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Jean-Marc Israël Head of Division, Monetary and Financial Statistics ECB. Statistics for macro-prudential analysis and micro-prudential supervision: transferable insights to other central banks. Skopje seminar 2-5 October 2013. Outline. 1. 2. 3. 2. Outline. 1. 2. 3. 3. - PowerPoint PPT Presentation
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Statistics for macro-prudential
analysis and micro-prudential
supervision:
transferable insights to other
central banks
Skopje seminar2-5 October 2013
Jean-Marc Israël
Head of Division,
Monetary and Financial Statistics
ECB
Outline
2
1
3
2
Outline
2
1
3
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- Increasing economic interdependencies among main economies need globally-comparable economic and financial statistics/indicators
- Increasing economic interdependencies among main economies need globally-comparable economic and financial statistics/indicators
Official statistics support multilateral policy responses
- For better financial stability analysis - For better financial stability analysis
Financial crisis revealed additional efforts are needed
- For monetary policy purposes- For monetary policy purposes
Central banks developed large amount of high quality data
Reliable statistics for global financial stability
4
Crisis and role statistics Macroeconomic surveillance Conclusions
Action plan on IMF/FSB report to G-20
1.20 Recommendations developed and implemented
2.Key role Inter-Agency Group on Economic and Financial Statistics
3.Principal Global Indicators (PGIs) website
http://www.principalglobalindicators.org
Statistics for financial stability: G-20
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Furthermore, G-20 support to the FSB-led initiative to create a global Legal Entity Identifier
1. Better capture build-up risk financial sector
2. Improve data international financial network
connections
3. Monitor vulnerability of domestic economies to
shocks
4. Better communication official statistics
1. Better capture build-up risk financial sector
2. Improve data international financial network
connections
3. Monitor vulnerability of domestic economies to
shocks
4. Better communication official statistics
G20 Recommendations
G-20 Recommendations
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Data gapExisting framework and ongoing collection
Framework needs further development
Build-up of risk in the financial sector
#2 Financial Soundness Indicators (FSIs) #5 Credit Default Swaps#7 Securities
#3 Tail Risk in the Financial System
#4 Aggregate Leverage and Maturity Mismatches
#6 Structured Products
Cross-border linkages
#10, #11, #12 Coordinated Portfolio Investment Survey, International Banking Statistics, International Investment Positions
#8 and #9 Global Network Connections and Systemically Important Global Institutions
#13 and #14 Financial and Nonfinancial Corporations’ Cross Border Exposures
Vulnerability of domestic economies to shocks
#15 Institutional Sector Accounts
#17 Government Finance Statistics
#18 Public Sector Debt
#19 Real Estate Prices
#16 Distributional Information
Improving communication
#20 Principal Global Indicators (PGI)
G-20 Recommendations
7
• The EU has a double role in the G-20 data gaps initiative:
– EU as Member of the G-20
Eurostat and ECB are providers of the statistics for the EU and the Euro Area
– Geographical area
Eurostat and ECB act as regional hubs for data collection for the EU countries
Eurostat and the ECB promote the developments of the European Statistical System and of the European System of Central Banks to match the G-20 Recommendations
European Union (EU) and G-20
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Sectoral accounts work of high importance1
Demand for greater granularity of data2Comprehensive and high-quality data essential 3Align data requirements for macro- and micro-prudential needs 4
Look for synergies with IMF SDDS Plus requirements5
Need to set priorities and timelines and to provide resources6
Strategic action lines
9
2012 IMF/FSB Report to G-20: action plans
Table 1: Enhancements Existing Statistical Frameworks and Ongoing Collection
RecommendationEnhancements Implemented
Progress to date in G-20 Economies Reporting
Timetables Going Forward and outstanding
issues
#2. Financial Soundness Indicators
#5. Credit Default Swaps
#7. Securities Statistics
#10/#11. Coordinated Portfolio Investment Survey
#10/#11. International Banking Statistics
#12. International Investment Position
#15. Sectoral Accounts
#17. Government Finance Statistics
#18. Public Sector Debt
#19. Real Estate Prices
#20. PGI
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Outline
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1
3
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2.1
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Macro-prudential oversight
As the financial crisis, triggered in August 2007 persisted and spread, in particular with the Lehman collapse in September 2008, the Financial Stability Board (in particular the US and the EU) decided to react to:
Enhance micro-prudential supervision
Develop a new function: macro-prudential oversight
Both micro and macro-prudential activities heavily rely on
timely, accurate and harmonised datasets
NB: Micro-prudential supervision stands for the oversight of individual institutions in the respective sector (banking, insurance, etc.)
