government finance division imf statistics department the views expressed herein are those of the...
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Government Finance DivisionIMF Statistics Department
The views expressed herein are those of the author and should not be attributed to the IMF, its Executive Board, or its Management.
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
Government Finance DivisionIMF Statistics Department
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Overview
Why Balance Sheets Matter?
Balance Sheet Analysis in IMF Surveillance
Data Sources and Data Gaps for the Balance Sheet Analysis
Looking Forward
Government Finance DivisionIMF Statistics Department
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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.
Government Finance DivisionIMF Statistics Department
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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
Government Finance DivisionIMF Statistics Department
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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.”
Government Finance DivisionIMF Statistics Department
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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
Government Finance DivisionIMF Statistics Department
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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
Government Finance DivisionIMF Statistics Department
The views expressed herein are those of the author and should not be attributed to the IMF, its Executive Board, or its Management.
(Example 1: FX shock-corporates borrow in FX)
Government Financial Sector Other Non- External TOTAL
(incl. Central Bank) Financial Sectors
A L A L A L A L A L
Government
In domestic currency
ST
LT
In foreign currency
ST
LT
Financial Sector
(incl. Central Bank)
In domestic currency
ST
LT
In foreign currency
ST
LT
Other Non-
Financial Sectors
In domestic currency
ST
LT
In foreign currency
ST
LT
External
In domestic currency
ST
LT
In foreign currency
ST
LT
TOTAL
In domestic currency
In foreign currency
Issu
er
of
the L
iab
ilit
y (
Deb
tor
Secto
r)Holder of the Liability (Creditor Sector)
Increase in NPLs
Depreciation of the
domestic currency
Reduced lending
Corporate bankruptcy
Government Finance DivisionIMF Statistics Department
The views expressed herein are those of the author and should not be attributed to the IMF, its Executive Board, or its Management.
(Example 2: liquidity shock)
Government Financial Sector Other Non- External TOTAL
(incl. Central Bank) Financial Sectors
A L A L A L A L A L
Government
In domestic currency
ST
LT
In foreign currency
ST
LT
Financial Sector
(incl. Central Bank)
In domestic currency
ST
LT
In foreign currency
ST
LT
Other Non-
Financial Sectors
In domestic currency
ST
LT
In foreign currency
ST
LT
External
In domestic currency
ST
LT
In foreign currency
ST
LT
TOTAL
In domestic currency
In foreign currency
Issu
er
of
the L
iab
ilit
y (
Deb
tor
Secto
r)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 le
nding
Government Finance DivisionIMF Statistics Department
The views expressed herein are those of the author and should not be attributed to the IMF, its Executive Board, or its Management.
(Example 3: contingent liabilities materialize)
Government Financial Sector Other Non- External TOTAL
(incl. Central Bank) Financial Sectors
A L A L A L A L A L
Government
In domestic currency
ST
LT
In foreign currency
ST
LT
Financial Sector
(incl. Central Bank)
In domestic currency
ST
LT
In foreign currency
ST
LT
Other Non-
Financial Sectors
In domestic currency
ST
LT
In foreign currency
ST
LT
External
In domestic currency
ST
LT
In foreign currency
ST
LT
TOTAL
In domestic currency
In foreign currency
Issu
er
of
the L
iab
ilit
y (
Deb
tor
Secto
r)Holder of the Liability (Creditor Sector)
Reduced
lending
Rise in interestrates
Banks' exposure to sovereign
Feedback loop to
government
Rise in debt from
contingent liability
Government Finance DivisionIMF Statistics Department
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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
Government Finance DivisionIMF Statistics Department
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Balance Sheet Analysis in IMF Surveillance (9/10)
Government Finance DivisionIMF Statistics DepartmentBalance Sheet Matrix (Expanded)
d
Government Central BankBanks (ODC)
Other Financial Corporation (OFC) Non Financial Sector
(Corp. + HH) External
A L A L A L A L A L A L
Government
Total
In domestic currency
In foreign currency
Central Bank
Total
In domestic currency
In foreign currency
Banks (ODC)
Total
In domestic currency
In foreign currency
Other Financial Corp. (OFC)
Total
In domestic currency
In foreign currency
Non Financial Sector
(Corp. + HH)
Total
In domestic currency
In foreign currency
External
Total
In domestic currency
In foreign currency
Holder of the Liability (Creditor Sector)
Issu
er
of
the L
iab
ilit
y (
Deb
tor
Secto
r)
Government Finance DivisionIMF Statistics Department
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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)
Government Finance DivisionIMF Statistics Department
Country Example
Government Central BankBanks (ODC)
Financial Sector(OFC)
Non Financial Sector (Corp. + HH) External TOTAL
A L A L A L A L A L A L A L
Government
Total
In domestic currency
In foreign currency
Central Bank
Total
In domestic currency
In foreign currency
Banks (ODC)
Total
In domestic currency
In foreign currency
Non-Bank Financial (OFC)
Total
In domestic currency
In foreign currency
Non Financial Sector
(Corporate + Household)
Total
In domestic currency
In foreign currency
External
Total
In domestic currency
In foreign currency
TOTAL
In domestic currency
In foreign currency
Holder of the Liability (Creditor Sector)
Issu
er
of
the L
iab
ilit
y (
Deb
tor
Secto
r)
351 52
351 30
0 22
262 188
243 183
19 5
0 0
0 0
0 0
52 351
30 351
22 0
763 3 0 0 2 6 884 1,516
685 3 0 0 0 6 0 0 716 361
78 0 0 0 2 0 33 1,092 135 1,092
188 262 3 763
183 243 3 685
5 19 0 78
253 175 2,881 2,733 3,809 4,049
231 141 2,427 2,300 43 3 2,887 3,371
22 34 454 434 166 115 646 680
0 0 0 0 175 253 44 299 219 552
0 0 0 0 141 231 44 241 17 0 202 472
0 0 0 0 34 22 0 58 70 5 104 85
6 2 2,733 2,881 299 44
6 0 2,300 2,427 241 44
0 2 434 454 58 0
1,092 33 118 209 5 87
0 0 3 42 0 17
1,092 33 115 166 5 70
1,453 851 4,051 3,533 557 306
361 716 3,371 2,887 472 202
1,092 135 680 646 85 104
SRF - Based
1,124 7
67 1,155
484 115
1,703 383
383 1,703 1,660 3,377
3,377 1,660
2,154 1,617
915
1,617 2,154
GFS-Based
417 1,370
417 1,370 3,728 6,112
3,728 6,112
BS IdentityIIP-Based
Government Finance DivisionIMF Statistics Department
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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
IMF/STA technical assistance/training/outreach
Government Finance DivisionIMF Statistics Department
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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
Government Finance DivisionIMF Statistics Department
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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
Government Finance DivisionIMF Statistics Department
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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
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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)