1. Statistics for macro-prudential analysis and micro-prudential supervision: transferable insights to other central banks Skopje seminar 2-5 October 2013 Jean-Marc Israël Head of Division, Monetary and Financial Statistics ECB

2. Outline International approach European approach Prospects for micro-prudential supervision 2 1 3 2

3. Outline International approach European approach Prospects for micro-prudential supervision 2 1 3 3

4. - Increasing economic interdependencies among main economies need globally- comparable economic and financial statistics/indicators Official statistics support multilateral policy responses - For better financial stability analysis Financial crisis revealed additional efforts are needed - For monetary policy purposes Central banks developed large amount of high quality data Reliable statistics for global financial stability 4 Crisis and role statistics Macroeconomic surveillance Conclusions

5. Action plan on IMF/FSB report to G-20 1.20 Recommendations developed and implemented 2.Key role Inter-Agency Group on Economic and Financial Statistics 3.Principal Global Indicators (PGIs) website  http://www.principalglobalindicators.org Statistics for financial stability: G-20 5 Furthermore, G-20 support to the FSB-led initiative to create a global Legal Entity Identifier

6. 1.Better capture build-up risk financial sector 2.Improve data international financial network connections 3.Monitor vulnerability of domestic economies to shocks 4.Better communication official statistics 1.Better capture build-up risk financial sector 2.Improve data international financial network connections 3.Monitor vulnerability of domestic economies to shocks 4.Better communication official statistics G20 Recommendations G-20 Recommendations 6

7. Data gap Existing framework and ongoing collection Framework needs further development Build-up of risk in the financial sector #2 Financial Soundness Indicators (FSIs) #5 Credit Default Swaps #7 Securities #3 Tail Risk in the Financial System #4 Aggregate Leverage and Maturity Mismatches #6 Structured Products Cross-border linkages #10, #11, #12 Coordinated Portfolio Investment Survey, International Banking Statistics, International Investment Positions #8 and #9 Global Network Connections and Systemically Important Global Institutions #13 and #14 Financial and Nonfinancial Corporations’ Cross Border Exposures Vulnerability of domestic economies to shocks #15 Institutional Sector Accounts #17 Government Finance Statistics #18 Public Sector Debt #19 Real Estate Prices #16 Distributional Information Improving communication #20 Principal Global Indicators (PGI) G-20 Recommendations 7

8. The EU has a double role in the G-20 data gaps initiative: –EU as Member of the G-20 Eurostat and ECB are providers of the statistics for the EU and the Euro Area –Geographical area Eurostat and ECB act as regional hubs for data collection for the EU countries Eurostat and the ECB promote the developments of the European Statistical System and of the European System of Central Banks to match the G-20 Recommendations European Union (EU) and G-20 8

9. Sectoral accounts work of high importance 1 Demand for greater granularity of data 2 Comprehensive and high-quality data essential 3 Align data requirements for macro- and micro-prudential needs 4 Look for synergies with IMF SDDS Plus requirements 5 Need to set priorities and timelines and to provide resources 6 Strategic action lines 9

10. 2012 IMF/FSB Report to G-20: action plans Table 1: Enhancements Existing Statistical Frameworks and Ongoing Collection Recommendation Enhancements Implemented Progress to date in G-20 Economies Reporting Timetables Going Forward and outstanding issues #2. Financial Soundness Indicators #5. Credit Default Swaps #7. Securities Statistics #10/#11. Coordinated Portfolio Investment Survey #10/#11. International Banking Statistics #12. International Investment Position #15. Sectoral Accounts #17. Government Finance Statistics #18. Public Sector Debt #19. Real Estate Prices #20. PGI 10

