Remarks by James Martin at the 2023 Financial Stability Conference

As prepared for delivery

Thank you, Dasol, for your introduction.

Good morning, everyone.

As Acting Director of the Office of Financial Research, I am delighted to be here with each of you, and I am excited to welcome you to day two of the Financial Stability Conference.

Before I dive into my remarks, I first want to express my thanks to President Loretta Mester, Joe Haubrich, and the entire staff of the Cleveland Fed for all of their hard work in organizing this conference in partnership with the OFR. I also thank them for their longstanding commitment to advancing financial-stability analysis and monitoring.

Also, I want to express my gratitude to the selection committee for identifying and bringing together such high-caliber researchers and discussants. And, of course, a huge thanks to the researchers and discussants for sharing your research, insights, and expertise. Day one’s presentations and panel discussions were outstanding, and I look forward to hearing more interesting discussions today, as well.

The theme of this year’s conference, “Financial Stability in Times of Macroeconomic Uncertainty,” is very timely and appropriate to the financial times that we find ourselves in.

More than three years since the height of the global pandemic, macroeconomic uncertainty in the U.S. remains elevated. Our financial system faces threats from persistent inflation, breaches to cybersecurity, geopolitical conflicts, banking-sector stress, and climate-related financial risk—just to name a few.

The threats to the stability of our financial system are increasing and coming from multiple sources. And as the financial system evolves, new threats and vulnerabilities will continue to emerge. Threats to our financial system can often cross over from the regulated to the unregulated space.

I would like to posit that during times of macroeconomic uncertainty, collaboration and information sharing among regulators is more crucial than ever. Our financial system is the most effective and stable when regulators have access to shared information and work together.

Recent stress events in the financial system, some of which were discussed yesterday, have demonstrated how critical it is for regulators to be able to collaborate and share information at a moment’s notice. As a general rule, but particularly during uncertain times, information sharing allows us to identify and fill data gaps so those who are analyzing financial-stability risks can formulate a more complete picture.

While I believe information sharing among regulators is of great importance, so too is their ability to integrate data of various types and disciplines. Until recently, the Financial Stability Oversight Council member agencies (the FSOC, or the Council) lacked a collaborative tool that could perform high-powered computing and analysis of large, complex, multidisciplinary data sets to assist with interagency sharing and understanding of information related to financial-stability risks.

I’m proud to say that in July of this year, the OFR successfully launched the Joint Analysis Data Environment (known as JADE), which is an innovative tool to help meet that need. JADE is an OFR-hosted platform designed for the FSOC member agencies to analyze risks to financial stability.

To facilitate collaborative research, JADE offers scalable, high-performance computing with analytical software and support for programming languages such as R and Python in a cloud-based environment with analysis-ready data. The OFR expects to make JADE available to users from at least four FSOC member agencies by the end of this calendar year and to expand access to other member agencies over the subsequent months.

JADE is a game-changer in how financial regulators will be able to monitor, assess, and share information about threats to financial stability. It is a platform that will prove invaluable to the work of the financial regulatory community, particularly during times of macroeconomic uncertainty.

I want to provide some brief background on the origins of JADE and how it was envisioned, and subsequently designed, to respond to regulators’ needs for a collaborative, scalable, and high-performance computing platform.

Thus far in the conference, there has been discussion of various sources of financial stability risks. Climate-related financial risk is a relatively new area of financial stability focus and is a major priority of the current Administration. As an underlying frontier risk, however, it remains difficult to define, and its potential risk to the financial system has proven challenging to forecast and model.

On May 21, 2021, President Biden issued an Executive Order on Climate-Related Financial Risk, which calls for, among other things, the Administration to “advance consistent, clear, intelligible, comparable, and accurate disclosure of climate-related financial risk” and to consider “facilitating the sharing of climate-related financial risk data and information among FSOC member agencies and other executive departments and agencies as appropriate.”

Specifically, the Executive Order directs the OFR “to assist the Secretary of the Treasury and the FSOC in assessing and identifying climate-related financial risk to financial stability, including the collection of data, as appropriate, and the development of research ….”

This directive aligns with OFR’s mission to promote financial stability by delivering high-quality financial data, standards, and analysis principally to support the Council and its member agencies. The OFR team understood that producing, and facilitating the ability of others to produce, high-quality research in this area would require access to both climate and financial data, as well as the ability to integrate these data.

The OFR met this call to action by first piloting what we initially called the OFR Climate Data and Analytics Hub that provided staff from the Federal Reserve Board and Federal Reserve Bank of New York access to public climate and financial data, high-performance computing tools, and analytical and visualization software.

The Data and Analytics Hub featured climate data from across the federal government, including, but not limited to, the USDA’s data on wildfire risk and crop conditions, temperature and precipitation data from NOAA’s Climate Prediction Center, and NASA’s data on atmospheric conditions. The Hub also provided the tools needed to merge this data with supervisory financial data.

Informed by the lessons learned from this successful pilot, the OFR recognized the FSOC’s need for a more comprehensive data hub capable of supporting secure research on all manner of financial stability topics– not just climate– as regulators work to address the financial-stability risks contributing to macroeconomic uncertainty. Thus, JADE was born.

To be a useful tool now and well into the future, JADE was engineered to be responsive to the evolving nature of risks to financial stability as they emerge. For instance, we can envision JADE being effective in many other areas of financial stability concern, such as digital assets, financial institution fragility, cybersecurity threats, or the risk area we’ve not yet even thought of.

As technology and the financial system evolve, the delivery of JADE is a fulfillment of OFR’s mandate to support FSOC and its member agency priorities by providing data, developing tools, and fostering a collaborative research environment.

I am proud to say that, through JADE, the OFR is truly enabling the conduct of interagency collaborative research and information sharing, which are fundamental for promoting financial stability.

JADE will help to transform how regulators work together, which will streamline regulators’ access to certain data and provide a platform for more comprehensive risk measurement, monitoring and understanding of the financial system. JADE has the tools to integrate and analyze data and ultimately produce interdisciplinary research that identifies where risks are and where they may go.

I will leave you with this. During times of macroeconomic uncertainty, the financial regulatory community needs tools with which to assess and better understand financial stability threats, and to collaborate with partners in that pursuit. JADE is a powerful platform that regulators can leverage to analyze emerging risks to financial stability during such times of macroeconomic uncertainty.

I encourage financial regulators to utilize the OFR’s JADE to support the work of their respective missions, and to advance the sharing of information with, and collaboration among, the financial regulatory community. When this community works together, financial stability threats can be better understood, and addressed.

Thank you very much.