Data needs for monitoring systemically important institutions Maarten Gelderman Head Macroprudential Analysis
What data do we need to form a better picture of the underlying health of systemically important financial institutions? What improvements in disclosure are needed to provide these data?
“Late” warning signals Delinquencies Provisioning Risk weights Google trends and similar statistics
Risk drivers Build up of leverage Build up of mismatches Build up of interlinkages/risk concentrations Herding Increasing reliance on bail-out Liquidity Solvency Reverse approach: return statistics?
Building up leverage Does not equal leverage ratio Off balance Inherent leverage of instruments Trading book/hedges Leverage interacts with interlinkages Collateral Guarantees Gross exposure measures Indicators of “risk reduction” due to common factors Note: in the end leverage of the system is more relevant than leverage of individual institutions
Herding Underestimation of risk Underpricing of risk Underpricing of liquidity Risk concentrations across balance sheets Note: market data may be used to support out case
An example Correlation moderate and stable Volatility low and stable
Reliance on bail-out Size/share of individual markets Reductions in franchise value Composition of capital Interlinkages between financial institutions
Wrap-up Challenging View across institutions needed View across assets (and other risk concentrations) needed View on markets needed?