Financial Stability Report April 2025
Central bank: fed | Document type: financial_stability_report | Date: 2025-04-25

Financial Stability Report
Note: this report generally reflects information that was available as of April 11, 2025.
Purpose and Framework ................................................. v
Revisions .............................................................. ix
Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1 Asset Valuations ..................................................... 5
2 Borrowing by Businesses and Households .............................. 17
3 Leverage in the Financial Sector ....................................... 27
box 3.1. Changes in the Classification of Nonbank Financial Institutions .............. 36
4 Funding Risks ....................................................... 37
box 4.1. runnables: An Indicator of Aggregate r un-related Vulnerabilities
in the Economy  ..................................................... 39
5 Near-Term Risks to the Financial System ............................... 47
box 5.1. Survey of Salient risks to Financial Stability  ........................... 49
Appendix: Figure Notes ................................................ 51
this report presents the Federal r eserve board’s current assessment of the stability of the U.S.
financial system. by publishing this report, the board intends to promote public understand -
ing by increasing transparency around, and creating accountability for, the Federal r eserve’s
views on this topic. Financial stability supports the objectives assigned to the Federal r eserve,
including full employment and stable prices, a safe and sound banking system, and an efficient
payments system.
A financial system is considered stable when
banks, other lenders, and financial markets
are able to provide households, communities,
and businesses with the financing they need
to invest, grow, and participate in a well-
functioning economy—and can do so even
when hit by adverse events, or “shocks.”
Consistent with this view of financial stabil-
ity, the Federal reserve board’s monitoring
framework distinguishes between shocks to,
and vulnerabilities of, the financial system.
Shocks are inherently difficult to predict,
while vulnerabilities, which are the aspects
of the financial system that would exacerbate
stress, can be monitored as they build up or
recede over time. As a result, the framework
focuses primarily on assessing vulnerabilities,
with an emphasis on four broad categories
and how those categories might interact to
amplify stress in the financial system.1
1 For a review of the research literature in this area, see t obias Adrian, Daniel Covitz, and Nellie Liang (2015),
“Financial Stability Monitoring,” Annual Review of Financial Economics , vol. 7 (December), pp. 357–95.
1. Valuation pressures arise when asset prices are high relative to economic fundamentals or
historical norms. these developments are often driven by an increased willingness of investors
to take on risk. As such, elevated valuation pressures may increase the possibility of outsized
drops in asset prices (see Section 1, Asset Valuations).
Purpose and Framework
More on the Federal
Reserve’s Monitoring Efforts
See the Financial Stability section  of the
Federal reserve board’s website for more
information on how the Federal r eserve
monitors the stability of the U.S. and world
financial systems.
the website includes:
• a more detailed look at our monitoring
framework for assessing risk in each
• more data and research on related topics;
• information on how we coordinate, cooper -
ate, and otherwise take action on financial
system issues; and
• public education resources describing the
importance of our efforts.
vi Financial Stability r eport
2. Excessive borrowing by businesses and households exposes the borrowers to distress if
their incomes decline or the assets they own fall in value. In these cases, businesses and
households with high debt burdens may need to cut back spending, affecting economic activity
and causing losses for investors (see Section 2, borrowing by businesses and Households).
3. Excessive leverage within the financial sector increases the risk that financial institutions will
not have the ability to absorb losses without disruptions to their normal business operations
when hit by adverse shocks. In those situations, institutions will be forced to cut back lending,
sell their assets, or even shut down. Such responses can impair credit access for households
and businesses, further weakening economic activity (see Section 3, Leverage in the
Financial Sector).
4. Funding risks expose the financial system to the possibility that investors will rapidly
withdraw their funds from a particular institution or sector, creating strains across markets
or institutions. Many financial institutions raise funds from the public with a commitment
to return their investors’ money on short notice, but those institutions then invest much of
those funds in assets that are hard to sell quickly or have a long maturity. t his liquidity and
maturity transformation can create an incentive for investors to withdraw funds quickly in
adverse situations. Facing such withdrawals, financial institutions may need to sell assets
quickly at “fire sale” prices, thereby incurring losses and potentially becoming insolvent, as
well as causing additional price declines that can create stress across markets and at other
institutions (see Section 4, Funding risks).
the Federal reserve’s monitoring framework also tracks domestic and international develop -
ments to identify near-term risks—that is, plausible adverse developments or shocks that could
stress the U.S. financial system. the analysis of these risks focuses on assessing how such
potential shocks may spread through the U.S. financial system, given our current assessment of
vulnerabilities.
While this framework provides a systematic way to assess financial stability, some potential
risks may be novel or difficult to quantify and therefore are not captured by the current approach.
Given these complications, we rely on ongoing research by the Federal r eserve staff, academ -
ics, and other experts to improve our measurement of existing vulnerabilities and to keep pace
with changes in the financial system that could create new forms of vulnerabilities or add to
existing ones.
purpose and Framework  vii
Federal Reserve actions to promote the resilience of the
financial system
the assessment of financial vulnerabilities informs Federal r eserve actions to promote the resil -
ience of the financial system. the Federal reserve works with other domestic agencies directly
and through the Financial Stability Oversight Council to monitor risks to financial stability and to
undertake supervisory and regulatory efforts to mitigate the risks and consequences of financial
instability.
Actions taken by the Federal reserve to promote the resilience of the financial system include
its supervision and regulation of financial institutions. In the aftermath of the 2007–09 financial
crisis, these actions have included requirements for more and higher-quality capital, an inno -
vative stress-testing regime, and new liquidity regulations applied to the largest banks in the
United States. In addition, the Federal reserve’s assessment of financial vulnerabilities informs
decisions regarding the countercyclical capital buffer (CCy b). the CCyb is designed to increase
the resilience of large banking organizations when there is an elevated risk of above-normal
losses and to promote a more sustainable supply of credit over the economic cycle.
On September 19, 2025, the top-right label in figure 1.19 was corrected to show that the data
are indexed to January 2010 = 100.
this report reviews vulnerabilities affecting the stability of the U.S. financial system related to
valuation pressures, borrowing by businesses and households, financial-sector leverage, and
funding risks. It also highlights several near-term risks that, if realized, could interact with these
vulnerabilities. this report reflects market conditions and data as of April 11, 2025.
Overview of financial system vulnerabilities
Leverage in the
ﬁnancial sector Funding risks
Borrowing by businesses
and householdsAsset valuations
• De spite declin es in
asset prices amid
signiﬁca nt market
volat ility, valuations
remain high across
a range of markets
including equities and
residential real estate .
• Li quidity in Treasury
and equity markets
was low and worsened
further in April, though
market functioning
remained orderly.
• Tr ansaction-bas ed
prices for commercial
proper ties have been
ﬂat rece ntly, but a
sizable number of
borrowers will need
to reﬁ nance maturing
loans in the next
few years.
• Vulnerabilities
from busine ss and
household debt
remained moderate,
as debt levels
adjusted for inﬂa tion
were stable.
• The ability of
busine sses to
service their debt
gener ally improved
even as leverage
remained elevated .
• Household debt was
at modest levels
relative to gros s
domestic product
and mostly owed by
borrowers with strong
credit  histories.
• Auto and credit  card
loan delinquenci es
remained above
pre-pandemic  levels .
• The banking system
remained sound
and resilient, with
regulato ry capital
ratios approaching
or exceeding
historical highs.
• Fair value losses on
ﬁxed-rate assets were
still sizable for some
banks and continued
to be sensitive to
ﬂuctuations in
interest rates.
• Broker-dealer leverage
has been low, though in
April heightened client
demand has reportedly
increased balance
sheet pressures for
some dealers.
• Hedge fund leverage
was at or near its
highest level since
2013, though it likely
decreased as hedge
funds unwound some
positions in early April.
• Funding markets were
resilient through early
April’s market volatility.
• Mo st domestic banks
maintained high
levels of liquid assets
and stable funding,
and their reliance on
uninsured deposits
remained well below
the elevated  levels
seen in 2022 and
early 2023.
• V ulnerabilities in
prime money market
funds have declined
somewhat in the past
year as reforms for
these funds went fully
into effect, but other
cash-m anagement
vehicles with structural
vulnerabilities
continued to grow.
• Nont raditional
liabili ties at life
insurers are at the
upper en d of their
historical distribution.
2 Financial Stability r eport
A summary of the developments in the four broad categories of vulnerabilities since the
November 2024 Financial Stability Report (FSr) is as follows:
1. Asset valuations. Asset valuations are notable. prior to early April’s market volatility, the
ratio of equity prices to earnings had remained near the high end of its historical range and
an estimate of the equity premium—the compensation for risk in equity markets—remained
well below average. Even after recent declines in equity prices, prices remained high relative
to analysts’ earnings forecasts, which adjust more slowly than market prices. treasury yields
across maturities remained at the higher end of their levels since 2008. Spreads between
yields on corporate bonds and those on comparable-maturity t reasury securities were at
moderate levels compared to their history, despite recent increases. Liquidity across many
financial markets remained low through the end of March and deteriorated further in April,
but market functioning was generally orderly. In U.S. property markets, home prices remained
elevated, and the ratio of house prices to rents continued to be near the highest levels on
record. transaction-based price indexes (adjusted for inflation) for commercial real estate
(CrE) properties showed some signs of stabilization, though vulnerabilities due to upcoming
refinancing needs remain (see Section 1, Asset Valuations).
2. Borrowing by businesses and households. Vulnerabilities from business and household
debt remained moderate. total debt of businesses and households as a fraction of gross
domestic product (GDp) continued to trend down to its lowest level in the past two decades.
Indicators of business leverage remained elevated relative to historical levels, and private
credit arrangements continued to grow. Nonetheless, measures of the ability of businesses
to service their debt have been stable and within typical ranges, though a sustained decline
in earnings could put some vulnerable business borrowers at risk. Household debt relative
to GDp is subdued relative to recent history. Most household debt is owed by borrowers
with strong credit histories who are well positioned to meet their payment obligations given
fixed-rate mortgage debt carrying low interest rates and debt service ratios slightly below
pre-pandemic levels. that said, delinquencies on credit cards and auto loans are above pre-
pandemic levels, particularly for borrowers with non-prime credit scores, a large share of whom
have low to moderate incomes (see Section 2, borrowing by businesses and Households).
3. Leverage in the financial sector. Vulnerabilities associated with financial leverage remained
notable. the banking sector remained sound and resilient overall, and most banks continued
to report capital levels well above regulatory requirements. Fair value losses on fixed-
rate assets were still sizable for some banks and continued to be sensitive to changes in
interest rates. Further, some banks, insurers, and securitization vehicles continued to have
concentrated exposures to CrE. bank credit commitments to nonbank financial institutions
(NbFIs) continued to increase. (Improvements to the methodology for measuring these
commitments are discussed in the box “Changes in the Classification of Nonbank Financial
Institutions.”) Indicators suggested that hedge fund leverage was at or near the highest level in
the past decade and concentrated in larger hedge funds. More recently, a number of leveraged
Overview  3
investors have unwound positions amid heightened volatility or in the course of meeting margin
calls, including hedge funds that participate in relative value trades. b roker-dealer leverage
has been near historical lows. Dealer intermediation in treasury markets hit record highs in the
first quarter of 2025, and heightened client demand in early April reportedly increased balance
sheet pressures for some dealers (see Section 3, Leverage in the Financial Sector ).
4. Funding risks. Funding risks have declined over the course of the past year to a moderate
level—broadly in line with historical norms. Aggregate runnable money-like liabilities remained
near their historical median and represent a persistent vulnerability (discussed in the box
“runnables:  An Indicator of Aggregate r un-related Vulnerabilities in the Economy”). banks
have significantly reduced their reliance on uninsured deposits from peaks in 2022 and early
2023. Vulnerabilities in prime money market funds (MMFs) have declined over the past year.
However, other cash-management vehicles with similar vulnerabilities continued to grow.
Additionally, bond and loan funds that hold assets that can become illiquid in times of stress
and are therefore susceptible to large redemptions experienced somewhat elevated outflows
in early April (see Section 4, Funding risks).
this report also discusses potential near-term risks, based in part on the most frequently cited
risks to U.S. financial stability as gathered from outreach to a wide range of researchers, academ -
ics, and market contacts conducted from February to early April (discussed in the box “ Survey of
Salient risks to Financial Stability”). the most frequently cited topics in the responses, the vast
majority of which were received before April 2, were risks to global trade, policy uncertainty, and
U.S. fiscal debt sustainability. A number of respondents also cited persistent inflation and correc -
tions in asset markets as salient risks.
Survey of salient risks to the financial system
Survey respondents cited several risks to the U.S. financial system and the broader global economy. For more
information, see the box “ Survey of Salient r isks to Financial Stability .”
of contacts
global trade
of contacts
U.S. ﬁscal debt
sustainability
of contacts
of contacts
uncertainty
of contacts
of contacts
Risk asset /
valuations correction
of contacts
of contacts
Persistent
of contacts
of contacts
Treasury market
functioning
of contacts
of contacts
1 Asset Valuations
Asset valuations were notable despite price declines in some
markets in early April
In April, announcements about changes to U.S. trade policy sparked a wave of price declines
and volatility across multiple markets as market participants reported heightened uncertainty
about the breadth and duration of possible changes to global trade patterns, perceptions of an
increased risk of a slowdown in economic activity, and concerns about higher inflation. Nonethe -
less, prices remained high rela tive to fundamentals across a range of markets.
treasury market liquidity continued to be low by historical standards heading into April. In early
April, yields on treasury securities exhibited considerable volatility, which contributed to a deteri -
oration in market liquidity. Nonetheless, amid this increase in volatility, trading remained orderly,
and markets continued to function without serious disruption. t reasury yields have remained
above their average levels since 2008.
Equity markets have been turbulent since the previous report. After significant gains in late 2024
and early 2025, equity market price indexes experienced notable swings beginning in early March,
with the largest moves occurring after April 2. On net through April 11, equity prices fell more
than 6 percent from the previous FS r. Despite this decline, equity prices remained high relative
to forecasted earnings, which adjust more slowly than market prices. Corporate bond spreads
have widened significantly but have stayed at or below their historical medians, while corporate
bond issuance slowed considerably, consistent with periods of elevated volatility.
CrE markets showed some signs of stabilizing prices and fundamentals, although the potential
for distressed commercial property sales remains if C rE borrowers who need to refinance their
mortgages are unable to do so. In residential real estate markets, prices relative to fundamentals
continued to be well above their historical averages.
table 1.1 shows the sizes of the asset markets discussed in this section. the two largest asset
markets are those for equities and residential real estate, which are substantially larger than the
next two markets, treasury securities and CrE. the table also shows recent and historical growth
rates for each asset class, because assets experiencing strong growth can be a sign of high risk
appetite in that sector.
