The sectoral accounts provide an overview of the whole economy…

bringing together the current, capital, nonfinancial and financial accounts by economic sector, for both flows and stocks. This is the complete framework of the national accounts and is an immensely powerful analytical tool. In a few sentences it is not feasible to bring out all the benefits of a fully integrated set of sectoral accounts.¹⁰ The sectoral accounts allow for the construction of many indicators of vulnerability that the global crisis highlighted. These include household debt to income, or the relative shift in activity of financial institutions, such as from banks to non-banks, while sectoral accounts also provides a tool for analyzing the link between the real and financial economies, a link that was highly potent during the global crisis. The relevance of this dataset is such that a sectoral balance sheet is one of the nine data categories¹¹ prescribed in the SDDS Plus¹².

While the sectoral accounts system has existed for some time, the global crisis, and its aftermath, demonstrated the need for an internationally coordinated effort to collect these data on a quarterly frequency. This work, under Recommendation 15 of the DGI, is now being actively taken forward by the IAG, and is being undertaken as countries implement the System of National Accounts 2008 (2008 SNA) or the new European System of Accounts (ESA 2010).

Perhaps most significant is that there is a longer-term vision being developed out of these recommendations. Over time the idea is to extend the sectoral accounts to the so-called flow of funds from-whom-to-whom data, that is who holds whose financial instruments within the domestic economy and with the rest of the world. The link to the rest of the world comes through some of the datasets described ahead: International Investment Position (IIP), the BIS International Banking Statistics (IBS), the IMF’s Coordinated Portfolio Investment Survey (CPIS) and Coordinated Direct Investment Survey (CDIS).

The vision is ultimately to develop from-whom-to-whom data both domestic and across border. With consistent definitions and concepts used in the sectoral accounts and in the cross-border surveys discussed above, such data would prove very powerful analytical tool, and provide the link to the real economy. If successful the analyst would be able understand and analyze the financial linkages within sectors of an economy and with other economies. For example with information on the exposure of their banks to securities of nonbank financial institutions in another economy, if the latter run into trouble, the analyst could monitor how this event might affect the banks’ balance sheets and the IIP, and then through the behavior of the banks how this event might impact other sectors in the domestic economy and the real economy. It is a vision with some ambition and a long way to go, but it is worth pursuing.

It is also worth noting that policy makers and those concerned with financial stability have a growing interest in the well-being agenda. This agenda focuses on the economic circumstances of individuals: income, consumption, wealth, and quality of life. For instance the OECD has launched the “Better Life Initiative.”¹³ Not only are policy makers increasingly recognizing the need for inclusive growth policies, but the global crisis highlighted the potential vulnerabilities of the distributional effects of economic development. Looking at averages in the household sector may mask vulnerabilities at different income strata.

The OECD and Eurostat set up two expert groups in early 2011 with member country participation to look into the distributional information issue, and to address Recommendation 16 of the DGI. One group is investigating the measurement of disparities between the national accounts framework and micro household surveys, defining a common methodology and implementing pilot studies. The other group is to investigate the joint distribution of income, consumption, and wealth using existing national accounts and related data. While these data can be important for financial sector analysis, the development work is still at an early stage and so for this reason such data were not considered for inclusion in the SDDS Plus.

The government is a major player in any economy…

yet the global crisis and aftermath highlighted the rather surprising weakness of government finance statistics. In developing the Principal Global Indictors (PGI) website (see ahead), the only sector for which comparable data for at least a minimum set of economies were not initially available was government finance statistics. Further comparable cross country data on government debt were also lacking.

Indeed as has been evident in the aftermath of the crisis, in particular where fiscal dominance is significant, the perception of misleading or even just poor government finance data can have a significant negative impact on financial stability both in the country and other countries through spillover effects. Further, the often close ties between the government and the financial sector can lead to a negative sovereign-bank feedback loop: financial sector problems can lead to bailouts by government, and the financial sector can have large exposures to governments (such as through security holdings, often encouraged by regulatory policy) that are facing fiscal stresses. High and rising levels of government debt can lead to concerns over fiscal sustainability, growth, and broader issues of financial stability given the significant role government plays in an economy.¹⁴

Almost all governments have well-developed national budget data formats, but these have variations such as institutional coverage, classification, and consolidation, that can make international comparisons difficult. While the policy focus on government and public sector debt has greatly increased as a result of the crisis, national debt figures show differences because of several factors, including different consolidation methods, valuation, and institutional and instrument coverage. Users of data may not be fully aware that the partial data to which they are accustomed are incomplete not least because of the terminology used to describe the data released.¹⁵

In some instances, governments appear reluctant to release comparable transactions data on a quarterly frequency and this, combined with an absence of comparable quarterly general government or more broadly public sector debt data, is a significant lacuna among economic and financial statistics.

