Transcript Document

Systemic Indicators: Developing Inputs on
System-Wide Risks for Financial Stability
and Macroprudential Policy
Charles Enoch
Deputy Director
Statistics Department, IMF
July 9, 2009
Financial Soundness Indicators:
Introduction
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FSIs intended as summary indicators of the
financial soundness of institutions and
markets in an economy.
Analysis of FSIs would therefore complement
other assessments of soundness, such as
early warning indicators and macroeconomic
vulnerability exercises.
Multiple FSIs: evolving views on definitions,
coverage, and measurement.
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Financial Soundness Indicators: Legacy
of Earlier Crises
 Conclusion
from 1994 Mexican crisis
that data partly responsible.
 Further focus on data after Asian
crisis.
 Development of data standards
(SDDS and GDDS).
 Recognition of gap between monetary
data and microprudential
information—focus on
“macroprudential indicators” (MPIs).
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Initial Usage of FSIs
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Introduction of FSAPs.
Need for broad set of indicators used for
strengthened surveillance: MPIs
comprising aggregated prudential
indicators.
Consultative meeting on
Macroprudential Indicators held at IMF
HQ September 1999.
Redesignation of MPIs as FSIs after
2001 IMF Board meeting (others, such
as ECB, still use MPI terminology).
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Survey and Selection
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Surveys of member countries on
availability and usefulness of potential
MPIs.
122 responses (covering 142 countries
and jurisdictions); all covered user
questionnaire, two-thirds the compilation
and dissemination questionnaire.
IMF Board endorsed list (slightly modified
in 2004) that comprises 15 core and 26
encouraged indicators.
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Choice of Indicators
Issue of coordination across agencies.
 Limited resources available for exercise.
 Parsimony.
 Reflecting prudential practices, CAMEL
framework underpinned structure.
 Recognition this was initial list.
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Choice of Indicators (2)
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Focus on core markets and institutions.
Analytical significance.
Revealed usefulness through high scores
in the 2000 survey results.
Relevant in most circumstances.
Availability.
Compilation Guide drafted 2002-2004
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Core Indicators
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Regulatory capital to risk weighted assets.
Regulatory tier 1 capital to risk weighted assets.
Nonperforming loans net of provisions to capital.
Nonperforming loans to total gross loans.
Sectoral distribution of loans to total loans.
Return on assets.
Return on equity.
Interest margin to gross income.
Noninterest expenses to gross income.
Liquid assets to total assets.
Liquid assets to short-term liabilities.
Net open position in foreign exchange to capital.
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Encouraged Indicators:
Encouraged FSIs for Deposit Takers
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Capital to assets.
Geographical distribution of loans to total loans.
Gross asset positions in financial derivatives to capital.
Gross liability positions in financial derivatives to capital.
Trading income to total income.
Personnel expenses to noninterest expenses.
Spread between reference rates and deposit rates.
Spread between highest and lowest interest rates.
Customer deposits to total noninterbank loans.
Foreign currency denominated loans to total loans.
Foreign currency denominated liabilities to total
liabilities.
Net open position in equities to capital.
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Encouraged Indicators:
OFCs (2) and NFCs (5)
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Assets to total financial system assets.
Assets to GDP.
Total debt to equity.
Return on equity.
Earnings to interest and principal
expenses.
Net foreign exchange exposure to equity.
Number of applications for protection
from creditors.
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Encouraged Indicators
Household (2), Market Liquidity (2), Real Estate (4)
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Household debt to GDP.
Household debt service and principal payments
to GDP.
Average bid-ask spread in securities markets.
Average daily turnover ratio in the securities
market.
Residential real estate prices.
Commercial real estate prices.
Residential real estate loans to total loans.
Commercial real estate loans to total loans.
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Coordinated Compilation Exercise
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62 countries invited to participate in Coordinated
Compilation Exercise (CCE), modeled on
CPIs—essentially the countries in SDDS.
52 have committed to supply data and
metadata.
First data points to be disseminated by end-July,
with metadata, with commitment to maintain
dissemination.
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July 2009 Dissemination (1)
 Expectation
data for around 25-35
countries will be disseminated; more
(and more metadata) to follow. (Around
seven countries disseminate more than
one data point.)
 7-14 G20 countries expected to be
among disseminators.
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July 2009 Dissemination (2)
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Nearly all countries disseminating will
disseminate all the core indicators.
Around six countries will disseminate at least
around 20 encouraged indicators, over half at
least 10 encouraged indicators.
Around half will disseminate quarterly, one
semi-annually, the rest annually.
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Results of the CCE
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Major efforts put into preparation of data and
metadata in many countries.
Institutional arrangements put in place in many
countries for interagency coordination.
Significant progress in understanding issues and
moving towards harmonization, e.g., as regards
consolidation.
Resource intensity of exercise has constrained
e.g., countries’ willingness to construct past data.
Over time, time series will be generated for an
increasing number of countries.
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Issues Concerning FSIs
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Periodicity—crisis shows importance of high
frequency.
Heavy concentration of indicators on banks,
especially in core indicators.
Aggregate figures hide variations in dispersion.
Lack of time series impedes analysis and
empirical testing.
Questions whether (and which) existing FSIs
“predicted” the present crisis.
Lack of clear “critical points” that would indicate
problems.
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Going Forward (1)
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Review of FSIs to possibly rebalance between core
and encouraged categories.
Increasing focus, for instance, on leverage ratios
rather than capital as lead indicator of problems.
Increasing focus beyond the on-balance-sheet
activities of commercial banks.
Recognition of real estate prices as key indicator of
emerging problems.
Further focus also on balance sheet data and
systemic risks.
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Going Forward (2)
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Revisions to, and increasing harmonization of,
regulatory framework (especially in Europe), will lead
towards international convergence in calculation of
FSIs, might also complicate creation of consistent
time series .
Present crisis may lead to added commitment at
national level to devote resources to FSIs and other
crisis-related statistics; could permit broadening in
range of FSIs.
Continued collaboration needed between statistical
and financial experts.
Any revision to IMF core and encouraged indicators
needs approval of IMF Board.
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FSIs and SDDS
 In
December 2008 IMF Executive
Board invited staff to return within a
year with work program to identify
FSIs (and other financial indicators)
for inclusion into SDDS on an
encouraged basis.
 If accepted, would represent
significant enhancement to SDDS.
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Feedback Requested...
 Revisions
and refinements to FSIs
require feedback from users, to
complement the ongoing in-house
analytical and operational work.
Thank you
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