The Financial Crisis and Information Gaps

Report to the
G-20 Finance Ministers and Central Bank Governors

Prepared by the IMF Staff and the FSB Secretariat
October 29, 2009

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Contents

Page

List of Abbreviations and Acronyms.........................................................................................3
Executive Summary ...................................................................................................................4
List of Recommendations ..........................................................................................................6
I. Introduction ............................................................................................................................9II. Context ..................................................................................................................................9III. A Proposed Action Plan.....................................................................................................11
IV. Key Recommendations......................................................................................................13
Monitoring Risk in the Financial Sector............................................................................13
Financial Soundness Indicators (FSIs)......................................................................13
Funding and Liquidity Risk........................................................................................14
Credit Transfer Instruments.......................................................................................15
International Network Connections ...................................................................................18
Systemically Important Global Financial Institutions ..............................................18
International Banking Statistics (IBS) and the Coordinated Portfolio
Investment Survey (CPIS) ..........................................................................................20
International Investment Position (IIP) data .............................................................21
Cross-border Activities of Nonbank Financial Institutions (NBFIs) .........................22
Sectoral and Other Financial and Economic Datasets .......................................................23
Sectoral Data .............................................................................................................23
Government Finance Statistics (GFS) .......................................................................24
Property Markets .......................................................................................................25
Communication of Official Statistics.................................................................................26

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LIST OF ABBREVIATIONS AND ACRONYMS
BCBS
BIS
BOPCOM
BSA
BPM6
CDS
CGFS
CPIS
DTCC
ECB
ESF
Eurostat
FASB
FSB
FSF
FSI
FVCs
G-20
G-22
GFS
IASB
IAG
IBS
IIP
ILO
IMF
IMFC
IOSCO
ISWGNA
NBFIs
OECD
OFC
OTC
PGI
SDDS
SIFMA
SNA
TFFS
UN
UNECE
ISWGNA
WGSD

Basel Committee on Banking Supervision
Bank for International Settlements
IMF Committee on Balance of Payments Statistics
Balance Sheet Approach
Balance of Payments and International Investment Position Manual,sixth edition
Credit Default Swaps
Committee on the Global Financial System
Coordinated Portfolio Investment Survey
Depository Trust and Clearing Corporation
European Central Bank
European Securitization Forum
Statistical Office of the European Communities
Financial Accounting Standards Board
Financial Stability Board
Financial Stability Forum
Financial Soundness Indicators
Financial Vehicle Corporations
The Group of Twenty
The Group of Twenty Two
Government Finance Statistics
International Accounting Standards Board
Interagency Group on Economic and Financial Statistics
International Banking Statistics
International Investment Position
International Labor Organization
International Monetary FundInternational Monetary and Financial Committee
International Organization of Securities Commissions
Inter-Secretariat Working Group on National Accounts
Nonbank Financial Institutions
Organisation for Economic Co-operation and Development
Offshore Financial Centers
Over-the-Counter
Principal Global Indicators
Special Data Dissemination Standard
Securities Industry and Financial Markets Association
System of National Accounts
Inter-Agency Task Force on Finance Statistics
United Nations
United Nations Economic Commission for Europe
Inter-Secretariat Working Group on National Accounts
Working Group on Securities Databases

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EXECUTIVE SUMMARYIn April 2009, the Group of Twenty (G-20) Finance Ministers and Central Bank Governors
Working Group on Reinforcing International Co-operation and Promoting Integrity in
Financial Markets called on the International Monetary Fund (IMF) and the Financial
Stability Board (FSB) to explore information gaps and provide appropriate proposals forstrengthening data collection and report back to the Finance Ministers and Central Bank
Governors. This call was endorsed by the IMF’s International Monetary and Financial
Committee (IMFC).
Data gaps are an inevitable consequence of the ongoing development of markets andinstitutions. As has been true of previous international financial crises, these gaps arehighlighted when a lack of timely, accurate information hinders the ability of policy makers
and market participants to develop effective responses. Indeed, the recent crisis has
reaffirmed an old lesson—good data and good analysis are the lifeblood of effective
surveillance and policy responses at both the national and international levels.
Following widespread consultation with official users of economic and financial data in G-20
countries and at other international institutions, particularly those responsible for financial
stability analysis, a broad consensus has emerged over the information gaps that need to be
filled. From this, the following key recommendations are made:Better capture the build-up of risk in the financial sectorStrengthen the international reporting of indicators of current financial health andsoundness of financial institutions (so-called Financial Soundness Indicators),
especially by expanding the number of reporting countries;

Develop measures of aggregate leverage and maturity mismatches in the financial
system; andImprove coverage of risk transfer instruments, including data on the credit default
swap markets.

Improve data on international financial network connections:

Enhance information on the financial linkages of systemically important global
financial institutions; andStrengthen data gathering initiatives on cross-border banking flows, investment
positions, and exposures, in particular, to identify activities of nonbank financial
institutions.

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Monitor the vulnerability of domestic economies to shocks:Strengthen the sectoral coverage of national balance sheet and flow of funds data;Promote timely and cross-country standardized and comparable government financestatistics; and

Work to disseminate more comparable data on real estate prices.

Communication of official statistics


There is also a need to improve the communication of official statistics, as in someinstances users were not fully aware of the available data series to address criticalpolicy issues.

The full list of recommendations is set out ahead.
Some of the identified gaps can be─and indeed are being─closed by strengthening existing
initiatives. Others will entail new initiatives and additional data collection from the private
sector. Implementation of some of the recommendations raises confidentiality issues thatwould need to be addressed. The legal framework for data collection might need to bestrengthened in some countries.
Expanded data collection entails costs. Staffs of the FSB and the IMF will initiate
consultations with relevant national and international bodies, and the private sector whereappropriate, including on the costs of addressing the identified gaps, and propose to reportback to the G-20 Finance Ministers and Central Bank Governors by June 2010 on the actions
taken by that date together with a concrete plan and timetable for implementing each of theoutstanding recommendations.
New institutional structures through which the program can be guided and carried out havebeen recently established by statisticians, financial stability experts, and regulators. These
structures will play an important role in coordinating implementation, leveraging resources,
and minimizing costs. A key lesson for the future is the importance of ensuring that statisticalinformation collection remains adaptable in response to rapid changes in financial markets.