Recommendation 17 of the DGI is focused on encouraging governments to disseminate general government finance statistics, based on a common framework, the Government Finance Statistics Manual 2001 (GFSM 2001). The concepts underlying this framework are consistent with the sectoral accounts, so allowing comparability with the data for other sectors of the economy; one sector’s surplus is another sector’s deficit. IMF staff reports are now adopting a standardized presentation of fiscal data following the GFSM 2001.

Under Recommendation 18 of the DGI, the World Bank, in cooperation with IMF and OECD, is hosting public/government sector debt data for multiple countries, so providing debt data in a single convenient place and format, following the approach used for the external debt data and the PGI databases.¹⁶ These data are consistent in approach not only with the sect oral accounts but also with the external debt statistics, so the government’s external debt forms one part of the larger picture of an economy’s external debt.

The IMF Executive Board has recognized the importance of comprehensive and frequent government operations and debt data for monitoring and assessing the fiscal performance by prescribing quarterly general government operations and general government gross debt data in the SDDS Plus on a quarterly frequency.

Cross-border developments can impact the economy in various ways…

so the new edition of the Balance of Payments and International Investment Position Manual (BPM6) gives an equal focus to the International Investment Position (IIP) as to the traditional balance of payments transactions accounts.

The equal focus on the stock and flows (transactions, revaluations, and other changes in volume) in BPM6 highlights another important story—the need to reconcile stocks and flows. While the traditional focus has been on transactions, and particularly the current account balance, the recent global crisis highlighted the role of valuation changes, particularly foreign security prices, in transmitting the crisis across border.

Further, the structure of the IIP, combined with its currency composition (a core element of the IIP in BPM6) data can give warning signs of vulnerability, such as growing foreign currency debt exposures of nonfinancial corporations, and rising short-term debt, and help estimate the likely impact of a currency appreciation or depreciation on the net external position.¹⁷ Bilateral cross-border position data such as from the BIS IBS, CPIS and CDIS can provide information to policy makers on the “upstream” and “downstream” exposures (see section B for more details).¹⁸

In short, the channel through which the growing exposures to the rest of the world will primarily affect the domestic economy is the IIP, be it through transactions, either current or financial account, or valuation, through changes in market prices and exchange rates, or other flows, such as debt write-offs. There are clear analytical benefits in using the integrated system of stocks and flows to understand which sectors gain and which sectors lose value during a financial crisis, and how the loss in value is funded.¹⁹ As with government finance statistics, the concepts underlying the IIP are the same as for the sectoral accounts.

The IMF is working closely with countries to increase the number of IIP reporters, particularly on a quarterly frequency. Recent years have seen a sharp jump in such reporters, but more work is needed to incorporate the enhancements in BPM6, including currency composition information and the identification on nonbank financial institutions (Recommendation 12 of the DGI). The importance of quarterly IIP data is increasingly recognized by countries, and by the IMF Executive Board in prescribing quarterly IIP in the SDDS, with a transition date until September 2014.

Domestic monetary conditions are relevant for macro-prudential and macro-economic policy makers…

so monetary and financial statistics have been and continue to be an integral dataset of macro-economic statistics. Well developed in many economies, their link to the DGI comes through their input into the Balance Sheet Approach²⁰ in Recommendation 15 of the DGI. Increasingly these data are directly relevant for macro-prudential analysis. Work at the BIS has demonstrated that a sharp growth in the credit to GDP ratio in a country can be a leading indicator of banking crisis,²¹ while data on credit to individual economic sectors can provide warning of emerging risks and vulnerabilities, not least if the borrowing is foreign currency denominated. Furthermore, work on measuring global liquidity, drawing on but beyond the traditional monetary aggregates, is underway at the IMF and BIS, to help policy-makers assess better the build-up of risks in and the performance of the financial system.