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Macro-prudential oversight Data needs ECB response
European institutional framework (I)
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Macro-prudential oversight Data needs ECB response
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European institutional framework (II)
Macro-prudential oversight Data needs ECB response
Macroprudential
oversight
[ESRB]
Microprudential supervision Macroeconomic policies
• Contribute to prevention of systemic risks to financial
stability in the EU
• ESRB establishes link micro-prudential supervision and
macro-economy
• ECB provides statistical support to ESRB
• Contribute to prevention of systemic risks to financial
stability in the EU
• ESRB establishes link micro-prudential supervision and
macro-economy
• ECB provides statistical support to ESRB
Macroprudential oversight
Scope of macro-prudential oversight
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Macro-prudential oversight Data needs ECB response
2.2
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1. Interlinkages
2. Profitability and solvency
3. Funding and liquidity
4. Credit risk
5. Market risk
6. Macro risk
ECB: identify main datasets and set priorities for ESRB/ECB’s own financial stability needs
Financial stability analysis – data needs
Led to breakdown in 6 risk categories:
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Macro-prudential oversight Data needs ECB response
ECB’s statistical initiatives
For each risk category, it is assessed:
– Which data are available according to the appropriate concepts
– Possible proxy data
– Are data missing?
1. Interlinkages
2. Profitability and
solvency
3. Funding and liquidity
4. Credit risk
5. Market risk
6. Macro risk
Risk typologies
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Macro-prudential oversight Data needs ECB response
ECB’s statistical initiatives
• Data often available in Eurosystem/ESCB or other national (supervisory) authorities
Otherwise, surveys enable to get a picture
• Distinctive datasets:• Active: data are reported to the competent authority
• Passive: data are defined (e.g. supervisory framework) though not regularly reported
• Ad-hoc: data need first to be defined and then reported
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Macro-prudential oversight Data needs ECB response
2.3
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New statistics on
• Investment funds (2009)
• Financial Vehicle Corporations engaged in securitisation (2011)
• Insurance Corporations and Pension Funds (2011)
• Financial market statistics
Development micro-datasets
• Centralised Securities Database
• Securities Holding Statistics
• Loans
• Consolidated banking data
• Register of Financial Institutions
• Household and corporate surveys
Enhancements to statistics
• Further development euro area accounts (flow of funds, etc.)
• Implementation new manuals (SNA2010-ESA2010, BPM6, etc.)
Other datasets
•BIS banking and CDS statistics
•IMF FSIs
•Commercial data
•Ad-hoc surveys
The ECB response to financial stability data needs
22
Macro-prudential oversight Data needs ECB response
New statistics- better information on all financial sectors Enhanced Monetary and Financial Statistics
• New statistics on assets and liabilities of euro area Investment Funds
Investment Funds
• Regular compilation statistics on euro area Financial Vehicle Corporations engaged in securitisation transactions and MFI securitisationFinancial
Vehicle Corporations
• New statistics on euro area Insurance Corporations & Pension Funds Insurance
Corporations & Pension Funds
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Macro-prudential oversight Data needs ECB response
Breakdowns
• Providing more breakdowns of banks’ balance sheet and interest rates
Credit lines
• New data on credit lines granted by banks
Compilation
• Compilation harmonised financial statistics on a consolidated basis
Alignment
• Working with supervisors in a better alignment of supervisory and statistical concepts and data
• Further advancing timelinessTimeliness
New statistics- better information on all financial sectors Enhanced Monetary and Financial Statistics
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Macro-prudential oversight Data needs ECB response
1. Financial markets statistics
2. Probability density functions
3. Exposures to sovereign debt/GFS
4. STEP market statistics
5. Foreign currency borrowings by non-financial corporations, households, or credit institutions
1. Financial markets statistics
2. Probability density functions
3. Exposures to sovereign debt/GFS
4. STEP market statistics
5. Foreign currency borrowings by non-financial corporations, households, or credit institutions
Other monetary / financial statistics in demand
New statistics - Better information on financial markets
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Macro-prudential oversight Data needs ECB response
Register of Financial institutions and groups composition1
Consolidated Banking Data/National Banking Indicators 2
Granular Credit Data3Sectoral/individual Issuance and Holdings of Securities4
SME Corporate finance6
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Statistics and Micro-databases
Developments of micro-datasets
Macro-prudential oversight Data needs ECB response
Household consumption and financing survey5
Other datasets
Other datasets
• BIS banking statistics (consolidated and locational by nationality)
• Banks’ disclosures • Commercial data from
Bloomberg, Moody’s, etc.