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LIST OF RECOMMENDATIONS
Recommendation
1.

Staffs of FSB and the IMF report back to G20 Finance Ministers and Central Bank
Governors by June 2010 on progress, with a concrete plan of action, including a timetable, toaddress each of the outstanding recommendations. Thereafter, staffs of FSB and IMF toprovide updates on progress once a year. Financial stability experts, statisticians, andsupervisors should work together to ensure that the program is successfully implemented.

Monitoring Risk in the Financial Sector
2.

The IMF to work on increasing the number of countries disseminating Financial Soundness
Indicators (FSIs), including expanding country coverage to encompass all G-20 members,
and on other improvements to the FSI website, including preferably quarterly reporting. FSI
list to be reviewed.

3.

In consultation with national authorities, and drawing on the Financial Soundness Indicators
Compilation Guide, the IMF to investigate, develop, and encourage implementation ofstandard measures that can provide information on tail risks, concentrations, variations in
distributions, and the volatility of indicators over time.

4.

Further investigation of the measures of system-wide macroprudential risk to be undertakenby the international community. As a first step, the BIS and the IMF should complete theirwork on developing measures of aggregate leverage and maturity mismatches in thefinancial system, drawing on inputs from the Committee on the Global Financial System(CGFS) and the Basel Committee on Banking Supervision (BCBS).

5.

The CGFS and the BIS to undertake further work in close cooperation with central banks
and regulators on the coverage of statistics on the credit default swap markets for the
purpose of improving understanding of risk transfers within this market.

6.

Securities market regulators working through IOSCO to further investigate the disclosure
requirements for complex structured products, including public disclosure requirements forfinancial reporting purposes, and make recommendations for additional improvements if
necessary, taking account of work by supervisors and other relevant bodies.

7.

Central banks and, where relevant, statistical offices, particularly those of the G-20
economies, to participate in the BIS data collection on securities and contribute to the further
development of the BIS-ECB-IMF Handbook on Securities Statistics (Handbook). The
Working Group on Securities Databases to develop and implement a communications
strategy for the Handbook.

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International Network Connections
8.

The FSB to investigate the possibility of improved collection and sharing of information on
linkages between individual financial institutions, including through supervisory college
arrangements and the information exchange being considered for crisis management
planning. This work must take due account of the important confidentiality and legal issues
that are raised, and existing information sharing arrangements among supervisors.

9.

The FSB, in close consultation with the IMF, to convene relevant central banks, national
supervisors, and other international financial institutions, to develop by end 2010 a common
draft template for systemically important global financial institutions for the purpose of
better understanding the exposures of these institutions to different financial sectors andnational markets. This work should be undertaken in concert with related work on thesystemic importance of financial institutions. Widespread consultation would be needed, anddue account taken of confidentiality rules, before any reporting framework can be
implemented.

10.

All G-20 economies are encouraged to participate in the IMF’s Coordinated Portfolio
Investment Survey (CPIS) and in the BIS’s International Banking Statistics (IBS). The IMF
and the BIS are encouraged to continue their work to improve the coverage of significant
financial centers in the CPIS and IBS, respectively.

11.

The BIS and the CGFS to consider, amongst other improvements, the separate identificationof nonbank financial institutions in the consolidated banking data, as well as information
required to track funding patterns in the international financial system. The IMF, in
consultation with the IMF’s Committee on Balance of Payments Statistics, to strive toenhance the frequency and timeliness of the CPIS data, and consider other possible
enhancements, such as the institutional sector of the foreign debtor.

12. The IMF to continue to work with countries to increase the number of International
Investment Position (IIP) reporting countries, as well as the quarterly reporting of IIP data.
The Balance of Payments and International Investment Position Manual, sixth edition(BPM6) enhancements to the IIP should be adopted by G-20 economies as soon as feasible.
13.

The Interagency Group on Economic and Financial Statistics (IAG) to investigate the issueof monitoring and measuring cross-border, including foreign exchange derivative, exposuresof nonfinancial, and financial, corporations with the intention of promoting reporting
guidance and the dissemination of data.

14.

The IAG, consulting with the FSB, to revisit the recommendation of the G-22 to examine thefeasibility of developing a standardized template covering the international exposures oflarge nonbank financial institutions, drawing on the experience with the BIS’s IBS data,
other existing and prospective data sources, and consulting with relevant stakeholders.

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Sectoral and Other Financial and Economic Datasets
15. The IAG, which includes all agencies represented in the Inter-Secretariat Working Group on
National Accounts, to develop a strategy to promote the compilation and dissemination of
the balance sheet approach (BSA), flow of funds, and sectoral data more generally, startingwith the G-20 economies. Data on nonbank financial institutions should be a particularpriority. The experience of the ECB and Eurostat within Europe and the OECD should be
drawn upon. In the medium term, including more sectoral balance sheet data in the data
categories of the Special Data Dissemination Standard could be considered.
16.

As the recommended improvements to data sources and categories are implemented,
statistical experts to seek to compile distributional information (such as ranges and quartile
information) alongside aggregate figures, wherever this is relevant. The IAG is encouraged
to promote production and dissemination of these data in a frequent and timely manner. The
OECD is encouraged to continue in its efforts to link national accounts data with
distributional information.

17.

The IMF to promote timely and cross-country standardized and comparable government
finance data based on the accepted international standard, the Government Finance Statistics
Manual 2001.

18.

The World Bank, in coordination with the IMF, and consulting with the Inter-Agency Task
Force on Finance Statistics, to launch the public sector debt database in 2010.

19.

The Inter-Secretariat Working Group on Price Statistics to complete the planned handbook
on real estate price indices. The BIS and member central banks to investigate disseminationon the BIS website of publicly available data on real estate prices. The IAG to consider
including real estate prices (residential and commercial) in the Principal Global Indicators(PGI) website.

Communication of Official Statistics
20.

The G-20 economies to support enhancement of the Principal Global Indicators website, andclose the gaps in the availability of their national data. The IAG should consider making
longer runs of historical data available.

