Copyright
© 2006 International Monetary Fund
Cataloging-in-Publication Data
Financial soundness indicators : compilation guide—Washington, D.C. : International Monetary Fund, 2006.
p. cm.
Includes bibliographical references.
ISBN 1-58906-385-6
1. Financial institutions—Auditing. 2. International Monetary Fund.
I. International Monetary Fund.
HF5686.F46F35 2006
Price: $32.00
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Contents
Abbreviations
1 Introduction
Background
Some Key Aspects of the Guide
Structure of the Guide
Terminology
PART I: CONCEPTUAL FRAMEWORK
2 Overview of the Financial System
Introduction
What Is a Financial System?
Financial Corporations
Nonfinancial Corporations
Households
Nonprofit Institutions Serving Households (NPISHs)
General Government
Public Sector
Financial Markets
Payment System
Real Estate Markets
3 Accounting Principles for Financial Soundness Indicators
Introduction
Definition of Flows and Positions
Time of Recognition of Flows and Positions
Valuation
Residence
Domestic and Foreign Currencies, Unit of Account, and Exchange Rate Conversion
Maturity
4 Accounting Framework and Sectoral Financial Statements
Introduction
Accounting Framework
Sectoral Financial Statements
5 Aggregation and Consolidation of Data
Introduction
Defining Terms
The Aggregate Resident-Based Approach
The Consolidated-Based Approach
Applying Consolidated Group Reporting to the Needs of FSI Data
Specific Issues Arising from the Consolidated Approach
Compiling Consolidated Sector-Level Data
Annex. Detailed Specification of the Sector-Level Adjustments Required
PART II: SPECIFICATION OF FINANCIAL SOUNDNESS INDICATORS
6 Specification of Financial Soundness Indicators for Deposit Takers
Introduction
Financial Soundness Indicators
7 Specification of Financial Soundness Indicators for Other Sectors
Introduction
Calculation of Financial Soundness Indicators
8 Financial Markets
Introduction
Interest Rates
Securities Markets
Annex. Structural Indicators for Financial Markets
9 Real Estate Price Indices
Introduction
Measuring Real Estate Prices
Structural Indicators of Real Estate Markets
Constructing Real Estate Price Measures
PART III: COMPILATION AND DISSEMINATION OF FINANCIAL SOUNDNESS INDICATORS
10 Strategic and Managerial Issues
Introduction
Strategic Issues
Managerial Issues
11 Compilation of FSI Data: Practical Issues
Introduction
Basic Data Sources
Other Data Requirements
Availability of Data
Breaks in Data Series
Seasonal Adjustment
12 Dissemination of FSI Ratios and Related Data
Introduction
Dissemination Practices
A Framework for Disseminating FSIs
PART IV: ANALYSIS OF FINANCIAL SOUNDNESS INDICATORS
13 Financial Soundness Indicators and Macroprudential Analysis
Introduction
Why Are FSI Data Needed?
What Is the Financial Stability Framework Within Which FSI Data Can Be Used?
What Are Some Other Tools That Can Enhance the Usefulness and Understanding of FSI Data?