• BIS banking statistics (consolidated and locational by nationality)
• Banks’ disclosures • Commercial data from
Bloomberg, Moody’s, etc.
Ad-hoc surveys
• Occur for specific issues
• Tailored to latest developments in financial sector
• Especially while EU Supervisory reporting frameworks are still in the making
• Occur for specific issues
• Tailored to latest developments in financial sector
• Especially while EU Supervisory reporting frameworks are still in the making
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Macro-prudential oversight Data needs ECB response
1. Enhancing integrated quarterly financial and non-financial accounts euro area:
• Advance timeliness• Improve consistency• Enhance completeness, coverage and length
2. Consolidated lending exposures credit institutions vis-à-vis counterparts
3. Implementation of new international statistical standards (SNA2008-ESA2010, BPM6)
Enhancements to macroeconomic statistics
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Macro-prudential oversight Data needs ECB response
ECB support to the ESRB
Improvements
• White Book – i.e. regular information pack
• Reference database for surveillance reports and regular models
supporting risk analysis
• Risk Dashboard
• Focus on EU Member States, e.g. National banking
indicators
• White Book – i.e. regular information pack
• Reference database for surveillance reports and regular models
supporting risk analysis
• Risk Dashboard
• Focus on EU Member States, e.g. National banking
indicators
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Macro-prudential oversight Data needs ECB response
Examples presentations White Book
Examples
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Macro-prudential oversight Data needs ECB response
Examples
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Macro-prudential oversight Data needs ECB response
The European Systemic Risk Board (ESRB) monitors and assesses the sources of systemic risk across the EU financial system as a whole
The ECB provides analytical, statistical, administrative and logistical support to the ESRB
Legal obligation to define a risk dashboard
ESRB Regulation (Art. 3.g) requires that the ESRB “in collaboration with the ESAs, develop a common set of quantitative and qualitative indicators (risk dashboard) to identify and measure systemic risk.”
ESRB Risk Dashboard defined in cooperation with the ECB
ESRB Risk Dashboard
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Macro-prudential oversight Data needs ECB response
ESRB Risk Dashboard 1st publication 20 September 2012
Specifications:
45 indicators and 6 risk typologies
Allows synthetic view situation for deeper
analysis
Cannot replace expert judgement, but
complements it
ObjectivesObjectives
Risk assessmentInput further systemic risk analysis
Risk assessmentInput further systemic risk analysis Communication toolCommunication tool
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Macro-prudential oversight Data needs ECB response
ESRB Risk Dashboard
• Domestic credit-to-GDP ratio• Actual and forecasted GDP growth• Domestic credit-to-GDP ratio• Actual and forecasted GDP growthMacro riskMacro risk
• Households debt-to-gross disposable income
• Real estate comm. property, market size over GDP
• Households debt-to-gross disposable income
• Real estate comm. property, market size over GDP
Credit riskCredit risk
• Global risk aversion indicator• Price/earning ratio• Global risk aversion indicator• Price/earning ratioMarket riskMarket risk
Liquidity & FundingLiquidity & Funding • Bank liabilities structure• Bank liabilities structure
InterlinkagesInterlinkages
• Composite indicator of systemic stress (CISS)
• Average systemic risk contribution of individual institution to overall risk using CoVar (EU banking syst.)