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THE FINANCIAL CRISIS AND INFORMATION GAPS
I. INTRODUCTION
1.
The experience of the financial crisis led to a call by the Group of Twenty (G-20)
Finance Ministers and Central Bank Governors Working Group #2 (Reinforcing International
Co-operation and Promoting Integrity in Financial Markets) for the IMF and the Financial
Stability Forum (FSF), the predecessor of the FSB, “to explore gaps and provide appropriate
proposals for strengthening data collection before the next meeting of the G-20 Finance
Ministers and Central Bank Governors.” This recommendation was endorsed by the IMF's
IMFC at its Spring Meetings in April 2009.
2.
The report identifies the main financial and economic information gaps and presents
recommendations for closing them. In preparing the draft report, the staffs of the FSB and the
IMF have consulted widely, including by organizing a users’ conference in July 2009. The
papers and presentations, and the summary of key points made at this conference, areavailable at www.imf.org/external/np/seminars/eng/2009/usersconf/index.htm. While there
are differences in emphasis, there has been a broad consensus over where the gaps lie. The
report translates the broad consensus into recommendations for improvements. Turning therecommendations into a concrete action plan is the next step that needs to be taken.
II. CONTEXT
3.
The integration of economies and markets, as evidenced by the financial crisis
spreading worldwide, highlights the critical importance of relevant statistics that are timely
and internally consistent as well as comparable across countries. The international
community has made a great deal of progress in recent years in developing amethodologically consistent economic and financial statistics system covering traditional
datasets, and in developing and implementing data transparency initiatives. Within
macroeconomic (real sector, external sector, monetary and financial, and government
finance) statistics, the System of National Accounts (SNA) is the central organizing
framework. For macro-prudential statistics, an analogous framework is not yet in place, butthere is on-going progress in developing a consensus among data users on key concepts andindicators, including in relation to the SNA.
4.
While the financial crisis was not the result of a lack of proper economic andfinancial statistics, it exposed a significant lack of information as well as data gaps on key
financial sector vulnerabilities relevant for financial stability analysis. Some of these gaps
affected the dynamics of the crisis, as markets and policy makers were caught unprepared byevents in areas poorly covered by existing information sources, such as those arising fromexposures taken through complex instruments and off-balance sheet entities, and from thecross-border linkages of financial institutions. Broadly, there is a need to address information
gaps in three main areas that are inter-related.

10

The build-up of risk in the financial sector: The crisis demonstrated both thedifficulty of capturing, and the importance of, sound indicators of the degree andlocation of leverage or excessive risk-taking within the system, particularly as regards
unregulated or lightly regulated institutions and instruments (the “shadow banking
system”) but also liquidity, credit and tail risks within the regulated sector. Related is
the issue of a better understanding of where risks actually lie across institutions andmarkets given the growth of risk transfer instruments. Improved data are needed toconstruct many of these indicators and to make sure they are sufficiently timely andconsistent. Information on “soft signals,” such as on lending standards, was alsolacking in some instances. In addition to the need to improve the compilation anddissemination of aggregate statistics or averages, the crisis has demonstrated that
attention has to be paid to ranges and distributions within the aggregates.

Cross-border financial linkages: There are important international financial network
connections that have developed and are not captured by available information. For
instance, the continued rapid growth of large financial institutions with a global reachhas increased the importance of cross-border network links in national financial
stability analysis, but information on these networks is lacking. Related is a lack of
information on “crowded trades” whereby large financial institutions—banks andnonbanks—invested in the same asset class and/or funded themselves in markets
where the supply of funding was subject to common directional risks.



Vulnerability of domestic economies to shocks: Data availability to monitor the
behavior and exposures of economic agents within the domestic economy needs
strengthening. Such data are relevant to ascertaining (1) the vulnerabilities embeddedin the balance sheet positions of financial institutions, governments, nonfinancial
corporates, and the households sectors; (2) conditions in markets to which several ofthese sectors are exposed, such as the real estate markets; and, (3) the financial andreal sector linkages within an economy.

5.
Indeed, the crisis also exposed fundamental weaknesses in the ability to integrate
financial sector linkages into the macro-economic models that have guided policymaking for
decades. High quality analysis is needed to understand financial crises. Indeed, the crisis has
reaffirmed an old lesson—good data and good analyses are the lifeblood of effective
surveillance and policy responses both at national and international levels. Further work onenhancing data for financial stability will contribute to developing a more robust macroprudential policy and conceptual framework.
6.
Moreover, the crisis has demonstrated a need to improve the communication of
official statistics and advance the interaction among the academic, policy and statisticalcommunities. The need for timely data compilations and releases is another important lessonof the crisis with some data that could have been useful in monitoring events during the crisis
having only been available with a lengthy time lag. Examples include data on cross-borderbanking exposures and balance-sheet disclosures by large financial institutions.

117.
Further, for efforts to improve data coverage and address gaps to be effective andefficient, the work needs to be coordinated and existing resources leveraged to the maximum
extent possible. This requires action and cooperation from individual institutions,supervisors, industry groups, central banks, statistical agencies, and international institutions.
Existing reporting frameworks should be used where possible. The legal framework for datacollection might need to be strengthened in some countries. Also, there is a need to continue
to use relevant data available in the private sector.
8.
There are potential resource implications arising from the work program, and it isrecognized that addressing data gaps might be costly. However, data gaps are an inevitableconsequence of the ongoing development of markets and institutions. These gaps arehighlighted, and significant costs incurred, when a lack of timely, accurate information
hinders the ability of policy makers and market participants to develop effective policy
responses.
III. A PROPOSED ACTION PLAN
9.
Experience demonstrates that closing information gaps typically involves a multiyear program, combined with a strong institutional framework to take the program forward,
and sustained policy support.
10.
The list of recommendations for such a work program is set out after the Executive
Summary, above. Staffs of the FSB and IMF will provide regular updates on progress inaddressing these gaps, initially by June 2010. The first report will report on concrete plans ofaction and timetables for addressing the recommendations. The report will follow further
consultations with relevant national and international bodies, and the private sector whereappropriate, and take into account the potential costs of implementation. The text indicates
those recommendations that build on existing initiatives and those that are new.
11.
The list of recommendations ahead represents a challenging program to implement.
Those recommendations that strengthen existing initiatives can continue to move forward,
albeit with a new sense of urgency, but for those that are new initiatives, a sense of relative
priority is needed. Among the new initiatives the following appear to merit the highest
priority based on the discussions held:

Developing measures of aggregate leverage and maturity mismatches in the financial
system;

Enhancing information on the financial linkages of systemically important global
financial institutions; and

Identifying cross-border activities of nonbank financial institutions.

