The Cleveland Financial Stress Index: A Tool for Monitoring Financial Stability
Cleveland Financial Stress Index
Data will be updated on the third Monday of each month. If this falls on a holiday, then the data will be released the following day.
News Release: October 15, 2012
Stress in the financial system decreased 0.33 units over the past month, according to the latest release of the Cleveland Financial Stress Index (CFSI). The index currently stands at −0.92 units, which indicates a below-normal stress period (Grade 1).
The CFSI is a coincident indicator of systemic stress, where a high value of CFSI indicates high systemic banking stress. Units of CFSI are expressed as standardized differences from the mean (z-scores).
Interpreting the CFSI
The CFSI provides a continuous measure of stress. To interpret the continuum, we first divide it into four levels, which we call grades. Each grade represents a qualitatively different level of stress, and each ought to be associated with a different set of supervisory responses. The four grades are
- Grade 1: Below-normal stress period
- Grade 2: Normal stress period
- Grade 3: Moderate stress period
- Grade 4: Significant stress period
The CFSI can also provide information about which markets are contributing to increasing system stress by decomposing the CFSI into series for each of the component markets. Each market series can be further decomposed into the time series of the individual indicators that go into each market measure. Analysis of these subseries can provide further insight into the factors causing stress.