At the present time, the IMF Statistics Department is updating the Monetary and Financial Statistics Manual (MFSM) and the update will take account of the growing financial stability needs, not least with regard to: globally-agreed measures of, money, credit and liquidity; nonbank financial institutions and the links between these institutions and deposit-takers; and the links to flow-of-funds and financial balance sheets.

The SDDS prescribes data on the analytical accounts of both the banking sector and the central bank. Because of the growing importance of the subsector for financial stability analysis, the SDDS Plus prescribes data on the nonbank financial institutions sector, with coverage following the MFSM guidelines.

The soundness and health of financial institutions needs monitoring

In the late 1990s, as it became clear that data to monitor the system-wide strength of the financial sector and its customers were not available, the international community started the project on financial soundness indicators (FSIs). In short, the question asked was how risky is the financial sector on a system-wide basis as measured by standard supervisory measures?

The FSI indicators developed cover capital adequacy, asset quality, earnings and profitability, liquidity, and sensitivity to market risk, and inevitably are largely drawn from supervisory statistics, with definitions, including consolidation, based on supervisory standards which are not always comparable across countries. So this dataset, one of the first to be developed specifically to meet financial stability policy needs, brought financial statisticians into contact with supervisors and supervisory-based data.

The regular reporting by countries of FSIs to the IMF was up and running around the time the global crisis struck. A web-based database is available on the IMF website covering over 70 economies (see http://fsi.imf.org); FSI data for over 100 countries for selected FSIs are linked to the GFSR; and increasingly a table of FSIs is included in IMF Article IV reports.

The general consensus is that FSIs, although backward looking, are good indicators of current developments and essential to monitoring the current health of the financial sector.²² FSI analysis using systematically collected and disseminated data are suited to flag issues for follow-up, not only on individual institutions (micro-prudential) but also on aggregate for systems (macro-prudential). In the wake of the global crisis, there is a need to review the list, particularly in the context of Basel III and with regard to nonbank financial institutions, encourage more countries to provide FSIs, and promote quarterly reporting (Recommendation 2 of the DGI). This work is underway.

The IMF Executive Board has recognized the need for countries that intend to adhere to the SDDS Plus to provide a set of core FSIs, including residential real estate prices.²³ Further, while the consolidation approaches are not always identical, there does appear scope for more cross-dataset analysis between monetary and FSI data. For instance, the linkages that could be explored include that between credit growth and capital ratios, and between credit growth and nonperforming loans to gross loans, and return on assets. Such cross-exploration is an avenue that financial stability analysts may find increasingly fruitful to explore. It would directly link macro-economic, micro-prudential, and macro-prudential analysis, and could help in the assessment of the interaction between monetary and macro-prudential policies.

One drawback of FSIs has been the lack of cross country comparability. This is an issue which is being addressed in the updated FSI Compilation Guide. But the inclusion of FSIs in the SDDS Plus could also be seen as an opportunity to enhance comparability of key FSIs across countries as a medium-term objective.

Within the context of the FSI work, the crisis also threw up concern over tail risks. As occurred in some economies, institutions at the tail of a distribution, because of the manner in which they are connected to the rest of the financial system, or because of the type of market or markets they are in, or simply their size, caused system-wide disturbances when they failed. Thus, Recommendation 3 of the DGI promotes work on getting a better handle on tail risks, with the intention of strengthening the monitoring of the financial sector through FSIs. The initial work on this recommendation has been of a conceptual nature.²⁴

Real estate developments can have economy-wide implications…

yet despite the central role of real estate property to financial and economic developments, remarkably, reliable data on real estate prices are often lacking, both residential and commercial prices. The relevance for financial stability analysis is self-evident as an exposure to property prices has been a common factor in many financial sector crises over many years, while property prices are also increasingly relevant for macroeconomic policy because of the direct and indirect links to economic growth through consumption and the wealth effect. Valuation of nonfinancial assets is also an important component of sectoral balance sheets, not least for the household sector.