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12.
The institutional structures through which the program can be guided and carried out
have been recently established, not least to help meet the needs of coordination, leverage
resources, and minimize costs. Some of the key structures are:

The staffs of the FSB and IMF have worked together to produce this report and cancontinue to work together on monitoring progress in the work program.



The Interagency Group on Economic and Financial Statistics (IAG) was establishedat end-2008 to coordinate work on the improvement of economic and financial
statistics (methodologies and data collection) among international agencies.
Members of the IAG are the Bank for International Settlements (BIS), the European
Central Bank (ECB), Eurostat, the IMF (chair), the OECD, the UN, and the World
Bank.



In June 2009, the FSB established the Standing Committee on Assessment ofVulnerabilities, to assess and monitor vulnerabilities in the global financial system,and the Standing Committee for Supervisory and Regulatory Cooperation to address
coordination issues that arise among supervisors and regulators.



The IMF, in cooperation with the FSB, in January 2009, established a Roundtable
Forum for enhancing collaboration on Financial Stability Analysis (Roundtable
Forum).

13.
A number of other long-standing institutional arrangements can also be used to carryout the work program, such as, but not limited to, the IMF Committee on Balance ofPayments Statistics (BOPCOM), the Committee on the Global Financial System (CGFS), theInter-Secretariat Working Group on National Accounts (ISWGNA), the Inter-Agency Task
Force on Finance Statistics (TFFS), and the Working Group on Securities Databases(WGSD).
14.
These institutional structures should be utilized to ensure that national agencies
involved in collecting and using data participate in implementing the key recommendations
set out ahead.
Recommendation # 1:
Staffs of FSB and IMF to report back to G20 Finance Ministers and Central Bank
Governors by June 2010 on progress, with a concrete plan of action, including atimetable, to address each of the outstanding recommendations. Thereafter, staffs of
FSB and IMF to provide updates on progress once a year. Financial stability experts,
statisticians, and supervisors should work together to ensure that the program is
successfully implemented.

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IV. KEY RECOMMENDATIONS
15.
The recommendations proposed below are clustered under four headings: monitoringrisk in the financial sector, international network connections; sectoral and other financial
and economic datasets; and communication of official statistics.
Monitoring Risk in the Financial Sector
16.
The crisis has revealed many gaps in data needed to monitor risk in the financial
system. For example, there is an identified need to better identify, measure, and monitor, on
an ongoing basis, the distribution of the risk embedded in structured credit products andcredit risk transfer instruments. Some recommendations for measuring these positions are set
out in this section. The related issue of “crowded trades” is covered in the next section.
17.
In some instances, a consensus has yet to emerge on the specific data needs tomonitor risk in the financial sector, and keeping up with financial innovations remains animportant challenge. For instance, how to utilize financial and other asset price informationin financial stability analysis and policymaking is still a subject of some debate. The
Roundtable Forum intends to exchange information on how to identify vulnerabilities,
including through “soft indicators” like lending standards and credit restrictions. In short,there is a need for continuing dialogue between the various international policy andanalytical groups that are to monitor such developments, the relevant international statisticalfora, national financial authorities and statistical agencies, and the various regulatory andindustry groups that also publish information.
Financial Soundness Indicators (FSIs)
18.
The IMF began work on FSIs following the experience of the financial crises of the
1990s. The intention was to provide indicators of the current financial health and soundnessof financial institutions in a country, and of their corporate and household counterparts. FSIs
are compiled more on a consolidated group approach than are the residence-based data ofmacro-economic datasets. Cross-country comparability of data is affected by differences inaccounting standards, and so detailed metadata (information about data) are provided. Also,
for a number of years, the OECD has been collecting and disseminating data on banks’ profit
statements and balance sheets in the OECD’s annual Bank Profitability Statistics.
19.
The regular dissemination of FSIs by the IMF started in July 2009 with 45
economies, of which 14 are members of the G-20. The IMF intends to broaden the FSI
database focusing on increasing the number of reporters and the frequency of reporting.
Quarterly frequency, in line with other major datasets, is preferred but practice varies;
expanded country coverage is the highest priority. With the IMF Executive Board in
December 2008 endorsing the proposal that financial indicators be included as encouraged
categories in the Special Data Dissemination Standard (SDDS), work is in train on
identifying an appropriate list of FSIs for inclusion in the SDDS.

14
20.
Analysis has shown that some FSIs performed well at foreshadowing the present
crisis, while others performed less well. 1 However, not all FSIs are necessarily intended to beleading indicators of a crisis, as some, for example, indicate potential ability to withstand acrisis, or actual resilience during a crisis, and so could be considered concurrent rather thanleading indicators. Against this background, the IMF is to look at refinements to thecategorization of FSIs between core and encouraged indicators, as well as additions of new
FSIs to the current list, drawing from the lessons of the current financial crisis. FSIs fornonbank financial institutions (NBFIs), 2 covering various aspects of risks, are being
considered.
Recommendation # 2:
The IMF to work on increasing the number of countries disseminating FSIs, including
expanding country coverage to encompass all G-20 members, and on otherimprovements to the FSI website, including preferably quarterly reporting. FSI list to
be reviewed.
21.
While producing and disseminating aggregate data are a good first step to assessing
financial soundness, it is recognized that tail risks, variations in the distributions withinaggregates, and the volatility of indicators over time may contain important signs ofemerging vulnerabilities. Indeed, as explained in the Financial Soundness Indicators Guide,stress-testing exercises involving tail risk scenarios can strengthen the analysis of FSIs.
Recommendation # 3:
In consultation with national authorities, and drawing on the Financial Soundness
Indicators Compilation Guide, the IMF to investigate, develop, and encourage
implementation of standard measures that can provide information on tail risks,
concentrations, variations in distributions, and the volatility of indicators over time.
Funding and Liquidity Risk
22.
Developing measures of funding and liquidity risk linked to maturity transformation
was recommended by the Report of the FSF on Addressing Procyclicality in the Financial
System in April 2009. That report proposed that the BIS and the IMF make available toauthorities information on leverage and on maturity mismatches on a system-wide level,drawing on research by the Basel Committee on Banking Supervision (BCBS) and the1

For instance, the Staff Position Note No. 2009/06, Addressing Information Gaps (Johnston, R. B., Effie
Psalida, Phil De Imus, Jeanne Gobat, Mangal Goswami, Christian B. Mulder, Francisco F Vázquez.) provides
an initial analysis of the usefulness of individual FSIs against the backdrop of the financial crisis.
2

Known as “other financial corporations” in the international statistical manuals.

