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THE USE OF FINANCIAL ACCOUNTS
IN ASSESSING FINANCIAL STABILITY
Reimund Mink and Nuno Silva
OECD Working Party on Financial Statistics
Paris, 6 October 2003
FINANCIAL ACCOUNTS IN ASSESSING FINANCIAL STABILITY
Contents of the presentation
• Quarterly MUFA
• Financial stability analysis
• Uses of MUFA in financial stability analysis
• Macro-prudential analysis at the ECB
• Quarterly MUFA - way forward
QUARTERLY MUFA
The ESA 95 concepts and definitions
• Residency and institutional sectors
• Financial assets
• Sequence of accounts
• Market valuation and accrual accounting
• Original maturity
QUARTERLY MUFA
The main uses of MUFA
Monetary policy
analysis
Financial stability
analysis
Statistical quality
analysis
QUARTERLY MUFA
Publication of data
• Quarterly press release
• Quarterly data
- ECB Monthly Bulletin, Table 6.1
- ECB Monthly Bulletin, Table 6.2
- ECB Statistical Pocket Book, Table 7.1 - 7.3
• Annual data
- ECB Monthly Bulletin, Table 6.3
- ECB Statistical Pocket Book, Table 6.1 and 6.2
QUARTERLY MUFA
Example: Table 1 of the Press Release
Financing of non-financial sectors in the euro area – main liabilities
Total
Debt
Households
Total
(debt)
Loans
taken
from euro
area MFIs
3
4
1
2
1999 Q4
2000 Q4
2001 Q2
Q3
Q4
2002 Q1
Q2
Q3
Q4
2003 Q1
6.4
6.4
6.6
5.9
5.2
4.6
4.2
4.0
3.8
4.1
7.0
7.3
7.2
6.7
6.1
5.4
5.2
4.8
4.8
5.3
11.7
7.4
6.9
6.4
6.3
5.8
6.2
6.5
6.7
6.6
2001 Q4
2003 Q1
100
100
78
86
21
23
Non-financial corporations
Total
Debt
Quoted
shares
Total
Loans
Debt Pension
fund
Taken securities
reserves
from euro
area MFIs
5
6
7
8
9
10
11
Annual growth rate (%)
11.7
7.2
9.7
9.4
8.1
14.7
5.1
4.3
7.3
8.8
14.5
15.1
10.9
16.4
4.9
4.2
6.9
9.1
14.2
13.1
10.8
28.4
5.1
5.0
6.4
7.9
12.5
11.3
9.2
26.6
5.2
3.8
5.8
6.2
10.0
8.5
7.8
24.4
4.8
2.7
5.3
4.4
6.7
5.5
5.0
16.3
4.8
1.8
5.7
3.4
5.8
5.3
4.4
9.7
4.9
0.8
5.8
2.7
4.2
3.7
3.5
7.1
5.1
0.6
5.9
2.3
4.0
3.9
3.6
4.1
5.4
0.2
5.8
2.7
5.1
4.6
4.0
8.1
5.4
-0.2
Ratio as a percentage of main liabilities (amounts outstanding)
20
48
26
22
18
3
2
22
22
42
29
23
19
4
2
14
General government
Total Deposits
Loans
Debt
(debt)
Taken securities
from euro
area MFIs
12
13
14
15
16
2.4
1.8
1.9
2.2
2.8
4.1
4.0
4.3
4.1
4.5
7.0
4.3
4.9
5.7
8.6
12.8
13.2
13.6
12.7
11.2
-0.9
-1.5
-2.4
-1.3
-0.2
0.6
-0.5
-0.7
-2.1
-3.1
0.3
-1.0
-1.9
-0.9
-0.9
0.0
-0.6
-1.1
-1.2
-2.8
3.0
2.5
2.8
2.9
3.3
4.6
4.6
5.0
5.2
6.0
31
34
1
1
6
6
5
5
24
27
QUARTERLY MUFA
Input for monetary policy analysis
• Commentary in the ECB Monthly Bulletin
• Quarterly briefing note to the ECB
Executive Board
FINANCIAL STABILITY ANALYSIS
The ECB definition
“A condition whereby the financial system is
able to withstand shocks without giving way
to cumulative processes, which impair the
allocation
of
opportunities
savings
and
the
payments in the economy”
to
investment
processing
of
FINANCIAL STABILITY ANALYSIS
Components of macro-prudential analysis
MPIs
Financial
accounts
STRESS
TESTS
Macroeconomic data
(prices, interest and
exchange rates)
Qualitative information
(compliance with standards)
Macro-prudential
analysis
Financial
accounts
Market-based data
(stock prices,
credit ratings)
Structural information
(relative size, ownership
of corporations)
USES OF MUFA IN FINANCIAL STABILITY ANALYSIS
The contribution
• Integrated approach (sectors, instruments and
stocks/flows)
• Contribution to the general Improvement in
statistics
• Source to derive MPIs for the non-financial
sectors
• Financial innovation and its implications
• Relationship with the “real” side of the economy
USES OF MUFA IN FINANCIAL STABILITY ANALYSIS
Methodological issues
• Residency criterion
• Aggregation and consolidation
• Valuation and accrual accounting
• Maturity definition
MACRO PRUDENCIAL ANALYSIS AT THE ECB
Article 3.3 of the ESCB Statute
“Contribute
policies
authorities
to
the
pursued
relating
smooth
by
to
the
the
conduct
of
competent
prudential
supervision of credit institutions and the
stability of the financial system”
MACRO PRUDENCIAL ANALYSIS AT THE ECB
The regular outputs
• The annual macro-prudential report on the
EU banking system
• The annual report on the structural
developments of the EU banking system
• The ECB biannual Financial Stability
Review
QUARTERLY MUFA - WAY FORWARD
The future of quarterly MUFA
• Extend the current TFIs for the non-financial
sectors and ICPFs to seven sectors
• Improve the timeliness (90 days)
• Complete the instrument coverage and the link
between stocks and flows
• Sectoral accounts
• Quarterly who-to-whom system