11. Outline International approach European approach Prospects for micro-prudential supervision 2 1 3 11

12. Macro-prudential oversight in Europe 2.1 12

13. Macro-prudential oversight As the financial crisis, triggered in August 2007 persisted and spread, in particular with the Lehman collapse in September 2008, the Financial Stability Board (in particular the US and the EU) decided to react to: Enhance micro-prudential supervision Develop a new function: macro-prudential oversight Both micro and macro-prudential activities heavily rely on timely, accurate and harmonised datasets NB: Micro-prudential supervision stands for the oversight of individual institutions in the respective sector (banking, insurance, etc.) 13 Macro-prudential oversight Data needs ECB response

14. European institutional framework (I) Macro-prudential supervision European Systemic Risk Board (ESRB) ECB Chair of Economic and Financial Committee National Supervisory Authorities 27 EU National Central Banks EU Commission 3 European Supervisory Authorities Advisory & Scientific Committees 14 Macro-prudential oversight Data needs ECB response

15. 15 European institutional framework (II) Macro-prudential oversight Data needs ECB response

16. Macroprudential oversight [ESRB] Microprudential supervision Macroeconomic policies Contribute to prevention of systemic risks to financial stability in the EU ESRB establishes link micro-prudential supervision and macro-economy ECB provides statistical support to ESRB Contribute to prevention of systemic risks to financial stability in the EU ESRB establishes link micro-prudential supervision and macro-economy ECB provides statistical support to ESRB Macroprudential oversight Scope of macro-prudential oversight 16 Macro-prudential oversight Data needs ECB response

17. Data needs for financial stability purposes 2.2 17

18. 1.Interlinkages 2.Profitability and solvency 3.Funding and liquidity 4.Credit risk 5.Market risk 6.Macro risk ECB: identify main datasets and set priorities for ESRB/ECB’s own financial stability needs Financial stability analysis – data needs Led to breakdown in 6 risk categories: 18 Macro-prudential oversight Data needs ECB response

19. ECB’s statistical initiatives For each risk category, it is assessed: –Which data are available according to the appropriate concepts –Possible proxy data –Are data missing? 1.Interlinkages 2.Profitability and solvency 3.Funding and liquidity 4.Credit risk 5.Market risk 6.Macro risk Risk typologies 19 Macro-prudential oversight Data needs ECB response

20. ECB’s statistical initiatives Data often available in Eurosystem/ESCB or other national (supervisory) authorities  Otherwise, surveys enable to get a picture Distinctive datasets: Active: data are reported to the competent authority Passive: data are defined (e.g. supervisory framework) though not regularly reported Ad-hoc: data need first to be defined and then reported 20 Macro-prudential oversight Data needs ECB response

21. The ECB response 2.3 21

22. New statistics on Investment funds (2009) Financial Vehicle Corporations engaged in securitisation (2011) Insurance Corporations and Pension Funds (2011) Financial market statistics Development micro-datasets Centralised Securities Database Securities Holding Statistics Loans Consolidated banking data Register of Financial Institutions Household and corporate surveys Enhancements to statistics Further development euro area accounts (flow of funds, etc.) Implementation new manuals (SNA2010-ESA2010, BPM6, etc. ) Other datasets BIS banking and CDS statistics IMF FSIs Commercial data Ad-hoc surveys The ECB response to financial stability data needs 22 Macro-prudential oversight Data needs ECB response

23. New statistics- better information on all financial sectors Enhanced Monetary and Financial Statistics New statistics on assets and liabilities of euro area Investment Funds Investment Funds Regular compilation statistics on euro area Financial Vehicle Corporations engaged in securitisation transactions and MFI securitisation Financial Vehicle Corporations New statistics on euro area Insurance Corporations & Pension Funds Insurance Corporations & Pension Funds 23 Macro-prudential oversight Data needs ECB response

24. Breakdowns Providing more breakdowns of banks’ balance sheet and interest rates Credit lines New data on credit lines granted by banks Compilation Compilation harmonised financial statistics on a consolidated basis Alignment Working with supervisors in a better alignment of supervisory and statistical concepts and data Further advancing timeliness Timeliness New statistics- better information on all financial sectors Enhanced Monetary and Financial Statistics 24 Macro-prudential oversight Data needs ECB response