15
CGFS. Work in this area is of interest both to supervisors and to those involved more broadly
in financial stability policy.
Recommendation # 4:
Further investigation of the measures of system-wide macroprudential risk to beundertaken by the international community. As a first step, the BIS and the IMF
should complete their work on developing measures of aggregate leverage and maturity
mismatches in the financial system, drawing on inputs from the CGFS and the BCBS.
Credit Transfer Instruments
23.
One clear lacuna in the crisis was the lack of information on credit transfer activity,
namely with regard to useful, timely information about where the risks lay and their scale.
Credit Risk Transfer Instruments
24.
The lack of transparency and limited coverage of statistical information regarding
over-the-counter (OTC) derivatives markets, particularly credit default swaps (CDS),
disguised key elements of an important risk transfer channel within the financial system. A
Working Group of the CGFS has looked at ways to enhance the existing collection of OTC
credit default swap data through the BIS.
25.
Also, the BIS, in close cooperation with central banks, is undertaking further work
looking both at the information from Depository Trust and Clearing Corporation (DTCC)’s
trade warehouse to see if more could be gleaned about the microstructure of the market for
credit default swaps and at data from the BIS consolidated international banking statistics(IBS) on an “ultimate risk” 3 basis to see how to reconcile banks’ cross-border exposuresrelated to CDS and the CDS statistics. The newly formed “OTC Derivatives Regulators
Forum” 4 is also looking at CDS transparency.
Recommendation # 5:
The CGFS and the BIS to undertake further work in close cooperation with central
banks and regulators on the coverage of statistics on the credit default swap markets
for the purpose of improving understanding of risk transfers within this market.
Structured Products
26.
The crisis demonstrated that not enough was known about the risk exposures of key
institutions to the instruments and asset classes at the core of the crisis.
3

The criterion for claims on an ultimate risk basis is the residency of the ultimate obligor or guarantor.

4This international forum of regulators of OTC derivatives markets was established in September 2009.

16
27.
Many of the recommendations in the FSF’s April 2008 Report on Enhancing Market
and Institutional Resilience for improved disclosure of exposures to complex assets andinstruments found their way into published financial statements. The International
Accounting Standards Board (IASB) and the US Financial Accounting Standards Board(FASB) have set forth enhancements to required risk disclosures for financial activities,
including for complex financial instruments. Also, through Pillar 3 of the Basel II capitalframework, the BCBS has set forth improvements to banks’ disclosures of their risk profiles,
particularly in relation to complex capital market and securitization activities. While these
disclosure enhancements are welcome it is important for risk disclosures to continue to be
sufficiently informative and relevant to investors and market participants as to the overall
exposures of these institutions to troubled asset classes based on the market conditions at thetime of the disclosure. 5
28.
Also, the BCBS and the European Commission are establishing a set of clear anddetailed standards in terms of what analysis a bank must conduct prior to investing in asecuritization exposure, and the appropriate level of monitoring it would have to undertakefor its securitization positions. These standards will be complemented by corresponding
disclosure requirements for originating banks (and/or rating agencies) in order to facilitate
investing banks' analysis.
29.
The International Organization of Securities Commissions (IOSCO) Task Force on
Unregulated Markets and Products has recently set forth recommendations for better
informing and protecting investors by requiring greater disclosure by issuers, including initialand ongoing information about underlying asset pool performance.
Recommendation # 6:
Securities market regulators working through IOSCO to further investigate thedisclosure requirements for complex structured products, including public disclosure
requirements for financial reporting purposes, and make recommendations for
additional improvements if necessary, taking account of work by supervisors and otherrelevant bodies.
Securities and Securitization
30.
A number of initiatives are underway to improve aggregate information availability
on securities markets and on securitization.

5

In this respect, the FSF recommended in 2008 that investors, industry representatives and auditors should
develop principles that should form the basis for useful risk disclosures. Also, the FSF recommended thatinvestors, industry representatives and auditors should meet together, on a semi-annual basis, to discuss the key
risks faced by the financial sector and to identify the types of risk disclosures that would be most relevant anduseful to investors at that time.

17Work on monitoring securitization is being undertaken by statisticians, principally
within the Working Group on Securities Databases (WGSD), chaired by the IMF.

The Handbook on Securities Statistics (Handbook), jointly published by the BIS, the
ECB and the IMF in May 2009, initially focused on statistics for debt securities
issuance, with securitization receiving special attention. The second phase of thework focuses on debt security holding statistics. There is a need for the WGSD tocommunicate the requirements and data format as specified in the recently released
first part of the Handbook.



The BIS, supported by the CGFS and the ECB, has a project to improve its publisheddomestic and international securities statistics for major national economies,
including the G-20 economies, on the basis of the conceptual framework set out in the
Handbook.

The OECD’s Working Party on Financial Statistics is also working on securitization,in particular on so-called off-balance sheet securitization.



The ECB published at end-January 2009 a new ECB Regulation concerning assets
and liabilities of Financial Vehicle Corporations (FVCs) engaged in securitizationtransactions and will publish related statistics from end-2010 onwards.



The European Securitization Forum 6 has also recently announced the publication of a
new and much expanded Securitization Data Report that consolidates relevant
aggregated European and US data for the securitization markets.