The international community led by Eurostat has produced an internationally agreed methodology for compiling residential real estate prices,²⁵ and similar work has started on commercial real estate prices.²⁶ The BIS is collecting data on real estate prices from central banks and re-disseminating the data on their website, and the European Central Bank is publishing residential property prices (Recommendation 19 of the DGI). ²⁷ As noted above, residential real estate prices are prescribed within the list of FSIs included in the SDDS Plus.

Global Systemically Important Financial Institutions (G-SIFI) are a special class of institution…

as the global crisis and its aftermath revealed. These institutions fall into the “too-big-to-fail” category, dominating global financial markets.

Monitoring G-SIFI activity is necessary for global financial stability purposes, as the global crisis demonstrated that when these institutions get their investment strategy wrong it has global economic and financial repercussions. This global reach has been recognized by the Basel Committee on Banking Supervision (BCBS) in requiring additional capital for the list of Globally Systemically Important Banks G-SIBs that the BCBS has defined. The G-20 Finance Ministers and Central Bank Governors have endorsed this approach as part of a comprehensive framework to reduce the risks posed by G-SIFIs.³⁰

As articulated in an IMF staff policy position note³¹ the global crisis revealed a lack of consistent and comparable data on these institutions’ exposures to national markets and sectors. Published bank level data are neither sufficiently granular nor comparable across countries. On the other hand, analyzing systemic risks in international banking, and taking a global view of interconnections requires granular data at the individual bank level, as common exposures to a particular assets class or funding source are easily masked in aggregate data.³²

It became evident during the crisis that supervisors and macro-prudential analysts were unaware of the linkages between G-SIFIs not least because of the different nationalities of institutions involved. These concerns prompted the work of the FSB working group on recommendations 8 and 9 in the DGI.³³

Templates are being developed to address these limitations. The institution-to-institution (I-I) template essentially provides data on the bilateral counterparts of G-SIFIs. This builds on an existing supervisory arrangement, and is intended to help identify common exposures and funding risks. The data will support the work of the BCBS on risk concentration.

The institution to aggregate data (I-A) template essentially provides information on G-SIFIs exposures to countries, sectors and instruments. The data are to be captured on a consolidated basis with counterparty data on both an immediate (residence-based) and ultimate risk basis. Like other initiatives, it is building on existing frameworks, such as the BIS’s IBS model, as far as possible but with increased granularity.

Once final decisions are made on the templates by the FSB Plenary, they will be phased in over the next 2 to 3 years. While the focus initially is on global systemically important banks, at a later stage global systemic non-banks will also be considered for coverage under this initiative.

International banking statistics are essential to understanding cross-border financial linkages…

and so the BIS’s IBS long standing data collection of cross border international banking positions have been used by policy makers and other analysts for many decades. There are two main sets, residence based and consolidated data (http://www.bis.org/). In the wake of the global crisis, the BIS and its member central banks have seen the need to strengthen these datasets, not least by providing a stronger link between the two datasets.

In enhancing the residence based data by asking for a more detailed breakdown of the residence data by nationality of banks (e.g., the separate positions of Germany, UK, U.S., and other banks in France), the BIS can build up a comprehensive picture of international banking not only from a global consolidated nationality viewpoint but also from a residence viewpoint.

What is the need? Because different structures of banking activity can result in differing reactions of banks to shocks, with feedbacks to both home and host economies. In the crisis it became clear that banks of a certain nationality or nationalities based in one country might undertake operations, such selling local currency and buying dollars, due to events in other parts of the organization and not due to local circumstances. Or, local banks in a group can be differently affected if they are funded largely by local deposits or by borrowing from their parent or other entities with the group. In addition some host supervisors might limit the extent to which local subsidiaries can transfer funds back to their parent. So both location and nationality, matter.³⁴

The BIS and member central banks are strengthening both residence and consolidated -based data with more granular sectoral, instrument, and other breakdowns, with instruments and sectors consistent with national accounts definitions. The enhancements are expected to be reflected in the IBS data over the coming few years, and, inter alia, should support efforts to better monitor maturity and currency mismatches among international banks. These enhancements help address Recommendation 11.

Among the enhancements is a more detailed breakdown by sector, including the identification of non-bank financial institutions. This will allow a better understanding of the linkages between banks and nonbank financial corporations, not least help in identifying their funding sources. With more information on the cross-border portfolio investments of such institutions (see the CPIS ahead), and on domestic investments through the sectoral balance sheet information, a better picture of the funding and investment strategies of nonbank financial institutions, not least those in the advanced countries, should emerge.

