The views expressed herein are those of the author and should not be attributed to the IMF, its Executive Board, or its management Statistical Implications of the Ongoing Global Crisis Mohammed El Qorchi Division Chief, Statistics Department International Monetary Fund V Astana Economic Forum Hosted by Statistics Agency of Kazakhstan May 24, 2012

2 Background: The Ongoing Global Crisis The main manifestations of the global crisis which surfaced in 2008: The main manifestations of the global crisis which surfaced in 2008: Originated and concentrated mainly in industrialized, and a large number of emerging economies; Originated and concentrated mainly in industrialized, and a large number of emerging economies; Severe in terms of lost output and high unemployment as well as large build up of debt; Severe in terms of lost output and high unemployment as well as large build up of debt; Propagating worldwide at a high speed; Propagating worldwide at a high speed; Involving systemically important global financial institutions (G-SIFIs), with operations spreading across many markets worldwide, as well as shadow banks. Involving systemically important global financial institutions (G-SIFIs), with operations spreading across many markets worldwide, as well as shadow banks. Today, we still observe significant, downside risks, particularly in Europe, a battered international financial system, and an ailing recovery. Today, we still observe significant, downside risks, particularly in Europe, a battered international financial system, and an ailing recovery.

3 Data Dimensions The crisis: The crisis: Highlighted the critical importance of timely, consistent, and comparable statistics across countries as economies and markets become more integrated Highlighted the critical importance of timely, consistent, and comparable statistics across countries as economies and markets become more integrated Revealed additional data gaps relevant for proper financial stability analysis and policy decision making: Revealed additional data gaps relevant for proper financial stability analysis and policy decision making:  Build-up of risk in the financial sector  Need to identify degree and location of leverage or excessive risk taking in the system  Capture information on shadow banking system and growth of risk transfer instruments

4 Data Dimensions (cont’d)  Cross border financial linkages  International financial network connections have developed but information not captured  Rapid growth of systemically important financial institutions with global reach  Vulnerability of domestic economies to shocks  Data needed to monitor the exposure of economic agents within domestic economy to shocks  Financial and real sector linkages within economy Identified room for improvement in the communication of official statistics Identified room for improvement in the communication of official statistics

5 Data Dimensions (cont’d) Crisis not the result of a lack of proper economic and financial statistics but highlighted certain data gaps, particularly data for financial stability analysis Crisis not the result of a lack of proper economic and financial statistics but highlighted certain data gaps, particularly data for financial stability analysis Data enhancements (public good) crucial to ability to provide global perspectives on potential risks and financial stability concerns Data enhancements (public good) crucial to ability to provide global perspectives on potential risks and financial stability concerns Good data and good analyses underlie effective policy responses both at national and international levels Good data and good analyses underlie effective policy responses both at national and international levels Work on improving data coverage and addressing data gaps needs to be coordinated to be effective and efficient Work on improving data coverage and addressing data gaps needs to be coordinated to be effective and efficient

6 Data Limitations Detecting financial risks (Cerutti, Claessens, and McGuire) Detecting financial risks (Cerutti, Claessens, and McGuire) Data on counterpart location (country) available only in aggregate form, overlooking bank-level heterogeneity Data on counterpart location (country) available only in aggregate form, overlooking bank-level heterogeneity Bank balance sheet based analyses do not fully capture banks’ organizational structures and legal status, as well as geographical structure of bank operations Bank balance sheet based analyses do not fully capture banks’ organizational structures and legal status, as well as geographical structure of bank operations Existing data overestimate countries’ dependence on foreign credits in cases where at least part of funding sources is from borrower country Existing data overestimate countries’ dependence on foreign credits in cases where at least part of funding sources is from borrower country Detailed trends of cross-currency funding and roll-over not identified owing to lack of data on residual maturities and foreign exchange swap markets Detailed trends of cross-currency funding and roll-over not identified owing to lack of data on residual maturities and foreign exchange swap markets

Interconnectedness of financial sector The European banks draw wholesale funding from the US and lend it back to US residents The European banks draw wholesale funding from the US and lend it back to US residents Some large transactions in assets and liabilities of the European banks to the US net out, and are reflected in the financial account only on a net basis Some large transactions in assets and liabilities of the European banks to the US net out, and are reflected in the financial account only on a net basis (Derived from Hyun Song Shin, pp3-4) Figure 1, “Global Banking Glut and Loan Risk Premium” by Hyun Song Shin, Paper prepared for the 2011 Mundell-Fleming Lecture of the Annual Research Conference (IMF) US Borrowers Wholesale funding market Shadow banking system border European Global Banks US Banking Sector US Households

