Lack of internationally comparable bond market data hinders market development in emerging market and developing countries (photo: Tengku Bahar/AFP)
BOND MARKET CONFERENCE
They met at a conference in early March to discuss how to improve the international comparability of securities statistics.
Well-functioning local currency bond markets can make a vital contribution to strong and sustainable economic growth and to financial stability in emerging market economies as well as developing countries (see related stories: "IMF Study Points to Gaps in Securities Market Regulation" and "IMF Helps Develop Local Bond Markets"). But internationally comparable data on domestic bond markets are limited—particularly on currency of denomination, maturity, issuers and holders, and coverage of corporate bond markets.
Recognizing this limitation, the Finance Ministers of the Group of Eight (G-8) countries at a meeting in Potsdam, Germany, last year, called on the IMF and other international financial institutions, such as the Bank for International Settlements (BIS) and the European Central Bank (ECB), to improve the quality, comparability, and consistency of local currency bond market data.
Coordinating with international bodies
In response, the IMF reconvened the Working Group on Securities Databases—which it chairs and whose other members include the BIS, the ECB, and the World Bank—to explore the development of a global securities database. The IMF also hosted a conference organized by the Irving Fisher Committee on Central Bank Statistics—a forum to discuss statistical issues of interest to central banks—at its headquarters in Washington, D.C., on March 4-5, 2008, to discuss the challenges of compiling securities statistics. The workshop—the first ever on global securities statistics—included representatives from central banks and statistical offices from a wide range of countries, as well as representatives of international and regional organizations.
Jan Smets, Chairman of the Irving Fisher Committee, highlighted the importance of securities statistics (IMF photo)
In his opening remarks, Jan Smets, Chairman of the Irving Fisher Committee, pointed out the "added insights that securities statistics can provide in the analysis of financial stability." "You will no doubt agree with me that this is highly relevant in today's tumultuous credit markets," he told participants (see interview with Jan Smets and Christian Dembiermont of the BIS).
Alfredo Leone, Deputy Director of the IMF's Statistics Department, speaking on behalf of the director of the department, noted that, in addition to sharing information and insights, this conference would influence the way the IMF moves forward in a number of areas. "For the IMF, I see this workshop as being very useful for our further work on the CPIS [Coordinated Portfolio Investment Survey] and monetary and financial statistics. The outcome of this conference will also help to set the priorities in these areas looking forward, establishing the degree of cross-country harmony that we can bring about and identifying the type and volume of technical assistance that the regional and international organizations might be able to offer," he added.
Data for better monitoring
During the first session, participants focused on the various users of debt securities statistics, which have a broad range of requirements. From the perspective of economic, monetary, and financial stability analysis, these requirements have become more apparent in recent decades, in line with the growing importance of securities markets in many countries around the world.
According to Ceyla Pazarbasioglu, Division Chief in the IMF's Monetary and Capital Markets Department, global capital markets have seen unprecedented growth in recent years. The size of the global securities market increased from $68 trillion at end-2000 to more than $120 trillion at end-2006. Emerging market bond and equity markets, though only about 12 percent of global markets, have grown twice as fast as mature markets.
On the sources of securities statistics, participants observed that information on securities is typically spread across different organizations and applications, thus making it difficult to develop accurate and comprehensive data. In addition, these various sources use different classification schemes and data exchange formats, making it difficult to group data and construct meaningful aggregates. In his presentation, Erich Hille (Austrian National Bank), noting that "a single optimal data source simply does not exist," described the challenges of compiling securities issuance statistics.
Alfredo Leone of the IMF said the conference would help the institution prioritize its technical assistance (IMF photo)
Other sessions focused on existing statistical frameworks and country experiences with debt issuance statistics. Participants also discussed specific methodological questions, such as residency of issuer versus location, appropriate breakdowns, valuation of debt instruments, and how to take account of short positions. Another session covered security-by-security databases—an approach based on collecting information on individual securities that is being implemented by the ECB and shows a great deal of promise.
During the last session of the conference, participants took stock of the status of international cooperation, and the challenges that lie ahead in defining an articulated set of principles and practices for global securities statistics.
Moving toward an international standard
Conference participants agreed on the need for a compilation guide for securities statistics, because no international standard for compiling these statistics exists. The intention is to have a concise reference document that will address the key methodological issues identified at the conference. The guide, which will include some templates and a list of reference metadata, will focus initially on statistics on debt securities issued but will eventually be expanded to cover other securities and securities holdings. The manual will also include an assessment of costs and benefits of security-by-security databases.
"We are very pleased with the outcome of the workshop, especially with the fact that a large number of countries and central banks participated in a very active way," said Smets after the conference. While the conference was a onetime event, the Working Group on Securities Databases plans to discuss key areas where follow-up would be useful.
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