Treasury yields remained high amid heightened volatility
treasury yields across maturities continued to be well above their average levels over the past
15 years (figure 1.1). Since the November report, the treasury yield curve has steepened as
6 Financial Stability r eport
Table 1.1. Size of selected asset markets
Item Outstanding
(billions of dollars)
2023:Q4–2024:Q4
Average annual growth,
1997–2024:Q4
Equities 70,332 22.9 9.7
Residential real estate 59,656 5.7 6.2
Treasury securities 28,139 7.3 8.2
Commercial real estate 21,676 −2.4 6.0
Investment-grade corporate bonds 8,038 6.7 8.0
Farmland 3,524 5.5 5.7
High-yield and unrated corporate bonds 1,682 3.0 6.1
Leveraged loans1 1,418 1.5 12.8
Price growth (real)
Commercial real estate2 −2.9 2.8
Residential real estate3 .4 2.6
Note: The data extend through 2024:Q4. Outstanding amounts are in nominal terms. Growth rates are nominal and
are measured from Q4 of the year immediately preceding the period through Q4 of the ﬁnal year of the period. Equi-
ties, real estate, and farmland are at nominal market value; bonds and loans are at nominal book value.
1 The amount outstanding shows institutional leveraged loans and generally excludes loan commitments held by
banks. For example, lines of credit are generally excluded from this measure. Average annual growth of leveraged
loans is from 2000 to 2024:Q4, as this market was fairly small before then.
2 One-year growth of commercial real estate prices is from December 2023 to December 2024, and average annual
growth is from December 1999 to December 2024. Both growth rates are calculated from equal-weighted nominal
prices deﬂated using the consumer price index (CPI).
3 One-year growth of residential real estate prices is from December 2023 to December 2024, and average annual
growth is from December 1998 to December 2024. Nominal prices are deﬂated using the CPI.
Source: For leveraged loans, PitchBook Data, Leveraged Commentary & Data; for corporate bonds, Mergent, Inc.,
Fixed Income Securities Database; for farmland, Department of Agriculture; for residential real estate price growth,
CoreLogic, Inc.; for commercial real estate price growth, CoStar Group, Inc., CoStar Commercial Repeat Sale Indices;
for all other items, Federal Reserve Board, Statistical Release Z.1, “Financial Accounts of the United States.”
Figure 1.1. Nominal Treasury yields remained high
2000 2005 2010 2015 2020 2025
Monthly average
Percent, annual rate
Source: Federal r eserve board, Statistical r elease H.15, “Selected Interest r ates.”
Asset Valuations 7
yields on shorter-maturity securities fell. A model-based estimate of the nominal t reasury term
premium—a measure of the compensation that investors require to hold longer-term t reasury
securities rather than shorter-term ones—fell a bit and remained near the top of its range
since 2010, though also near its longer-term historical median (figure 1.2). Moves in treasury
yields were sizable in early April. Unlike previous flight-to-safety episodes, t reasury prices fell
alongside steep declines in equity prices amid heightened uncertainty. Interest rate volatility
implied by interest rate swaps was elevated by historical standards and increased further in early
April (figure 1.3).
Equity markets declined, on net, amid a large increase in volatility
Measures of equity valuations were stretched by historical standards through March. t he
p/E ratio, defined as the ratio of equity prices to expected 12-month earnings, remained well
above its historical median (figure 1.4). the difference between the forward p/E ratio and the
real 10-year treasury yield—a measure of the additional return that investors require for holding
stocks relative to risk-free bonds (the equity premium)—remained well below its historical median
(figure 1.5).2 Equity prices had experienced notable swings in March before declining substan -
tially in early April, with various indexes concluding the week of April 7 somewhat below their
values as of the November report. Option-implied equity market volatility rose dramatically and
reached levels not seen since March 2020 (figure 1.6, black line). these developments suggest
that investors demanded increased compensation for holding stocks. Despite the recent decline,
prices remained high relative to analysts’ earnings forecast, which update more slowly than
market prices.
2 t his estimate is constructed based on expected corporate earnings for 12 months ahead.
Figure 1.2. An estimate of the nominal
Treasury term premium was near its
historical median
2000 2005 2010 2015 2020 2025
Monthly average
Percentage points
Median = 0.54
Source: Department of the t reasury; Wolters Kluwer,
blue Chip Financial Forecasts; Federal r eserve bank
of New York; Federal reserve board staff estimates.
Figure 1.3. Interest rate volatility remained
well above its median since 2005
2005 2010 2015 2020 2025
Monthly average
Basis points
Median = 82.10
Source: For data through July 13, 2022, b arclays
and S&p Global; for data from July 14, 2022,
onward, ICAp, Swaptions and Interest r ate Caps and
Floors Data.
8 Financial Stability r eport
Spreads in corporate debt markets widened notably but remained at
moderate levels
Yields on bbb-rated and high-yield corporate bonds were higher than the levels reported in the
November report (figure 1.7). Spreads relative to comparable-maturity t reasury securities wid -
ened notably, from very compressed to moderate levels relative to their historical distributions
(figure 1.8). the excess bond premium for all nonfinancial corporate bonds—a measure of the
risk premium required by bond investors after controlling for bond characteristics and credit
quality—continued to be near its long-run average ( figure 1.9). Nonprice indicators pointed toward
moderating risk appetite, particularly in April. Issuance in the corporate bond market slowed
Figure 1.5. As of March, an estimate of the
equity premium was near a 20-year low
1995 2000 2005 2010 2015 2020 2025
Percentage points
Median = 4.64
Source: LSEG, Institutional b rokers’ Estimate
System, North American Summary & Detail
Estimates, Level 2, Current & History Data, Adjusted
and Unadjusted, https://www.lseg.com/en/
data-analytics/financial-data/company-data/ibes-
estimates.
Figure 1.6. Volatility in equity markets rose
significantly in April
Option-implie d volatility
Realized volatility
1997 2001 2005 2009 2013 2017 2021 2025
Median = 18.98
Source: Cboe Volatility Index®(VIX®) accessed via
bloomberg Finance L. p.; Federal reserve board staff
estimates.
Figure 1.4. Before the April volatility, the price-to-earnings ratio of S&P 500 firms was close to the
upper end of its historical range
1990 1997 2004 2011 2018 2025
Median = 15.77
Source: LSEG, Institutional b rokers’ Estimate System, North American Summary & Detail Estimates, Level 2, Current
& History Data, Adjusted and Unadjusted, https://www.lseg.com/en/data-analytics/financial-data/company-data/
ibes-estimates .
Asset Valuations 9
significantly, consistent with previous episodes of elevated market volatility. In the second half of
2024, the share of deep junk corporate bond issuance—the fraction of total non-investment-
grade issuance accounted for by bonds rated b - or lower—declined from already low levels.
Market-based forecasts of one-year-ahead default probabilities of nonfinancial firms (a forward-
looking indicator of credit quality) rose somewhat to elevated levels by historical standards.
Since the last report, the average spread on leveraged loans in the secondary market increased
to around the 40th percentile of its historical distribution since 2009 ( figure 1.10). Leveraged
loan issuance also slowed substantially. though other measures generally reflect moderate
vulnerabilities, the year-ahead expected default rate for leveraged loan borrowers rose sharply
to the 90th percentile of its historical distribution since 2009, consistent with increased
market volatility.
Figure 1.7. Corporate bond yields rose but
remained near their median for the past
High-yield
2000 2005 2010 2015 2020 2025
Source: ICE Data Indices, LLC, used with permission.
Figure 1.8. Corporate bond spreads increased
to moderate levels
Triple-B (left scale)
High-yield (right scale)
2000 2005 2010 2015 2020 2025
Percentage pointsPercentage points
Source: ICE Data Indices, LLC, used with permission.
Figure 1.9. The excess bond premium was near its long-run average
2000 2005 2010 2015 2020 2025
Percentage points
Source: Federal r eserve board staff calculations based on Lehman b rothers Fixed Income Database (Warga);
Intercontinental Exchange, Inc., ICE Data Services; Center for r esearch in Security p rices, CrSp/Compustat Merged
Database, Wharton r esearch Data Services; S& p Global, Compustat.
10 Financial Stability r eport
Market liquidity has been low by historical standards and was further
strained in April, although markets continued to function
Market liquidity refers to the ease of buying and selling an asset. Low liquidity can amplify the vol -
atility of asset prices and result in larger price moves in response to shocks. Similarly, increased
volatility can dampen liquidity because liquidity providers may become more cautious in providing
quotes. In extreme cases, low liquidity can threaten continued market functioning, leading to a
situation in which participants are unable to trade without incurring a significant cost.
treasury market liquidity is particularly important because of the key role these securities play
in the financial system. before April, various measures of treasury market liquidity, including two
different measures of market depth in the most liquid on-the-run segment, indicated that liquidity
remained low by historical standards (figures 1.11 and 1.12). In April, measures of market liquid-
ity declined further amid a notable rise in trading volumes and volatility, but t reasury markets
continued to function without signs of the severe strains that have emerged in some past
stress episodes.
Figure 1.11. Treasury market depth fell significantly in April from already low levels
5-year (right scale)
10-year (right scale)
30-year (left scale)
Jan. Apr. JulyO ct.J an.A pr. JulyO ct.J an.A pr. JulyO ct.J an.A pr. JulyO ct.J an.A pr. JulyO ct.J an.A pr. JulyO ct.J an.A pr.
5-day moving average
Millions of dolla rsMillions of dolla rs
2019 2020 2021 2022 2023 2024 2025
Source: Inter Dealer b roker Community.
Figure 1.10. Spreads on leveraged loans stayed moderately below their average over the past decade
2000 2005 2010 2015 2020 2025
Percentage points
Frequency change
Source: pitchbook Data, Leveraged Commentary & Data.
Asset Valuations 11
Liquidity in equity markets stayed well below average, and worsened somewhat amid a large
increase in volatility (figure 1.13). through March, liquidity in corporate bond markets was in
line with the average level observed in recent years but deteriorated with the higher volatility in
early April.
Commercial real estate prices showed some signs of stabilizing
Aggregate CrE prices measured in inflation-adjusted terms were stable since the November
report after falling significantly in 2022 and 2023 ( figure 1.14). these transaction-based prices
may not fully reflect conditions in the CrE market, as many owners wait for more favorable
conditions to put properties on the market rather than realizing losses. However, transaction
volumes also picked up notably in the fourth quarter of 2024, including in the office sector, which
had experienced the largest price declines in 2022 and 2023. Moreover, vacancy rates and rent
growth, fundamental determinants of prices, have also shown signs of stabilizing. Capitaliza -
tion rates at the time of property purchase, which measure the annual income of commercial
Figure 1.12. On-the-run Treasury market depth was close to its historical lows
2-year OTR market depth (right scale)
10-year OTR market depth (left scale)
Oct. Jan. Apr. JulyO ct.J an.A pr. JulyO ct.J an.A pr. JulyO ct.J an.A pr. JulyO ct.J an.A pr. JulyO ct.J an.A pr.
5-day moving average
Millions of dolla rsMillions of dolla rs
2019 2020 2021 2022 2023 2024 2025
Source: brokertec; Federal reserve board staff calculations.
Figure 1.13. A measure of liquidity in equity markets stayed well below average
2000 2005 2010 2015 2020 2025
14005-day moving average
Market depth (number of contracts)
Average = 278
Source: LSEG, DataScope t ick History; Federal r eserve board staff calculations.
12 Financial Stability r eport
properties relative to their prices, rose—suggesting prices may be better supported by operating
incomes—but remained near the low end of the historical distribution ( figure 1.15). In the
January 2025 Senior Loan Officer Opinion Survey on b ank Lending practices (SLOOS), banks
reported some further tightening of lending standards for all C rE loan categories in the fourth
quarter of 2024 (figure 1.16).3
refinancing risk remained a potential vulnerability for C rE prices. Industry estimates suggest
that about 20 percent of all outstanding C rE loans, just shy of $1 trillion, will mature in 2025.4
3 t he SLOOS results reported are based on banks’ responses weighted by each bank’s outstanding loans in the respec -
tive loan category and might therefore differ from the results reported in the published SLOOS, which are based on
banks’ unweighted responses.
4 t he Mortgage b ankers Association estimates $957 billion will mature in 2025, and S& p Global estimates
$998 billion.
Figure 1.15. Income of commercial properties relative to prices continued to increase but remained
below the historical average
2001 2005 2009 2013 2017 2021 2025
Average = 6.9
Source: MSCI— real Capital Analytics; Andrew C. Florance, Norm G. Miller, r uijue peng, and Jay Spivey (2010),
“Slicing, Dicing, and Scoping the Size of the U.S. Commercial r eal Estate Market,” Journal of Real Estate Portfolio
Management, vol. 16 (May–August), pp. 101–18.
Figure 1.14. Commercial real estate prices adjusted for inflation were little changed
2001 2005 2009 2013 2017 2021 2025
Jan. 2001 = 100
Source: MSCI— real Capital Analytics; consumer price index, b ureau of Labor Statistics via Haver Analytics.
Asset Valuations 13
In addition, many borrowers have not yet secured refinancing to pay off their maturing debts
amid tight lending standards, reduced property valuations, and interest rates above the levels
that prevailed when much of the debt was originated. Forced sales in a thin market could cause
significant price declines, including for properties that are not distressed. Servicers of loans that
have been securitized in commercial mortgage-backed securities (CM bS) granted a large number
of office loan modifications in January, and the rate at which office loans in CM bS became delin-
quent at maturity dropped markedly, though it remained elevated by historical standards.
Residential real estate prices remained high relative to fundamentals
Valuations in the residential real estate
sector remained elevated. House prices
continued to increase through February of
this year (figure 1.17). A model of house price
valuation based on prices relative to market
rents and the real 10-year treasury yield
suggested that valuations in housing markets
were at levels seen in the early to mid-2000s.
An alternative measure of valuation pressures
(which uses owners’ equivalent rent instead
of market rents and has a longer history)
remained similarly elevated (figure 1.18). the
median price-to-rent ratio measured across
a wide distribution of geographic areas was
little changed since the November report, hov -
ering near its previous peak in the mid-2000s
Figure 1.16. Banks reported tightening lending standards for commercial real estate loans in the
fourth quarter of 2024
1999 2004 2009 2014 2019 2024
Net percentage of banks reporting
Easing Tightening
Source: Federal r eserve board, Senior Loan Officer Opinion Survey on b ank Lending practices; Federal r eserve
board staff calculations.