During the global crisis some financial institutions were exposed with little capital to cover losses, as they had increased leverage to boost profitability. As work at the BIS has shown, before the crisis there was evidence of institutions borrowing in the short-term wholesale markets to fund long-term positions, in foreign currency.³⁵ The drying up of liquidity in dollar markets, in particular, caused severe financial strains in European banks that were only resolved by the swap lines between the U.S. Federal Reserve and central banks in Europe.

So there is policy interest in a better understanding of maturity mismatches and leverage in the financial system (the subject of Recommendation 4 of the DGI). For banks the BIS’s IBS is the main data source and the enhancements coming over the next few years should provide data that would further help track developments. There is a similar interest in maturity mismatches and leverage for shadow banks, although this work is even more conceptually challenging than for banks, with available information very limited. Work is being conducted at the IMF and in the shadow banking task force of the FSB (see ahead).

Cross-border securities investments have been an increasing source of finance…

tracked by the CPIS. The survey, coordinated by the IMF, provides data on the holdings of securities (equity and bonds), by country by counterpart issuer, that is, say U.S. resident’s holdings of securities issued by Canadian residents. After an initial survey with reference to end 1997, the CPIS has been conducted annually since 2001. For a long time the CPIS data were somewhat of an undiscovered treasure for policy makers and other users (e.g., the build-up of European investments in U.S. securities during the middle years of the 2000s was clearly evident in the CPIS data but was not picked up by analysts).³⁶

One explanation of the relative obscurity was that the CPIS was an annual exercise with a year’s delay in the release of the results. In other words, too many analysts considered it out of date data even when released. Providing data on cross-border security holdings across the whole economy is a large undertaking, which explains the delay.

With the support of the IMF Committee on Balance of Payment Statistics (BOPCOM), a decision has been made to make the CPIS a semi-annual survey, available within nine months of the reference period. This helps address Recommendation 11 of the DGI. These enhancements are expected to be implemented with reference to June 2013. The work on securities statistics mentioned ahead may help speed up the process, particularly if the approach of attributing security holdings and issuance by using a database that holds details of individual securities (so-called security-by-security database) becomes more prevalent. However, security-by-security database is a project with high costs as well as high benefits.

Users have become more interested in the CPIS, and are asking for further breakdowns. Data on holdings by economic sector and the currency composition of the securities held, which also supports the work on the currency composition of the IIP, and would be supported by a security-by-security database, are already voluntary items. In the wake of the global crisis users are requesting a better understanding of resident’s security holdings by sector of issuer—which sector’s liabilities in country x do my country’s residents hold. Going further, users are asking for data by sector of holder and issuer (e.g., are my banks exposed to government debt of the U.S.?). On a voluntary basis the IMF is adding templates to the CPIS that would provide data on a from-whom- to-whom basis for the 25 economies that are considered by the IMF to have systemically important financial sectors.

More generally, there is a need to expand the country coverage of the IBS and the CPIS surveys. Country coverage is generally very good, but some significant financial centers do not participate. This is the subject of Recommendation 10 of the DGI. This is an important gap to fill because the implications of financial interconnections are global in nature, and they can only truly be monitored through reliable data. The more extensive the coverage of the significant centers, the better the data from these surveys.

Also, Recommendation 14 of the DGI calls for improved coverage of the international exposures of nonbank financial institutions and the intention is to draw on the CPIS, encouraging more countries to voluntarily provide data by sector of holder.

As is evident from the above discussion, the CPIS is a vital source of information on cross-border financial interconnections,³⁷ so participation in the CPIS by provision of at least the core set of data is required in the SDDS Plus.³⁸

Foreign direct investment is another important form of cross-border financial interconnectedness…

with the recent launch of the Coordinated Direct Investment Survey (CDIS) complementing the IBS and the CPIS. The first CDIS was undertaken with reference to end 2009 data, by the IMF, with support of BOPCOM. While typically of a longer term nature than portfolio and banking flows, direct investment is an important channel through which cross-border financial linkages are established and such investment can be a source of productivity growth.³⁹

Because of the importance of direct investment to many economies, the CDIS has proved to be a very successful project with 84 economies reporting inward data and 59 reporting outward data in the initial survey. The first set of data was disseminated in December 2010, with the latest data for end-2011 released in December 2012.

