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Robert W. EdwardsDirectorStatistics DepartmentInternational Monetary Fund

OECD World Forum on Statistics, Knowledge, and PolicyIstanbul, June 27-30, 2007

Policy and Statistical Issues Underpinning Financial Stability: The IMF Perspective

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Financial Stability in Global World

Unprecedented deepening in financial markets

Internationalization of financial institutions

National economies part of vast network of closely interconnected balance sheets, with potential for severe spillover effects

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Financial Stability Implications For individual institutions, globalization

helps diversify risks and may have improved financial stability, particularly in face of relatively small shocks

At the systemic level, severe crises may be more broad-ranging and difficult to deal with due to spillovers Financial instability in one country may

be transmitted to other countries or affect developments in regional or global markets

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Containing Potential Risks Need to reduce likelihood of systemic crises

and limit their severity if they occur: Effective monetary policy

Sound fiscal stance

Deep, broad, and resilient financial systems Coordinated oversight of cross-border financial

institutions

Cross-border crisis management and resolution arrangements

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Role of the IMF Through universal reach and expertise on

macroeconomic and financial issues and on statistics: Enhance monitoring of global economy

Help individual countries strengthen resilience of their economies

Help provide timely, comprehensive, and internationally comparable data

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New Directions in Financial Surveillance

No single widely-accepted methodology for assessing financial sector stability

Two key questions: What are key interactions between macro-

economy, financial markets, and financial institutions?

What is role of financial sector in initiating, transmitting, or amplifying disturbances in the economy?

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IMF Financial Surveillance Framework Continued emphasis on the Financial Sector

Assessment Program (FSAP) Designed to assess stability of system as a whole 120 initial assessments and 27 updates (June 2007)

Greater financial coverage in Article IV consultations Ensuring continuity between FSAP assessments Integrating financial analysis into traditional macro-

economic analysis.

More global perspective Integrating multilateral and regional issues Regional FSAPs

FSAP Participation (as of May 2007)

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Analytical Tools Use of indicators in surveillance

Financial Soundness Indicators (FSIs) of banks and their clients are a key tool of surveillance

Forward-looking tools such as stress tests and market-based indicators support analysis of FSIs

The Balance Sheet Approach (BSA) Based on stocks of assets and liabilities of economic

sectors

Examine determinants and evolution of these stocks and how they can trigger flow adjustments (capital inflows, holdings of foreign currency assets)

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Statistical Initiatives Collecting and presenting high quality

statistical data to support analytical work needed for surveillance: Intensification of cross-border financial flows and

positions with spillover effects

Lack of good-quality cross-country comparable financial soundness indicators

Balance sheet nature of major recent crises

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Cross-Border Financial Flow Data

External Sector Data International Investment Position (IIP)

Coordinated Portfolio Investment Survey (CPIS)

Coordinated Direct Investment Survey (CDIS) (planned)

Data Template on International Reserves and Foreign Currency Liquidity (Reserve Template)

Currency Composition of Official Foreign Exchange Reserves (COFER)

Joint External Debt Hub (JEDH)

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Financial Soundness Indicators

To encourage compilation of internationally comparable FSIs: Compilation Guide: Financial Soundness

Indicators (12 core and 27 encouraged FSIs)

Coordinated Compilation Exercise 62 participating countries

End-2005 FSI data and metadata posted on IMF website for 57 countries

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Meeting data needs of BSA Intensive data framework requiring stock

data, currency denomination, and maturities of sectoral assets and liabilities Standardized Report Forms (SRFs) introduced in

2005

SRF data provide most of the information needed for BSA

About 80 countries report SRF data to IMF

Other data sources: CPIS, IIP, and JEDH

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Much Work Remains to be Done Policy and analytical front

Provide key insights about financial risks and vulnerabilities

More attention to macro-linkages Better use of available data Strengthen focus on spillovers and cross-country links

Statistical front Wider production and reporting of timely data to shed

light on global financial flows Greater coverage of data essential for BSA Regular collection of FSIs and expansion of indicators

to include FSIs for non-banks