The Global Financial Crisis:
What Are We Learning About
Policy-Makers’ Data Needs?
Tessa van der Willigen and Pedro Rodriguez
Strategy, Policy, and Review Department
IMF
Outline
 What
happened
 Short-term actions
 Better early warning in future
 Data needs
Disclaimer: I may stray outside SNA proper, but balance
sheets are key...
What Happened?
Background
 Macroeconomic


Low global interest rates, reflecting large
external surpluses in key emerging markets
and easy monetary policy
Very large increases in asset prices
 Financial


conditions:
sector regulation:
Rapid growth in “subprime” mortgages in US
Repackaging into traded structured products
What Happened?
The Crisis
 Correction
in the US housing market
 Fall in, and increased uncertainty in, the
price of structured products
 Financial institutions:



made losses and sold assets
began to hoard liquidity because of increased
uncertainty (about values and counterparties)
reacted sharply to the collapse of Lehman
Brothers
What Happened?
International Linkages
 Origins
of the crisis in the US
 Spillovers to Europe because of direct
exposures and declines in wholesale
funding
 Emerging markets hit after the collapse of
Lehman:


The “decoupling” hypothesis was probably
always optimistic
Accelerated deleveraging
Getting the Crisis Under Control--I
 Restoring
confidence in mature financial
systems:



Providing short-term liquidity
Removing damaged assets from banks’
balance sheets
Recapitalizing banks
Getting the Crisis Under Control--II
 Dealing
with capital flow reversals in
emerging markets:




Use reserve buffers
Liquidity support (swap lines with major
central banks, the IMF’s new Short-Term
Liquidity Facility)
Adjust as necessary
Review contingency plans in case of banking
sector problems
Getting the Crisis Under Control--III
 Addressing
the fiscal consequences of
intervention in the financial system


Ensure debt sustainability
Develop an exit strategy
Better Early Warning in Future--I
 Better


financial stability analysis:
Risks were moved to off-balance sheet
vehicles
Risks moved to a burgeoning superstructure
of complex marketable products and
derivatives and became untraceable
Better Early Warning in Future--II
 Better


macroeconomic analysis:
Need better identification of asset price
bubbles
Need a better understanding of how
concerned we should be about external
imbalances
(e.g., the discrepancies between the development of
US foreign assets and its current account)
Better Early Warning in Future--III
 International

financial linkages:
We had far too little idea of countries’
exposures to other countries, different kinds of
institutions, and different kinds of instruments
Data Needs—Fiscal
 Accurate


and transparent recording of
the fiscal costs of intervention in the banking
sector and implications for public debt
contingent liabilities
Data Needs—Financial Sector

A big agenda for regulators
 Related, we also need better aggregate financial
stability analysis
 Considerable efforts in recent years:

Balance sheet analysis
(the IMF’s Standardized Report Forms for Monetary and
Financial Statistics cover banks, non-bank depository
corporations, insurance companies, pension funds,
investment funds, special purpose entities, etc.)

Financial Soundness Indicators
(Coordinated Compilation Exercise; though these are lagging
indicators)
Data Needs—Financial Sector, Ctd.
 Importance





of information on:
Off balance sheet entities
Contingent exposures (derivatives)
Maturity of liabilities and assets
Intrasectoral exposures/market structures
Valuation
Data Needs—External Sector

We need:



better analysis of the buildup of external
vulnerabilities; and
better analysis of the potential for international
spillovers through the financial sector.
Again, considerable efforts in recent years:




initiatives on debt and reserves data after the Asian
crisis
Balance of Payments Manual 6th edition, with more
emphasis on the International Investment Position
(IIP) and its composition (e.g., maturity, currency)
Coordinated Portfolio Investment Survey
Coordinated Direct Investment Survey (forthcoming)
Data Needs—External Sector, Ctd
 IIP:



Sectoral composition
Geographical composition
Currency composition (incl. of reserves)
 Expand
CPIS (key countries not covered,
annual frequency, long lags)
 Valuation issues, esp. of FDI
Conclusion
Some themes that may be relevant for SNA:





Balance sheets are indeed crucial
We need not just their amounts but their
sensitivities to various developments (for
stress testing)
Off balance sheet and contingent exposures
are crucial
Aggregation can mask important features
Valuation issues are very difficult