Measuring Securitization in the
Flow of Funds Accounts in Japan
Yoshiko Sato
Financial Statistics Section
Research and Statistics Department
Bank of Japan
Working Party on Financial Statistics, OECD Paris, 2-4 November 2009
1/16
Motivation



Recent financial turmoil has led an increasing number of
people to look into Flow of Funds Accounts (FFA) statistics.
The statistics is primarily designed to describe a country’s
financial structure in rather a long-term perspective. But
recent financial events set it to another task of providing
information to narrow “data gaps” or to capture “shadow
banking system” (as highlighted in G20).
In this sense, the paper intends to assess to what extent
FFA captures the securitization under the current statistical
treatment.
–
–
–
–
How do we compile securitization figures?
What is the coverage of securitization?
What can we learn from the FFA data?
What should we do to improve the statistics?
2/16
Outline
1. Statistical treatment
- Definition of the sector and instruments.
- Compilation method (Sources/Scope/Valuation/ Holding sector)
- Treatment of securitization through JHFA
2. Assessment of coverage
3. What can we learn from FFA data?
4. Possible future approach
5. Conclusion
3/16
1.Statistical treatment – sector, instruments

What sector captures securitization activity?
“SPC and Trust” sector
A sub-sector of non-banks in other financial institution

How does the sector work?
It issues ABS, ABCP, and MCT backed by loans, installment
credit (i.e. lease), bonds, and trade credits.
SPC and Trust
Loans
Housing loans
Consumer credits
Loans to companies and Government
Installment credit
Corpotate bonds
Trade credits and foreign trade credits
Structured-financing instruments
・ ABS
・ ABCP
・ MCT (Monetary claim trusts)
80.8%
4/16
1.Statistical treatment – compilation method
Typical Securitization Scheme in Japan
Loan sales (not securitization)
Case 1
Originator
Investors
(Banks)
(Banks)
Trust
Trust
Case 2
Originator
Trust
Investors
Monetary claim trust (MCT)
MCT
SPC and Trust
Trust
Case 3
ABS
Originator
Trust
SPC
Investors
MCT
MCT
5/16
1.Statistical treatment – compilation method

Sources
MCT
ABS
4 major trust banks
Direct reporting from 20 institutions 11 trust subsidiaries
5 trust companies
Publicly available data
aggregate data from JSDA (Japan Security Dealers
Association) classified by each type of underlying asset.
ABCP

Estimation is conducted by assuming that it is
proportionate to MCT.
Scope of the “SPC and Trust” sector
Private or public issues
Residency

Valuation
Book value basis
ABS includes privately placed issues
but since there is no primary data we
conduct estimation.
Domestic bonds issued by non-resident SPC
are within the scope of “SPC and Trust” sector
but available data are limited to the publicly
placed issues.
6/16
1.Statistical treatment – compilation method

Information of holding sector
Most difficult part to know.
Holding amounts of banks, insurance companies, finance companies,
and social security funds are based on the financial statement.
Those of non-residents are estimated. The residual with no specific
holding entity goes to private non-financial institutions.

Treatment of securitization through JHFA
JHFA (Japan Housing Finance Agency) is the largest issuer of MBS.
The outstanding amount of MBS reaches 8.9 trillion yen.
JHFA’ securitization is “On-balance sheet” securitization. So it is
excluded from the SPC and Trust sector but included in the
“Government financial institution” sector.
7/16
2. Assessment of coverage

FFA has a good coverage in that
All major financial institutions are contributing to reporting MCT
which are quite often used in Japan’s securitization.
Private placement and non-resident SPC are partly covered.

However, the coverage is incomplete in that
Primary data source of private placement of ABS/MBS is
almost absent.
Non-resident SPC’s private placement is inseparable from the
primary data source of BP and IIP statistics.
8/16
3. What can we learn from FFA data?
(1) Turning point
Total assets of the SPC and Trusts sector
(trillion yen)
40
35
30
Total Assets
25
20
15
10
5
19
97
19 .04
9
19 8.0
9 2
19 8.04
9
19 9.0
9 2
20 9.04
0
20 0.0
0 2
20 0.04
0
20 1.0
0 2
20 1.04
0
20 2.0
0 2
20 2.04
0
20 3.0
0 2
20 3.04
0
20 4.0
04 2
20 .04
0
20 5.0
0 2
20 5.04
0
20 6.0
0 2
20 6.04
0
20 7.0
0 2
20 7.04
0
20 8.0
0 2
20 8.04
09
.0
2
0

There is outstanding of 30 trillion yen in Structured-financing instruments.

The volume has been expanding during the first half of 2000s.
The data correctly traces the turning point of the sector in mid 2007.

9/16
3. What can we learn from FFA data?
(1) Turning point
Proportion of Underlying Assets
4.5% 0.6%
9.7%

“Housing loans” includes
JHFA’s MBS.
Housing loans
40.5%
Loans to companies and governments
Trade credits and foreign trade credits
19.0%
Installment credit (i.e. lease)
Consumer credits
Corporate Bonds
25.8%
5.8% 0.7%

“Housing loans” excludes
JHFA’s MBS.
12.6%
22.7%
Housing loans
Loans to companies and governments
Trade credits and foreign trade credits
Installment credit (i.e. lease)
Consumer credits
24.6%
Corporate Bonds
33.5%
10/16
12
8
2
0
Trade credits and foreign trade credits
10
8
6
5
4
3
1
19
19 97.0
9 4
19 8.0
2
19 98.0
19 99.04
9 2
20 9.0
4
20 00.0
20 00.02
0 4
20 1.0
2
20 01.0
20 02.04
0 2
20 2.0
4
20 03.0
0 2
20 3.0
4
20 04.0
20 04.02
0 4
20 5.0
2
20 05.0
20 06.04
0 2
20 6.0
4
20 07.0
20 07.02
0 4
20 8.0
2
20 08.0
09 4
.0
2
19
9
19 7.
9 04
19 8.0
9 2
19 8.
9 04
19 9.0
9 2
20 9.
0 04
20 0.0
0 2
20 0.
0 0
20 1. 4
0 02
20 1.0
0 4
20 2.
0 02
20 2.0
0 4
20 3.
0 02
20 3.0
0 4
20 4.
0 02
20 4.0
0 4
20 5.
0 0
20 5. 2
0 04
20 6.0
0 2
20 6.
0 04
20 7.0
0 2
20 7.
0 04
20 8.0
0 2
20 8.
09 04
.0
2
14
19
9
19 7.0
9 4
19 8.0
9 2
19 8.0
9 4
19 9.0
9 2
20 9.0
4
20 00.0
0 2
20 0.0
0 4
20 1.0
0 2
20 1.0
0 4
20 2.0
0 2
20 2.0
0 4
20 3.0
0 2
20 3.0
0 4
20 4.0
0 2
20 4.0
0 4
20 5.0
0 2
20 5.0
4
20 06.0
0 2
20 6.0
0 4
20 7.0
0 2
20 7.0
0 4
20 8.0
0 2
20 8.0
09 4
.0
2
19
9
19 7.
9 04
19 8.0
9 2
19 8.
9 0
19 9. 4
9 02
20 9.0
0 4
20 0.
0 0
20 0. 2
0 04
20 1.0
0 2
20 1.
0 0
20 2. 4
0 02
20 2.0
0 4
20 3.
0 02
20 3.0
0 4
20 4.
0 0
20 4. 2
0 04
20 5.0
0 2
20 5.
0 0
20 6. 4
0 02
20 6.0
0 4
20 7.
0 0
20 7. 2
0 04
20 8.0
0 2
20 8.
09 04
.0
2
3. What can we learn from FFA data?
(1) Turning point
SPC and Trust sector classified by type of underlying assets
Loans to companies and governments
Housing loans
(trillion yen)
9
(trillion yen)
8
10
7
6
5
6
4
4
3
2
1
0
Installment credit (i.e. lease)
(trillion yen)
6
(trillion yen)
9
7
5
4
3
2
2
1
0
0
11/16
3. What can we learn from FFA data?
(2) Cross-border securitization
Balance of Payment Statistics
Direct investment
6
(trillion yen)
Portfolio investment in securities
20
5
15
4
10
3
(trillion yen)
5
0
2
-5
0
-15
-1
-20
19
9
19 7.0
9 4
19 8.0
9 2
19 8.0
9 4
19 9.0
9 2
20 9.0
0 4
20 0.0
0 2
20 0.0
0 4
20 1.0
0 2
20 1.0
0 4
20 2.0
0 2
20 2.0
0 4
20 3.0
0 2
20 3.0
0 4
20 4.0
0 2
20 4.0
0 4
20 5.0
0 2
20 5.0
0 4
20 6.0
0 2
20 6.0
0 4
20 7.0
0 2
20 7.0
0 4
20 8.0
0 2
20 8.0
09 4
.0
2
-10
19
9
19 7.0
9 4
19 8.0
9 2
19 8.0
9 4
19 9.0
9 2
20 9.0
0 4
20 0.0
0 2
20 0.0
0 4
20 1.0
0 2
20 1.0
0 4
20 2.0
0 2
20 2.0
0 4
20 3.0
0 2
20 3.0
0 4
20 4.0
0 2
20 4.0
0 4
20 5.0
0 2
20 5.0
0 4
20 6.0
0 2
20 6.0
0 4
20 7.0
0 2
20 7.0
0 4
20 8.0
0 2
20 8.0
09 4
.0
2
1