Figure 1.17. House prices continued to
increase in recent months
Case-S hiller
2005 2010 2015 2020 2025
12-month percent change
Source: Zillow, Inc., real Estate Data; CoreLogic,
Inc., real Estate Data; S& p Case-Shiller Home p rice
14 Financial Stability r eport
(figure 1.19). However, outstanding mortgage
balances relative to both market- and model-
implied house values remained far below
levels seen in the mid-2000s (see Section 2),
suggesting that house price declines are
less likely to leave borrowers in the types
of low- or negative equity positions that are
associated with a higher likelihood of default.
Moreover, credit conditions for borrowers
remained tighter relative to the early 2000s,
suggesting that weak credit standards are not
driving house price growth.
Farmland valuations remained high relative to farm income
U.S. farmland prices continued to rise in 2024 from historically high levels (figure 1.20), as did
price-to-rent ratios ( figure 1.21). prices continued to be sustained in the short run by limited farm -
land inventory, despite elevated interest rates and higher operating costs. t hese valuations have
been, in part, supported by expected growth in farm income.
Figure 1.19. House price-to-rent ratios were broadly unchanged and remained elevated across
geographic areas
Middle 80 percent of markets
1997 2001 2005 2009 2013 2017 2021 2025
Jan. 2010 = 100
Source: For house prices, Zillow, Inc., r eal Estate Data; for rent data, b ureau of Labor Statistics.
Figure 1.18. Model-based measures of house
price valuations climbed to near historically
high levels
Owners’ equivalent rent
Market-based rents
1983 1990 1997 2004 2011 2018 2025
Q1Quarterly
Source: For house prices, Zillow, Inc., r eal Estate
Data; for rent data, b ureau of Labor Statistics.
Asset Valuations 15
Figure 1.20. Inflation-adjusted farmland prices rose further in 2024 from already elevated levels
Midwest index
1968 1976 1984 1992 2000 2008 2016 2024
8000Annual
2023 dollars per acre
Median = $3,596.66
Source: Department of Agriculture; Federal r eserve bank of Minneapolis staff calculations.
Figure 1.21. Farmland prices relative to rents increased to historical highs in 2024
Midwest index
1968 1976 1984 1992 2000 2008 2016 2024
Median = 18.19
Source: Department of Agriculture; Federal r eserve bank of Minneapolis staff calculations.
2 Borrowing by Businesses and
Households
Vulnerabilities from business and household debt remained moderate
the balance sheet conditions of businesses and households were stable in the aggregate
since the last report. the level of total private nonfinancial-sector debt continued its moderate
decline in real terms and relative to GDp, with the debt-to-GD p ratio reaching its lowest level in
two decades (figure 2.1). trends in both the household and business sectors contributed to the
decline in the overall debt-to-GD p ratio.
business debt-to-GD p (figure 2.2, blue line) and gross leverage of publicly traded corporations
edged down but remained near the upper part of their respective historical ranges. Interest
Figure 2.1. The total debt of businesses and households relative to GDP declined to its lowest level in
1982 1988 1994 2000 2006 2012 2018 2024
Source: Federal r eserve board staff calculations based on b ureau of Economic Analysis, national income and
product accounts, and Federal r eserve board, Statistical r elease Z.1, “Financial Accounts of the United States.”
Figure 2.2. Both business and household debt-to-GDP ratios continued to fall
Nonﬁnancia l business
(right scale)
Househol d (left scale)
1982 1988 1994 2000 2006 2012 2018 2024
RatioRatio
Source: Federal r eserve board staff calculations based on b ureau of Economic Analysis, national income and
product accounts, and Federal r eserve board, Statistical r elease Z.1, “Financial Accounts of the United States.”
18 Financial Stability r eport
coverage ratios (ICrs)—defined as the ratio of earnings before interest and taxes to interest
expense—improved slightly and remained at moderate levels, partly reflecting stable earnings.
However, for private firms, some signs of weakness remained, including IC rs that were at the
lower end of their historical ranges.
the household debt-to-GD p ratio continued to tick downward and remained near 20-year lows
(figure 2.2, black line). Homeowners have solid equity cushions buoyed by high house prices.
Many households also continued to benefit from lower interest rate payments associated
with mortgages that were originated or refinanced several years ago, resulting in aggregate
debt-service-to-income ratios that are below pre-pandemic levels. Delinquency rates for credit
cards and auto loans were largely unchanged at levels somewhat above their historical medians,
due largely to delinquencies of nonprime borrowers.
these vulnerabilities suggest that a sharp downturn in economic activity would depress business
earnings and household incomes and reduce the debt-servicing capacity of smaller, riskier busi -
nesses with already low ICrs as well as households that are financially stretched.
For additional context, table 2.1 shows the amounts outstanding and recent historical growth
rates of different forms of debt owed by nonfinancial businesses and households as of the fourth
quarter of 2024.
Business debt vulnerabilities remained moderate
Nonfinancial business debt adjusted for inflation fell modestly in the second half of 2024
(figure 2.3). traditional sources of debt, such as corporate bonds and bank-intermediated
loans, have continued to grow at a modest pace. Net issuance of risky debt—defined as issu -
ance of speculative-grade bonds, unrated bonds, and leveraged loans minus retirements and
repayments—was positive in the fourth quarter of 2024, driven by institutional leveraged loans
(figure 2.4). private credit continued to grow quickly and now constitutes about 9 percent of total
outstanding nonfinancial corporate debt.
record bond issuance at low borrowing costs both before and in the aftermath of the pandemic
has led to elevated levels of outstanding borrowings for large public companies, but robust
earnings and ample cash buffers have limited debt-servicing vulnerabilities. Gross leverage—the
ratio of debt to assets—of all publicly traded nonfinancial firms fell in the fourth quarter of 2024
(figure 2.5) but remained high relative to history, though significantly lower than record highs seen
at the onset of the pandemic. Net leverage—the ratio of debt less cash to total assets—also
edged downward and remained near the middle of its historical distribution. Nonetheless, the
pass-through of higher interest rates into debt-servicing costs continued to be muted by the large
share of long-term, fixed-rate liabilities. For public firms in aggregate, the IC r increased since
borrowing by businesses and Households  19
Figure 2.3. Business debt adjusted for inflation declined slightly
1999 2004 2009 2014 2019 2024
Percent change, annual rate
Source: Federal r eserve board, Statistical r elease Z.1, “Financial Accounts of the United States.”
Table 2.1. Outstanding amounts of nonﬁnancial business and household credit
Item Outstanding
(billions of dollars)
2023:Q4–2024:Q4
Average annual growth,
1997–2024:Q4
Total private nonﬁnancial credit 41,748 2.0 5.3
Total nonﬁnancial business credit 21,553 2.5 5.8
Corporate business credit 13,741 2.3 5.3
Bonds and commercial paper 8,502 3.2 5.6
Bank lending 1,918 −3.4 3.5
Leveraged loans1 1,375 1.2 12.9
Noncorporate business credit 7,812 2.7 6.8
Commercial real estate credit 3,364 2.1 6.1
Total household credit 20,195 1.5 5.0
Mortgages 13,343 2.6 5.0
Consumer credit 4,989 −.7 5.0
Student loans 1,777 2.8 7.1
Auto loans 1,569 .9 5.2
Credit cards 1,317 −.1 3.5
Nominal GDP 29,720 5.0 4.7
Note: The data extend through 2024:Q4. Outstanding amounts are in nominal terms. Growth rates are nominal and
are measured from Q4 of the year immediately preceding the period through Q4 of the ﬁnal year of the period. The
table reports the main components of corporate business credit, total household credit, and consumer credit. Other,
smaller components are not reported. The commercial real estate (CRE) row shows CRE debt owed by both nonﬁnan-
cial corporate and noncorporate businesses as deﬁned in Table L.220: Commercial Mortgages in the “Financial
Accounts of the United States.” Total household-sector credit includes debt owed by other entities, such as nonproﬁt
organizations. GDP is gross domestic product.
1 Leveraged loans included in this table are an estimate of the leveraged loans that are made to nonﬁnancial busi-
nesses only and do not include the small amount of leveraged loans outstanding for ﬁnancial businesses. The
amount outstanding shows institutional leveraged loans and generally excludes loan commitments held by banks.
For example, lines of credit are generally excluded from this measure. Average annual growth of leveraged loans is
from 2000 to 2024:Q4, as this market was fairly small before then.
Source: For leveraged loans, PitchBook Data, Leveraged Commentary & Data; for GDP, Bureau of Economic Analysis,
national income and product accounts; for all other items, Federal Reserve Board, Statistical Release Z.1, “Financial
Accounts of the United States.”
20 Financial Stability r eport
the November report and remained high compared to its historical distribution. t he median ICr
for non-investment-grade public firms rose above 2 in the fourth quarter of 2024, indicating that
firms are generally able to service their debt with sufficient headroom ( figure 2.6). However, while
the fraction of debt maturing in the next year remained low, approximately 15 percent of invest -
ment-grade and 27 percent of high-yield bonds are expected to mature between one and three
years from now, indicating that the pass-through of higher interest rates into debt-servicing costs
may increase if borrowing costs stay elevated.5 the 12-month trailing corporate bond default rate
continued to be near the median of its historical distribution. Expectations of year-ahead defaults
were elevated relative to their history.
5 t he fraction of outstanding debt maturing over the next year increased with respect to the previous year but remained
low, with 8 percent of investment-grade and 14 percent of high-yield bonds maturing over the coming year.
Figure 2.5. Gross leverage of large businesses
edged down but stayed high by historical
75th percentil e
2000 2006 2012 2018 2024
Source: Federal r eserve board staff calculations
based on S&p Global, Compustat.
Figure 2.6. Interest coverage ratios, which
indicate firms’ ability to service their debt,
increased moderately
Median for all ﬁrms
Median for all non-inve stment-grade ﬁrms
2000 2004 2008 2012 2016 2020 2024
Source: Federal r eserve board staff calculations
based on S&p Global, Compustat.
Figure 2.4. Net issuance of risky debt picked up moderately
Instituti onal leveraged loans
High-yield and unrated bonds
2005 2009 2013 2017 2021 2025
Billions of dolla rs
Source: Mergent, Inc., Fixed Income Securities Database; p itchbook Data, Leveraged Commentary & Data.
borrowing by businesses and Households  21
the vulnerabilities of leveraged loans remained above historical norms. For leveraged loan borrow -
ers, gross and net leverage ratios declined modestly but remained above their historical medians
since 2016. the share of newly issued loans to large corporations with debt multiples—defined
as the ratio of debt to earnings before interest, taxes, depreciation, and amortization—greater
than 4 rose slightly in 2024 compared to 2023 but remained near its lowest level in the past
decade (figure 2.7). For leveraged loan borrowers, gross and net leverage ratios declined mod -
estly but remained above their historical medians since 2016. the median ICr for leveraged loan
borrowers increased slightly but stayed near its historical lows. IC rs of smaller and riskier firms,
including leveraged loan borrowers, are sensitive to interest rate changes due to their high lever -
age, high use of floating-rate loans, and short-term debt maturity structure. t he volume-weighted
default rate on leveraged loans stayed well below its historical median ( figure 2.8, black line).
However, defaults including distressed exchanges, which reflect the number of defaults and dis -
tressed loans that have been renegotiated between the borrower and the lender, continue to be
elevated relative to history (figure 2.8, blue line).
Figure 2.7. Newly issued leveraged loans with debt multiples greater than 4 increased slightly but
remained near their lowest levels in a decade
Debt multiples ≥ 6x
Debt multiples 5x–5.99x
Debt multiples 4x–4.99x
Debt multiples < 4x
2001 2005 2009 2013 2017 2021 2025
Source: Mergent, Inc., Fixed Income Securities Database; p itchbook Data, Leveraged Commentary & Data.
Figure 2.8. The realized default rate on leveraged loans remained well below its previous peaks
Realized default rate
Realized default rate (including
distresse d exchanges)
2000 2005 2010 2015 2020 2025
Source: pitchbook Data, Leveraged Commentary & Data.
22 Financial Stability r eport
privately held firms, which tend to be small or middle market, have less access to capital markets
and primarily borrow from banks, private credit funds, and other sophisticated investors (such as
insurance companies). While private firms account for roughly 60 percent of the total outstanding
debt of U.S. nonfinancial firms, data for these firms are not as comprehensive as those for public
firms. Some firms in this group may be less well positioned to weather a large shock. b ased on
available data, the ICr for the median firm in this category continued its downward trend over the
previous few years and was slightly below its pre-pandemic level, as higher interest rates have
contributed to reduced earnings and increased the cost of debt servicing. t he average ICr at
issuance for private credit borrowers, which comprise almost exclusively small and middle-market
private firms, increased but remained low around a value of 2, indicating debt-servicing capacity
in the range of below-investment-grade public firms. Aggregate gross and net leverage of private
firms were similar to the previous report and remained near their historical medians.
Credit availability to small businesses tightened and delinquencies
remained above pre-pandemic levels
Interest rates on small business loans have been largely stable in recent months and remained
near the top of the range observed since 2008. Credit availability has continued to tighten for
small firms in recent months. According to the February 2025 National Federation of Indepen -
dent business’s Small business Economic trends Survey, the share of firms that borrow regularly
has fallen to its lowest value since May 2022.6 Data from the Small business Lending Survey
showed that banks continued to tighten credit standards.7 that said, measures of small business
loan originations edged up through January 2025. Credit quality has improved over the past few
months, as both short-term (up to 90 days) and long-term (more than 90 days) delinquency rates
ticked down from the increase observed in the second half of 2024, though they remained above
their pre-pandemic levels.
Vulnerabilities from household debt remained moderate
Outstanding household debt adjusted for inflation has been little changed since the November
report (figure 2.9). the ratio of total required household debt payments to total disposable
income (the household debt service ratio) was virtually unchanged since the last report and
remained slightly below pre-pandemic levels. Most household debt has fixed interest rates, and
the higher interest rate environment of the past few years has only partially passed through to
household interest expenses.
6 t his survey’s data are available on the National Federation of Independent b usiness’s website at https://www.nfib.
com/surveys/small-business-economic-trends .
7 t his survey’s data are available on the Federal r eserve bank of Kansas City’s website at https://www.kansascityfed.
org/surveys/small-business-lending-survey/ .
borrowing by businesses and Households  23
Mortgage credit risk remained low
Mortgage debt accounted for roughly three-
fourths of total household debt. Housing
leverage—measured as outstanding mort -
gage loan balances relative to home values—
continued to sit well below previous peaks
(figure 2.10). When measured relative to
market prices for house values (figure 2.10,
the blue line), outstanding mortgage balances
have remained subdued. Outstanding mort -
gage loan balances relative to an estimate of
home values from a model using rents and
other market fundamentals were somewhat
higher but remained far below earlier peaks
(figure 2.10, the black line). the overall mort-
gage delinquency rate remained at the lower end of its historical distribution in the second half of
2024, while the share of mortgage balances in loss-mitigation programs increased, albeit from
low levels (figure 2.11). Delinquency rates remained subdued due to large home equity cushions
(figure 2.12) and strong underwriting standards.
