Financial Soundness Indicators and the IMF

Last Updated: November 2015

To access FSI data and metadata reported on a regular basis by member countries go to FSI Reporting (Data & Metadata)
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Financial soundness indicators (FSIs) provide insight into the financial health and soundness of a country’s financial institutions as well as corporate and household sectors. FSIs support economic and financial stability analysis.

Following an initial consultative meeting of experts and a survey of member countries, the IMF’s Executive Board endorsed a list of core and encouraged FSIs in June 2001. In June 2003, the IMF Executive Board reviewed progress and discussed the way forward on the work program for FSIs and welcomed the ongoing work on the development, compilation, and use of FSIs, as well as the broad support provided by member countries, international organizations, and other standard-setting bodies in this exercise. At that time, Executive Directors commended the completion of the draft Financial Soundness Indicators Compilation Guide (Guide), which they considered a milestone in establishing a standard reference on concepts and definitions for the compilation of FSIs by the Fund’s membership.

FSI Reporting Countries

The IMF’s Statistics Department disseminates on the Fund’s FSI website reporting countries’ data and metadata on selected FSIs according to the methodology set out in the Guide; many reporting countries also post these data on their national websites. Steady progress has been made in increasing FSI country coverage. As of October 2015, 103 countries and jurisdictions report FSIs (data and metadata) to the Fund on a regular basis, including all Group of Twenty (G-20) countries (Figure 1).

Figure 1. Financial Soundness Indicators: Reporting Countries and Economies

Source: IMF’s FSI website.

Reporting countries and jurisdictions compile FSI data using different approaches. As such, FSI users are advised to consult the accompanying metadata to better understand cross-country comparisons or to assess the evolution of a given FSI for any of the reporters.

Financial Soundness Indicators Compilation Guide

The primary purpose of the Guide is to provide information and advice on the concepts and definitions as well as on data sources and techniques, for the compilation and dissemination of the list of core and encouraged FSIs (Table 1). The Guide defines the types of financial institutions and sets out detailed accounting rules, such as time of recognition of positions and flows, valuation of instruments, and conceptual advice on individual line items in the income and expense and balance sheet accounts, from which the underlying series used to calculate many FSIs should be drawn. It elaborates the concepts of, and preferred approaches to, aggregation and consolidation. Guidance is also provided on measurement issues for real estate prices and certain financial market information.

Practical advice on data sources, compilation issues, and on the dissemination of data is provided along with methods of assembling and analyzing peer group data. Appendices to the Guide include numerical examples to illustrate some of the more complex conceptual issues. The Guide is available in English, Chinese, French, Russian, and Spanish.

Table 1. Financial Soundness Indicators: The Core and Additional Sets

FSI Code Core FSIs for Deposit Takers

I01

Regulatory capital to risk-weighted assets

I02

Regulatory Tier 1 capital to risk-weighted assets

I03

Nonperforming loans net of provisions to capital

I04

Nonperforming loans to total gross loans

I05

Sectoral distribution of loans to total loans

I06

Return on assets

I07

Return on equity

I08

Interest margin to gross income

I09

Noninterest expenses to gross income

I10

Liquid assets to total assets

I11

Liquid assets to short-term liabilities

I12

Net open position in foreign exchange to capital

Additional FSIs for Deposit Takers
I13

Capital to assets

I14

Large exposures to capital

I15

Geographical distribution of loans to total loans

I16

Gross asset position in financial derivatives to capital

I17

Gross liability position in financial derivatives to capital

I18

Trading income to total income

I19

Personnel expenses to noninterest expenses

I20

Spread between reference lending and deposit rates (base points)

I21

Spread between highest and lowest interbank rates (base points)

I22

Customer deposits to total (noninterbank) loans

I23

Foreign-currency-denominated loans to total loans

I24

Foreign-currency-denominated liabilities to total liabilities

I25

Net open position in equities to capital

FSIs for Other Financial Corporations
I26

Assets to total financial system assets

I27

Assets to gross domestic product

FSIs for Nonfinancial Corporations
I28

Total debt to equity

I29

Return on equity

I30

Earnings to interest and principal expenses

I31

Net foreign exchange exposure to equity

I32

Number of bankruptcy proceedings initiated

FSIs for Households
I33

Household debt to gross domestic product

I34

Household debt service and principal payments to income

FSIs for Market Liquidity
I35

Average bid-ask spread in the securities market

I36

Average daily turnover ratio in the securities market

FSIs for Real Estate Markets
I37

Residential real estate prices (Percentage change/last 12 months)

I38

Commercial real estate prices (Percentage change/last 12 months)

