Guide to the international financial statistics

Introduction A revised version of this paper has been released in July 2009. The origins of BIS activities in the field of international financial statistics go back to the mid-1960s and the emergence of the so-called eurocurrency markets that had sprung up to circumvent domestic regulations. At that time the key policy concern that gave rise to the joint data collection exercise by the central banks of the G10 countries under the aegis of the BIS was the need to monitor the rapid growth of these markets and its possible monetary implications. This led to the introduction of reporting by internationally active banks of their international positions in major individual currencies, with a geographical and partial sectoral breakdown. On the basis of these reports the central banks and the BIS compiled the so-called locational banking statistics for various lending and borrowing countries. In the subsequent years, the issue of recycling the current account surpluses of oil-producing countries shifted the emphasis in favour of a more detailed geographical breakdown and of flow data. In the context of the deregulation of domestic financial systems and capital flows in the 1970s and 1980s these concerns abated, but in their place came others, notably the rise in the indebtedness of many developing countries to international banks in the early 1980s. This build-up was visible in the existing locational banking statistics collected and published by the BIS, but it was not possible to evaluate in a comprehensive way the risk characteristics of the exposures of national banking systems to individual borrowing countries. The need for such information therefore led to the reporting of a second set of international banking data on a fully consolidated basis. A maturity breakdown of the consolidated banking claims was also introduced at that time. In response to calls for more up-to-date information on the international lending activities of banks, the BIS began in the early 1990s to collect and publish data on signed syndicated credit facilities. More recently, with the objective of enhancing the analysis of country risk exposures, efforts have been made to achieve a more complete and detailed reporting of consolidated banking data on an ultimate risk basis, including off-balance sheet positions relating to bank's derivatives transactions. As a result of the increasing role of the international securities markets in global financial intermediation, the BIS was mandated in the mid-1980s to collect and publish statistics on these markets on the basis of data from commercial databases and information available to individual central banks. In the 1990s the BIS also became increasingly involved in the coordination of joint surveys that central banks carried out on a regular basis to monitor activity in global foreign exchange markets. Moreover, as derivatives markets expanded in the wake of financial innovation, central banks asked the BIS to collect and publish international data on exchange-traded and over-the-counter derivatives transactions. The development of the BIS international financial statistics thus reflects evolving central bank concerns relating to monetary and financial stability in the context of worldwide financial market deregulation, innovation and globalisation. In addition to their use for policy-related monitoring purposes by central banks, the international financial statistics have meanwhile proved to be of interest to private sector market participants. The latter have come to recognise the unique value of the BIS data for tracking the borrowing by emerging market countries from the international banking and securities markets. The BIS data are also used by the IMF in the compilation of its international financial statistics and in its surveillance of individual economies. Moreover, the BIS data have proved to be useful for improving balance of payment statistics and for measuring and monitoring developing countries' foreign debt. With respect to the latter, following the 1997 Asian debt crisis the IMF, OECD, World Bank and BIS pooled their respective statistics to collectively publish data from creditor and market sources on countries' foreign indebtedness. Apart from providing insights into the geographical distributions of international financial flows and external vulnerabilities and risk exposures of debtors and creditors, the international financial statistics collected and disseminated by the BIS contain important information on the structural developments in international financial markets. They can be used, for instance, to analyse the importance of individual financial centres (including so-called offshore centres), the emergence of new relationships between financial and non-financial firms, the level and concentration of activity in financial markets as well as spillovers between different market segments. Much of this is not easily available elsewhere. The statistics become even more valuable when they are combined with other sources covering financial asset prices, market liquidity and trading patterns, external ratings, and the activity of non-bank financial firms and non-financial companies. They then allow market participants and policymakers to make an assessment of credit and liquidity risks in domestic and international financial markets as well as of potential vulnerabilities to systemic disturbances in these markets. The usefulness of the international financial statistics is, of course, potentially affected by the fact that the boundaries between international and domestic markets are becoming more blurred. This could, on the one hand, constitute a weakness of the statistics as it may become increasingly difficult to define and distinguish pure international financial market activity from that in domestic markets. On the other hand, as this guide explains and illustrates, the methodology of the international statistics has tried to keep pace with such developments and to ensure that financial analysts are aware of the limitations of the statistics. Moreover, given that financial innovations have often started in the competitive environment of the international financial markets and that market sentiments are becoming increasingly correlated internationally, the BIS statistics have been and continue to be a very useful tool to capture structural and market developments in global markets at an early stage. The BIS, and the central banking community working through it, have also taken steps to complement the publication of the international financial statistics with a selection of highlights and analyses of major market trends. In the case of the BIS this applies to the press releases accompanying the release of new data; to the BIS Quarterly Review, which contains more in-depth analysis of specific issues, and to its Annual Report, which analyses long-term trends and emerging policy issues. The statistics are also mentioned and explained regularly in presentations by senior BIS officials to central banks, market participants and academics. Other initiatives to promote the use of the statistics include making them available in electronic form on the BIS website and updating the guidelines and methodological notes on a regular basis. Work on collecting, compiling and disseminating the BIS international financial statistics is closely related to, and guided by, the activities of the various Basel-based committees and expert groups as well as those of other international institutions. The Committee on the Global Financial System (CGFS) plays a key role in reaching a consensus on priorities to improve the BIS statistics. With respect to international banking data, the Basel Committee on Banking Supervision (BCBS) is consulted on methodological issues to help ensure the collection of adequate statistical information from internationally active banks on risk exposures. The Financial Stability Forum (FSF) has also formulated a number of recommendations to enhance statistics on international financial markets and capital flows that are taken into account by the BIS in its statistical work. As a result of the strong support of these groups it has been possible to improve on the reporting frequency and timeliness of the international financial statistics in recent years. One of the major underlying objectives of the various Basel-based groups is to strengthen financial stability through transparency and market discipline. Increased public disclosure plays a key role in this and should, over time, lead to better quantitative and qualitative information on the activities and risk profiles of individual institutions as well as market infrastructures such as payment, settlement and trading systems. With respect to the functioning of domestic and international financial markets, various proposals have been made to complement the BIS statistics on banking, securities, foreign exchange and derivatives markets over time by improved aggregate information on liquidity, leverage and position-taking in these markets. More recently the IMF has been elaborating a methodology for the collection by individual countries of comprehensive financial soundness indicators, which should complement the BIS statistics. The disclosure framework on the exposures and capital structure of internationally active banks proposed under the New Basel Capital Accord (its so-called Pillar III) should contribute to better balance sheet data of individual internationally active banks. This Guide is structured around the three main areas of the BIS international financial statistics: the international banking statistics (Part II); the securities statistics (Part III); and the derivatives and foreign exchange statistics (Parts IV and V). It also provides a description of the joint BIS-IMF-OECD-World Bank statistics on external debt for which the BIS is a main contributor of data (Part VI). The guide provides a detailed description of the sources, compilation, transformation and publication of the data. Two separate chapters on the quality and the uses of the statistics (Parts VII and VIII) follow the description of the statistics. A more detailed description of the BIS international banking statistics and their underlying methodology is provided in a separate guide. This Guide has been prepared by Paul Van den Bergh, Rainer Widera, Karsten von Kleist, Jesper Wormstrup and others in the Monetary and Economic Department of the BIS. Chapter VIII draws largely on an article by Philip Wooldridge.