New mortgage extensions rose slightly for borrowers with a prime credit score (the group with
the largest share) in the fourth quarter of 2024 but declined slightly for borrowers with near-
prime or subprime credit scores (figure 2.13). In the second quarter of 2024, the early payment
delinquency rate—the share of balances becoming delinquent within one year of mortgage
origination—remained somewhat above the median of its historical distribution.
Figure 2.9. Inflation-adjusted household debt was largely unchanged
Near prime
1999 2004 2009 2014 2019 2024
Trillions of dollar s (real)
Source: Federal r eserve bank of New York Consumer Credit p anel/Equifax; consumer price index, b ureau of Labor
Statistics via Haver Analytics.
Figure 2.10. Measures of housing leverage
stayed significantly below their peak levels
Relative to model-implie d values
Relative to market value
1999 2004 2009 2014 2019 2024
1999:Q1 = 100
Source: Federal r eserve bank of New York Consumer
Credit panel/Equifax; Zillow, Inc., r eal Estate Data;
bureau of Labor Statistics via Haver Analytics.
24 Financial Stability r eport
Consumer loan balances adjusted for inflation remained high by
historical standards
Consumer debt accounted for the remaining one-fourth of household debt and consisted primarily
of student, auto, and credit card loans. Auto and student loan balances were broadly unchanged
in inflation-adjusted terms relative to the last report, though credit card balances had somewhat
increased (figure 2.14).
the average maturity of auto loans at origination for used cars was near historical highs for bor -
rowers with a nonprime credit score (figure 2.15). On balance, longer-maturity loans tend to have
higher default risks, partly because such loans have higher risk of falling deep into a negative
equity position, which can drive consumer defaults. t he share of auto loans in delinquent status
Figure 2.13. New mortgage extensions declined for near-prime and subprime borrowers
Near prime
2000 2004 2008 2012 2016 2020 2024
1800Annual
Billions of dollar s (real)
Source: Federal r eserve bank of New York Consumer Credit p anel/Equifax; consumer price index, b ureau of Labor
Statistics via Haver Analytics.
Figure 2.11. Mortgage delinquency rates
edged up but remained close to the low end of
their historical distribution
Mortgages in loss mitigation
All mortgages
2004 2009 2014 2019 2024
Percent of mortgages
Source: Federal r eserve bank of New York Consumer
Credit panel/Equifax.
Figure 2.12. Very few homeowners had
negative equity in their homes
2012 2014 2016 2018 2020 2022 2024
Percent of mortgages
Source: Cotality r eal Estate Data.
borrowing by businesses and Households  25
was largely unchanged from the last report and stood at a level somewhat above its historical
median (figure 2.16), due in part to a more significant rise in delinquencies in 2023 and early
2024 among borrowers with a subprime credit score. t he increase in subprime auto loan delin-
quencies over the past couple of years may be due to higher car prices and higher interest rates,
combined with loosened underwriting standards and elevated loan maturities.
Aggregate inflation-adjusted credit card balances grew moderately for all borrower types over
the second half of 2024 (figure 2.17). Credit card delinquency rates inched down in the fourth
quarter of 2024 after reaching their highest level since 2010 in the previous quarter following
looser underwriting standards during the pandemic era and large growth in real revolving credit
(figure 2.18). the overall increase since early 2022 was attributable primarily to elevated delin -
quencies among borrowers with a nonprime credit score.
Figure 2.14. Credit card balances trended up last year; auto and student loan balances were about
Student loans
Auto loans
Credit cards
1999 2004 2009 2014 2019 2024
Billions of dollar s (real)
Source: Federal r eserve bank of New York Consumer Credit p anel/Equifax; consumer price index, b ureau of Labor
Statistics via Haver Analytics.
Figure 2.15. The average maturity of auto
loans at origination for used cars was elevated
for nonprime borrowers
Near prime
2016 2018 2020 2022 2024
Source: Experian Velocity.
Figure 2.16. Auto loan delinquencies have
been above normal levels
2000 2004 2008 2012 2016 2020 2024
Source: Federal r eserve bank of New York Consumer
Credit panel/Equifax.
26 Financial Stability r eport
the on-ramp period for student loan payments, which prevented loans from being reported as
delinquent to credit bureaus, ended in September 2024, and student loan delinquencies reflected
on borrower credit records can be expected to rise in the coming quarters. While student-loan
borrowers have not yet shown much greater difficulty in meeting their non-student-loan debt pay -
ments relative to the overall population, some student loan borrowers may find it more difficult to
keep up payments or to service other forms of debt.
Figure 2.18. Credit card delinquencies remained somewhat above their pre-pandemic levels
2000 2004 2008 2012 2016 2020 2024
Source: Federal r eserve bank of New York Consumer Credit p anel/Equifax.
Figure 2.17. Inflation-adjusted credit card balances for all risk segments trended higher
Near prime
1999 2004 2009 2014 2019 2024
Billions of dollar s (real)
Source: Federal r eserve bank of New York Consumer Credit p anel/Equifax; consumer price index, b ureau of Labor
Statistics via Haver Analytics.
Leverage in the Financial Sector3
Vulnerabilities associated with financial leverage remained notable
the banking system remained sound and resilient. Measures of regulatory capital for banks
increased over the second half of 2024. However, fair value losses on fixed-rate assets
remained sizable for certain banks, while some banks continued to have concentrated exposures
to CrE loans.
Outside the banking sector, leverage at broker-dealers decreased in the fourth quarter of 2024
and stayed near historically low levels. However, the potential for strains on dealers’ intermedia -
tion capacity during periods of market stress remained a vulnerability to t reasury markets. Life
insurers’ leverage remained at the upper end of its historical distribution, and life insurers con -
tinued to hold a significant share of illiquid and risky assets. While hedge funds’ leverage rose to
historical highs in the third quarter of 2024 and remained concentrated among the largest hedge
funds, it likely decreased in early April as some hedge funds unwound leveraged positions amid
heightened market volatility.
table 3.1 shows the sizes and growth rates of assets of financial institutions discussed in
this section.
Banks maintained historically high levels of regulatory capital,
though fair value losses in fixed-rate assets remained sizable
the common equity tier 1 (CEt1) ratio, a regulatory risk-based measure of bank capital adequacy,
continued to rise since the last report. this increase was primarily driven by strong retained earn-
ings, bringing these ratios across all bank sizes to the upper end of their range from 2010 to 2024
(figure 3.1). As of the end of 2024, measures of bank profitability continued to improve and were
around the median of their historical distributions. banks’ average interest rate on interest earning
assets remained well above the average interest rate paid on liabilities, supporting net interest
margins (figure 3.2). Earnings for the largest banks were reportedly robust in the first quarter of
2025, though early earnings calls highlighted elevated economic uncertainty and downside risk,
with some banks increasing loan-loss reserves to buffer against a potential increase in defaults.
Higher interest rates continued to reduce the fair value of banks’ fixed-rate assets. At the end of
2024, the fair values of banks’ available-for-sale (AFS) and held-to-maturity (H tM) portfolios were
below their book values by $182 billion and $297 billion, respectively (figure 3.3). the fair value of
banks’ securities holdings remained sensitive to changes in interest rates.
28 Financial Stability r eport
Figure 3.1. Banks’ average risk-based capital ratios were near or above previous peaks
Large non–G-SIBs
Other BHCs
2003 2006 2009 2012 2015 2018 2021 2024
Percent of risk-weighted assets
Source: Federal r eserve board, Form Fr Y-9C, Consolidated Financial Statements for Holding Companies.
An alternative measure of bank capital is the ratio of tangible common equity to total tangible
assets. While this ratio shares similarities with the CE t1 ratio—as both exclude intangible items
like goodwill from capital—there are important differences between the two. Unlike the CE t1
ratio, the tangible common equity ratio does not factor in the riskiness of assets, but it does
include fair value declines on AFS securities for all banks. While the tangible common equity ratio
increased across all bank categories in the second half of 2024, it remained below its average
level over the past decade (figure 3.4).
Table 3.1. Size of selected sectors of the ﬁnancial system, by types of institutions and vehicles
Item Total assets
(billions of dollars)
2023:Q4–2024:Q4
Average annual growth,
1997–2024:Q4
Banks and credit unions 27,812 0.8 5.6
Mutual funds 21,685 10.6 9.1
Insurance companies 13,812 6.5 5.6
Life 10,249 5.5 5.6
Property and casualty 3,563 9.3 5.7
Hedge funds1 11,105 13.1 8.1
Broker-dealers2 5,963 7.1 5.2
Outstanding
(billions of dollars)
Securitization 13,842 2.8 5.4
Agency 12,229 2.3 5.8
Non-agency3 1,613 7.0 3.7
Note: The data extend through 2024:Q4 unless otherwise noted. Outstanding amounts are in nominal terms. Growth
rates are nominal and are measured from Q4 of the year immediately preceding the period through Q4 of the ﬁnal year
of the period. Life insurance companies’ assets include both general and separate account assets.
1 Hedge fund data start in 2012:Q4 and are updated through 2024:Q2. Growth rates for the hedge fund data are
measured from Q2 of the year immediately preceding the period through Q2 of the ﬁnal year of the period.
2 Broker-dealer assets are calculated as unnetted values.
3 Non-agency securitization excludes securitized credit held on balance sheets of banks and ﬁnance companies.
Source: Federal Reserve Board, Statistical Release Z.1, “Financial Accounts of the United States”; Federal Reserve
Board, “Enhanced Financial Accounts of the United States.”
Leverage in the Financial Sector 29
Figure 3.3. The fair value losses of banks’ securities portfolios remained sizable
Available-for-sale securities
Held-to-maturity securities
2017 2018 2019 2020 2021 2022 2023 2024
Billions of dolla rs
Source: Federal Financial Institutions Examination Council, Call r eport Form FFIEC 031, Consolidated r eports of
Condition and Income (Call r eport); Federal r eserve board, Form Fr Y-9C, Consolidated Financial Statements for
Holding Companies.
Figure 3.2. Banks kept healthy net interest margins
Average interes t rate on interes t-earning assets
Average interes t expense rate on liabilities
2014 2016 2018 2020 2022 2024
Source: Federal r eserve board, Form Fr Y-9C, Consolidated Financial Statements for Holding Companies.
Figure 3.4. The ratio of tangible common equity to tangible assets increased, on net, for banks of all
categories in the second half of 2024
Large non–G-SIBs
Other BHCs
1988 1994 2000 2006 2012 2018 2024
Percent of tangible assets
Source: For data through 1996, Federal Financial Institutions Examination Council, Call r eport Form FFIEC 031,
Consolidated reports of Condition and Income (Call r eport). For data from 1997 onward, Federal r eserve board,
Form Fr Y-9C, Consolidated Financial Statements for Holding Companies; Federal Financial Institutions Examination
Council, Call report Form FFIEC 031, Consolidated r eports of Condition and Income (Call r eport).
30 Financial Stability r eport
Figure 3.6. Credit standards for commercial and industrial loans were little changed in the second
half of 2024
1999 2004 2009 2014 2019 2024
Net percentage of banks reporting
Easing Tightening
Source: Federal r eserve board, Senior Loan Officer Opinion Survey on b ank Lending practices; Federal r eserve
board staff calculations.
Credit quality at banks remained sound despite rising delinquencies
in certain loan segments
Delinquency rates for commercial and industrial (C&I) and C rE loans increased slightly in the
second half of 2024, while delinquency rates for credit card and auto loans were little changed
and remained above their pre-COVID levels. Delinquencies of loans backed by office and multi -
family properties remained elevated at global systemically important banks (G-SI bs) and large
non–G-SI bs, while delinquencies at regional banks increased slightly, but from much lower levels.
Larger banks, where the delinquencies are concentrated, tend to have more substantial loan loss
allowances and appear to be positioned to manage potential portfolio losses.
banks’ CrE portfolios have a sizable share of
loans backed by office and multifamily proper -
ties where weaker fundamentals have begun
to show some signs of improvement. banks
have actively managed their CrE exposures
by modifying loan terms, which has reduced
delinquency rates.
the leverage of borrowers with C&I loans
increased slightly since November (figure 3.5).
recent responses from the SLOOS indicate
that lending standards for C&I loans remained
unchanged, on net, following previous tighten -
ing (figure 3.6).
Figure 3.5. The financial condition of firms
with commercial and industrial bank loans has
slightly deteriorated
Non-publicly-t raded ﬁrms
Publicly traded ﬁrms
2014 2016 2018 2020 2022 2024
Debt as percentage of assets
Source: Federal r eserve board, Form Fr Y-14Q
(Schedule H.1), Capital Assessments and Stress
Leverage in the Financial Sector 31
Broker-dealers’ leverage remained low
At the end of 2024, the ratio of broker-dealers’ assets to equity was at the lower end of its
historical distribution (figure 3.7). Smoothing through seasonal factors, profits were up year
over year (figure 3.8). the breakdown of broker-dealer profits remained relatively balanced, with
earnings evenly distributed across equity; fixed income, rates, and credit; and other business
lines (figure 3.9).
Figure 3.8. Trading profits in the second half
of 2024 were within the range of the past
2018 2019 2020 2021 2022 2023 2024
Millions of dolla rs
Source: Federal r eserve board, reporting,
recordkeeping, and Disclosure r equirements
Associated with r egulation VV (proprietary trading
and Certain Interests in and r elationships with
Covered Funds, 12 C.F.r. pt. 248).
Figure 3.7. Leverage at broker-dealers
remained near historical lows
1996 2000 2004 2008 2012 2016 2020 2024
Ratio of assets to equity
Source: Federal reserve board, Statistical release Z.1,
“Financial Accounts of the United States.”
Figure 3.9. The distribution of the sources of broker-dealer trading profits was in line with recent
Fixed income, rates, and credit
2018 2019 2020 2021 2022 2023 2024
Source: Federal reserve board, reporting, recordkeeping, and Disclosure requirements Associated with regulation VV
(proprietary trading and Certain Interests in and relationships with Covered Funds, 12 C.F.r. pt. 248).
32 Financial Stability r eport
Dealer intermediation in treasury markets rose in the first quarter of 2025, and treasury posi-
tions increased. Such an increase was consistent with high treasury issuance and reports from
market participants highlighting reduced demand from other t reasury investors. While dealers’
intermediation capacity remains adequate for market functioning in normal times, balance sheet
pressures could constrain dealers’ ability to intermediate in treasury markets during periods of
market stress. Heightened client demand in early April reportedly increased balance sheet pres -
sures for some dealers.
