Developing and Improving Sectoral Financial Accounts an introduction Bruno Tissot Head of Statistics and Research Support, BIS Workshop on Developing and Improving Sectoral Financial Accounts Introduction Bank of Algeria / Irving Fisher Committee on Central Bank Statistics 20-21 January 2016, Algiers, Algeria The views expressed are those of the author and do not necessarily reflect those of the BIS or the IFC. Restricted
Evolving terminology and concepts SNA traditional framework Flows accounts Balance sheets accounts Issues & Refinements Sectoral accounts Balance sheet approach From-whom-to-whom Integrated sectoral financial accounts International initiatives Remaining issues Restricted 2
Traditional national accounts Current account (the SNA traditional national accounts framework) Production accounts (goods & services) Income accounts (generation, distribution & redistribution) Use of income: economic actions eg consumption Focus on the real sphere Triggers lending / borrowing decisions (the financial sphere) Restricted 3
Flows Accumulation account Capital account: net acquisition of non-financial assets and way of financing (saving, capital transfers) distinct from the BoP capital account concept! Financial account: net acquisition of financial assets / incurrence of liabilities Revaluation account: gains and losses in (non-financial and financial) assets and liabilities Other changes in the volume of assets account Flow of funds : Matrix of fund flows in the economy Impact of asset prices Restricted 4
Positions Balance sheets: stock positions corresponding to changes in financial positions as recorded in the accumulation account Non-financial assets Financial assets Liabilities (only financial!) Net worth Matrix showing financial positions (assets and liabilities) within the economy Flows and stocks recorded in a consistent way Mixed concepts Restricted 5
SNA and financial flows and positions accounts Restricted 6
Issues in analysing financial transactions Three challenges for financial analysis (1) Who is taking decisions (more granular sub-sectors, for instance for financial institutions?) (2) Instruments? (eg what type of liability is issued/maturity?) (3) Counterparties? (eg who is financing an increase in a given liability?) Partial refinements Sectoral accounts Balance sheet approach Whom-to-whom Restricted 7
Refinements (1) - Sectoral (financial) accounts Matrix showing assets and liabilities of various institutional sectors of an economy, by type Holistic approach integrating data on the real, external, fiscal and financial sectors Non-financial accounts: non-financial assets such as Produced assets (fixed assets; inventories; valuables) Non-produced assets (natural resources inc. land; contracts, leases and licenses; goodwill and marketing assets) Financial accounts: financial asset and liabilities broken down by sector Restricted 8
Financial sectoral accounts (flows and stocks) Restricted 9
Refinements (2) - Balance sheet approach Concept developed by the IMF in early 2000s - problems identified during the Asian financial crisis Focuses on country s balance sheets (assets and liabilities), esp. by maturity and currency Four sources of financial fragilities Maturity mismatch Currency mismatch Capital structure mismatch Solvency risk Growing focus on key sectors: eg government, financial sector Restricted 10
Refinements (3) From-whom-to-whom accounts Financial assets and liabilities of institutional sectors broken down by counterparty sector (ie the one that holds/ has issued a given instrument) Detailed Flow of Funds : Full matrix recording financial flows and positions on a from-whom-to-whom basis Three dimension tables: by type of asset-liability / creditor sector / debtor sector Presentation of non-consolidated data recommended (intrasectoral positions) Restricted 11
From-whom-to-whom accounts Restricted 12
Objective: integrated financial accounts Financial transactions recorded as counterpart of real sector operations or as pure transactions SNA concepts: asset/liability double-entry bookkeeping, stock/flows consistency No horizontal discrepancy ie for one type of transaction (instrument) No vertical discrepancy ie for a given sector Integration in strong sense: no discrepancies at all between financial and national accounts But financial flows not always compiled following SNA concept Heterogeneous data: securities, credit register, BoP, GFS, monetary statistics Information gaps Integration in weak sense: joint effort of compilers to integrate accounts, starting with specific sectors&instruments (min./encouraged) Restricted 13
Enhanced financial stability analysis Supports the analyses of: How net lending or net borrowing (savings and investments) of sectors arises Financial linkages/interconnections among sectors (domestic and foreign) or within Who does what with whom: who is financing whom, for how much, and with which instrument? Role of financial corporations Financial importance (assets, instruments, intermediation) Focus on key sub-sectors - eg money-issuing corporation, insurance, pension fund, others Focus on specific instruments eg deposits, loans, debt securities, FX, maturity Restricted 14
Evolving concepts reflect evolving economic analysis Initial flows accounts more closely related to real sector and traditional analysis of economic imbalances (BOP crises, monetary policy transmission, budget deficits) Focus on financing of the economy and related constraints From real to financial Financial crises of last few decades have indicated need to look at stocks/balance sheets Reflect accumulation of flows (eg debt) Facilitate analysis of financial cycles From financial to real Enhanced details on subsectors/instruments to reflect potential risks developing within the financial system Restricted 15
International initiatives to promote the compilation of financial sectoral account statistics Description of financial sectoral accounts improved in SNA 2008 G20 Data Gaps Initiative Phase I Issued by FSB and IMF in 2009 with 20 recommendations Rec # 15: The Interagency Group on Economic and Financial Statistics to develop a strategy to promote the compilation and dissemination of the balance-sheet approach, flow-of-funds, and sectoral data more generally data on nonbank financial institutions should be a particular priority. Restricted 16
International initiatives: 2 nd DGI phase (DGI-II, 2016) Implementing the collection and dissemination of comparable, timely, integrated, high quality, and standardized statistics for policy use II.5 Shadow Banking Enhance data collection on the shadow banking system by contributing to the FSB monitoring process, including through the provision of sectoral accounts data II.8 Sectoral accounts Compile and disseminate, on a quarterly and annual frequency, sectoral accounts flows and balance sheet data, based on the internationally agreed template, including ( ) other (nonbank) financial corporations sector, and develop from-whom to-whom matrices for both transactions and stocks to support balance sheet analysis Restricted 17
International initiatives to promote the compilation of financial sectoral accounts Development of a template on (financial) sectoral accounts Available sectoral accounts data published by IOs Outreach, technical assistance and training Inclusion of sectoral balance sheet data in SDDS Plus BSA indicators for IMF surveillance work Almost half of G20 countries publish some form of quarterly sectoral accounts; others are developing them Clear international support for developing and improving (integrated) financial sectoral accounts Restricted 18
Remaining issues Valuation (market price) Institutional units (more granular sub-sectors?) ROW treated as a single sector (global flow of funds?) Data gaps (eg non financial sector, non-financial balance sheets, new instruments) Data variety (micro data) Residence approach: (i) analysing cross-border operations controlled by home country entities (eg corporate group, consolidated bank) (ii) treating data reported by non-resident entities Restricted 19
IFC contribution Regional workshops Best practice and knowledge sharing Report to Central Bank Governors and recommendations Link with international work (eg AIG, ISI) A recommended core template? Restricted 20