31.
Coordination among international agencies is needed to avoid duplication of work fornational agencies. Further, there may be a need to consider reporting of qualitative aspects of
securitized transactions, for example by monitoring in a systemic manner the structure of thecomplex transactions in a standardized format.
Recommendation # 7:
Central banks and, where relevant, statistical offices, particularly those of the G-20
economies, to participate in the BIS data collection on securities and contribute to thefurther development of the BIS-ECB-IMF Handbook. The WGSD to develop andimplement a communications strategy for the Handbook.

6

The European Securitization Forum (ESF) is an affiliate of the Securities Industry and Financial Markets
Association (SIFMA) and is a forum for the European securitization industry.

18
International Network Connections
32.
The need to improve understanding of international financial network connections
was a very clear message from the consultations made for the preparation of this report,
including the users’ conference organized by the FSB and the IMF in July 2009. Addressing
this issue requires coordination at the international level, drawing on the work of central
banks, national statistical institutes, and supervisory authorities.
Systemically Important Global Financial Institutions
33.
A key lesson of this crisis has been that the interconnectedness of systemicallyimportant financial institutions has significant implications for global and domestic financial
stability. More needs to be done to monitor these interconnections and to assess theirimplications in order to improve the understanding, and enable a closer monitoring, of theallocation of risks internationally. This has two aspects.
34.
First, losses experienced by a relatively small number of institutions, together with
their cross-border linkages within and across national markets, were important factors in thepersistence and the rapid spillover of the crisis. For those analyzing global stability, an
understanding of the global network linkages and risk exposures is essential for anassessment of emerging vulnerabilities. For those responsible for financial stability at thenational (or regional e.g., European Union) level, it is essential to know how their respective
domestically headquartered financial institutions, and markets, are linked both domesticallyand to these important global institutions.

35.
Second, despite improvements in home-host arrangements, serious questions havebeen raised by financial stability experts about the adequacy of information sharing on
financial institutions that have local offices but are headquartered abroad. These questions
can sometimes be addressed at a regional level within established frameworks, such as the
specific provisions in the European Union’s Capital Requirement Directive. Further, thesupervisory colleges established for a number of large global financial institutions under the
auspices of the FSB and others offer a channel for information sharing among supervisors.
However, there is a need to consider further ways to achieve adequate exchange of
information with host supervisors that are not members of the colleges without imposing
unnecessary burdens on the college process. Another area to be explored is improved
information sharing with non-supervisory central banks.
36.
Measures to identify the network exposures among systemically important global
financial institutions, and with respect to national markets, through a framework of consistentreporting, would address both of these considerations. The development of common
reporting templates for use across countries (and regions) would permit aggregation at thenational level and cross-institutional and country comparison. If sufficiently granular, it
would facilitate measurement of concentration, (including “crowded trades”) and19
identification of network links. In such work, it would be important to recognize the complex
structure of these institutions, and take account of evolving supervisory reporting needs. 7
Ideally, the information should cover the exposures represented by their trading book, theirloan book, and their funding risks, both on- and off- balance sheets. Putting in place such aframework would need to address confidentiality issues and legal restrictions on the sharing
of information faced by some national supervisors. Implementing such a framework would
require establishing criteria for the identification of institutions that are particularly importantfor systemic stability, which is the subject of ongoing work arising from another request of
the G-20. 8
37.
An international body could be best suited to compile and aggregate the national dataat the global level. The availability of frequent and timely aggregate data on the cross-borderactivities of systemically important financial institutions would support the monitoring of
global financial stability, given for example, the lags in availability of the comprehensive
BIS IBS.
38.
In making this proposal, it is recognized that there is a need to liaise and consult withthe appropriate national (and regional) agencies. Success in this area requires high-levelsupport—in particular in the countries and regions that are homes to the majority of thesystemically important global financial institutions—as well as the necessary resources andongoing cooperation. To complement this work public disclosure could be strengthened,accompanied by strengthening consistency in financial accounting standards and moves
toward more standardized reporting among G-20 countries.
Recommendation # 8:
The FSB to investigate the possibility of improved collection and sharing of information
on linkages between individual financial institutions, including through supervisory
college arrangements and the information exchange being considered for crisis
management planning. This work must take due account of the importantconfidentiality and legal issues that are raised, and existing information sharing
arrangements among supervisors.

7

The development of the template would require expertise from supervisory as well as statistical experts. The
latter will have to address the methodology to be used for consolidation, as in the case of the IMF FSI, and the
BIS consolidated IBS.

8

See “Guidance to Assess the Systemic Importance of Financial Institutions, Markets and Instruments: Initial
Considerations” IMF/BIS/FSB, forthcoming. The paper emphasizes that the assessment methods should involvea high degree of judgment and that the guidelines should be sufficiently flexible to apply to a broad range ofcountries and circumstances.

20
Recommendation # 9:
The FSB, in close consultation with the IMF, to convene relevant central banks,
national supervisors, and other international financial institutions to develop by end2010 a common draft template for systemically important global financial institutions
for the purpose of better understanding the exposures of these institutions to different
financial sectors and national markets. This work should be undertaken in concert withrelated work on the systemic importance of financial institutions. Widespread
consultation would be needed, and due account taken of confidentiality rules, before
any reporting framework can be implemented.
International Banking Statistics (IBS) and the Coordinated Portfolio Investment Survey(CPIS)
39.
The long-established BIS’s IBS provide from-whom-to-whom data on internationalbanking flows on an aggregated basis on a quarterly frequency, while the IMF’s CPIS
provide similar information for portfolio investment (debt and equity) positions on an annual
frequency. These surveys provide a wealth of information on cross-country financial
linkages, and include many important financial centers. However, there are significant
reporting lags. These surveys could be strengthened both in terms of country coverage, thedata series they cover, and, for the CPIS data, frequency and timeliness. The growing
importance of nonbank financial institutions also suggests the need for their separate sectoral
identification in the BIS’s IBS data, while information on funding patterns in theinternational financial system would support “crowded trade” analysis. Consultations on
enhancements should take place in the CGFS and the BOPCOM.
40.
In developing a new template for systemically important global financial institutions,account should be taken of the series covered and accounting rules in the IBS and the CPIS
to avoid duplication of effort.
Recommendation # 10:
All G-20 economies are encouraged to participate in the IMF’s CPIS and in the BIS’s
IBS. The IMF and the BIS are encouraged to continue their work to improve thecoverage of significant financial centers in the CPIS and IBS, respectively.
Recommendation # 11:
The BIS and the CGFS to consider, amongst other improvements, the separate
identification of nonbank financial institutions in the consolidated banking data, as wellas information required to track funding patterns in the international financial system.
The IMF, in consultation with the BOPCOM, to strive to enhance the frequency andtimeliness of the CPIS data, and consider other possible enhancements, such as theinstitutional sector of the foreign debtor.