In the March 2025 Senior Credit Officer Opinion Survey on Dealer Financing t erms (SCOOS),
dealers reported a slight easing in terms for securities financing transactions and over-the-
counter derivatives since November.8 Over the same period, their clients’ use of financial lever-
age remained unchanged on net. Additionally, one-fifth of dealers noted a relaxation in collateral
spreads for agency residential mortgage-backed securities ( rMbS) and CMbS. the March SCOOS
also included special questions focusing on dealers’ and their clients’ practices in treasury repur-
chase agreement (repo) markets, specifically regarding cross-margining, which allows market par -
ticipants to transfer margin from accounts with an excess of margin to accounts with insufficient
margin. While most dealers indicated that their clients engage in both treasury repo and treasury
futures or interest rate derivatives transactions, only a small fraction reported significant use of
cross-margining agreements for these trades.
Insurers’ leverage increased, and they continued to invest in risky
and illiquid assets
While leverage at life insurers remained around the 85th percentile of its historical distribution
over the second half of 2024, leverage at property and casualty insurers remained near the lower
end of its historical distribution (figure 3.10). Life insurers continued to take additional credit
and liquidity risk by allocating a growing share of their portfolios to riskier and less liquid assets,
such as leveraged loans, collateralized loan obligations (CLOs), high-yield corporate bonds,
privately placed corporate bonds, and alternative investments. Additionally, as major holders of
CMbS, life insurers could face valuation pressures if commercial property values experience a
significant decline.
8 t he SCOOS is available on the Federal r eserve board’s website at https://www.federalreserve.gov/data/scoos.htm .
Leverage in the Financial Sector 33
Hedge funds’ leverage has likely decreased from historically high
levels due to repositioning and unwinding levered trades in April
In the third quarter of 2024, the most recent quarter for which the Securities and Exchange
Commission’s form pF data are available, hedge funds’ leverage reached historical highs and
remained heavily concentrated among the largest funds (figure 3.11 and figure 3.12). According to
data from the March SCOOS, hedge funds’ leverage remained largely unchanged between mid-
November 2024 and mid-February 2025 (figure 3.13). More recently, however, hedge fund lever-
age likely declined amid elevated market volatility. this reported decrease reflects a partial
unwinding of leveraged positions by some hedge funds. Hedge fund repositioning and deleverag -
ing may have contributed to the recent market volatility, both in equities and risky assets as well
as in some longer-dated treasury securities.
Figure 3.10. Leverage at life insurers was around the 85th percentile of its historical distribution
Property and casualt y
2003 2006 2009 2012 2015 2018 2021 2024
Ratio of assets to equity
Source: Generally accepted accounting principles data from 10-Q and 10-K filings accessed via S& p Global, Capital
Figure 3.11. As of 2024:Q3, hedge funds’
leverage was at its highest level since data
became available
Mean gross leverage
Mean balance sheet leverage
2014 2016 2018 2020 2022 2024
Source: Securities and Exchange Commission,
Form pF, reporting Form for Investment Advisers to
private Funds and Certain Commodity p ool Operators
and Commodity trading Advisors.
Figure 3.12. Balance sheet leverage at the
15 largest hedge funds stayed elevated
Top 15, by GAV
16–50, by GAV
51+, by GAV
2014 2016 2018 2020 2022 2024
Source: Securities and Exchange Commission,
Form pF, reporting Form for Investment Advisers to
private Funds and Certain Commodity p ool Operators
and Commodity trading Advisors.
34 Financial Stability r eport
Issuance of non-agency securities remained strong through March
Issuance of non-agency securities—which increases the amount of leverage in the financial
system—remained robust through March ( figure 3.14).9 Credit spreads on most major securi -
tized products generally narrowed from November into early 2025 before widening in April. Credit
performance across securitized products backed by riskier loan collateral showed continued signs
of deterioration. this decline in credit performance was particularly pronounced in C rE-related
securitizations, with prime auto and credit card asset-backed securities (A bS) also experiencing
signs of deterioration.
9 Securitization allows financial institutions to bundle loans or other financial assets and sell claims on the cash flows
generated by these assets as tradable securities, much like bonds. b y funding assets with debt issued by invest -
ment funds known as special purpose entities (S pEs), securitization can add leverage to the financial system, in part
because SpEs are generally subject to regulatory regimes, such as risk retention rules, that are less stringent than
banks’ regulatory capital requirements. Examples of the resulting securities include CLOs (predominantly backed by
leveraged loans), asset-backed securities (often backed by credit card and auto debt), CM bS, and rMbS.
Figure 3.14. The pace of issuance of securitized products remained robust through March
Private- label RMBS
Non-agenc y CMBS
Auto loan/lease ABS
CDOs (including CLOs and ABS CDOs)
2001 2005 2009 2013 2017 2021 2025
3200Annual
Billions of dollar s (real)
Source: Green Street, Commercial Mortgage Alert’s CM bS Database and Asset- backed Alert’s AbS Database;
consumer price index, b ureau of Labor Statistics via Haver Analytics.
Figure 3.13. Dealers indicated that the use of leverage by hedge funds remained largely unchanged
for most clients
Hedge funds
Trading REITs
Insurance companies
Mutual funds
2013 2015 2017 2019 2021 2023 2025
Net percentage
Source: Federal r eserve board, Senior Credit Officer Opinion Survey on Dealer Financing t erms.
Leverage in the Financial Sector 35
Bank lending to nonbank financial institutions continued to grow
bank credit commitments to NbFIs grew modestly in 2024 to $2.3 trillion (figure 3.15). Growth
in some areas, such as commitments to open-end investment funds, special purpose entities,
and securitization vehicles, was strong (figure 3.16). As outlined in the box “Changes in the
Classification of Nonbank Financial Institutions ,” there have been a number of improvements to
the methodology for the identification of different types of N bFI borrowers. One result of these
improvements is that a substantial amount of loans to borrowers previously classified in catego -
ries such as “Other financial vehicles” have been identified as private equity ( pE) firms, business
development companies (bDCs), and private credit (pC) funds. Overall, bank lending to NbFIs
is not significantly concentrated in any one sector, most commitments are rated investment
grade, and these loans traditionally have had delinquency rates lower than loans to nonfinancial
businesses.
Figure 3.15. Bank credit commitments to nonbank financial institutions increased
1. Financial transactions processing
2. Private equity, BDCs, and credit funds
3. Broker-dealer s
4. Insurance companies
6. Open-end investment funds
7. Special purpose entities , CLOs, and ABS
8. Other ﬁnancial vehicles
9. Real estate lenders and lessors
2018 2020 2022 2024
2500Q4Quarterly
Billions of dolla rs
10. Consumer lenders, other lenders, and lessors
Source: Federal r eserve board, Form Fr Y-14Q (Schedule H.1), Capital Assessments and Stress t esting.
Figure 3.16. Growth of commitments to open-end investment funds, special purpose entities,
collateralized loan obligations, and asset-backed securities grew between 2023:Q4 and 2024:Q4
Committed amounts
Utilized amounts
REITs Total
transactions
processing
investment
Source: Federal r eserve board, Form Fr Y-14Q (Schedule H.1), Capital Assessments and Stress t esting.
36 Financial Stability r eport36
Box 3.1. Changes in the Classiﬁ  cation of Nonbank Financial
Institutions
Since the November report, the methodology for identifying bank credit commitments to NbFIs has
been updated. As part of the change, new data on company names from various data vendors now
supplement bank-reported North American Industry Classifi  cation System codes. the estimates now
incorporate data from additional bank-holding companies that recently started reporting Fr Y-14Q
information as part of the annual supervisory stress test. As a result of this change, total commit-
ment amounts to NbFIs, shown in fi  gure 3.15, are $124 billion higher, implying a total of $2.3 trillion
for 2024:Q4.
relative to the previous classifi  cation, loan commitment amounts identifi  ed in the combined pE,
bDC, and pC sector and in the real estate investment trusts (rEIts) sector are higher by $243 billion
and $158 billion, respectively, in 2024:Q4. the higher level of commitments to pE/bDC/pC is mainly
driven by improved name-matching and reclassifi  cations from the “Other fi  nancial vehicles” category.
the higher level of commitments to rEIts is mostly driven by reclassifi  cations from “real estate lend-
ers and lessors.”
While the improvements to the methodology have resulted in a signifi  cant upward revision to the
estimated level of loan commitments to pE/bDC/pC and rEIts, estimated historical growth rates
remained roughly unchanged relative to the growth rates reported using the previous methodology.
4 Funding Risks
Over the past year, vulnerabilities from funding risks have declined to
a level in line with historical norms
Funding risks for most banks remained near historical norms. Uninsured deposits as a share of
bank funding have declined significantly from their 2022 peak, though some banks’ reliance on
potentially less-stable forms of funding remained high. On the asset side, large banks subject to
the liquidity coverage ratio (LCr) maintained sound levels of high-quality liquid assets (HQLA).
MMFs and other cash-management vehicles continued to be vulnerable to runs, as they allow
daily investor redemptions while investing in assets with a degree of credit risk and limited
secondary-market trading, which can lead to strains in stress episodes. Vulnerabilities in prime
and tax-exempt MMFs have diminished as reforms went into effect and assets under manage -
ment (AUM) in institutional prime funds, the most run-prone segment, declined. However, other
cash-management vehicles continued to grow.
Some open-end bond mutual funds remained susceptible to large outflows, as they allow daily
redemptions while holding assets that might become illiquid in times of stress. Meanwhile, life
insurers continued to face funding risk owing to their reliance on nontraditional liabilities in combi -
nation with an increasing share of investments in less-liquid assets.
Overall, estimated runnable money-like financial liabilities grew 8.2 percent over the past year,
exceeding $23 trillion, driven by growth in MMFs and repos. As a share of GD p, runnable liabilities
remained near their historical median of around 78 percent (table 4.1 and figure 4.1). the box
“runnables: An Indicator of Aggregate r un-related Vulnerabilities in the Economy” provides an
overview of their composition, historical trends, and recent developments.
Most banks maintained high levels of liquidity, and their funding
sources have stabilized over the past year
Aggregate liquidity in the banking system remained sound, as HQLA relative to total assets
remained above pre-pandemic levels ( figure 4.2). Many U.S. G-SIbs held a significant portion of
their HQLA in HtM securities, primarily long-duration agency mortgage-backed securities, whose
market values continued to be well below their book values. Securities held in H tM accounts
are accounted at book value when used in the calculation of regulatory capital and book equity,
but they are valued at fair value for LCr purposes; therefore, fluctuations in the value of these
securities can affect banks’ LCr levels. HtM securities can be pledged at the Federal r eserve’s
discount window or in repos at their market value.
38 Financial Stability r eport
Table 4.1. Size of selected instruments and institutions
Item Outstanding/total assets
(billions of dollars)
2023:Q4–2024:Q4
Average annual growth,
1997–2024:Q4
Total runnable money-like liabilities1 23,388 8.5 5.0
Uninsured deposits 7,067 5.0 10.7
Domestic money market funds2 6,852 15.8 6.4
Government 5,638 16.4 15.2
Prime 1,079 13.3 3.3
Tax exempt 136 9.9 −.8
Repurchase agreements 4,920 3.1 5.8
Commercial paper 1,323 8.0 2.7
Securities lending3 1,045 8.6 7.3
Bond mutual funds 4,867 7.6 8.0
Note: The data extend through 2024:Q4 unless otherwise noted. Outstanding amounts are in nominal terms. Growth
rates are nominal and are measured from Q4 of the year immediately preceding the period through Q4 of the ﬁnal year
of the period. Total runnable money-like liabilities exceed the sum of listed components. Unlisted components of run-
nable money-like liabilities include variable-rate demand obligations, federal funds, funding-agreement-backed securi-
ties, private liquidity funds, offshore money market funds, short-term investment funds, local government investment
pools, and stablecoins. Bond mutual funds are not part of the total runnable money-like liabilities.
1 Average annual growth is from 2003:Q1 to 2024:Q4.
2 Average annual growth is from 2001:Q1 to 2024:Q3.
3 Average annual growth is from 2000:Q1 to 2024:Q3. Securities lending includes only lending collateralized by cash.
Source: Securities and Exchange Commission, Private Funds Statistics; iMoneyNet, Inc., Offshore Money Fund Ana-
lyzer; Bloomberg Finance L.P.; Securities Industry and Financial Markets Association: U.S. Municipal Variable-Rate
Demand Obligation Update; DTCC Solutions LLC, an afﬁliate of the Depository Trust & Clearing Corporation: commer-
cial paper data; Federal Reserve Board staff calculations based on Risk Management Association, Securities Lending
Report; S&P Securities Finance; Investment Company Institute; Federal Reserve Board, Statistical Release Z.1,
“Financial Accounts of the United States”; Federal Financial Institutions Examination Council, Consolidated Reports of
Condition and Income (Call Report); Morningstar, Inc., Morningstar Direct; Llama Corp, DeFiLlama.
Figure 4.1. The ratio of runnable money-like liabilities to GDP remained near its median
2. Securities lending
3. Commercial paper
4. Domestic money market funds
5. Repurchase agreements
6. Uninsured deposit s
2003 2006 2009 2012 2015 2018 2021 2024
Percent of GDP
Source: Securities and Exchange Commission, p rivate Funds Statistics; iMoneyNet, Inc., Offshore Money Fund
Analyzer; bloomberg Finance L. p.; Securities Industry and Financial Markets Association: U.S. Municipal Variable-
rate Demand Obligation Update; D tCC Solutions LLC, an affiliate of the Depository t rust & Clearing Corporation:
commercial paper data; Federal reserve board staff calculations based on risk Management Association, Securities
Lending report; S&p Securities Finance; Investment Company Institute; Federal r eserve board, Statistical r elease
Z.1, “Financial Accounts of the United States”; Federal Financial Institutions Examination Council, Consolidated
reports of Condition and Income (Call r eport); gross domestic product, b ureau of Economic Analysis via Haver
Analytics; Llama Corp, DeFiLlama.
Funding risks 39 39
Box 4.1. Runnables: An Indicator of Aggregate Run-Related
Vulnerabilities in the Economy1
runs can precipitate severe strains in short-term funding markets. As such, short-term uninsured
liabilities that are susceptible to runs, or “runnables,” serve as a key metric for assessing aggregate
run-related vulnerabilities in the economy. 2 this box provides an overview of runnables, including their
composition, historical trends, and recent developments.
1 this box provides explanations and analyses for figure 4.1, which shows runnable money-like liabilities as a share of GDp.
2 the concept of “runnables” was introduced in Jack bao, Josh David, and Song Han (2015), “the runnables,” FEDS
econresdata/notes/feds-notes/2015/the-runnables-20150903.html .
3 In the example above, this approach results in total runnables of $20,000, reflecting both the MMF shares and the Cp
Concept of runnables
runnables play a vital role in the economy by offering investors cash-management options and provid-
ing short-term funding to businesses, governments, and fi  nancial institutions. their total outstanding
volume amounts to roughly 80 percent of U.S. GDp, highlighting their signifi  cant presence in the fi  nan-
cial system.
