Public Information Notice No. 11/61

Public Information Notice: IMF Executive Board Discusses Monitoring Financial Interconnectedness, Including the Data Template for Global Systemically Important Financial Institutions

May 25, 2011

On May 18, 2011, the Executive Board of the International Monetary Fund (IMF) discussed progress in closing the identified data gaps related to financial interconnectedness, particularly with reference to the data template for the global systemically important financial institutions (G - SIFIs).

Background

The global financial crisis highlighted the need to strengthen the information relevant to ascertain risks and understand financial interconnectedness. The focus of the effort to meet this need has been the IMF/Financial Stability Board (FSB) work, in collaboration with other international institutions, on the Group of 20 Economies (G-20) Data Gaps Initiative,¹ which was endorsed by the G-20 Finance Ministers and Central Bank Governors and by the International Monetary and Financial Committee (IMFC) in 2009, 2010, and more recently at the 2011 Spring Meetings.

A key component of the G-20 Data Gaps Initiative is better capturing in a consistent and comprehensive manner the activities of the G-SIFIs. In April 2011, following the work of the FSB Working Group on Data Gaps and Systemic Linkages, on which the IMF was represented, the FSB approved proposals to progress work on a consistent template for improving the collection, and sharing among relevant authorities, of data on G-SIFIs.

Work has progressed on other datasets that support the analysis of financial inter-connectedness, including: agreement in the fall of 2010 to make the Coordinated Portfolio Investment Survey a semi-annual survey; the first results from the Coordinated Direct Investment Survey released in December 2010; and positive outcomes from a joint IMF/Organization for Economic Cooperation and Development conference on sectoral accounts earlier this year.

Executive Board Assessment²

Executive Directors welcomed the opportunity to have an exchange of views on monitoring financial interconnectedness. They commended ongoing efforts to address gaps in financial data, while taking due account of the reporting burden, confidentiality concerns, and legal constraints. Directors stressed the importance of continued collaboration between the Fund and other international bodies and national authorities. They also noted that the resources needed for any new data initiatives should not crowd out other forms of Fund engagement with its members.

Directors shared the view that, for the Fund to better assess risks and understand cross-border financial linkages in an increasingly integrated global environment, more granular data are needed. Financial data on a residence basis, disaggregated by country, sector, instrument, maturity, and currency denomination would facilitate the identification of interest rate and exchange rate risks, maturity mismatches or funding gaps, and the potential for spillovers. Directors therefore encouraged staff to continue to work to close the data gaps that had been identified. More broadly, a few Directors underscored the need for the official sector to take the lead in the collection of financial sector data.

Directors noted that the Fund has contributed significantly to the G-20 Data Gaps Initiative. Most Directors encouraged staff to continue to work closely with the FSB Secretariat to finalize the data template for global systemically important financial institutions, develop statistical guidance, and establish an appropriate mechanism for data sharing among relevant official institutions. At the same time, Directors emphasized that confidentiality rules and legal limitations on sharing firm-specific data in some jurisdictions would need to be addressed, and many highlighted the importance of also covering nonbank financial institutions. A number of Directors, however, were not convinced that information of a supervisory nature is relevant for Fund surveillance, with a few seeing a useful role for the Fund in encouraging countries to enhance public disclosure of financial sector data. A few Directors also called for a careful cost-benefit analysis. Directors looked forward to the final decision by the FSB on data access.

Directors welcomed the initiatives to improve the availability of data, including the Coordinated Portfolio Investment Survey and the Coordinated Direct Investment Survey. They encouraged staff to further explore ways of reducing the reporting burden on member countries.

Directors broadly supported the efforts to expand the currency and country coverage of the Currency Composition of Foreign Exchange Reserves (COFER) database, while preserving current confidentiality arrangements. They welcomed the proposal to initiate bilateral consultations before implementing any changes. Directors also generally supported exploring the possibility of generating less aggregated data for COFER, securities held in foreign exchange reserves, and instruments held in foreign exchange reserves, to facilitate better understanding of global capital flows and financial interconnections.

Directors welcomed the proposed enhancements of the Bank for International Settlements (BIS) International Banking Statistics, noting that this would help close important data gaps essential to the Fund’s surveillance work. Many saw merit in considering a master agreement with the BIS for the sharing of these data, while a few considered the current ad hoc arrangements adequate.

Directors generally supported integrating new and enhanced datasets into the Fund’s financial sector and multilateral surveillance work, including the Global Financial Stability Report, the Financial Sector Assessment Program, and the vulnerability and early warning exercises. They looked forward to a progress report in this area.

¹ These two reports presented to, and endorsed by, the G-20 Ministers of Finance and Central Bank Governors at their meetings in November 2009 and June 2010 can be found at http://www.imf.org/external/np/g20/pdf/102909.pdf and  http://www.imf.org/external/np/g20/pdf/053110.pdf, respectively.

² An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.