Financial Crisis and Data Gaps
IMF Strengthens Financial Data Dissemination
By Mohammed El Qorchi and Nolvia Saca Saca
IMF Statistics Department
March 24, 2010
- Data gaps masked key financial sector vulnerabilities in the run-up to global crisis
- IMF working with other international agencies to close information gaps
- Frequency and coverage of financial and external sector indicators enhanced
In an effort to plug the data gaps that have come to light as a result of the global financial crisis, the IMF will increase the availability and frequency of financial sector data it disseminates through the Special Data Dissemination Standard (SDDS).
The recent financial crisis has heightened the need to put in place policies and safeguards that would help prevent the occurrence of similar crises in the future. One of the areas identified by the international community as key in crisis prevention is the availability of timely and more detailed financial data that could provide early warning signals of impending risks and vulnerabilities. The SDDS (see box) can help reduce the size and transmission of shocks by allowing investors to differentiate better between the economic and financial performances across countries.
Closing the gaps
In response to requests by the International Monetary and Financial Committee (IMFC) in April 2009, and building on work for the Group of Twenty (G-20) economies, the IMF and the Financial Stability Board (FSB) have identified data gaps pertaining to credit, liquidity, leverage, and the solvency risks facing financial systems; cross-border financial linkages; and vulnerabilities facing domestic sectors and markets.
The IMF’s data dissemination standard
In the wake of the financial crises in the 1990s, there was broad consensus on the need for specific steps to increase the availability of comprehensive, timely, and high frequency data. In 1996, the SDDS was established to provide guidance on disseminating data to the public for member countries that have, or that might seek, access to international capital markets. The SDDS was designed to evolve over time to address new data needs and promote information transparency.
As a result, the IMF will contribute to addressing these gaps by:
• including seven financial soundness indicators into the SDDS on an “encouraged” basis (that is, not legally “prescribed” under the SDDS) to strengthen information about the health of the financial sector and better detect system risks;
• moving to quarterly dissemination (from annual) of the international investment position (IIP) data, with a maximum lag of one quarter, on a “prescribed” basis and a four-year transition period, to better capture cross-border linkages;
• adding a simplified table on countries’ external debt by remaining maturity (on an “encouraged” basis) to better monitor the vulnerability of domestic economies to external shocks; and
• accelerating the timing of the IMF’s Eighth Review of the Data Standards Initiatives to within 24 months―at least a year and a half earlier than previously anticipated.
These modifications to the SDDS are aimed at strengthening the international financial system by filling data gaps through improved dissemination. While cross-country comparability of the data underlying these indicators can pose challenges early on, these issues tend to dissipate over time as the quality of national data and their dissemination improve.
Addressing some of the identified gaps through the SDDS is an effective tool to encourage the wider Fund’s membership to disseminate financial data. The SDDS now has 67 subscribers. As such, it is a core global data dissemination framework that can support national and international efforts to address new data gaps and to strengthen transparency.
The Eighth Review of the Fund’s Data Standards Initiatives will assess country progress in implementing the proposed changes. The Seventh Review was conducted in December 2008.
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