Data Requirements For Assessing the
Health of Systemically Important
Financial Institutions (SIFIs)
for IMF-FSB Users Conference
Washington, D. C., July 8-9, 2009
Hans Genberg
Hong Kong Monetary Authority
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Outline
1. What is a SIFI?
2. What data do we currently collect?
 Data requirements before the credit crisis
 Extra data requirements after the credit
crisis
3. What other data can potentially improve
our risk assessment?
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Characteristics of SIFIs
Systemically Important
= potentially pose significant risks to financial
stability
= potentially pose significant risks of severe
disruptions to the smooth functioning of the
financial system
Size is the single most important determining
factor – the larger it is , the greater its potential
systemic consequences
Apart from size, what other features that may
characterize a SIFI?
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Characteristics of SIFIs
Financial institutions whose difficulties tend
to produce a domino effect in the financial
system
1. Deposit taking financial institutions
 Great impact on the confidence of the
general public
2. Major financial market players
 Large number of counterparties
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Characteristics of SIFIs
Financial institutions whose profitability tends
to be positively correlated with financial
market volatility :
 Hedge fund
 Highly leveraged financial institutions
• Volatility = profitable opportunities
= risks to stability of the system
 Lead to herding and rush-to-exit
 Some trading strategies undermine the
financial system
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Characteristics of SIFIs :
Hedge Fund and Highly Leveraged FIs
They are difficult to monitor because of :
1. The absence of supervisory mandate
under existing laws
 Credit lines are provided by banks overseas
2. The lack of international framework for
information exchange
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Data Requirements
Before the Global Credit Crisis
Balance Sheet
 Asset and Liabilities
-
Capital and reserves, deposits from customers,
cash, and certificates of indebtedness
 Profit and Loss
-
Interest income/ loss, income from investment, and
dividend
 Large Exposures
- Commitments and contingencies, interest rate
contracts, and foreign exchange contracts
 Loans and Advances
-
Classification of loans and advances by economic
sector, and asset quality
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Data Requirements
Before the Global Credit Crisis
Capital Adequacy
 Capital Adequacy
-
Core capital, supplementary capital, and riskweighted positions
 Interest Rate Risk
-
Total interest bearing assets and liabilities
classified by time band
 Market Risk
-
Debt securities, debt-related derivative contracts,
interest rate derivative contracts in the trading
book, and FX and equity exposures
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Data Requirements
Before the Global Credit Crisis
Liquidity
 Liquidity
-
Gold, marketable securities, exchange fund
bills/notes, and eligible loan repayment
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Additional Data Requirements
After the Global Credit Crisis
• Two half-yearly surveys on off-balance
sheet exposures and debt securities
portfolios
• Banks encouraged to disclose:
 Sub-prime related assets and their impairment
charges
 Complex financial instruments and structured
financial products
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Potentially Useful Data
• No significant data gaps
• Two areas of potentially useful data for
conducting stress testing analysis
1. Breakdown of undrawn irrevocable credit
commitments by types of customers
2. Creditworthiness of debt securities other
than credit ratings
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Potentially Useful Data: Undrawn
Irrevocable Credit Commitments by
Customer Type
• The breakdown of undrawn irrevocable
credit commitment by customer type is
important in assessing contingent
liquidity risk
• Sources of contingent liquidity risk :
 Considerable drawdowns on irrevocable
credit commitments
 Over-concentration of irrevocable credit
commitments
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Potentially Useful Data:
Creditworthiness of Debt Securities
• Drawbacks of through-the-cycle credit ratings
 Low sensitivity of ratings to current market risk
• Particularly important for SIFIs risk
assessment
 Usually hold larger investment portfolio
 Exposed to significant market risk
Examples
 Current Market Yield
 Internal model default risk of banks’ holdings of
debt securities
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Potentially Useful Data: Framework for
Information Exchange and Disclosure
• International framework for information
exchange of large non-bank SIFIs could
enhance the monitoring process
• Central banks and financial regulators could
disclose data on the activities of non-bank
SIFIs at an aggregate level
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