The data are collected on an annual frequency, with counterpart country data provided for inward investment (equity and debt), with some large direct investors providing data on outward investment by counterpart country. The survey will become permanent on an annual frequency.

As with the CPIS, the CDIS is a vital source of information on cross-border financial interconnections, so participation in the CDIS by provision of inward direct investment data is required in the SDDS Plus.

Reserve asset holdings impact of international financial market conditions…

and so the IMF undertakes a quarterly survey of the currency composition of official reserve assets (COFER).⁴⁰ This is a closely watched survey by market participants and policy makers, providing information on trends in official holdings of foreign currency. The global crisis has further stimulated interest in this dataset, and the IMF is working to expand the range of currencies and countries covered.

Because the information it provides on cross-border financial linkages is important for monitoring developments in the international monetary system, participation in the COFER reporting to the IMF is prescribed in the SDDS Plus. As at present, no individual country data reported the IMF will be revealed, only the aggregate totals. Individual country data will remain strictly confidential.

Shadow banking is a growing phenomenon…

with a particular concern of policy makers being that regulatory reform will shift activity from the regulated deposit-takers to the more lightly regulated, non-banks as well as other shadow banking activities. The G-20 leaders asked the FSB to look into the oversight and regulation of this heterogeneous group of institutions.

Shadow banking is a broad term covering a variety of markets, instruments and institutions which replicates core features of commercial banks. The institutions covered can broadly include financial entities that are not closely regulated, such as structured finance vehicles.⁴² Other financial institutions (OFCs), or non-bank financial institutions, cover these entities and closely regulated institutions such as insurance companies and pension funds.

A number of recommendations in the DGI support a better understanding of the activities of OFCs. Detailed information from the sectoral accounts is envisaged. Indeed, the FSB report on shadow banking mentioned above calls for annual monitoring of sectoral accounts data to first assess the broad scale and trends of non-bank credit intermediation in the financial system, complemented with other relevant information such as supervisory data to monitor risk factors, including maturity transformation and leverage, on an annual basis.^{43 44}

Other data to support an assessment of the role of OFCs in the domestic and international financial systems include enhancements to monetary and financial statistics to provide more information on the funding and investment patterns of OFCs, and the detailed sectoral breakdowns to be included in the IBS and CPIS would support deeper analysis. Further the review of the FSIs is likely to lead to the inclusion of more FSIs for OFCs to help assess their financial strength, profitability, and liquidity.

Because of the importance of monitoring developments among these institutions, as noted above, an OFC survey of high level data on claims and liabilities by sector is prescribed in the SDDS Plus.

Among the markets and instruments that might be considered as part of shadow banking are “securitization” markets and secured financing contracts such as repurchase agreements and securities lending.

The available information on these markets and instruments tend to be most readily available from market sources, such as on trading volume. As noted in the FSB’s report on shadow banking, 2012, efforts are underway to obtain more data from supervisory and market sources, while the Handbook on Securities Statistics (see next section) encourages the collection of data on debt securities issued by securitization corporations.

G-SIFIs are subject to regulatory reform…

and are discussed in more detail above. The I-I and I-A templates, and the structural template also being developed for these too-big-to-fail data institutions will provide information to help assess the impact of regulatory reform, such a capital surcharges, on these institutions.

OTC derivatives markets including credit default swaps…

have been subject to greater scrutiny since the global crisis as a source of systemic risk. The focus of attention has been more on the impact of regulatory reform on the OTC derivatives market. The BIS has long collected data on a semi-annual frequency on the OTC derivatives market.⁴⁵ This survey provides information on the structural developments, such as the relative size of the different types of risk based derivatives and, broadly the investor base. One of the first uses of the Legal Entity Identifier (LEI) (see ahead) will be as a tool for the reporting and aggregation of data on OTC derivatives.⁴⁶

The credit default swap (CDS) market is monitored through a semi-annual survey of the markets in 13 financial centers conducted by the BIS (http://www.bis.org/statistics/derdetailed.htm). The centers asked to report are determined by the size of the market reported in the BIS’s triennial global central bank survey on the size and structure of foreign exchange (FX) and over-the-counter (OTC) derivatives markets.