However, these liabilities also pose signifi  cant systemic risk due to their susceptibility to runs, in
which investors stop providing funding by redeeming shares, withdrawing deposits, or refusing to roll
over short-term debts. Such runs have contributed to several episodes of fi  nancial stress over the
past two decades. Hence, monitoring the aggregate size and composition of runnables is critical for
assessing vulnerabilities stemming from funding risk.
Estimation approach for runnables
Short-term funding markets include both funding instruments—such as repos and commercial paper
(Cp)—and investment vehicles like MMFs that invest in those instruments. Instruments and vehicles
may overlap in providing funding. For example, an investor purchasing $10,000 in MMF shares may
indirectly provide that funding to a bank if the MMF uses the proceeds to purchase Cp issued by the
bank. runs can occur in either segment of this funding chain: the MMF can suffer a run if investors
rapidly redeem shares, and a Cp issuer can experience a run if MMFs suddenly stop rolling over its
maturing Cp. Furthermore, such events are often linked, as redemptions from an MMF may compel it
to curtail the fi  nancing provided to its borrowers, amplifying systemic stress.
thus, to quantify the aggregate size of runnables, the sum of the outstanding amounts of all runnable
components is used, rather than a net amount. 3 Conceptually, this aggregate measure is designed
to capture all types of short-term liabilities that could be subject to runs. to account for inﬂ  ation and
economic growth over time, runnable liabilities are scaled by nominal U.S. GDp.
Components of runnables and their vulnerabilities
While runnables play a vital role in the fi  nancial system, in the past two decades most have experi-
enced runs or run-like events—some of which stabilized only after government intervention.
Domestic MMF shares are used for cash management by both institutional and retail investors,
while MMFs provide short-term funding to fi  nancial and nonfi  nancial fi  rms as well as governments.
prime MMFs, which bear credit risk, suffered industry-wide runs in September 2008 and again in
March 2020. Cp is a key source of short-term funding for large corporations and fi  nancial institu-
tions. However, during crises, issuers have struggled to roll over maturing Cp, leading to sharp spikes
(continued)
40 Financial Stability r eport40
infunding costs and market freezes. repos are short-term, secured loans that serve as a key funding
source for broker-dealers and leveraged investors, who often depend on continuous rollovers. repo
markets experienced major disruptions in 2008, with funding volumes contracting abruptly. Securities
lending is economically similar to repo, with securities lenders typically reinvesting cash collateral in
short-term instruments. Some of these reinvestments came under stress in 2008, which strained
securities lenders’ ability to return cash collateral on demand. Uninsured bank deposits—those
exceeding the Federal Deposit Insurance Corporation insurance limit—are an important funding source
for some banks but have been vulnerable to rapid withdrawals during multiple periods of stress.
the coverage of runnables has expanded notably since 2015, partly due to improved data availability. 4
the measure now also includes dollar-denominated offshore MMFs, bank-sponsored short-term invest-
ment funds, local government investment pools, private liquidity funds, and ultrashort bond funds—
many of which invest in similar markets as domestic MMFs. Most of these runnable vehicles have
grown steadily over the past decade, and many experienced notable stresses during crises. More
recently, innovation in short-term funding markets has given rise to new forms of runnables, particu-
larly stablecoins. As fi  nancial innovations continue, the list of runnables will likely expand further.
4 the new data series discussed in this paragraph, including stablecoins, are incorporated in the “Other” category of figure 4.1.
this “Other” category also includes federal funds, variable-rate demand obligations, and funding-agreement-backed securi-
ties. Due to data limitations, the size of some of these runnables may be underestimated.
Evolution of runnables
the usefulness of runnables as an indicator of aggregate fi  nancial vulnerability was evident in the
years leading up to 2007, when their share of GDp reached record highs—driven largely by the expan-
sion of nonbank fi  nancial intermediaries and their heavy use of short-term funding markets. these
elevated levels signaled heightened run risks.
that fragility materialized during the 2007–09 fi  nancial crisis, as several key components of runnables
experienced damaging runs. the most prominent include the run on asset-backed commercial paper
(AbCp), the run on prime MMFs, and the freeze in the triparty repo market. Following the crisis, total
runnables declined sharply relative to GDp, as market participants pulled back from certain funding
markets—such as repos, securities lending, and AbCp—while uninsured deposits temporarily shrank
due to expanded deposit insurance coverage.
Uninsured deposits returned to elevated levels in 2013 after the expiration of temporary deposit
insurance expansions and saw another boost in 2020 amid the pandemic. these increases not
only markedly contributed to the growth of aggregate runnables but also were a factor in the 2023
regional bank crisis, during which runs on uninsured deposits led to the failure of several banks.
Although uninsured deposits have declined in the aftermath of the 2023 turmoil, the overall volume
of runnables remains substantial. runnables are a key asset for investors and funding source for bor-
rowers, and the liquidity mismatch associated with runnables contributes to inherent vulnerabilities in
the fi  nancial system.
Box 4.1—continued
Funding risks 41
banks’ funding structure was little changed at the end of 2024 relative to the end of 2023. t he
share of uninsured deposits relative to total bank funding remained well below the elevated levels
seen in 2022 and early 2023. Large banks adjusted to lower uninsured deposits by increasing
their reliance on short-term non-deposit wholesale funding sources, such as repos, and regional
and community banks generally became more reliant on brokered and reciprocal deposits
(figure 4.3). While reciprocal deposits are fully insured, they are more expensive than traditional
core insured deposits and may not be as stable during times of stress.
Money market funds and other cash-management vehicles remained
susceptible to runs
Vulnerabilities in prime MMFs have declined somewhat in the past year and AUM in institutional
prime MMFs—historically, the most vulnerable segment—shrank substantially. t otal prime assets
declined only slightly over the past year, as retail prime MMFs attracted sizable inflows.
Figure 4.2. The share of high-quality liquid assets to total assets remained above pre-pandemic levels
Large non–G-SIBs
Other BHCs
2003 2006 2009 2012 2015 2018 2021 2024
Percent of assets
Source: Federal r eserve board, Form Fr Y-9C, Consolidated Financial Statements for Holding Companies.
Figure 4.3. Banks’ reliance on short-term wholesale funding has returned to pre-pandemic levels
2000 2004 2008 2012 2016 2020 2024
Percent of assets
Source: Federal r eserve board, Form Fr Y-9C, Consolidated Financial Statements for Holding Companies.
42 Financial Stability r eport
As of January 2025, total MMF assets had risen to $6.9 trillion from $6.0 trillion in January 2024,
likely because MMFs continued to provide more attractive yields relative to most bank deposits
(figure 4.4). More than 80 percent of MMF assets are in funds that hold only U.S. government
securities and repo backed by them.
Other cash-management vehicles, such as dollar-denominated offshore MMFs and short-term
investment funds, also invest in money market instruments and engage in liquidity transforma -
tion. Estimated aggregate AUM of these vehicles remained at $2.1 trillion, unchanged from the
November report, with roughly $1 trillion to $2 trillion of that amount in vehicles with portfolios
similar to those of prime MMFs.10
Many cash-management vehicles—including retail and government MMFs, offshore MMFs, and
short-term investment funds—seek to maintain stable net asset values that are typically rounded
to $1.00. If short-term interest rates rise sharply or portfolio assets lose value for other reasons,
the market values of these funds may fall below their rounded share prices, potentially triggering
large redemptions and destabilizing short-term funding markets.
Stablecoins continued to grow and remained vulnerable to runs
Stablecoin assets—digital assets designed to maintain a stable value relative to a national
currency or another reference asset—continued to grow. 11 by early April, the total market capital -
ization of stablecoins reached approximately $235 billion, above the previous high observed in
April 2022 before terra’s collapse (figure 4.5).
10 Cash-management vehicles included in this total are dollar-denominated offshore MMFs, short-term investment funds,
private liquidity funds, ultrashort bond mutual funds, and local government investment pools.
11 Stablecoins are typically backed by a pool of “reserve” assets that include t reasury bills and other short-term instru -
ments, but some stablecoin reserve assets also include loans and other digital assets.
Figure 4.4. Assets under management at money market funds increased to an all-time high in January
1. Government
2. Tax exempt
3. Retail prime
4. Instituti onal prime
2000 2005 2010 2015 2020 2025
7000Jan.Monthly
Billions of dollar s (real)
Source: Federal r eserve board staff calculations based on Investment Company Institute data; consumer price
index, bureau of Labor Statistics via Haver Analytics.
Funding risks 43
Bond mutual funds remained exposed to liquidity risks
Mutual funds that invest substantially in corporate bonds, municipal bonds, and bank loans
may be particularly exposed to liquidity transformation risks, given that these funds are required
to offer daily redemptions and hold assets that can become illiquid in times of stress. As of
the fourth quarter of 2024, mutual funds held approximately $1.4 trillion in corporate bonds—
accounting for nearly 14 percent of corporate bonds outstanding ( figure 4.6). In early 2025, total
AUM of the subcategories of mutual funds holding high-yield bonds and bank loans—both of
which tend to hold riskier and less liquid securities—increased modestly, while net inflows into
these funds remained relatively subdued (figure 4.7 and figure 4.8).12 In early April, amid height-
ened market volatility, outflows from bank loan and high-yield bond mutual funds were somewhat
12 As of the fourth quarter of 2024, mutual funds held approximately 10 percent and 18 percent of high-yield and bank
loans outstanding, respectively.
Figure 4.5. Market capitalization of major stablecoins has grown significantly
2. TerraUSD
4. Binance USD
5. USD Coin
Jan. Apr. JulyO ct.J an.A pr. JulyO ct.J an.A pr. JulyO ct.J an.A pr. JulyO ct.J an.A pr.
Billions of dolla rs
2021 2022 2023 2024 2025
Source: Llama Corp, DeFiLlama.
Figure 4.6. Corporate bonds held by bond mutual funds increased in the second half of 2024
2000 2004 2008 2012 2016 2020 2024
Billions of dollar s (real)
Source: Federal r eserve board staff estimates based on Federal r eserve board, Statistical r elease Z.1, “Financial
Accounts of the United States”; consumer price index, b ureau of Labor Statistics via Haver Analytics.
44 Financial Stability r eport
Figure 4.7. Assets held by bank loan and high-yield mutual funds have been trending up since late 2023
Bank loan mutual funds
High-yield bond mutual funds
2000 2005 2010 2015 2020 2025
Billions of dollar s (real)
Source: Investment Company Institute; consumer price index, b ureau of Labor Statistics via Haver Analytics.
Figure 4.8. Mutual fund flows remained subdued through February
Investment-grade bond mutual funds
Bank loan mutual funds
High-yield bond mutual funds
Feb. JuneO ct.F eb. JuneO ct.F eb. JuneO ct.F eb. JuneO ct.F eb. JuneO ct.F eb. JuneO ct.F eb. JuneO ct.F eb. JuneO ct.F eb.
150Monthly
Billions of dolla rs
2017 2018 2019 2020 2021 2022 2023 2024 2025
Source: Investment Company Institute.
Central counterparties’ initial margin levels and prefunded resources
remained high
Central counterparties’ (CCps) initial margin levels remained high and stable during the second
half of 2024. CCps also maintained high levels of prefunded mutualized resources.13 Elevated ini-
tial margins and ample overall prefunded resources lower the risk faced by CC ps to the potential
default by a clearing member or market participant. t his, in turn, reduces the possibility of large
liquidity demands from a CCp to its credit providers (usually banks). More recently, CCps operated
normally as transaction volumes across cleared products grew in early April. However, the con -
centration of clients’ collateral at the largest clearing members remains a vulnerability, as such
13 prefunded resources represent financial assets, including cash and securities, transferred by the clearing members
to the CCp to cover that CCp’s potential credit exposure in case of default by one or more clearing members. t hese
prefunded resources are held as initial margin and prefunded mutualized resources, which builds the resilience of
CCps to the possible default of a clearing member or market participant.
Funding risks 45
concentration could make transferring client positions to other clearing members challenging if it
were ever necessary.14
Life insurers’ reliance on nontraditional liabilities for funding
continued to increase
Life insurers continued to increase their reliance on nontraditional liabilities for funding, including
funding-agreement-backed securities, Federal Home Loan b ank advances, and cash received
through repos and securities lending transactions ( figure 4.9). these liabilities can create liquidity
risk through the inability to roll over funding if the proceeds from such funding are not invested
in assets with similar maturity profiles (figure 4.10). the combination of a growing reliance on
nontraditional liabilities and a steady decline in the liquidity of life insurers’ assets could make it
challenging for life insurers to meet a sudden rise in withdrawals or other claims.
14 If a clearing member were to default, its client positions would need to be transferred. However, transferring these
positions could be difficult if they are large. Given that a significant portion of client positions is currently con -
centrated with a few clearing members, such a transfer would likely be challenging if one of these members were
to default.
Figure 4.9. Life insurers’ reliance on nontraditional liabilities for funding increased further in the
second half of 2024
Repurchase agreements
Securities lending cash collateral
FHLB advances
Funding-ag reement-backed securities
2006 2008 20102 0122 0142 0162 0182 0202 0222 024
Billions of dollar s (real)
Source: Consumer price index, b ureau of Labor Statistics via Haver Analytics; Moody’s Analytics, Inc., CreditView,
Asset-backed Commercial p aper program Index; Securities and Exchange Commission, Forms 10-Q and 10-K;
National Association of Insurance Commissioners, quarterly and annual statutory filings accessed via S& p Global,
Capital IQ pro; bloomberg Finance L. p.
46 Financial Stability r eport
Figure 4.10. Life insurers continued to hold a significant share of risky and illiquid assets on their
balance sheets
1. Other ABS
2. CRE loans
3. CRE loans, securitize d
4. Alternative investments
5. Illiquid corporate debt
6. Illiquid corporate debt,
Share of life insurer assets (left scale)
Share of P&C insurer
assets (left scale)
2007 2009 2011 2013 2015 2017 2019 2021 2023
3000Billions of dollar s (real)Percent share
securitized
Source: Consumer price index, b ureau of Labor Statistics via Haver Analytics; Federal r eserve board staff estimates
based on data from b loomberg Finance L. p. and National Association of Insurance Commissioners Annual Statutory
Near-Term Risks to the Financial
the Federal reserve routinely engages in discussions with domestic and international policymak -
ers, academics, community groups, and others to gauge the set of risks of greatest concern to
these groups. As captured in the box “Survey of Salient risks to Financial Stability,” significantly
fewer respondents in recent outreach noted risks associated with the continued geopolitical
conflict in the Middle East and russia’s war against Ukraine than had done so in the fall survey.