25. 1.Financial markets statistics 2.Probability density functions 3.Exposures to sovereign debt/GFS 4.STEP market statistics 5.Foreign currency borrowings by non-financial corporations, households, or credit institutions 1.Financial markets statistics 2.Probability density functions 3.Exposures to sovereign debt/GFS 4.STEP market statistics 5.Foreign currency borrowings by non-financial corporations, households, or credit institutions Other monetary / financial statistics in demand New statistics - Better information on financial markets 25 Macro-prudential oversight Data needs ECB response

26. Register of Financial institutions and groups composition 1 Consolidated Banking Data/National Banking Indicators 2 Granular Credit Data 3 Sectoral/individual Issuance and Holdings of Securities 4 SME Corporate finance 6 26 Statistics and Micro-databases Developments of micro-datasets Macro-prudential oversight Data needs ECB response Household consumption and financing survey 5

27. Other datasets BIS banking statistics (consolidated and locational by nationality) Banks’ disclosures Commercial data from Bloomberg, Moody’s, etc. BIS banking statistics (consolidated and locational by nationality) Banks’ disclosures Commercial data from Bloomberg, Moody’s, etc. Ad-hoc surveys Occur for specific issues Tailored to latest developments in financial sector Especially while EU Supervisory reporting frameworks are still in the making Occur for specific issues Tailored to latest developments in financial sector Especially while EU Supervisory reporting frameworks are still in the making 27 Macro-prudential oversight Data needs ECB response

28. 1.Enhancing integrated quarterly financial and non-financial accounts euro area: Advance timeliness Improve consistency Enhance completeness, coverage and length 2.Consolidated lending exposures credit institutions vis-à-vis counterparts 3.Implementation of new international statistical standards (SNA2008-ESA2010, BPM6) Enhancements to macroeconomic statistics 28 Macro-prudential oversight Data needs ECB response

29. ECB support to the ESRB Improvements White Book – i.e. regular information pack Reference database  for surveillance reports and regular models supporting risk analysis Risk Dashboard Focus on EU Member States, e.g. National banking indicators White Book – i.e. regular information pack Reference database  for surveillance reports and regular models supporting risk analysis Risk Dashboard Focus on EU Member States, e.g. National banking indicators 29 Macro-prudential oversight Data needs ECB response

30. Examples presentations White Book Examples 30 Macro-prudential oversight Data needs ECB response

31. Examples 31 Macro-prudential oversight Data needs ECB response

32. The European Systemic Risk Board (ESRB) monitors and assesses the sources of systemic risk across the EU financial system as a whole The ECB provides analytical, statistical, administrative and logistical support to the ESRB Legal obligation to define a risk dashboard  ESRB Regulation (Art. 3.g) requires that the ESRB “in collaboration with the ESAs, develop a common set of quantitative and qualitative indicators (risk dashboard) to identify and measure systemic risk.” ESRB Risk Dashboard defined in cooperation with the ECB ESRB Risk Dashboard 32 Macro-prudential oversight Data needs ECB response

33. ESRB Risk Dashboard 1st publication 20 September 2012 Specifications: 45 indicators and 6 risk typologies Allows synthetic view situation for deeper analysis Cannot replace expert judgement, but complements it Objectives Risk assessment Input further systemic risk analysis Risk assessment Input further systemic risk analysis Communication tool 33 Macro-prudential oversight Data needs ECB response

34. ESRB Risk Dashboard Domestic credit-to-GDP ratio Actual and forecasted GDP growth Domestic credit-to-GDP ratio Actual and forecasted GDP growth Macro risk Households debt-to-gross disposable income Real estate comm. property, market size over GDP Households debt-to-gross disposable income Real estate comm. property, market size over GDP Credit risk Global risk aversion indicator Price/earning ratio Global risk aversion indicator Price/earning ratio Market risk Liquidity & Funding Bank liabilities structure Interlinkages Composite indicator of systemic stress (CISS) Average systemic risk contribution of individual institution to overall risk using CoVar (EU banking syst.) Composite indicator of systemic stress (CISS) Average systemic risk contribution of individual institution to overall risk using CoVar (EU banking syst.) Profitability & Solvency EU large banks: Leverage ratios 34 Macro-prudential oversight Data needs ECB response