The BIS set up a working group that reported in 2009 with its recommendations for expanding the available information. These recommendations were accepted by the overseeing Committee on Global Financial Systems (CGFS) and implemented in two phases in 2010 and 2011.⁴⁷ More information is being provided on the type of counterparties and the type of instruments underlying CDS. It is an important step forward and will help analysts get a better understanding of developments in the CDS market.

Expanding this survey to improve understanding of credit risk transfers is the subject of Recommendation 5 of the DGI.

Securities markets help support diversification of funding sources…

so the work to improve the availability of data on securities markets is part of a wider effort to promote securities markets in support of financial deepening—not least the G-20 Local Bond Market Initiative.⁴⁸ By broadening the channels of intermediation, so diversifying the sources of finance, reliance on one channel, such as banks, is reduced so supporting financial stability. Good securities data, along with monetary and financial statistics can be used to examine the extent to which financial intermediation is being diversified. Recommendation 7 of the DGI has given further impetus to this work by reinforcing the importance of good security statistics.

The focus of the international community has been on providing clear international methodological guidance on compiling securities data, through the Handbook on Securities Statistics (Handbook) and on making data more readily available through the BIS and, in the future, through the SDDS Plus.

The Handbook is a joint work of BIS, ECB, and IMF. It recognizes the importance of good securities data in its core tables, which are aligned fully with the national accounts definitions. The Handbook has three parts, on debt issues, debt holdings, and equity securities issues and holdings, respectively (www.imf.org/external/np/sta/wgsd/index.htm).

The BIS has strengthened the collection and dissemination of securities data. The number of central banks reporting data has risen to around 60, including virtually all G-20 members, and the BIS’s dissemination of securities statistics has been adapted to the recommendations in the Handbook, in particular revising the definition of an international issue and aligning the published breakdowns with the definitions in the Handbook.

Given the importance of debt security markets, for the reasons mentioned above, the SDDS Plus requires countries to provide data on the stocks of debt securities by issuer and holder on a from-whom-to-whom basis with quarterly periodicity and timeliness.⁴⁹

More generally the strengthening of securities statistics is also relevant to the implementation of a number of the recommendations in the DGI, such as the sectoral accounts and the CPIS, because securities data feed into the position and flow data throughout the national accounts. With some exceptions, all sectors of the economy are issuers and holders of securities.

Structured products can be complex…

and the global crisis raised the issue of whether investors were misled by issuers of structured products; that is whether the prospectuses for such instruments were possibly misleading, so causing a misallocation of financial resources and market disruptions when the true nature of the instruments became apparent.

Recommendation 6 called on securities regulators through International Organization of Securities Commissions (IOSCO) to further investigate disclosure requirements for complex structured products. Subsequently IOSCO has published a report providing guidance to security regulators on disclosure principles for asset-backed securities.⁵⁰

Consistency in identifying counterparts to financial transactions…

has been a high priority of the international community since the global crisis. Work is under way under the auspice of the FSB to create a universal legal entity identifier (LEI) that would provide a unique identifier to all legal entities participating in financial markets across the globe. Such an initiative has the potential to reduce systemic risk in financial markets by making it easier for market participants to recognize their counterparties and manage their exposures, so hopefully improving the functioning of financial markets and reducing counterparty risk.

The FSB Legal Entity Identifier Group has made significant progress, and a global LEI Regulatory Oversight Committee Charter was endorsed by G-20 Finance Ministers and Central Bank Governors in November 2012.

Access to basic financial services is an indication of financial inclusion…

and to monitor this the IMF annually undertakes a Financial Access Survey (FAS) to provide geographic and demographic data on access to basic consumer financial services worldwide (http://fas.imf.org). This is a global supply side database on financial inclusion, encompassing internationally comparable basic indicators of financial access and usage, and a source of data for the G-20 Basic Set of Financial Inclusion Indicators.⁵¹

In addition to providing a better understanding of the state of domestic financial inclusion as well as how a country ranks amongst its regional and income group peers, the FAS also enables policy makers, researchers, and financial sector practitioners to better assess the relationships between financial inclusion and poverty reduction, growth, macro prudential risks, and financial sector/macroeconomic stability.