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Can Can the OECD Bank Profitability database the OECD Bank Profitability database
satisfy data needs for FSIs?satisfy data needs for FSIs?
Working Party on Financial StatisticsWorking Party on Financial Statistics10-11 October 200510-11 October 2005
by Michèle Chavoix-Mannato, OECD/NAFS and Paolo Poloni, IMF
Presentation Chapter 1: The OECD database on Bank Profitability
Chapter 2: The IMF Compilation Guide on Financial
Soundness Indicators
Chapter 3: Gaps between the current OECD database and
data requirements for compiling FSIs
Issues for consideration of the WPFS
Chapter 1:
The Bank Profitability database
First issued in 1987 Based on a standard framework Three tables
Income statement and balance sheetStructure of the financial systemClassification of banks’ assets
Methodological information
Need for changes
Last review of the database in mid-1990s
Discussions at the 2002 WPFS meeting In favour of more comparabilityNeed for more information
Opportunity to seize: the FSIs
Statistical coverage of the data Timeliness: 5 to 12 months after the end of the year Period coverage: 1979 at the soonest Table 1 coverage
Income statement: 23 items Balance sheet: 18 items Capital adequacy: 5 items
Table 2 coverage Data on the structure of national financial systems
Table 3 coverage Assets: residents/non-residents; domestic/foreign
currencies
Table 1: Income statement and Balance sheet
Institutional coverage
All Banks 16 countries Commercial Banks 18 countries Large Commercial Banks 7 countries Foreign Commercial Banks 7 countries Savings Banks 8 countries Co-operative Banks 6 countries
Table 2: Structure of the financial system Central Bank 27 countries
Other monetary institutions Commercial banks Foreign banks Savings banks Co-operative banks
23 countries
22
18
14
17
Other financial institutions Mortgage credit institutions Development credit institutions Finance companies
19 countries
12
8
11
Insurance institutions Insurance companies Pension funds
22 countries
23
1
All financial institutions 19
Residents / Non-residents 24 countries
Domestic / Foreign currencies 25 countries
No breakdown available 4 countries
Table 3:Classification of assets of banks
Institutional coverage (continued)
Instructions to fill the OECD questionnaire
Definitions given for a number of items of the income statements and balance sheets
No definition provided for the banks to cover
World-wide consolidation recommended foreign branches of reporting banks included Domestic/foreign subsidiaries included
Presentation Chapter 1: The OECD database on Bank Profitability
Chapter 2: The IMF Compilation Guide on Financial
Soundness Indicators
Chapter 3: Gaps between the current OECD database and
data requirements for compiling FSIs
Issues for consideration of the WPFS
One of the IMF responses to 1997 financial crises Was finalized in July 2004 following extensive consultation Aims to promote compilation of cross-country comparable FSIs by
providing guidance on the concepts and definitions, data sources, and compilation techniques
Provides a new statistical framework that draws on 1993 SNA, MFSM, IASs, and BCBS standards
Flexibility is allowed to accommodate differences between various measurement systems, to deal with data shortage, and to meet analytical needs
Encourages the dissemination of data and metadata Covers 12 core indicators for the DT sector and 27 encouraged
indicators for DT and other sectors.
The Compilation Guide on FSIs (Guide)
What are FSIs? FSIs are indicators of the current financial health and
soundness of the financial institutions in a country, and of their corporate and household counterparts
FSIs include both aggregated individual institution data and indicators about the markets in which the financial institutions operate
Why are FSI data needed? FSIs identify the strengths and weaknesses of the
financial sector and their counterparts for the purpose of supporting macroprudential analysis that could form a basis for taking actions
What are FSIs and why are needed?
Conceptual framework: definitions of institutions and markets, accounting principles, sectoral financial statements, aggregation and consolidation)
Specification of FSIs: guidance on how to calculate FSIs for deposit-takers, other sectors, financial markets, and real estate markets
Practical aspects on compilation and dissemination Analytical aspects: FSIs are part of a larger body of
information used to monitor financial stability
Appendices
Structure of the Guide
Aggregation and consolidation (see next slides) Time of recognition of flows and positions
Use of accrual basis of accounting Recording transactions in accordance with change in ownership
Provisioning and nonperforming loans Valuation Foreign-currency-denominated instruments and
currency for conversion Maturity
Short-term is one year or less; long-term is more than one year Remaining and original maturity
Recording of gains and losses on financial instruments
Key methodological issues (1)
Aggregation and consolidation are methods used to derive sector-level data Aggregation is the summation of data on gross
positions or flows Consolidation is the elimination of positions and flows
between units within a group or between groups within a sector
Consolidation approaches Cross-border consolidation of domestically
controlled institutions (recommended approach) Domestic consolidated data (supplementary
approach) Cross-sector consolidation of domestically controlled
institutions (third possible approach)
Key methodological issues (2)
The compilation of FSIs for DT necessitates information to make three main types of adjustments: Deconsolidation – to eliminate business of non-DT
entities (subsidiaries and/or parent holding companies) within the group
Intra-sector adjustments – to eliminate double counting of capital and income among the reporting population (see slide 4)
IFRS-related adjustments – when accounting standards are different from the accounting benchmarks in the Guide (see slide 5)
Key methodological issues (3)
Intra-sector adjustments 1. Adjustments to the sector-level income statement
Provisions for accrued interest on NPA to other DTs Fees/commissions receivable and payable from other DTs Dividends receivable and payable from other DTs The investing DT’s pro-rated share of the earnings of associate
DTs Other income receivable and payable from other DTs Gain and losses on DT’ ownership of equities of other DTs Provisions on loans to other DTs
2. Adjustments to the sector-level balance sheet Investments in associates resident in the economy The market value of shares and other equity investments in
other DTs Specific provisions on claims on other DTs
Key methodological issues (4)
IFRS-related adjustments Adjustments pertain to
recording all fees/commission under noninterest income deconsolidating non-DT subsidiaries and applying pro-
rated approach for recording holdings of shares of unconsolidated subsidiaries
recording loans gross of general provisions recording tradable held-to-maturity instruments at market
value not recording nontradable instruments at fair value if
these fair values are not reliable, but at nominal value (with appropriate provisioning)
recording all gains/losses on all tradable assets/liabilities, including derivatives, under relevant item in income and expense statement
Key methodological issues (5)
Aim: to develop countries’ capacity to compile FSIs and promote cross-country comparability of FSIs
Voluntary participation by IMF member countries 62 participating countries (including 29 OECD countries)
Participating countries agree to Compile the 12 core FSIs Provide the IMF (by end-July 2006) the data and metadata for core FSIs
as of a reference date (end-2005) using standard report forms Nominate a single agency to act as the point of contact
Participating countries are encouraged to Compile some or all of the encouraged indicators Provide the IMF the data and metadata for encouraged FSIs Other information: sectoral financial statements, measures of dispersion
and concentration, historical data series
CCE
Presentation
Chapter 1:
The OECD database on Bank Profitability
Chapter 2:
The IMF Compilation Guide on Financial Soundness Indicators
Chapter 3:
Gaps between the current OECD database and data requirements for compiling FSIs
Issues for consideration of the WPFS
Main gaps
Data frequency and timeliness
Institutional coverage
Number and definition of variables
Consolidation approach
Accounting rules
Data frequency and timeliness
OECD current practice: annual data, within 12 months
FSI Guide: quarterly frequency, within 3 months
Proposal to close the gap: frequency remains annual; timeliness is reduced to 3 - 6 months
Institutional coverage
OECD current practice: only the banking sector
FSI Guide: FSIs cover the DT sector and other sectors
Proposals to close the gap: use the IMF definition of DT sector; common standard framework for table 2 “Structure
of the financial system”
Number and definition of variables
OECD current practice: 49 variables collected, definitions largely follow national practice
FSI Guide: larger number of variables, differences in definitions and presentation of certain items
Proposals to close the gap: additional variables to be collected by the OECD, following definitions of the Guide
OECD current practice: cross-border cross-sector consolidation approach; neither sector-level nor IFRS-related adjustments
FSI Guide: cross-border approach for domestically controlled DTs; sector-level and IFRS-related adjustments
Proposals to close the gap : converge to the consolidation approach recommended by the Guide, make intra-sector and IFRS-related adjustments
Consolidation approach
Accounting rules
OECD current practice: no accounting guidance
FSI Guide: guidance re. Valuation, use of accruals, recording of gains/losses on financial instruments, ecc.
Proposals to close the gap: use IMF accounting guidance; explore impact of IFRS
Presentation
Chapter 1: The OECD database on Bank Profitability
Chapter 2: The IMF Compilation Guide on Financial
Soundness Indicators
Chapter 3: Gaps between the current OECD database and
data requirements for compiling FSIs
Issues for consideration of the WPFS
QUESTION 1
Are there Delegates who do not agree
that the OECD should adapt
its Bank Profitability database
to increase its usefulness,
relying on the work undertaken by the IMF
on Financial Soundness Indicators (FSI)
so that it better meets
the requirements for the compilation of FSI?
Preliminary questions to the WPFS
QUESTION 2
Among Delegates who agree on this work,
which are the experts who would volunteer
to start an EDG to discuss
all issues that are necessary
to ensure a better convergence of
Bank Profitability on the IMF Guide?
Preliminary questions to the WPFS (cont.)
Issue 1:
A further investigation regarding the application of the new IAS rules
before recommending any specific accounting rules based on the IMF Guide
seems to be appropriate:
Are there comments?
Issues for Consideration of the WPFS
Issue 2:
Is there any country which is not able to reduce the time-lag,
between 3 – 6 months,after the end of the reference year
in the transmission of data to the OECD?
Issues for Consideration of the WPFS
Issue 3:
Do Delegates agree that the OECD should collect additional data
on income statement and balance sheet for the sector ‘Deposit-Takers’ as a whole
and publish them in Table 1 of the OECD publication?
Issues for Consideration of the WPFS
Issue 4:
It seems appropriate to use in priority definitions and recommendations
given in the IMF Guide:
are there any objections?
Issues for Consideration of the WPFS
Issue 5:
The list of items relating to Income Statement and Balance Sheet currently requested by the OECD should be expanded in order to be able
to calculate the core-set of FSIs:
Do Delegates agree to rely on the EDG to discuss and decide on the additional
items to be collected?
Issues for Consideration of the WPFS
ConclusionsConclusions
The Secretariat thanks the IMF which has The Secretariat thanks the IMF which has contributed to this exercicecontributed to this exercice
The Secretariat thanks the volunteering The Secretariat thanks the volunteering countries which are ready to participate to countries which are ready to participate to an EDG in order to discuss remaining an EDG in order to discuss remaining issues and decide on the follow-up of this issues and decide on the follow-up of this exerciseexercise. .