I39

Residential real estate loans to total gross loans

I40

Commercial real estate loans to total gross loans

Source: FSI Compilation Guide

Revision of the Financial Soundness Indicators Compilation Guide

In November 2011, as part of a broad consultation process with the international expert community, the IMF’s Statistics Department convened a meeting of the Financial Soundness Indicators Reference Group (FSIRG) that was attended by representatives from 32 countries and 10 international and regional organizations. The meeting reviewed (1) the current list of core and additional FSIs against the backdrop of the global financial crisis, changes in the regulatory framework facing financial institutions (the so-called Basel Accords in the banking sector), and the G-20 call for enhanced reporting and dissemination of these indicators (see the 2009 Report to the G-20 Finance Ministers and Central Bank Governors on The Financial Crisis and Information Gaps); and (2) discussed and agreed on a work program and actions for updating the FSI list. Based on the FSIRG's Summary of Key Points and Conclusions, the IMF's Statistics Department has developed a work program on FSIs that will include revision of the 2006 Guide. The revised FSI Guide will reflect new and emerging methodological and compilation issues, newly added FSIs, and analytical tools that could enhance usefulness of these indicators for policy analysis.

In September 2013, IMF staff informed the Executive Board of its intention to revise the list of FSIs in response to users’ needs and financial sector developments (see Modifications to the Current List of Financial Soundness Indicators and Modifications to the Current List of Financial Soundness Indicators—Background paper). The revised FSI list (Table 2) includes new indicators to expand the coverage of the financial sector to include money market funds, insurance corporations, pension funds, other nonbank financial institutions, as well as non-financial corporations and households. Detailed descriptions and compilation issues related to these new FSIs will be elaborated in the revised Guide.

Table 2. Financial Soundness Indicators: Revised list of the Core and Additional Sets

FSI Code Core FSIs for Deposit Takers

I01

Regulatory capital to risk-weighted assets

I02

Regulatory Tier 1 capital to risk-weighted assets

I03 (new)

Common equity Tier 1 to risk-weighted assets (Solvency ratio)

I04

Capital to assets

I05

Non-performing loans net of provisions to capital

I06

Non-performing loans to total gross loans

I07 (new)

Provisions to non-performing loans

I08

Sectoral distribution of loans to total loans

I09

Return on assets

I10

Return on equity

I11

Interest margin to gross income

I12

Noninterest expenses to gross income

I13

Liquid assets to total assets

I14

Liquid assets to short-term liabilities (liquidity coverage ratio will replace this measure when Basel III is fully adopted)

I15 (new)

Available amount of stable funding to required amount of stable funding (Net stable funding ratio)

I16

Net open position in foreign exchange to capital

FSI Code Additional FSIs for Real Estate Markets

I17

Regulatory capital to risk-weighted assets

FSI Code Additional FSIs for Deposit Takers

I18

Large exposures to capital

I19

Geographical distribution of loans to total loans

I20

Gross asset position in financial derivatives to capital

I21

Gross liability position in financial derivatives to capital

I22

Trading income to total income

I23

Personnel expenses to noninterest expenses

I24

Spread between reference lending and deposit rates (base points)

I25

Spread between highest and lowest interbank rates (base points)

I26

Customer deposits to total (non-interbank) loans

I27

Foreign-currency-denominated loans to total loans

I28

Foreign-currency-denominated liabilities to total liabilities

I29 (new)

Credit growth to private sector

FSI Code FSIs for Other Financial Corporations

I30 (new)

Other Financial Corporations assets (percent of total financial system assets)

• Money Market Funds assets (percent of total financial system assets)

• Insurance Corporations assets (percent of total financial system assets)

• Pension funds assets (percent of total financial system assets)

• Other Other Financial Corporations assets (percent of total financial system assets)

I31 (new)

Other Financial Corporations assets (percent of gross domestic product)

• Money Market Funds assets (percent of gross domestic product)

• Insurance Corporations assets (percent of gross domestic product)

• Pension funds assets (percent of gross domestic product)

• Other Other Financial Corporations assets (percent of gross domestic product)

FSI Code FSIs for Money Markets Funds

I32 (new)

Sectoral distribution of investments (percent of total investments)

• Central bank

• Deposit takers

• Other financial corporations

• General government

• Nonfinancial corporations

• Non residents

I33 (new)

Maturity distribution of investments (percent of total investments) [Liquidity]

• 1- 30 days

• 31- 90 days

• >90 days

FSI Code FSIs for Insurance Corporations

I34 (new)

Shareholder equity to invested assets [Capital Insurance Corporations]

