Financial Soundness Indicators: Recent Developments and Plans Manik Shrestha IMF Statistics Department OECD Working Party on Financial Statistics Paris, October 24-27, 2011 The views expressed herein are those of the author and should not be attributed to the IMF, its Executive Board, or its management.

Background on FSI Work IMF started to work on developing Financial Soundness Indicators (FSIs) together with international community in early 2000 – A draft compilation guide was prepared in 2004 Final version published in 2006 Amendments to guide were introduced in 2007 to enhance international comparability, particularly for consolidation rules and the use of Basel principles and IFRS for compiling underlying data series – IMF launched online database of FSIs in July 2009 ( Includes data underlying FSIs, where available 2

Scope of FSIs A list of 40 FSIs (approved by the IMF’s Executive Board) – 25 for deposit-takers (12 core and 13 encouraged FSIs) – 2 for other financial corporations (encouraged) – 5 for non-financial corporations (encouraged) – 2 for households (encouraged) – 2 for market liquidity (encouraged) – 4 for real estate markets (encouraged)  See Annex for a complete list and reporting status 3

FSIs: Recent Developments FSIs for inclusion in the SDDS – Approval in March 2010 by the IMF Board to include 7 FSIs as a new data category in SDDS on an encouraged basis – Technical work is underway to make these FSIs available through the SDDS – One FSI not in the list of original 40 FSIs in the IMF’s Global Financial Stability Report (GFSR) to be integrated into the FSI project – GFSR FSIs will become by-product of overall IMF FSI Project – Collection and preparation of FSIs for inclusion in GFSR starting with the April 2011 issue Work focused on non-FSI reporters included in GFSR Work with current FSI reporters to obtain time series data – One FSI not in the list of original 40 SDDS Plus has a proposal to – Include almost all FSIs encouraged in the SDDS as required in the SDDS Plus – Add two real estate prices to the list of required data in the SDDS Plus 4

FSI Reference Group (FSIRG) Meeting FSIRG meeting is scheduled to take place during November 15-16, 2011 at IMF Headquarters An Issues Paper was circulated in July 2011 that identifies issues for discussion – FSIs for deposit takers Impact of the BASEL III Accord on the scope and definition of FSIs – FSIs for other financial corporations Scope of FSIs, sectoral breakdown of OFCs, large non-bank financial institutions, etc. – FSIs for non-financial corporations, households, and real estate markets Scope or refinement of FSIs for non-financial corporations Scope or refinement of FSIs for households Expanding the reporting of real estate prices – Improving the frequency and timeliness of FSIs Higher frequency, at least quarterly; timeliness to be reduced to 8-16 weeks? Underlying profit and loss accounts and balance sheets – Improving the cross-country comparability Consolidation basis and other issues for better standardization 5

FSIs Concerning Households I33 Household debt to GDP (encouraged) – The data for household debt comprise debt incurred by resident households of the economy. This FSI measures the overall level of household indebtedness (commonly related to consumer loans and mortgages) as a share of GDP. I34 Household debt service and principal payments to income (encouraged) – This FSI is calculated by using household debt service payments as the numerator and gross disposable income over the same period as the denominator. It measures the capacity of households to cover their debt payments (interest and principal).  has data entries (quarterly and/or annual) from (at least) 2010 Q1 for only 22 and 8 respectively for the above indicators of the 65 countries on the database. Many not up to date. I37 Residential real estate price index (encouraged) – See next slide 6

Residential Property Prices Indexes A difficult area: —Only a sub-set of properties are transacted each period. Not comparing prices of like with like. —Data sources for weights and prices differ between countries depending on legal registration and financing arrangements. Sources include land registry, lenders, realtors. Progress on methods: Handbook on Residential Property Prices Indexes, version 4, May 2011 on: ppi_handbook ppi_handbook —Essentially complete: aim is to facilitate the setting-up/improvement of residential property prices. —Focus is on methods of quality-mix adjustment; also includes a conceptual issues, uses, methods used, and empirical examples. Progress on implementation: Eurostat initiative to develop harmonized RPPIs. Experimental results available for owner-occupied housing (OOH) in the framework of the Harmonized Indexes of Consumer Prices (HICP) for countries in the euro area and at the European Union level. Progress on dissemination: BIS database —Currently includes data from 43 countries at different frequencies. Data differ significantly from country to country in terms of type of property, area covered, vintage, priced unit, and compilation methods. —Country RPPIs included are in some cases a selection of those available. 7

Other Data Initiatives Related to Households Income, consumption, and wealth of households – The Inter Agency Group (IAG) on Economic and Financial Statistics (BIS, Eurostat, ECB, IMF, OECD, UN, and World Bank) is promoting the production and dissemination of sectoral macroeconomic accounts, including those for the household and nonprofit institutions sector. Financial interconnectedness of household with the other economic sectors (including the rest of the world) – The IAG is promoting the development of from-whom-to-whom breakdowns of the sectoral macroeconomic accounts for financial positions and flows within the context of the sectoral accounts work. Distributional aspects and micro-macro link – OECD and Eurostat task forces will develop the methodology for matching micro data with national accounts. Once methodologies are in place, periodic monitoring of the distribution of household economic resources (income, consumption, and wealth) within the System of National Accounts could be envisaged. This might extend to household debt, given its importance to the identification of vulnerabilities developing in the domestic economy. 8

9 GFSR – IMF’s Global Financial Stability Report