11.1 This chapter provides practical guidance on strategic and management considerations about the compilation of FSIs and dissemination practices, which can be adapted to meet specific country circumstances.
1.1 This 2019 Financial Soundness Indicators Compilation Guide (Guide) provides guidance on the concepts and definitions, data sources and methods for the compilation and dissemination of financial soundness indicators (FSIs). (Table 1.1 contains the set of core and additional FSIs.)
12.1 Financial soundness indicators for a sector may hide variations that could endanger the entire financial system. For example, the sector-wide capital-asset ratio for deposit takers is an average ratio for the system, but it does not reveal whether individual institutions’ capital ratios are clustered around the average value or are spread over a wide range. Moreover, data for highly capitalized deposit takers could offset the data for undercapitalized deposit takers, such that the aggregate ratio may appear robust while masking significant vulnerabilities from weak deposit takers whose failure could lead to contagion throughout the system. For this reason, FSIs need to be supplemented by concentration and distributions measures (CDMs).
13.1 This chapter provides an overview of the use of FSI data in macroprudential analysis. It begins with a brief review of approaches to financial stability analysis, macroprudential frameworks and macroprudential policies, and the role that FSIs can play in the supporting analysis. It continues with a more detailed discussion of the potential and current use of FSIs in macroprudential analysis, and a brief overview of related analytical approaches that commonly employ FSIs as inputs or outputs. The chapter concludes with a summary of key points.
2.1 This chapter starts by defining institutional units (as holders and issuers of financial assets) and classifying them into sectors following the overarching macroeconomic statistics principles in the 2008 System of National Accounts (2008 SNA). Subsequently, the concept of residence is used to establish the economic boundary for compiling FSIs. It determines the foreign/domestic breakdown of assets and liabilities of financial corporations (FCs). Next, resident institutional units are classi-fed into institutional sectors and subsectors. This allows the presentation of FCs’ claims on and liabilities to the different sectors of the domestic economy. Finally, the chapter identifies and defines the main types of players and markets that typically constitute a financial system.
3.1 This chapter discusses prudential standards relating to capital and liquidity developed by the Basel Committee on Banking Supervision (BCBS)— the international standard setter for banks—which are relevant to compiling FSIs.1 An overview of the concepts and key terminology is provided, but much of the technical detail, which will not in the normal course be required by compilers, has been omitted. Compilers requiring additional detail are referred to the publications of the BCBS.2