Instead, the most cited risks were focused on global trade, policy uncertainty, and U.S. debt
sustainability.
the following discussion considers possible interactions of existing domestic vulnerabilities with
three potential near-term risks.
A U.S. slowdown, particularly if accompanied by higher interest
rates, could pose risks for the wider economy as well as financial
institutions
A slowdown in economic activity in the United States could have wide-ranging financial and
economic effects and prompt further declines in asset prices. Adverse dynamics could be ampli -
fied if interest rates rose at the same time. In the near term, higher interest rates could raise
consumer borrowing costs and strain household budgets, increasing the potential for delinquen -
cies. Debt-servicing costs for governments and corporations would similarly increase, which
could amplify existing vulnerabilities linked to high leverage and upcoming refinancing needs.
Collectively, these factors could lead to fair value losses on fixed-rate securities among financial
intermediaries, which, in turn, could reduce the supply of credit to the economy, further weighing
on economic activity.
A marked slowdown in global economic growth could expose
existing financial vulnerabilities
A pronounced economic slowdown in major advanced and emerging economies could weigh on
investor, business, and consumer sentiment and prompt a broader pullback from riskier assets or
those with elevated valuations, increasing volatility in financial markets and raising the potential
for market dislocations. Weaker-than-expected economic activity could also erode the fundamen -
tals of some businesses and households by broadly reducing the outlook for revenue and income
growth, impairing their ability to service debt and raising the potential for defaults and delinquen -
cies. these increased credit risks could strain the balance sheets of financial intermediaries,
48 Financial Stability r eport
which may restrict the supply of credit as a result. In addition, concerns about elevated public
debt levels and fiscal deterioration in many advanced economies may limit governments’ ability to
respond to weaker growth.
Cyberattacks and other cyber events could disrupt market
functioning and the provision of financial services
Over recent years, cyber events, and the risks they pose to the financial system, have been a
recurring concern for participants in the Federal r eserve’s market outreach surveys. In addi-
tion to malicious cyberattacks and costly heists, non-malicious cyber events, such as software
malfunctions, have caused disruptions to the provision of financial services. Shocks caused by
cyber events may propagate through complex interdependencies among financial institutions
and market infrastructures as well as service providers, and can be further amplified by existing
financial vulnerabilities. For example, a cyber event at a financial market utility may disrupt core
infrastructure that supports clearing and settlement, degrading market liquidity. An attack on a
large financial institution could impair its ability to access or verify data, complete transactions,
or meet obligations, posing risks for funding and depositor runs as well as fire sales. Attacks
on critical third-party providers could affect multiple institutions, with the effects of such disrup -
tions likely to be further amplified when there is limited substitutability for the affected services.
through continued interagency coordination and information sharing, U.S. government agencies
and financial regulators are advancing efforts to further protect the financial system and financial
infrastructure from cyber risks.
Near-term risks to the Financial System 49 49
Box 5.1. Survey of Salient Risks to Financial Stability
As part of its market intelligence gathering, staff from the Federal reserve bank of New York solicited
views from a wide range of contacts on risks to U.S. fi  nancial stability. From February to early April,
the staff surveyed 22 contacts, including professionals at broker-dealers, investment funds, and
research and advisory fi  rms, as well as academics (fi g u r e  A). this section is a summary of the views
provided by survey respondents and should not be interpreted as representing the views of the
Federal reserve board or the Federal reserve bank of New York.
risks emanating from changes to global trade policy were the most cited risk. U.S. fi  scal debt sus-
tainability, which was the top-cited risk last fall, was slightly less noted this round. broader policy
uncertainty, which was often cited in the survey last fall, remained frequently cited this cycle
(fi  gure b). A correction in risk assets as well as persistent inﬂ  ation were also frequently cited in this
round. respondents also expressed concern that treasury market functioning could become impaired
due to a conﬂ  uence of factors.
Risks to global trade
Concern over changes to trade policy was the top-cited risk this cycle. While many respondents
viewed tariffs as the key risk, some noted that the domestic economy could weather incremental tar-
iffs on imported goods with only modest disruption. respondents considered that the potential for an
escalatory trade war could have more severe consequences.
Policy uncertainty
respondents also highlighted policy uncertainty outside of trade, including changes in government
spending priorities and the extent of U.S. international engagement. As in the fall, the need to raise
the debt limit was also cited.
U.S. fiscal debt sustainability
Contacts noted concerns that elevated treasury supply could crowd out private investment, raise
term premia, and further challenge treasury market liquidity.
Risk asset/valuation correction
Contacts cited a correction in the price of risk assets, with elevated valuations as a notable risk.
Persistent inflation
respondents continued to note the risk of persistent inﬂ  ation, though not as frequently as in surveys
over the past several years. participants highlighted that inﬂ  ation could rise from tariffs and disrup-
tions to global supply chains. Several contacts specifi  cally mentioned the risk that longer-term inﬂ  a-
tion expectations could become unanchored.
Treasury market functioning
respondents noted that the intermediation capacity in the treasury market could become challenged.
In addition, some expressed concerns about the demand for treasury securities from foreign inves-
tors and how shifts in investor behavior could impact the treasury market.
(continued)
50 Financial Stability r eport50
Box 5.1—continued
Figure A. Spring 2025: Most cited potential shocks over the next 12 to 18 months
Risks to global trade
Policy uncertainty
U.S. ﬁscal debt sustainability
Persistent inﬂation/uni003B monetary tightening
Risk asset/valuations correction
Treasury market functioning
U.S. recession
Banking-sector stres s
Geopolit ical risks
Foreign divestment from U.S. assets
Private credit stres s
Nonbank ﬁnancial instituti on stres s
Value of U.S. dollar
Corporate credit stres s
01 02 03 04 05 06 07 08 0
Percentage of respondents
Source: Federal reserve bank of New York survey of 22 market contacts from February through early April.
Figure B. Fall 2024: Most cited potential shocks over the next 12 to 18 months
U.S. ﬁscal debt sustainability
Middle East tensions
Policy uncertainty
U.S. recession
Risks to global trade
Persistent inﬂation/uni003B monetary tightening
Risk asset/valuations correction
Cyberat tacks
Russia–Ukraine war
Banking-sector stres s
Chinese economic weakness
Market liquidity strains and volat ility
Commercial and residential real estate
01 02 03 04 05 06 07 0
Percentage of respondents
Source: Federal reserve bank of New York survey of 24 market contacts from August to October.
Figure 1.1. Nominal treasury yields remained high
treasury rates are the 2-year and 10-year constant-maturity yields based on the most actively
traded securities. Values are averaged within a calendar month, except for the value of the last
month of the series, which is averaged through the data close date.
Figure 1.2. An estimate of the nominal treasury term premium was near its historical median
term premiums are estimated from a 3-factor term structure model using t reasury yields and
blue Chip interest rate forecasts. Values are averaged within a calendar month, except for the
value of the last month of the series, which is averaged through the data close date.
Figure 1.3. Interest rate volatility remained well above its median since 2005
the data begin in April 2005. Implied volatility on the 10-year swap rate, 1 month ahead, is
derived from swaptions. Values are averaged within a calendar month, except for the value of the
last month of the series, which is averaged through the data close date.
Figure 1.4. before the April volatility, the price-to-earnings ratio of S& p 500 firms was close to the
upper end of its historical range
the figure shows the aggregate forward price-to-earnings ratio of Standard & p oor’s (S&p) 500
firms, based on expected earnings for 12 months ahead. Values are reported as of month-end.
Figure 1.5. As of March, an estimate of the equity premium was near a 20-year low
the data begin in October 1991. the figure shows the difference between the aggregate forward
earnings-to-price ratio of Standard & p oor’s 500 firms and the expected real treasury yields,
based on expected earnings for 12 months ahead. Expected real t reasury yields are calculated
from the 10-year consumer price index inflation forecast, and the smoothed nominal yield curve is
estimated from off-the-run securities. Values are reported as of month-end.
Figure 1.6. Volatility in equity markets rose significantly in April
realized volatility is computed from an exponentially weighted moving average of 5-minute daily
realized variances with 75 percent of the weight distributed over the past 20 business days.
Median refers to the median option-implied volatility. Values are averaged within a calendar
month, except for the value of the last month of the series, which is averaged through the data
close date.
Figure 1.7. Corporate bond yields rose but remained near their median for the past 30 years
the triple-b series reflects the effective yield of the ICE b ank of America Merrill Lynch (bofAML)
triple-b U.S. Corporate Index (C0A4), and the high-yield series reflects the effective yield of the
ICE bofAML U.S. High Yield Index (H0A0). Values are reported as of month-end, except for the
value of the last month of the series, which is reported as of the data close date.
Appendix Figure Notes
52 Financial Stability r eport
Figure 1.8. Corporate bond spreads increased to moderate levels
the triple-b series reflects the option-adjusted spread of the ICE b ank of America Merrill
Lynch (bofAML) triple-b U.S. Corporate Index (C0A4), and the high-yield series reflects the
option-adjusted spread of the ICE b ofAML U.S. High Yield Index (H0A0). Values are reported as of
month-end, except for the value of the last month of the series, which is reported as of the data
close date.
Figure 1.9. the excess bond premium was near its long-run average
the excess bond premium (Ebp) is a measure of bond market investors’ risk sentiment. It is
derived as the residual of a regression that models corporate bond spreads after controlling for
expected default losses. by construction, its historical mean is 0. positive (negative) Ebp values
indicate that investors’ risk appetite is below (above) its historical mean.
Figure 1.10. Spreads on leveraged loans stayed moderately below their average over the
past decade
the data show secondary-market discounted spreads to maturity. Spreads are the constant
spread used to equate discounted loan cash flows to the current market price. b -rated spreads
begin in July 1997. the black dashed line represents the data transitioning from monthly to
weekly in November 2013.
Figure 1.11. treasury market depth fell significantly in April from already low levels
Market depth is defined as the average top 3 bid and ask quote sizes for on-the-run t reasury
securities.
Figure 1.12. On-the-run treasury market depth was close to its historical lows
the data show the time-weighted average market depth at the best quoted prices to buy and sell,
for 2-year and 10-year treasury notes. Otr is on-the-run.
Figure 1.13. A measure of liquidity in equity markets stayed well below average
the data show the depth at the best quoted prices to buy and sell, defined as the ask size plus
the bid size divided by 2, for E-mini Standard & poor’s 500 futures.
Figure 1.14. Commercial real estate prices adjusted for inflation were little changed
the data are deflated using the consumer price index. t he dashed line at 100 indicates the index
to January 2001 values.
Figure 1.15. Income of commercial properties relative to prices continued to increase but
remained below the historical average
the data are a 12-month moving average of weighted capitalization rates in the industrial, retail,
office, and multifamily sectors, based on national square footage in 2009.
Figure 1.16. banks reported tightening lending standards for commercial real estate loans in the
fourth quarter of 2024
banks’ responses are weighted by their commercial real estate loan market shares. Survey
respondents to the Senior Loan Officer Opinion Survey on b ank Lending practices are asked
Figure Notes 53
about the changes over the quarter. the shaded bars with top caps indicate periods of busi -
ness recession as defined by the National b ureau of Economic research: March 2001–
November 2001, December 2007–June 2009, and February 2020–April 2020.
Figure 1.17. House prices continued to increase in recent months
the data extend through February 2025 for Zillow and January 2025 for CoreLogic and
Case-Shiller.
Figure 1.18. Model-based measures of house price valuations climbed to near historically
high levels
the owners’ equivalent rent value for 2025:Q1 is based on monthly data through February 2025.
the data for the market-based rents model begin in 2004:Q1 and extend through 2025:Q1.
Figure 1.19. House price-to-rent ratios were broadly unchanged and remained elevated across
geographic areas
the data are seasonally adjusted. percentiles are based on 19 large metropolitan
statis tical areas.
Figure 1.20. Inflation-adjusted farmland prices rose further in 2024 from already elevated levels
the data for the U.S. begin in 1997. Midwest index is a weighted average of Corn belt and
Great plains states derived from staff calculations. Values are given in real terms.
Figure 1.21. Farmland prices relative to rents increased to historical highs in 2024
the data for the U.S. begin in 1998. Midwest index is a weighted average of Corn b elt and
Great plains states derived from staff calculations.
Figure 2.1. the total debt of businesses and households relative to GD p declined to its lowest
level in 20 years
the shaded bars with top caps indicate periods of business recession as defined by the National
bureau of Economic research: January 1980–July 1980, July 1981–November 1982, July 1990–
March 1991, March 2001–November 2001, December 2007–June 2009, and February 2020–
April 2020. GDp is gross domestic product.
Figure 2.2. both business and household debt-to-GD p ratios continued to fall
the shaded bars with top caps indicate periods of business recession as defined by the National
bureau of Economic research: January 1980–July 1980, July 1981–November 1982, July 1990–
March 1991, March 2001–November 2001, December 2007–June 2009, and February 2020–
April 2020. GDp is gross domestic product
Figure 2.3. business debt adjusted for inflation declined slightly
Nominal debt growth is seasonally adjusted and is translated into real terms after subtracting the
growth rate of the price deflator for the core personal consumption expenditures price index.
54 Financial Stability r eport
Figure 2.4. Net issuance of risky debt picked up moderately
the data begin in 2004:Q2. Institutional leveraged loans generally exclude loan commitments
held by banks. the key identifies bars in order from top to bottom (except for some bars with at
least one negative value). For 2025:Q1, the value corresponds to preliminary data.
Figure 2.5. Gross leverage of large businesses edged down but stayed high by historical
Gross leverage is an asset-weighted average of the ratio of firms’ book value of total debt to book
value of total assets. the 75th percentile is calculated from a sample of the 2,500 largest firms
by assets. the dashed sections of the lines in 2019:Q1 reflect the structural break in the series
due to the 2019 compliance deadline for Financial Accounting Standards b oard rule Accounting
Standards Update 2016-02. t he accounting standard requires operating leases, previously con -
sidered off-balance-sheet activities, to be included in measures of debt and assets.
Figure 2.6. Interest coverage ratios, which indicate firms’ ability to service their debt, increased
moderately
the interest coverage ratio is earnings before interest and taxes divided by interest payments.
Firms with leverage less than 5 percent and interest payments less than $500,000 are excluded.
Figure 2.7. Newly issued leveraged loans with debt multiples greater than 4 increased slightly but
remained near their lowest levels in a decade
Volumes are for large corporations with earnings before interest, taxes, depreciation, and amor -
tization greater than $50 million and exclude existing tranches of add-ons and amendments as
well as restatements with no new money. the key identifies bars in order from top to bottom.