21International Investment Position (IIP) data
41.
The IIP is an important data source for understanding the linkages between thedomestic economy and the rest of the world. The number of countries reporting this dataset
to the IMF has increased sharply over the past decade, but with just over 100 reporting
countries coverage is still incomplete. Frequency and timeliness of reporting lags that of thetransactions data in the balance of payments.
42.
The crisis has increased attention on important vulnerabilities on both sides of theexternal position. For a number of economies, international assets turned out to be a sourceof weaknesses, such as arising from the quality of assets held. Further work on compilingdata on countries’ gross external assets would be a major step forward, following theincreased focus on liabilities over the past decade. This work can be linked to that of
improving from-whom-to-whom exposures. External debt remained a source of vulnerability,
particularly in terms of liquidity risk.
43.
The recently internationally agreed Balance of Payments and International
Investment Position Manual, sixth edition (BPM6), will help address some of the data
deficiencies regarding the IIP. BPM6 provides a more detailed sectoral breakdown, including
identification of the non-bank financial institutions; standardized reporting for the currencycomposition of international assets and liabilities; information on the impairment of crossborder loans; and supplementary (voluntary) detail on the remaining maturity of international
assets and debt liabilities, so supporting liquidity analysis.
Recommendation # 12:
The IMF to continue to work with countries to increase the number of IIP reporting
countries, as well as the quarterly reporting of IIP data. The BPM6 enhancements to
the IIP should be adopted by G-20 economies as soon as feasible.
44.
The crisis has highlighted the lack of data on cross-border exposures of nonfinancial
corporates. “Onshore” corporates, both financial and nonfinancial, used offshore entities toraise finance and provide implicit guarantees, and this was unknown to policy makers. In
some emerging markets, authorities were unaware of significant corporate exposure to
exchange rate derivative products because these were booked outside of their jurisdictions.
For instance, small and medium firms that were highly concentrated in exporting businesses
in some instances acquired foreign exchange exposures through derivatives contracts bookedon foreign markets. Data deficiencies were mostly in relation to cross-border transactions.
45.
While some guidance exists to identify such cross-border exposures—such as the“ultimate risk” measures of the BIS’s consolidated IBS data and as set out in the TFFS’s
Guide on External Debt Statistics, and Table 6.4 in the Financial Soundness Indicators
Guide to identify derivative exposures—a more comprehensive approach is needed. Work inthis area will need to address the methodological and practical issues of handling the concept
of consolidation and the definition of corporate groups. This is a new initiative.

22
Recommendation # 13:
The IAG to investigate the issue of monitoring and measuring cross-border, including
foreign exchange derivative, exposures of nonfinancial, and financial, corporations with
the intention of promoting reporting guidance and the dissemination of data.
Cross-border Activities of Nonbank Financial Institutions (NBFIs)
46.
In October 1998, the G-22 report on transparency and accountability recommended
that “a working party comprising private sector representatives, international groups, andnational authorities be formed as soon as possible to examine the modalities of compiling andpublishing data on the international exposures of investment banks, hedge funds, and otherinstitutional investors.” This recommendation reflected the growing significance of suchinvestors in international markets. The intention was to model this collection on the BIS’s
IBS, but it was not taken forward.
47.
The importance of monitoring the activities (stocks and flows) of NBFIs has again
arisen in the ongoing crisis. Indeed, the scope of these institutions has widened in the context
of the so-called “shadow banking system.” This concept is broadly defined as financial
intermediation by institutions, markets, and products outside of the banking sector andtraditional securities markets: nonbank financial institutions (including off-balance sheet
vehicles), financial products, such as asset backed securities, and markets, such as repo
markets.
48.
There are various data sources on nonbank financial institutions, including theOECD’s data on institutional investors (life and non-life insurance companies, pension funds
and investment funds), and the ECB’s enhanced data collection on investment funds,
including hedge funds. Also, there are a number of recommendations in this report thatwould strengthen coverage of NBFIs within existing initiatives. Further, there are other key
stakeholders, such as, but not limited to, the International Association of Insurance
Supervisors, and commercial data suppliers.
49.
Current work to expand the regulatory perimeter will result in reporting requirements
on unregulated financial entities. This should eventually provide a basis for improved data on
NBFIs.
Recommendation # 14:
The IAG, consulting with the FSB, to revisit the recommendation of the G-22 to
examine the feasibility of developing a standardized template covering the international
exposures of large NBFIs, drawing on the experience with the BIS’s IBS data, otherexisting and prospective data sources, and consulting with relevant stakeholders.

23
Sectoral and Other Financial and Economic Datasets
50.
The crisis has revealed weaknesses in the availability of some sectoral and otherfinancial and economic datasets. Many of the actions that need to be taken to improve data
availability lie at the national level. However, the international agencies can do more topromote and advise on the relevance of these datasets, and seek synergies with national
statistical offices and central banks in closing the data gaps.
Sectoral Data
51.
The importance of sectoral data, including from-whom-to-whom information, hasbeen highlighted by the crisis. Indeed, the ongoing crisis provides the context for new
thinking about how to measure vulnerabilities in the nonfinancial sectors that might feedback onto the financial system, and vice versa. Empirical analysis is crucial to addressing
how household and nonfinancial firms’ financial positions affect borrower delinquencies anddefaults and thereby, ultimately, the balance sheet position of financial institutions. In thisregard, improved data on disposable income and savings, and indebtedness of the household
sector are also needed.
52.
The increased availability of sectoral financial accounts and balance sheets would
advance the analysis of the systemic risks and vulnerabilities, and the interrelationshipbetween the real sector accounts and the financial accounts. The Balance Sheet Approach(BSA) provides additional focus on vulnerabilities arising from the maturity (liquidity),
currency (domestic/foreign), and capital (leverage) structure of key financial sectors.
53.
Linking data on financial flows within the economy—as is contained in countries’
flow of funds accounts—with data on expenditures on goods and services and factors of
production—as is contained in the national accounts—is important for studying financial andreal sector linkages. Being able to link expenditure and production categories in the national
accounts with financial flows in the flow of funds accounts would facilitate understanding ofwhether and how expenditure and production decisions are restrained by disruptions in credit
markets. However, due to the complexities of the statistical work, it is not an exercise thatappears to have been widely performed.