I35 (new)

Total premium income minus premium ceded by primary insurers to total premium income [Risk retention ratio Insurance Corporations]

I36 (new)

Return on assets

I37 (new)

Return on equity

FSI Code FSIs for Pension Funds

I38 (new)

Liquid assets to estimated pension payments in the next year

I39 (new)

Return on assets

FSI Code Additional FSIs for Non-financial Corporations

I40

Total debt to equity

• External debt to equity

• Foreign currency debt to equity

I41 (new)

Return on assets

I42

Return on equity

I43

Earnings to interest and principal expenses

I44 (new)

Earnings to interest expenses

I45 (new)

Liquid assets to total assets

I46 (new)

Non-financial Corporations debt to gross domestic product

FSI Code Additional FSIs for Households

I47

Household debt to gross domestic product

I48

Household debt service and principal payments to income

I49 (new)

Household debt to household disposable income

FSI Code Additional FSIs for Real Estate Markets

I50

Commercial real estate prices (Percentage change/last 12 months)

I51

Residential real estate loans to total gross loans

I52

Commercial real estate loans to total gross loans

Source: IMF Board Paper Modifications to the Current List of Financial Soundness Indicators November 13, 2013.

In the context G-20 Data Gaps Initiative (DGI), the Fund has also been called upon to investigate the possibility of regular collection of standard measures that can provide information on tail risks, concentrations, variations in distributions, and the volatility of FSIs over time. Consequently, the revised FSI Guide will also include so-called concentration and distributions measures (CDMs) to further enhance the usefulness of the FSIs. CDMs provide information that is not revealed by averages, making them an additional tool for monitoring financial sector vulnerabilities and risks. The CDMs could include the following indicators: (1) minimum, maximum, and mean; (2) weighted standard deviation and skewness; (3) quartiles and the asset share of the bottom quartile; and (4) a concentration (Herfindahl) index.

Worldwide review of the revised FSI Guide is planned for mid-2016, with a pre-publication version expected by the end of that year.

Reference Material and Background Documents

Financial Soundness Indicators and Banking Crises; by Matias Costa Navajas, Aaron Thegeya; IMF Working Paper No. 13/263; December 2013.

Modifications to the Current List of Financial Soundness Indicators (FSIs); IMF Policy Paper; November 13, 2013.

Modifications to the Current List of Financial Soundness Indicators (FSIs) Background Paper; IMF Policy Paper; November 13, 2013 .

The Financial Crisis and Information Gaps: Report to the G-20 Finance Ministers and Central Bank Governors; Prepared by the IMF Staff and the FSB Secretariat October 29, 2009.

FSIRG's Summary of Key Points and Conclusions; Statistics Department; November 15–16, 2011.

IMF Executive Board Concludes Financial Soundness Indicators—Experience with the Coordinated Compilation Exercise and Next Steps
Public Information Notice (PIN) No. 07/135 November 20, 2007.

Amendments to the Financial Soundness Indicators (FSIs): Compilation Guide (Guide). November 7, 2007.

Financial Soundness Indicators: Experience with the Coordinated Compilation Exercise and Next Steps: Background Paper. October 18, 2007.

Countries Take Stock of Financial Soundness Exercise. June 18, 2007.

Financial Soundness Indicators: Compilation Guide, 2006.

Progress on the Financial Soundness Indicators Work Program. June 14, 2005.

Stress Testing Financial Systems: What to Do When the Governor Calls (pdf file).
Matthew T. Jones, Paul L. Hilbers, and Graham L. Slack
IMF Working Paper No. 04/127 (2004).

Experts Meeting on Financial Soundness Indicators (October 29-30, 2003)
(pdf file).

Public Information Notice (PIN) No. 03/71 (June 13, 2003)
.

Financial Soundness Indicators
. May 14, 2003.

Financial Soundness Indicators-Background Paper
. May 14, 2003.

Availability of Financial Soundness Indicators
(pdf file).
Graham Slack. IMF Working Paper No. 03/58 (2003).

Experts Meeting on Financial Soundness Indicators (October 21, 2002)
(pdf file).

Financial Soundness Indicators: Analytical Aspects and Country Practices
.
V. Sundararajan, Charles Enoch, Armida San José, Paul Hilbers, Russell Krueger, Marina Moretti, and Graham Slack . IMF Occasional Paper No. 212. April 8, 2002.

Macroprudential Indicators of Financial System Soundness
.

IMF Occasional Paper No. 192. April 8, 2000.

Consultative Meeting on Macroprudential Indicators (September 27, 1999)
(pdf file).