Office has forecast the debt burden growing “in an accelerating manner in the coming decades,” the FSOC report warned. Publicly held U.S. sovereign debt outstanding had reached $15.8 trillion by October, the report noted.
“Achieving long-term sustainability of the national budget is important to maintain global market confidence in U.S. Treasury securities,” the report noted.
Cybersecurity is a perennial key financial stability vulnerability identified by the FSOC in its annual report.