54.
An additional data challenge is presented by entities that fall outside the regulatory
perimeter, and that may not disclose information on their exposures and operations in a
sufficiently granular manner to allow assessments of their systemic relevance. An expansion
and refinement in flow of funds data to cover financial entities that fall outside the regulatory
perimeter, and in the “shadow banking system,” could help track the relevance of such
entities in the overall flows of funds in the economy, and hence to alert authorities tosituations where more intensive monitoring may be required. The OECD’s work on
developing data sources on institutional investors, referred to above, is important in thisregard.

24
55.
These initiatives tie in with the ongoing work on the SNA implementation programs,
which are coordinated through the Inter-Secretariat Working Group on National Accounts(ISWGNA), and the work of the IMF to promote Standardized Report Forms for monetaryand financial statistics, and include improving timeliness, frequency, and country coverage.
Recommendation # 15:
The IAG, which includes all agencies represented in the ISWGNA, to develop a strategy
to promote the compilation and dissemination of the BSA, flow of funds, and sectoral
data more generally, starting with the G-20 economies. Data on NBFIs should be aparticular priority. The experience of the ECB and Eurostat within Europe 9 and theOECD should be drawn upon. In the medium term, including more sectoral balance
sheet data in the data categories of the Special Data Dissemination Standard could beconsidered.
56.
As suggested above, in analyzing sectoral data to assess risks, aggregate ratios can bemisleading because they do not capture developments in the tails of distributions. Averages
need to be complemented by distributional information. This requires linking national
accounts concepts with micro-economic concepts of income and wealth and merging macroand micro-datasets. This is also a central conclusion of the report by the Commission for the
Measurement of Economic Performance and Social Progress (‘Stiglitz-Sen Commission’) put
in place by the President of France. The OECD has committed to initiate work to follow up
on several recommendations emerging from the Commission’s report.
Recommendation # 16:
As the recommended improvements to data sources and categories are implemented,
statistical experts to seek to compile distributional information (such as ranges andquartile information) alongside aggregate figures, wherever this is relevant. The IAG is
encouraged to promote production and dissemination of these data in a frequent andtimely manner. The OECD is encouraged to continue its efforts to link national
accounts data with distributional information.
Government Finance Statistics (GFS)57.
The fiscal stimulus and financial system support measures introduced by manynational authorities in the recent crisis have led to substantial increases in fiscal deficits andgovernment debt, which in some cases are hard to measure. Over time macroeconomic policy
will be greatly complicated if there is not full understanding of the size of a country’s fiscal
position. GFS will therefore likely be of a higher profile than for many years past. Work has
9

The ECB and Eurostat have developed integrated financial and nonfinancial accounts for all institutional
sectors of the Euro area in line with international standards. These data are published quarterly.

25
been underway in the IMF to promote the reporting of general government data on astandardized basis using the methodology of the Government Finance Statistics Manual
2001. 10 The crisis has further highlighted data gaps and problems in the comparability of
government finance data, with wide differences in coverage and definitions in national fiscal
data, particularly for balance sheet items. Further, the frequency and timeliness ofharmonized fiscal data are insufficient to monitor trends in many cases.
58.
The World Bank, in cooperation with the TFFS, is creating an internet-based databaseon general government and public sector debt statistics (“public sector debt database”) topromote the availability of such data and to enhance international comparability. Better dataon the maturity profile and classification (such as currency and holder) is needed. The IMF,
in cooperation with the TFFS, is preparing a guide to the compilation and use of public sector
debt statistics to support work by countries to improve the availability of data.
Recommendation # 17:
The IMF to promote timely and cross-country standardized and comparable
government finance data based on the accepted international standard, the Government
Finance Statistics Manual 2001.
Recommendation # 18:
The World Bank, in coordination with the IMF, and consulting with the TFFS, tolaunch the public sector debt database in 2010.
Property Markets
59.
Data on the stock of dwellings, the associated price levels and their changes over time
are critical ingredients for understanding household wealth, its evolution over time, and forthe vulnerability of households’ financial position. Similar information on commercial
property is relevant not just for monitoring the wealth of the corporate sector, but also forfinancial stability more generally, given that commercial property accounts for a significant
share of collateralized lending for many banks. Where data exist, their international
comparability is limited.
60.
Work is underway to produce a handbook on real estate price indices, led by Eurostat
under the auspices of the Inter-Secretariat Working Group on Price Statistics (UNECE, ILO,
IMF, OECD, World Bank, and Eurostat) that over time could help improve cross-country
comparability. Further, the BIS and its member central banks have collected a large numberof real estate price indicators from various countries around the world.

10

The GFSM 2001 is subject to revision in accordance with 2008 SNA.

26
Recommendation # 19:
The Inter-Secretariat Working Group on Price Statistics to complete the planned
handbook on real estate price indices. The BIS and member central banks to investigate
dissemination on the BIS website of publicly available data on real estate prices. The
IAG to consider including real estate prices (residential and commercial) in the
Principal Global Indicators (PGI) website.
Communication of Official Statistics
61.
To improve the communication of official statistics and timeliness of data, the IAG
launched the Principal Global Indictors (PGI) website, in April 2009. The website includes
economic and financial data for G-20 economies and has been receiving a healthy number of“hits” per day. There are plans to develop world and regional totals for a key set ofindicators.
62.
In enhancing the website, the IAG should consider making available longer runs ofhistorical data, as well as more detailed information about conditions in the banking system,and the risks distributed within nonfinancial sectors’ balance sheets.
Recommendation # 20:
The G-20 economies to support enhancement of the PGI website, and close the gaps in
the availability of their national data. The IAG should consider making longer runs ofhistorical data available.