Remarks of James Martin, Acting Director of the Office of Financial Research, at the Office of Financial Research’s Rising Scholars Conference

As prepared for delivery

WASHINGTON – Good morning. I am pleased to welcome everyone to OFR’s Rising Scholars Conference. I’m OFR’s Acting Director, James Martin. Thank you for being here today.

To the authors, thank you for submitting such thoughtful research—and to our discussants, thank you for lending your expertise on these important topics.

This is OFR’s first Rising Scholars Conference. We’re excited to provide a forum where scholars who received their PhD within the last six years can meet experts in their fields, get professional and constructive feedback on their work, and raise issues for broader consideration.

Today, authors and discussants will be exploring a range of topics, from fintech and stablecoins to shadow banking and bank deposits—with a specific focus on how these issues could threaten financial stability.

Risks to financial stability often emerge from traditional sources, such as changes in fiscal, monetary, and regulatory policies. Markets and institutions are also exposed to frontier risks that pose new challenges. Each risk is unique, and each stems from a different source. While there will always be fundamental uncertainty about the sources of threats to financial stability, there is no uncertainty about the need to make sure our financial system can withstand them.

The 2008 financial crisis spurred important institutional changes. In the United States, the Dodd-Frank Act created the Office of Financial Research and the Financial Stability Oversight Council. The OFR works with the Council to look across the financial system to identify and monitor threats to financial stability, and the Council serves as a forum for evaluating those threats and considering policies to address them.

Our job at OFR is to shine a light on relatively dark corners of the market to see where risks to financial stability are coming from and assess how much of a threat they may pose. We provide policymakers with financial analysis and information, and we evaluate the effectiveness of policy tools to mitigate risks. We thus help policymakers design better financial shock absorbers and guardrails that reduce the risk of a financial crisis and soften the effects of any crisis that occurs.

To meet our mandate, we’ve built a collaborative environment for conducting, coordinating, and sponsoring research and analysis. Our premier research product is the OFR Annual Report to Congress, which we published at the start of the year. In this report, we discussed how the systemic-risk level rose in 2022 as financial institutions faced growing uncertainty from rising inflation, tightening credit conditions, and the geopolitical landscape. The report also looked at emerging threats from nontraditional sources of risk, such as cybersecurity, digital assets, and climate-related catastrophic events.

More recently, our researchers also sought to understand the underlying causes of two stress events: the dramatic spike in repo rates in September 2019 and the precipitous drop in U.S. Treasury securities prices in March 2020. We published working papers that explained the causes of both events and offered actionable insights to policymakers, as well as market participants. During the remainder of 2023, we will continue to conduct research—on our own and in conjunction with staff at Council member agencies—on threats to financial stability stemming, for example, from nonbanks, climate change, and the growth in digital assets.

I am tremendously proud of OFR’s research team, their high-caliber research, and their expertise and impact in helping to uncover vulnerabilities in the financial system.

In closing, I want to thank you all for taking the time to attend today. These are vital issues, and it’s great to meet in person the rising scholars who are dedicated to understanding and addressing them. Thank you for your research into these risks and for sharing your insights at this conference.

I look forward to the discussion today.