The role of financial centers Figure 4, “Cross-Border Investment in Small International Financial Centers” (IMF Working Paper wp/10/38) by Philip R. Lane and Gian-Maria Milesi-Ferretti The Small Industry Finance Corporation (SIFCs) account for a non-negligible share of external assets and liabilities held by key players in the financial market. The Small Industry Finance Corporation (SIFCs) account for a non-negligible share of external assets and liabilities held by key players in the financial market. The SIFC could work as a channel of financial transaction. The SIFC could work as a channel of financial transaction. Data (e.g. IIP) are not always available from these financial centers. Data (e.g. IIP) are not always available from these financial centers. 8

Data Limitations (cont’d) Emerging markets Emerging markets Shift in global financial power to “Safe” assets (gov. bonds of advanced countries) may no longer be that safe Shift in global financial power to “Safe” assets (gov. bonds of advanced countries) may no longer be that safe To monitor associated risks, need enhancements to data on government debt and foreign reserve allocations To monitor associated risks, need enhancements to data on government debt and foreign reserve allocations Share of reserves for which currency composition is allocated Share of reserves for which currency composition is allocated 9 IMF COFER Database

10 A Cluster Analysis of Global Trade and Financial Architecture

International Collaboration IAG: BIS, ECB, Eurostat, IMF (chair), OECD, UN, World Bank FSB IMF In response, the G-20 Data Gaps Initiative is well underway to address data gaps and reinforce the national and global statistical systems In response, the G-20 Data Gaps Initiative is well underway to address data gaps and reinforce the national and global statistical systems 20 recommendations which call for improvements to bank-level and aggregate statistics 20 recommendations which call for improvements to bank-level and aggregate statistics The initiative involves a great deal of collaboration among international institutions: The initiative involves a great deal of collaboration among international institutions: Work is coordinated by the Inter- Agency Group on Economic and Financial Statistics (IAG) Reporting to the G-20 Finance Ministers and Central Bank Governors is done by the IMF and the Financial Stability Board (FSB) 11

12 Brief Chronology Establishment of the Inter-Agency Group on Economic and Financial Statistics, IAG (2008) Establishment of the Inter-Agency Group on Economic and Financial Statistics, IAG (2008) BIS, ECB, Eurostat, IMF (Chair), OECD, UN, WB BIS, ECB, Eurostat, IMF (Chair), OECD, UN, WB Coordinate work to explore data gaps and strengthen data collection Coordinate work to explore data gaps and strengthen data collection Established Principal Global Indicators (PGI) Website: Established Principal Global Indicators (PGI) Website: G-20 request to the IMF and the FSB to explore gaps and provide proposals to address them to the G-20 Finance Ministers and Central Bank Governors. G-20 request to the IMF and the FSB to explore gaps and provide proposals to address them to the G-20 Finance Ministers and Central Bank Governors. Reports provided in November 2009, June 2010, and June Reports provided in November 2009, June 2010, and June Data gaps identified and work plans and timetables endorsed by the G-20 Finance Ministers and Central Bank Governors. Data gaps identified and work plans and timetables endorsed by the G-20 Finance Ministers and Central Bank Governors. Work is progressing and next progress report to the G-20 has been requested by September Work is progressing and next progress report to the G-20 has been requested by September 2012.

Brief Chronology (con’t) IMFC (IMF Advisory Body) welcomed and endorsed the work of the IMF and FSB to provide better indicators of systemic risks and address data gaps (April 2009, October 2010, and September 2011) IMFC (IMF Advisory Body) welcomed and endorsed the work of the IMF and FSB to provide better indicators of systemic risks and address data gaps (April 2009, October 2010, and September 2011) IMF Executive Board approved enhancements to the IMF Special Data Dissemination Standard (SDDS), including the establishment of a higher tier, the SDDS Plus. IMF Executive Board approved enhancements to the IMF Special Data Dissemination Standard (SDDS), including the establishment of a higher tier, the SDDS Plus. The Global Issues Group (GIG) of the World Economic Forum, comprising leaders of the world’s multilateral and regional institutions, supports the efforts underway as part of the G-20 Data Gaps Initiative to create a global financial reporting system that will comprehensively monitor global financial flows and stocks. The Global Issues Group (GIG) of the World Economic Forum, comprising leaders of the world’s multilateral and regional institutions, supports the efforts underway as part of the G-20 Data Gaps Initiative to create a global financial reporting system that will comprehensively monitor global financial flows and stocks. 13