14 What Use Can Be Made of the Specific FSIs?
Introduction
Deposit Takers
Other Financial Corporations
Nonfinancial Corporations
Households
Real Estate Markets
15 Peer Group Analysis and Descriptive Statistics
Introduction
Peer Group Analysis
Descriptive Statistics
Appendixes
I. Survey on the Use, Compilation, and Dissemination of Macroprudential Indicators
II. Summary of Guidance for Each Financial Soundness Indicator
III. Additional Definitions of FSIs and Related Data Series
IV. Reconciliation Between the Guide’s Methodology and National and Commercial Accounting
V. Numerical Examples
VI. Remaining Issues: Provisioning, Interest Rate Risk, and Stress Testing
VII. Glossary of Terms
Bibliography
Index
Boxes
4.1. Measurement Frameworks
4.2. The Basel Capital Adequacy Ratio
4.3. Islamic Financial Institutions and Financial Soundness
4.4. The Approach to Valuation and Provisioning in the Guide
5.1. Interbank Flows and Positions
5.2. Flows and Positions in the Non-Deposit-Taking Sectors
5.3. What Is the Difference Between Data on a Cross-Border and a Domestic Basis?
8.1. Converting Bid-Ask Spreads from Yield Quotes into Price Terms
10.1. Managing Data Compilation Systems
11.1. Relationship Between Monetary and Financial Statistics and FSIs
12.1. Illustrative Points for Items to Be Covered in the Metadata
13.1. Using Interbank Stress Testing to Assess Systemic Risk
A2.1. FSIs: Index of Summaries
A3.1. The International Standard Industrial Classification of All Economic Activities (ISIC)
A6.1. U.S. Loan Classification System (Commercial Bank Examination Manual)
A6.2. Loan Classification System of Japanese Financial Supervisory Agency
Tables
1.1. Financial Soundness Indicators: The Core and Encouraged Sets
4.1. Deposit Takers
4.2. Other Financial Corporations
4.3. Nonfinancial Corporations
4.4. Households
5.1. Schematic Presentation of Levels of Consolidation
5.2. Sector-Wide Data: Consolidating Income and Expense as Well as Balance Sheet Items
6.1. Deposit Takers: Financial Soundness Indicators
6.2. Net Open Position in Foreign Currencies
6.3. Example of Measuring the Net Open Position in Foreign Exchange
6.4. Future Cash Flows Arising from Financial Derivative Contracts by Maturity
8.1. Stage of Development in Domestic Financial Markets for a Hypothetical Country
8.2. Example of Data Request During an FSAP
9.1. Quantities and Prices of Real Estate
11.1. Domestic Deposit Takers: Series Not Covered in National Accounts Methodology
11.2. Domestic Deposit Takers: Intrasector Positions and Flows
11.3. Domestic Deposit Takers: Other Intragroup Positions and Flows
11.4. Domestically Controlled Deposit Takers: Intergroup Positions and Flows (Cross-Border Consolidated Data)
11.5. Other Financial Corporations: Additional Data Series
11.6. Nonfinancial Corporations: Series Not Covered in National Accounts Methodology
11.7. Nonfinancial Corporations: Additional Data Series
11.8. Example for Computing Changes in Capital Adequacy Ratio Given the Changes in Population of Reporting Banks
11.9. Deposit Takers’ Income and Expense Statement and Balance Sheet
11.10. Nonfinancial Corporations’ Income and Expense Statement and Balance Sheet
11.11. Households’ Income
12.1. Illustrative Presentation of Financial Soundness Indicators
12.2. Illustrative Presentation of Structural Indicators for the Domestic Financial Sector
13.1. Basel Core Principles Containing Information Relevant to the Interpretation of FSIs
15.1. Example of Computing the Herfindahl Index
15.2. Example of Computing the Gini Index
15.3. Dispersion Statistics of Capital Asset Ratios (Equal-Weight Approach)
15.4. Dispersion Statistics of Capital Asset Ratios (Weighted-by-Contribution Approach)
15.5. Extensions of Dispersion Statistics of Capital Asset Ratios (Equal-Weight Approach)
15.6. Statistics of Capital Asset Ratios, by Range
15.7. Statistics of Capital Asset Ratios, by Percentile
15.8. Transition Matrix for One-Year Transitions Among Percentiles of the Distribution of Return on Capital
15.9. Analysis of Tails of the Distribution by Industry Classification
A1.1. FSIs by Type of Economy
A1.2. Group II FSIs by Type of Economy
A3.1. Calculating the Hui-Heubel Ratio
A3.2. Deposit Takers: Memorandum Series
A3.3. Other Financial Corporations: Memorandum Series
A3.4. Nonfinancial Corporations: Memorandum Series
A5.1. Income and Expense Statements: Deposit Takers—Aggregated Data
A5.2. Balance Sheets and Related Material: Deposit Takers—Aggregated Data
A5.3. Financial Soundness Indicators: Deposit Takers—Aggregated Data
A5.4. Recording Gains and Losses on Traded Instruments: Case 1
A5.5. Recording Gains and Losses on Traded Instruments: Case 2
A5.6. Recording Gains and Losses on Traded Instruments: Case 3
A5.7. Recording Gains and Losses on Traded Instruments: Case 4
A5.8. Recording Gains and Losses on Traded Instruments: Case 5
A5.9. Treatment of Interest on Nonperforming Loans: Case 1
A5.10. Treatment of Interest on Nonperforming Loans: Case 2
A5.11. Treatment of Interest on Nonperforming Loans: Case 3
A5.12. Interbank Positions and Flows
A5.13. Other Intragroup Positions and Flows
A5.14. Income and Expense Statements: Deposit Takers—Sector-Level Consolidated Data (Domestic Consolidated Data)
A5.15. Balance Sheets: Deposit Takers—Sector-Level Consolidated Data (Domestic Consolidated Data)
A5.16. Intergroup Positions and Flows (Cross-Border Consolidated Data)
A5.17. Income and Expense Statements: Deposit Takers—Sector-Level Consolidated Data (Cross-Border Consolidated Data)
A5.18. Balance Sheets: Deposit Takers—Sector-Level Consolidated Data (Cross-Border Consolidated Data)
A5.19. Consolidation of Sector-Wide Capital: Base Case
A5.20. Consolidation of Sector-Wide Income and Capital: Unrealized Valuation Gains—Case 1
A5.21. Consolidation of Sector-Wide Income and Capital: Unrealized Valuation Gains—Case 2
A5.22. Consolidation of Sector-Wide Income and Capital: Realized Valuation Gains—Case 1
A5.23. Consolidation of Sector-Wide Income and Capital: Realized Valuation Gains—Case 2
A5.24. Goodwill and Sector-Wide Capital: Purchase with Cash
A5.25. Goodwill and Sector-Wide Capital: Purchase by Issuing Shares
A5.26. Income and Expense Statements: Nonfinancial Corporations—Sector-Level Consolidated Data
A5.27. Balance Sheets: Nonfinancial Corporations—Sector-Level Consolidated Data
A5.28. Financial Soundness Indicators: Nonfinancial Corporations—Sector-Level Consolidated Data
A6.1. Levels of Provisions for Different Loan Classifications
A6.2. Interest Rate Risk
A6.3. Example of Gap Analysis
A6.4. Interest-Rate-Sensitive Assets and Liabilities with a Time to Repricing of One Year or Less
A6.5. Duration (D) of a Six-Year Eurobond with 8 Percent Coupon and Yield
A6.6. Portfolio Duration
A6.7. Sector-Level Duration
A6.8. Duration (D*) When the Yield Curve Is Upward Sloping
Figures
8.1. Market Depth and Tightness
13.1. Analytic Framework for Financial Stability
15.1. Distribution of Observations
15.2. Distribution of Ratios by Weight
15.3. Distribution of Capital Asset Ratios by Number of Institutions and by Weight
15.4. Percentiles of Distribution of Return on Equity
15.5. Coincidence of Financial Soundness Indicators
A1.1. Average Number of FSIs Compiled and Disseminated, by Type of Economy
Abbreviations
AAOIFI | Accounting and Auditing Organization for Islamic Financial Institutions |
BCBS | Basel Committee on Banking Supervision |
BCLP | Bank Loan Classification and Provisioning Practices in Selected Developed and Emerging Countries (Laurin and Majnoni, 2003) |
BCPs | Basel Core Principles |
BIS | Bank for International Settlements |
BPM5 | Balance of Payments Manual, fifth edition (IMF, 1993) |
CAMELS | Capital adequacy, asset quality, management soundness, earnings and profitability, liquidity, and sensitivity to market risk |
CFC | Consumption of fixed capital |
CPLG | Basel Core Principles Liaison Group |
DQAF | Data Quality Assessment Framework (IMF) |
EBIT | Earnings before interest and tax |
ECB | European Central Bank |
ERGD | Expected recovery given default (BCBS) |
EWS | Early warning system |
FC | Funds contributed by owners |
FSAP | Financial Sector Assessment Program |
FSF | Financial Stability Forum |
FSI | Financial Soundness Indicator |
FSIM | Financial services indirectly measured |
G-10 | Group of Ten |
GDDS | General Data Dissemination System |
GDP | Gross domestic product |
GFSM | Government Finance Statistics Manual (IMF, 2001a) |
GNF | Global note facility |
HHR | Hui-Heubel Ratio |
IAS | International accounting standard |
IASB | International Accounting Standards Board |
IBS | International banking statistics (BIS) |
IFI | Islamic financial institution |
IFRS | International Financial Reporting Standard (IASB) |
IFSB | Islamic Financial Services Board |
IIF | Institute for International Finance |
IMF | International Monetary Fund |
IRB | Internal Ratings Based (BCBS) |
ISIC | International Standard Industrial Classification of all Economic Activities |
LGD | Losses given default |
LoCs | Letters of credit |
MFSM | Monetary and Financial Statistics Manual (IMF, 2000a) |
NIF | Note issuance facility |
NPISHs | Nonprofit institutions serving households |
NPLs | Nonperforming loans |
ODC | Other depository corporation |
OFC | Other financial corporation |
OTC | Over-the-counter |
PD | Probabilities of default |
PLS | Profit and loss sharing |
RAROC | Risk-adjusted return on capital |
Repo | Repurchase agreement |
ROA | Return on assets |
ROE | Return on equity |
RTGS | Real Time Gross Settlement |
RUF | Revolving underwriting facility |
SDDS | Special Data Dissemination Standard (IMF) |
SDRs | Special drawing rights |
SIC | Standard Industrial Classification |
SIR | Spread between the highest and lowest interbank rate |
SLDR | Spread between reference lending and deposit rates |
1993 SNA | System of National Accounts 1993 (Commission of the European Communities and others, 1993) |
SPE | Special purpose entity |
SPV | Special purpose vehicle |
WAMU | West African Monetary Union |