• Composite indicator of systemic stress (CISS)
• Average systemic risk contribution of individual institution to overall risk using CoVar (EU banking syst.)
Profitability & Solvency
Profitability & Solvency • EU large banks: Leverage ratios• EU large banks: Leverage ratios
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Macro-prudential oversight Data needs ECB response
ESRB Risk Dashboard
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Six risk typologies
Macro risk
Credit risk
Market risk
Liquidity and funding
Interlinkages
Profitability & solvency
Interlinkages
ESRB Risk dashboard examples
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Funding and liquidity
“Good statistics are much cheaper than policy mistakes‘‘
(Janez Potočnik, EU Commissioner for the Environment, Eurostat Conference 2011)
Outline
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1
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Overview
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Euro area summit statement (29 June):
“The Commission will present Proposals on the basis of Article 127(6) for a single supervisory mechanism shortly. We ask the Council to consider these Proposals as a matter of urgency by the end of 2012.
When an effective single supervisory mechanism is established, involving the ECB, for banks in the euro area the [European Stability Mechanism] could, following a regular decision, have the possibility to recapitalize banks directly.”
=> Draft Regulation will soon be adopted
(based on Art. 127.6 of the Treaty)
Overall framework (1/2)
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Three components:
- Banking supervision (on- and off-site) – high priority
- Resolution mechanism – second high priority
- Deposit guarantee scheme – lower priority
It has become critical to “break the vicious circle between banks and
sovereigns”
Overall framework (2/2)
Scope – some important articles
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Art. 5: Both the ECB and national competent authorities shall be subject to a duty of cooperation in good faith, and an obligation to exchange information
Art. 5: Both the ECB and national competent authorities shall be subject to a duty of cooperation in good faith, and an obligation to exchange information
Art. 9: ECB empowered to require […] including information to be provided at recurring intervals and in specified formats for supervisory and related statistical purposes
Art. 9: ECB empowered to require […] including information to be provided at recurring intervals and in specified formats for supervisory and related statistical purposes
Art. 18: Separation from monetary policy function; […] the ECB shall adopt and make public any necessary internal rules, including rules regarding professional secrecy and information exchanges between the two functional areas.
Art. 18: Separation from monetary policy function; […] the ECB shall adopt and make public any necessary internal rules, including rules regarding professional secrecy and information exchanges between the two functional areas.
Commission proposal on the SSM agreed by Council (ECOFIN) on 12 September 2012 (I/3)
Art. 20: Professional secrecy and exchange of information [with national or European authorities and bodies]
Art. 20: Professional secrecy and exchange of information [with national or European authorities and bodies]
Scope – article 5(4)
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Total assets > €30 bnTotal assets > €30 bn
Receiving public assistance from EFSF or ESMReceiving public assistance from EFSF or ESM
Ratio total assets/GDP > 20% (unless total assets < €5 bn)Ratio total assets/GDP > 20% (unless total assets < €5 bn)
Significance is notified by NSA and confirmed by ECBSignificance is notified by NSA and confirmed by ECB
Upon ECB initiative, significant cross-border activity (subsidiaries in more than one countries etc.); MethodologyUpon ECB initiative, significant cross-border activity (subsidiaries in more than one countries etc.); Methodology
The ECB shall be responsible for the supervision of significant banking groups, stand-alone banks and branches, which on a consolidated basis meet any of the following conditionsThe ECB shall be responsible for the supervision of significant banking groups, stand-alone banks and branches, which on a consolidated basis meet any of the following conditions
Commission proposal on the SSM agreed by Council (ECOFIN) on 12 September 2012 (2/3)
The three most significant banks in each countryThe three most significant banks in each country
By 1.7.13, ECB to publish the framework (list of significant banks, methodology, etc)
Legal power to request information
INVESTIGATORY POWERSArticle 9Requests for information
INVESTIGATORY POWERSArticle 9Requests for information
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The ECB may require the following legal or natural persons (see list below) to provide all information that is necessary in order to carry out the SSM tasks, including information to be provided at recurring intervals and in specified formats for supervisory and related statistical purposes. Where the ECB obtains information directly from these persons, it shall make that information available to national authorities concerned.