Build-up of Risk in the Financial Sector Cross-border Financial Linkages Vulnerability of Domestic Economies to Shocks Improving Communication of Official Statistics # 2 Financial Soundness Indicators (FSIs) #5 Credit Default Swaps #7 Securities # 10, #11, #12 Coordinated Portfolio Investment Survey, International Banking Statistics, International Investment Positions #15 Institutional Sector Accounts # 17 Government Finance Statistics # 18 Public Sector Debt #19 Real Estate Prices #20 Principal Global Indicators (PGIs) # 3 Tail Risk in the Financial System #4 Aggregate Leverage and Maturity Mismatches; #6 Structured Products #8 and # 9 Global Network Connections and Systemically Important Global Institutions # 13 and #14 Financial and Nonfinancial Corporations’ Cross Border Exposures #16 Distributional Information There Exist Conceptual/ Statistical Frameworks and Ongoing Collection Conceptual Statistical Framework Needs Further Development Overview of the 20 recommendations 10

Consultation Process with the G-20 IMF/FSB G-20 Senior Officials Conferences: IMF/FSB G-20 Senior Officials Conferences: July 2009 and March 2011, Washington, D.C., USA July 2009 and March 2011, Washington, D.C., USA April 2010, and June 2012 (planned) Basel, Switzerland April 2010, and June 2012 (planned) Basel, Switzerland IMF staff conducted bilateral consultations with G-20 economies (2010/2011) IMF staff conducted bilateral consultations with G-20 economies (2010/2011) Four regional conferences: Four regional conferences: Mexico City, Mexico (March 2012); Mexico City, Mexico (March 2012); Ankara, Turkey (April 2012); Ankara, Turkey (April 2012); Paris, France (April 2012); and Paris, France (April 2012); and China (May 2012). China (May 2012). 15

Communication Process UNSC Side Events: UNSC Side Events: ult.html ult.html ult.html ult.html IMF Statistics Department Seminars at IMF/World Bank Annual Meetings (2010 and 2011) IMF Statistics Department Seminars at IMF/World Bank Annual Meetings (2010 and 2011) Financial Stability — the Data Challenge: Financial Stability — the Data Challenge: Casting Light on Shadow Banking: Data Needs for Financial Stability: Casting Light on Shadow Banking: Data Needs for Financial Stability:

Communication Process (con’t) Principal Global Indicators  A product of the Inter-Agency Group (IAG)  Brings together data for G-20 economies and five non G-20 economies members of the FSB  One-stop shop 

Emerging Views from the Consultations Broad agreement on the identified data gaps that need to be addressed Broad agreement on the identified data gaps that need to be addressed Recognition that enhancements to existing datasets could address certain gaps in the near future Recognition that enhancements to existing datasets could address certain gaps in the near future Other gaps would take longer and require additional resources Other gaps would take longer and require additional resources The inter-agency coordination is very much welcome. IAG and PGI seen as major steps forward, but it needs to be intensified, including by: The inter-agency coordination is very much welcome. IAG and PGI seen as major steps forward, but it needs to be intensified, including by: Reducing reporting burden to countries Reducing reporting burden to countries Developing common templates to facilitate common sourcing of data Developing common templates to facilitate common sourcing of data Improving data sharing across international institutions Improving data sharing across international institutions 18

Concluding Remarks 19  Considerable progress is being made in addressing data gaps, with individual IAG agencies allocated to lead specific recommendations and G-20 countries implementing enhancements  Already the outcomes of these efforts are yielding results, with improvements in available data on credit default swaps, securities, CPIS, IIP, sectoral accounts, government finance statistics, public debt, real estate prices, and in the communication of statistics (PGI)  Data Dissemination Standards (GDDS, SDDS, and SDDS Plus) have been strengthened

Concluding Remarks (con’t)  But challenges remain ahead, including the need to sustain:  Implementation of plans and timetables  Further progress in the development of new data frameworks  Adequate resources for statistical work  Coordination and collaboration—not only among IAG agencies, but also with and within national statistical agencies 20

Paper References 21  FSB/IMF reports on the G-20 data Gaps Initiative:  Financial Stability Board and International Monetary Fund (2009), The Financial Crisis and Information Gaps, Report to the G-20 Finance Ministers and Central Bank Governors,  Two progress reports have been prepared and submitted to the G-20 Finance Ministers and Central Bank Governors; in November 2010 and June 2011 ( and respectively)  Cerutti, Claessens, and McGuire:  Hyun:  Lane and Milesi-Ferretti: