What are the main data issues
arising from the crisis?
IMF-FSB Users Conference
Washington, D.C.
(July 8–9, 2009)
Simon Hall
Bank of England
Larger banks
Major UK banks’ and LCFIs’ total assets(a)
Sources: Bankscope published by Bureau van Dijk Electronic Publishing, published accounts
and Bank calculations.
(a) Assets converted at average exchange rate 2001–08.
(b) US GAAP banks report on a net basis; IFRS banks’ derivative exposures netted from 2007.
(c)‘Other’ includes other receivables, other assets, goodwill and property and insurance.
Larger banks
Consolidated banking group assets relative to GDP
by nationality of ownership(a)(b)(c)
Sources: The Banker, Bankscope published by Bureau van Dijk Electronic Publishing, International Monetary Fund and Bank calculations.
(a) Total consolidated banking group assets for domestically owned banking sector only. This includes assets of domestic banks held abroad.
(b) End-2007, except for the United Kingdom, which is at end-2008.
(c) Data for all countries except the United Kingdom are from The Banker’s ranking of the world’s largest 1,000 banks by assets. This measure will
underestimate the size of banking systems that have a large proportion of banking sector assets outside of the list. UK data are from Bankscope and
include all banks and building societies.
Greater interconnectedness
Global financial network
1985
2005(a)
Sources: BIS, IMF, OECD, UNCTAD and Kubelec and Sa (2009).
(a) Nodes represent countries and are scaled in proportion to a country’s gross external financial stocks (Total
External Assets + Total External Liabilities). The thickness of the lines between the nodes is proportional to
the bilateral external financial stocks, relative to the nodes’ combined GDP, ie (Total External Assetsij + Total
External Liabilitiesij)/(GDPi + GDPj).
Greater interconnectedness
Network of large exposures(a) between UK banks(b)(c)
Source: FSA returns.
(a) A large exposure is one that exceeds 10% of a lending bank’s eligible capital during a period. Eligible capital is defined as Tier 1 plus Tier 2 capital,
minus regulatory deductions.
(b) Each node represents a bank in the United Kingdom. The size of each node is scaled in proportion to the sum of (1) the total value of exposures to a
bank, and (2) the total value of exposures of the bank to others in the network. The thickness of a line is proportionate to the value of a single bilateral
exposure.
(c) Based on 2008 Q1 data.
Greater interconnectedness
1%
5%
3%
7%
2%
1%
9%
1%
1%
1%
1%
3%
1%
13%
9%
4%
1%
1%
1%
7%
8%
9%
8%
6%
2%
9%
4%
6%
7%
2%
5%
7%
3%
12%
11%
7%
9%
8%
11%
7%
10%
11%
8%
16%
8%
16%
11%
10%
10%
7%
14%
9%
7%
9%
12%
13%
7%
8%
13%
9%
15%
13%
14%
8%
13%
8%
6%
7%
7%
7%
14%
8%
11%
8%
7%
8%
7%
16%
17%
16%
18%
1%
2%
1%
2%
2%
1%
1%
7%
3%
1%
2%
1%
0.025 0.041 0.037 0.034 0.090 0.464 0.081 0.087 0.118 0.048 0.032 0.043 0.046 0.050 0.046 0.049 0.059 0.057 0.076 0.077 0.086
Unweighted Sum
13%
9%
FX - vanilla options
Global M & A Completed
Global M & A Announced
9%
4%
9%
Equity - exotic
13%
4%
21%
11%
13%
Equity - index options
16%
4%
15%
12%
1%
1%
1%
Equity
CDO excl. ABS
8%
9%
8%
1%
Credit - structured
56%
ABS
Subprime MBS
39%
15%
6%
15%
11%
1%
2%
9%
1%
10%
1%
1%
5%
2%
3%
Credit - vanilla CDS
5%
6%
7%
7%
21%
6%
5%
3%
13%
3%
5%
FX - exotic options
8%
3%
11%
3%
3%
3%
Prime MBS
High Yield Corporate
Investment Grade Corporate
7%
6%
8%
5%
4%
4%
7%
4%
6%
4%
2%
4%
4%
1%
2%
3%
1%
1%
FX - forwards
8%
6%
9%
5%
5%
4%
8%
4%
6%
3%
2%
4%
4%
1%
2%
2%
1%
2%
FX - swaps
7%
3%
7%
6%
1%
1%
3%
1%
6%
4%
2%
2%
3%
3%
Derivatives
Interest rate - swaptions
JPMorgan
Deutsche Bank
Bank of America - Merrill Lynch
RBS
UBS
Goldman Sachs
Barclays
Morgan Stanley
Citi
BNP Paribas
Société Générale
Credit Suisse
HSBC
Wells Fargo - Wachovia
Nomura
UniCredit
Mitsubishi UFJ
Mizuho
Evercore Partners
Calyon
Herfindahl
M&A
Interest rate - swaps (<2 years)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Bond Issuance
Syndicated Lending
Primary Markets
193
149
117
112
100
97
92
80
75
66
44
37
17
11
10
9
8
7
7
7
Globalisation of financial activity
BIS reporting banks’ cross-border claims(a)
Sources: BIS locational banking statistics by residence and World Bank World Development Indicators.
(a) Cross-border claims are the sums of cross-border assets and liabilities of all BIS reporting banks.
(b) 2008 world GDP based on forecast by World Bank.
Greater complexity
Financial contracts
Structural changes in financial systems
•
•
•
•
Larger banks
More interconnected
More international
More complexity
=> More economic impact
=> Greater interactions
=> X-border spillovers
=> Extra data demands
Gaps exposed in this crisis
• Sources of risk?
No
“…low levels of risk premia and long-term interest rates, increased exposures
to complex and illiquid products, rising household sector indebtedness, and
persistent or growing external and fiscal imbalances”
FSF, London meeting (September 2005).
• Propagation of shocks?
Yes
– Wide dispersion of risks
– …but uncertain incidence
– Strong interconnectedness between entities,
including non-banks
– Criticality of market functioning
– Macroeconomic impact
Understanding financial networks: nodes
• Better information on key ‘nodes’:
–
–
–
–
–
–
More granular, timely, frequent bank disclosure
On/off balance sheet exposures
Liquidity risk profiles
Intra-period variation
Forward looking, risk focused information
Including all system critical nodes
Understanding financial networks: links
• Better information on ‘links’:
– Enriched large exposures data
– Tapping sources of data on market conditions
– International efforts to improve ‘flow of funds’
data
Concluding thoughts
• Better data essential for effective
macroprudential policy
• Structural change has outstripped data
availability
• International dimension critical given crossborder interconnections
• Lessons from other disciplines?