credit institutionscredit institutions
persons belonging to such entities or 3rd parties to whom entities have outsourced functions or activitiespersons belonging to such entities or 3rd parties to whom entities have outsourced functions or activities
financial holding companiesfinancial holding companies
mixed financial holding companiesmixed financial holding companies
mixed-activity holding companiesmixed-activity holding companies
Information can be requested from Information can be requested from
Commission proposal on the SSM agreed by Council (ECOFIN) on 12 September 2012 (3/3)
…. in compliance with single rule book (by European Banking Authority)!
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Organisation chart for supervisory data flows: state-of-play in euro area countries
In 13 euro area countries the NCB is also the NSA
The organisation of supervisory reporting is integrated either in Statistics orin a separate unit (with access to supervisory data)
In the remaining 4 euro area countries (EE, FI, FR and MT)
Supervisory data are collected by the NCB on behalf of the NSA in MT and FR
Statistics have access to the supervisory data in the NCBs of EE and FI
In Banque de France, access to supervisory data is limited to statistical use
Consequent working assumption (to be validated):
data flows can be organised via (Statistics Departments of) NCBs in the euro area
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Organisation chart for supervisory data flows: MFI balance sheet statistics: a model for SSM?
Monetary analysisMonetary analysis
MFIsMFIs
NCBsNCBs
ECBECB
Other statistical purposes:• National accounts• Balance of payments
Other statistical purposes:• National accounts• Balance of payments
Minimum reservesMinimum reserves
Economic and financial stability analysis
Economic and financial stability analysis
IndividualIndividual
Individual &aggregatedIndividual &aggregated
Euro area and EU perspectiveEuro area and EU perspective
National perspective
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SSM – Other data-related issues (1/2)
Coverage:• About 130 Banking groups in the euro area
based on the thresholds in the draft Regulation
• Ca. 2,000 Credit institutions
– pertaining to these banking groups and financial conglomerates, or
– stand-alone banks
Reporting• The banking groups will fall under the micro-supervision of the
ECB, and will still remain subject to EU law (likely from mid-2014)
– e.g. single rule book will apply, as set up and maintained by the EBA
• The ECB may need additional, more specific and timely information
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SSM – Other data-related issues (2/2)Scope:
• Initial pilot based on data available
• For supervision of ‘significant’ cross-border groups, ECB staff will need to adequately receive, store and disseminate highly sensitive information
based on the existing (not fully comparable) and forthcoming (harmonised) FINREP / COREP
• The ECB will also make available a wide range of (available or new) information on
» groups’ composition (for mapping purpose, and combining various datasets)
» very granular securities (issues and holdings),
» loans (from credit registers, etc.),
» derivatives (e.g. CDS)
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Many outstanding questions arising from SSM
How will the task related to data collection be shared with national authorities?
How will the task related to data collection be shared with national authorities?
Access by supervisors to ECB statistical data?
Access by supervisors to ECB statistical data?
Uses of information for macro-prudential or
monetary policy analysis?
Uses of information for macro-prudential or
monetary policy analysis?Internal ECB organisation:
integration of supervisory/statistical data
processes?
Internal ECB organisation: integration of
supervisory/statistical data processes?
Sharing of tasks will have an impact on scope of individual information collected by the ECB
Sharing of tasks will have an impact on scope of individual information collected by the ECB
National discretion in current supervisory
reporting (e.g. Pillar II and FinRep for non-IFRS banks)?
National discretion in current supervisory
reporting (e.g. Pillar II and FinRep for non-IFRS banks)?
How many banks will be supervised under the SSM and from when?
How many banks will be supervised under the SSM and from when?
Data flow to/from EBA/ESMA/ESRB?Data flow to/from EBA/ESMA/ESRB?
Which data from banks not supervised by ECB?
Which data from banks not supervised by ECB?
List of significant banks and their maintenance?
List of significant banks and their maintenance?
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Thank you for your attention!
Questions? ☺