Workshop on the Implementation of the 2008 SNA in EECCA Countries and Linkages with BPM6 and GFSM 2014 Istanbul (May 68, 2015) Florina Tanase, Deputy Division Chief, IMF Statistics Department The Importance of Balance Sheet Information
"Workshop on the Implementation of the 2008 SNA in" is the property of its rightful owner. Permission is granted to
download and print the materials on this website for personal, non-commercial use only, and to display it
on your personal computer provided you do not modify the materials and that you retain all copyright
notices contained in the materials. By downloading content from our website, you accept the terms of this
agreement.
Presentation Transcript
01
Workshop on the Implementation of the 2008 SNA in EECCA Countries and Linkages with BPM6 and GFSM 2014
Istanbul (May 6–8, 2015)
Florina Tanase, Deputy Division Chief, IMF Statistics Department The Importance of Balance Sheet Information<br>
02
Overview Why Balance Sheets Matter?
Balance Sheet Analysis in IMF Surveillance
Data Sources and Data Gaps for the Balance Sheet Analysis
Looking Forward 2<br>
03
Why Balance Sheets Matter? “National balance sheet analysis, examining vulnerabilities in all sectors individually and in aggregate, could have made a difference to preventing the global financial crisis.“
Sir Paul Tucker, Former BOE Deputy Governor, from the 2014 Triennial Surveillance Review (TSR) External Study on Risks and Spillovers. 3<br>
04
Balance Sheet Analysis in IMF Surveillance (1/10) Economic and financial surveillance: one of the most important roles of the IMF; it focuses on identifying risks and policies to mitigate them
Keeping surveillance relevant: triennial surveillance reviews (TSRs) with the most recent completed in September 2014
2014 TSR priorities:
Deepen analysis of risks and spillovers
Increase attention to national balance sheets and cross-border positions
Further develop the balance sheet approach (BSA) based on granular national and external balance sheets 4<br>
05
Balance Sheet Analysis in IMF Surveillance (2/10) Key recommendation of the 2014 TSR: strengthen analysis of national balance sheets
“The Fund has overhauled its surveillance to make it more risk based and better reflect global interconnections… The goal now is to take this work to the next level, by focusing more on how risks spread across countries and how, in turn, spillovers can transmit across sectors.” 5<br>
06
Balance Sheet Analysis in IMF Surveillance (3/10) Why develop balance sheet analysis?
TSR proposes expanding balance sheet analysis in surveillance for:
Indicators of balance sheet vulnerability (i.e., FX mismatches)
Scenario analysis tracing transmission of shocks across sectors
Assess consistency of growth outlook and balance sheet condition
Exploit data improvements using BSA matrix as surveillance tool
Start with basic sector disaggregation possible with IMF data and expand
Allows analysis of linkages across sectors, not just one sector at a time 6<br>
07
Balance Sheet Analysis in IMF Surveillance (4/10) The IMF use of balance sheets in surveillance evolved over time:
Pre-Asian crisis: balance sheets with focus on public and external debt
Asian crisis led to development of the balance sheet matrix covering entire economy—balance sheet approach (BSA)
Global crisis highlighted gaps in balance sheet analysis related to (i) increased financial complexity and (ii) inadequate surveillance of cross-border links between balance sheets
Focus of the BSA:
Stocks of assets and liabilities
System of interlinked sectoral balance sheets 7<br>
08
Issuer of the Liability (Debtor Sector) Holder of the Liability (Creditor Sector) Increase in NPLs Depreciation of the domestic currency Reduced lending Corporate bankruptcy<br>
09
Issuer of the Liability (Debtor Sector) Holder of the Liability (Creditor Sector) Unable to rollover external debt Loss of liquidity Fire Sale of Assets Default on loans and bonds Rise in NPLs losses on assets Reduced lending<br>
10
Issuer of the Liability (Debtor Sector) Holder of the Liability (Creditor Sector) Reduced lending Rise in interest rates Banks' exposure to sovereign Feedback loop to government Rise in debt from contingent liability<br>
11
Balance Sheet Analysis in IMF Surveillance (8/10) BSA allows analysis of key risks, as it generates indicators of
Currency mismatches
Maturity mismatches and liquidity risks
Capital structure mismatches (leverage)
Solvency or credit risks
Bilateral linkages between sectors in the BSA illustrate how shocks might propagate across sectors, including the potential for feedback effects that may magnify their initial impact 11<br>
12
Balance Sheet Analysis in IMF Surveillance (9/10) 12<br>
13
Holder of the Liability (Creditor Sector) Issuer of the Liability (Debtor Sector)<br>
14
Data Sources and Data Gaps for Balance Sheet Analysis (1/5) A BSA matrix can be filled (much but not all) with data from various IMF datasets:
Standardized Report Forms (SRFs)
External sector statistics
International Investment Position (IIP)
Quarterly external debt statistics (QEDS)
Coordinated Portfolio Investment Survey (CPIS)
Coordinated Direct Investment Survey (CDIS)
Government finance statistics (GFS)
Public Sector Debt Statistics (PSDS) 14<br>
15
Holder of the Liability (Creditor Sector) Issuer of the Liability (Debtor Sector) SRF - Based IIP-Based<br>
16
Data Sources and Data Gaps for Balance Sheet Analysis (3/5) Progress has been made through various initiatives:
Data Gaps Initiative with focus on priority areas identified by the crisis for G-20
Global Systemically Important Financial Institutions
International banking statistics, securities statistics, IIP, CPIS
Sectoral balance sheets
SDDS Plus
Includes all data sets relevant for sectoral balance sheets
Data Sources and Data Gaps for Balance Sheet Analysis (4/5) Around thirty countries report all needed data
Biggest gap: data on nonbank financial institutions (OFCs)
The BSA matrix is still useful for surveillance when data are incomplete
In some emerging markets and low income countries, OFC balance sheets are small and can be ignored
Gaps need to be identified and filled from national sources 17<br>
18
Data Sources and Data Gaps for Balance Sheet Analysis (5/5) Main data gaps for balance sheet analysis:
Coverage
Nonbank financial institutions
Corporate sector
Household sector
Off-balance sheet data
Granularity
Breakdown by major currencies
Breakdown by remaining maturity
Bilateral counterpart information 18<br>
19
Looking Forward (1/2) Comprehensive reporting of data on IMF report forms is a key
Euro area collects but does not report OFC data as systems are being adapted
Identify data gaps from policy needs with priorities being based on capacity of countries 19<br>
20
Looking Forward (2/2) Augment BSA to analyze linkages within each sector (e.g., within financial sector—analyze links between banks and nonbanking financial institutions)
Construct Global Flow-of-Funds (GFF) analysis to show spillover channels between national balance sheets
additional data are needed to construct of full GFF matrix
a partial GFF matrix is also useful to analyze financial spillovers (e.g., IIP, international banking statistics, and CPIS data give cross country bilateral financial linkages) 20<br>