Both increase toward the 4Q 2008 and decrease shortly after then.

If we assume that a part of such increase should attribute to any
private placements of non-residents SPC, the figure would have
behaved differently; it might have continued to increase until the end
2008.
12/16
3. What can we learn from FFA data?
(2) Cross-border securitization
Types of SPC related transaction

Expected transactions to be captured
Borderline
Non-resident
SPC
Securitization
Sells assets
Tokyo branch of the
non-resident SPC
Issues MBS
Buy MBS
Originator
Domestic
Investors
Portfolio investment in securities (outward)

Transactions really happened
Banks’ Recapitalization
Borderline
Non-resident
SPC
Subordinated loans
Banks
Direct investment or portfolio
investment in securities (outward)
Preferred stocks
Domestic
Investors
13/16
3. What can we learn from FFA data?
(3) Holding sector of “Structured-financial instruments”
(trillion yen)
Total
30.5
Financial institutions
23.0
Depository corporations
12.0
Insurance
8.6
Pension funds
0.9
Other financial institutions
1.5
Non-financial corporations
6.7
General government
0.0
Rest of the world
0.8
Sources: Bank of Japan, “Flow of Funds Accounts”
14/16
4. Possible Future Approach

Use of electronically registered data for statistical
purpose instead of using survey data
Using existing data source is efficient without additional reporting
burden if the data is permitted to use for social statistical purpose.
Electronically registered book-entry transfer system (i.e. JASDEC)
has already been in operation. Such database is expected to
contain security-by-security information.
Co-operation between the related bodies (industry association,
depository center, other statistical authorities) should be prerequisite.

International co-operation in data collection
Statistics may not improve solely by compilers’ domestic efforts.
International co-operation in data collection is helpful for identifying
cross-border secutitization.
15/16
5. Conclusion

FFA serves to capture securitization activity.
It correctly traces the turning point in mid 2007.

Enriching primary data source is needed.
Data gap is a problem where no primary data exists.
Usefulness of FFA can be more enhanced by precise
primary data.
- End of presentation 16/16