Figure 2.8. the realized default rate on leveraged loans remained well below its previous peaks
the data begin in December 1998; the data including distressed exchanges begin in
December 2016. the default rate is calculated as the amount in default over the past 12 months
divided by the total outstanding volume of loans that are not in default at the beginning of
the 12-month period. the default rate including distressed exchanges is calculated as the
number of issuers in default or distressed exchange over the past 12 months divided by the
total number of issuers that are not in default at the beginning of the 12-month period. t he
shaded bars with top caps indicate periods of business recession as defined by the National
bureau of Economic research: March 2001–November 2001, December 2007–June 2009, and
February 2020–April 2020.
Figure 2.9. Inflation-adjusted household debt was largely unchanged
Subprime are borrowers with an Equifax r isk Score less than 620; near prime are from 620 to
719; prime are greater than 719. Scores are measured contemporaneously. Student loan bal-
ances before 2004 are estimated using average growth from 2004 to 2007, by risk score. t he
data are converted to constant 2024 dollars using the consumer price index.
Figure Notes 55
Figure 2.10. Measures of housing leverage stayed significantly below their peak levels
Housing leverage is estimated as the ratio of the average outstanding mortgage loan balance
for owner-occupied homes with a mortgage to (1) current home values using the Zillow national
house price index and (2) model-implied house prices estimated by a staff model based on rents,
interest rates, and a time trend.
Figure 2.11. Mortgage delinquency rates edged up but remained close to the low end of their
historical distribution
Loss mitigation includes tradelines that have a narrative code of forbearance, natural disaster,
payment deferral (including partial), loan modification (including federal government plans), or
loans with no scheduled payment and a nonzero balance. Delinquent includes loans reported to
the credit bureau as at least 30 days past due.
Figure 2.13. New mortgage extensions declined for near-prime and subprime borrowers
the figure plots the year-over-year change in balances for the second quarter of each year among
those households whose balance increased over this window. Subprime are those with an Equifax
risk Score less than 620; near prime are from 620 to 719; prime are greater than 719. Scores
were measured 1 year ago. the data are converted to constant 2024 dollars using the consumer
price index. the key identifies bars in order from left to right.
Figure 2.14. Credit card balances trended up last year; auto and student loan balances were
about unchanged
the data are converted to constant 2024 dollars using the consumer price index. Student loan
data begin in 2005:Q1.
Figure 2.15. the average maturity of auto loans at origination for used cars was elevated for
nonprime borrowers
the data are seasonally adjusted. Loans are for used auto vehicles only. Subprime are those with
a VantageScore less than 601; near prime are from 601 to 660; prime are greater than 660.
Figure 2.16. Auto loan delinquencies have been above normal levels
Delinquent includes loans reported to the credit bureau as at least 30 days past due. t he data
for auto loans are reported semiannually by the risk Assessment, Data Analysis, and research
Data Warehouse until 2017, after which they are reported quarterly. the data are seasonally
Figure 2.17. Inflation-adjusted credit card balances for all risk segments trended higher
Subprime are borrowers with an Equifax r isk Score less than 620; near prime are from 620 to
719; prime are greater than 719. Scores are measured contemporaneously. the data are con-
verted to constant 2024 dollars using the consumer price index.
56 Financial Stability r eport
Figure 2.18. Credit card delinquencies remained somewhat above their pre-pandemic levels
Delinquency measures the fraction of balances that are at least 30 days past due, excluding
severe derogatory loans, which are delinquent and have been charged off, foreclosed, or repos -
sessed by the lender. the data are seasonally adjusted.
Figure 3.1. banks’ average risk-based capital ratios were near or above previous peaks
the sample consists of domestic bHCs and intermediate holding companies (IHCs) with a
substantial U.S. commercial banking presence. G-SI bs are global systemically important banks.
Large non–G-SI bs are bHCs and IHCs with greater than $100 billion in total assets that are
not G-SIbs. before 2014:Q1 (advanced-approaches bHCs) or before 2015:Q1 (non-advanced-
approaches bHCs), the numerator of the common equity tier 1 ratio is tier 1 common capital.
Afterward, the numerator is common equity t ier 1 capital. the denominator is risk-weighted
assets. the shaded bars with top caps indicate periods of business recession as defined by
the National bureau of Economic research: March 2001–November 2001, December 2007–
June 2009, and February 2020–April 2020. t he data are seasonally adjusted by Federal reserve
board staff.
Figure 3.2. banks kept healthy net interest margins
Average interest rate on interest-earning assets is total interest income divided by total
interest-earning assets. Average interest expense rate on liabilities is total interest expense
divided by total liabilities. the shaded bar with a top cap indicates a period of business recession
as defined by the National bureau of Economic research: February 2020–April 2020.
Figure 3.3. the fair value losses of banks’ securities portfolios remained sizable
the figure plots the difference between the fair and amortized cost values of the securities. t he
sample consists of all bank holding companies and commercial banks.
Figure 3.4. the ratio of tangible common equity to tangible assets increased, on net, for banks of
all categories in the second half of 2024
the sample consists of domestic bHCs, intermediate holding companies (IHCs) with a substan-
tial U.S. commercial banking presence, and commercial banks. G-SI bs are global systemically
important banks. Large non–G-SI bs are bHCs and IHCs with greater than $100 billion in total
assets that are not G-SIbs. bank equity is total equity capital net of preferred equity and intangi -
ble assets. bank assets are total assets net of intangible assets. t he shaded bars with top caps
indicate periods of business recession as defined by the National b ureau of Economic research:
July 1990–March 1991, March 2001–November 2001, December 2007–June 2009, and
February 2020–April 2020. t he data are seasonally adjusted by Federal reserve board staff.
Figure 3.5. the financial condition of firms with commercial and industrial bank loans has slightly
deteriorated
the figure shows the weighted median leverage of nonfinancial firms that borrow using com -
mercial and industrial loans from the 23 banks that have filed in every quarter since 2013:Q1.
Leverage is measured as the ratio of the book value of total debt to the book value of total
Figure Notes 57
assets of the borrower, as reported by the lender, and the median is weighted by committed
Figure 3.6. Credit standards for commercial and industrial loans were little changed in the second
half of 2024
banks’ responses are weighted by their commercial and industrial loan market shares. Survey
respondents to the Senior Loan Officer Opinion Survey on b ank Lending practices are asked
about the changes over the quarter. results are shown for loans to large and medium-sized firms.
the shaded bars with top caps indicate periods of business recession as defined by the National
bureau of Economic research: March 2001–November 2001, December 2007–June 2009, and
February 2020–April 2020.
Figure 3.7. Leverage at broker-dealers remained near historical lows
Leverage is calculated by dividing total assets by equity.
Figure 3.8. trading profits in the second half of 2024 were within the range of the past 5 years
the sample includes all trading desks of bank holding companies subject to the Volcker rule
reporting requirement.
Figure 3.9. the distribution of the sources of broker-dealer trading profits was in line with recent
the sample includes all trading desks of bank holding companies subject to the Volcker rule
reporting requirement. the “other” category comprises desks trading in municipal securities,
foreign exchange, and commodities, as well as any unclassified desks. the key identifies series
in order from top to bottom.
Figure 3.10. Leverage at life insurers was around the 85th percentile of its historical distribution
ratio is calculated as (total assets – separate account assets)/(total capital – accumulated other
comprehensive income) using generally accepted accounting principles. t he largest 10 publicly
traded life and property and casualty insurers are represented.
Figure 3.11. As of 2024:Q3, hedge funds’ leverage was at its highest level since data became
Means are weighted by net asset value (NAV). On-balance-sheet leverage is the ratio of gross
asset value to NAV. Gross leverage is the ratio of gross notional exposure to NAV. Gross notional
exposure includes both on-balance-sheet exposures and off-balance-sheet derivative notional
exposures. Options are delta adjusted, and interest rate derivatives are reported at 10-year bond
equivalent values. the data are reported on a 2-quarter lag beginning in 2013:Q1.
Figure 3.12. balance sheet leverage at the 15 largest hedge funds stayed elevated
Leverage is measured by gross asset value (GAV) divided by net asset value (NAV). Funds are
sorted into cohorts based on GAV. Average leverage is computed as the NAV-weighted mean. t he
data are reported on a 2-quarter lag beginning in 2013:Q1.
58 Financial Stability r eport
Figure 3.13. Dealers indicated that the use of leverage by hedge funds remained largely
unchanged for most clients
Net percentage equals the percentage of institutions that reported increased use of financial
leverage over the past 3 months minus the percentage of institutions that reported decreased
use of financial leverage over the past 3 months. rEIt is real estate investment trust.
Figure 3.14. the pace of issuance of securitized products remained robust through March
the data from the first quarter of 2025 are annualized to create the 2025 bar. r MbS is residen-
tial mortgage-backed securities; CM bS is commercial mortgage-backed securities; CDO is col -
lateralized debt obligation; CLO is collateralized loan obligation. the “other” category consists of
other asset-backed securities (AbS) backed by credit card debt, student loans, equipment, floor
plans, and miscellaneous receivables; resecuritized real estate mortgage investment conduit
(re-rEMIC) rMbS; and re-rEMIC CMbS. the data are converted to constant 2025 dollars using
the consumer price index. the key identifies bars in order from top to bottom.
Figure 3.15. bank credit commitments to nonbank financial institutions increased
Committed amounts on credit lines and term loans extended to nonbank financial institutions.
Nonbank financial institutions are identified based on reported North American Industry Classifi -
cation System (NAICS) codes. In addition to NAICS codes, a name-matching algorithm is applied
to identify specific entities such as real estate investment trusts ( rEIts), special purpose enti-
ties, collateralized loan obligations (CLOs), asset-backed securities (AbS), private equity, business
development companies (bDCs), and private credit. rEIts incorporate both mortgage (trading)
rEIts and equity rEIts. broker-dealers also include commodity contracts dealers and broker -
ages and other securities and commodity exchanges. Other financial vehicles include closed-end
investment and mutual funds.
Figure 3.16. Growth of commitments to open-end investment funds, special purpose entities,
collateralized loan obligations, and asset-backed securities grew between 2023:Q4 and 2024:Q4
the figure shows 2024:Q4-over-2023:Q4 growth rates as of the end of the fourth quarter of
2024. rEIt is real estate investment trust; pE is private equity; bDC is business development
company; SpE is special purpose entity; CLO is collateralized loan obligation; AbS is asset-backed
securities. the key identifies bars in order from left to right.
Figure 4.1. the ratio of runnable money-like liabilities to GD p remained near its median
the black striped area denotes the period from 2008:Q4 to 2012:Q4, when insured deposits
increased because of the transaction Account Guarantee program. t he “other” category consists
of variable-rate demand obligations (V rDOs), federal funds, funding-agreement-backed securities,
private liquidity funds, offshore money market funds, short-term investment funds, local govern -
ment investment pools, and stablecoins. Securities lending includes only lending collateralized
by cash. GDp is gross domestic product. Values for VrDOs come from bloomberg beginning
in 2019:Q1. See Jack bao, Josh David, and Song Han (2015), “the runnables,” FEDS Notes
Figure Notes 59
federalreserve.gov/econresdata/notes/feds-notes/2015/the-runnables-20150903.html.
Figure 4.2. the share of high-quality liquid assets to total assets remained above
pre-pandemic levels
the sample consists of domestic bHCs, intermediate holding companies (IHCs) with a substantial
U.S. commercial banking presence, and commercial banks. G-SI bs are global systemically import-
ant banks. Large non–G-SI bs are bHCs and IHCs with greater than $100 billion in total assets
that are not G-SIbs. Liquid assets are cash plus estimates of securities that qualify as high-
quality liquid assets as defined by the Liquidity Coverage ratio requirement. Accordingly, Level 1
assets as well as discounts and restrictions on Level 2 assets are incorporated into the estimate.
Figure 4.3. banks’ reliance on short-term wholesale funding has returned to pre-pandemic levels
Short-term wholesale funding is defined as the sum of large time deposits with maturity less
than 1 year, federal funds purchased and securities sold under agreements to repurchase,
deposits in foreign offices with maturity less than 1 year, trading liabilities (excluding revalu -
ation losses on derivatives), and other borrowed money with maturity less than 1 year. t he
shaded bars with top caps indicate periods of business recession as defined by the National
bureau of Economic research: March 2001–November 2001, December 2007–June 2009, and
February 2020–April 2020.
Figure 4.4. Assets under management at money market funds increased to an all-time high
in January
the data are converted to constant 2025 dollars using the consumer price index.
Figure 4.5. Market capitalization of major stablecoins has grown significantly
the key identifies series in order from top to bottom.
Figure 4.6. Corporate bonds held by bond mutual funds increased in the second half of 2024
the data show holdings of all U.S. corporate bonds by all U.S.-domiciled mutual funds (holdings of
foreign bonds are excluded). the data are converted to constant 2024 dollars using the consumer
price index.
Figure 4.7. Assets held by bank loan and high-yield mutual funds have been trending up since
the data are converted to constant 2025 dollars using the consumer price index. t he key identi-
fies series in order from top to bottom.
Figure 4.8. Mutual fund flows remained subdued through February
Mutual fund assets under management as of February 2025 included $2,428 billion in
investment-grade bond mutual funds, $276 billion in high-yield bond mutual funds, and $86 billion
in bank loan mutual funds. bank loan mutual funds, also known as floating-rate bond funds, are
excluded from high-yield bond mutual funds.
60 Financial Stability r eport
Figure 4.9. Life insurers’ reliance on nontraditional liabilities for funding increased further in the
second half of 2024
the data are converted to constant 2024 dollars using the consumer price index. FHL b is Federal
Home Loan bank. the data are annual from 2006 to 2010 and quarterly thereafter. t he key iden-
tifies bars in order from top to bottom.
Figure 4.10. Life insurers continued to hold a significant share of risky and illiquid assets on their
balance sheets
the data are converted to constant 2023 dollars using the consumer price index. Securitized
products include collateralized loan obligations for corporate debt, private-label commercial
mortgage-backed securities for commercial real estate (C rE), and private-label residential
mortgage-backed securities and asset-backed securities (A bS) backed by autos, credit cards,
consumer loans, and student loans for other AbS. Illiquid corporate debt includes private place -
ments, bank and syndicated loans, and high-yield bonds. Alternative investments include assets
filed under Schedule bA. p&C is property and casualty. t he key identifies bars in order from top
to bottom.
Box 5.1. Survey of Salient Risks to Financial Stability
Figure A. Spring 2025: Most cited potential shocks over the next 12 to 18 months
responses are to the following question: “Over the next 12–18 months, which shocks, if realized,
do you think would have the greatest negative impact on the functioning of the U.S. financial
Figure b. Fall 2024: Most cited potential shocks over the next 12 to 18 months
responses are to the following question: “Over the next 12–18 months, which shocks, if realized,
do you think would have the greatest negative impact on the functioning of the U.S. financial
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