35. ESRB Risk Dashboard 35 Six risk typologies Macro risk Credit risk Market risk Liquidity and funding Interlinkages Profitability & solvency Interlinkages

36. ESRB Risk dashboard examples 36 Funding and liquidity

37. “ Good statistics are much cheaper than policy mistakes‘‘ (Janez Potočnik, EU Commissioner for the Environment, Eurostat Conference 2011)

38. Outline International approach European approach Prospects for micro-prudential supervision 2 1 3 38

39. Overall framework and legal provisions for collection of information to support the tasks of the SSM Organisational chart for supervisory data SSM: Other data-related issues Outstanding issues Overview

40. 40 Euro area summit statement (29 June): “The Commission will present Proposals on the basis of Article 127(6) for a single supervisory mechanism shortly. We ask the Council to consider these Proposals as a matter of urgency by the end of 2012. When an effective single supervisory mechanism is established, involving the ECB, for banks in the euro area the [European Stability Mechanism] could, following a regular decision, have the possibility to recapitalize banks directly.” =>Draft Regulation will soon be adopted (based on Art. 127.6 of the Treaty) Overall framework (1/2)

41. 41 Three components: -Banking supervision (on- and off-site) – high priority -Resolution mechanism – second high priority -Deposit guarantee scheme – lower priority It has become critical to “break the vicious circle between banks and sovereigns” Overall framework (2/2)

42. Scope – some important articles 42 Art. 5: Both the ECB and national competent authorities shall be subject to a duty of cooperation in good faith, and an obligation to exchange information Art. 9: ECB empowered to require […] including information to be provided at recurring intervals and in specified formats for supervisory and related statistical purposes Art. 18: Separation from monetary policy function; […] the ECB shall adopt and make public any necessary internal rules, including rules regarding professional secrecy and information exchanges between the two functional areas. Commission proposal on the SSM agreed by Council (ECOFIN) on 12 September 2012 (I/3) Art. 20: Professional secrecy and exchange of information [with national or European authorities and bodies]

43. Scope – article 5(4) 43 Total assets > €30 bn Receiving public assistance from EFSF or ESM Ratio total assets/GDP > 20% (unless total assets < €5 bn) Significance is notified by NSA and confirmed by ECB Upon ECB initiative, significant cross-border activity (subsidiaries in more than one countries etc.); Methodology The ECB shall be responsible for the supervision of significant banking groups, stand-alone banks and branches, which on a consolidated basis meet any of the following conditions Commission proposal on the SSM agreed by Council (ECOFIN) on 12 September 2012 (2/3) The three most significant banks in each country By 1.7.13, ECB to publish the framework (list of significant banks, methodology, etc)

44. Legal power to request information INVESTIGATORY POWERS Article 9 Requests for information INVESTIGATORY POWERS Article 9 Requests for information 44 The ECB may require the following legal or natural persons (see list below) to provide all information that is necessary in order to carry out the SSM tasks, including information to be provided at recurring intervals and in specified formats for supervisory and related statistical purposes. Where the ECB obtains information directly from these persons, it shall make that information available to national authorities concerned. credit institutions persons belonging to such entities or 3 rd parties to whom entities have outsourced functions or activities financial holding companies mixed financial holding companies mixed-activity holding companies Information can be requested from Commission proposal on the SSM agreed by Council (ECOFIN) on 12 September 2012 (3/3) …. in compliance with single rule book (by European Banking Authority)!

45. 45 Organisation chart for supervisory data flows: state-of-play in euro area countries In 13 euro area countries the NCB is also the NSA  The organisation of supervisory reporting is integrated either in Statistics or in a separate unit (with access to supervisory data) In the remaining 4 euro area countries (EE, FI, FR and MT)  Supervisory data are collected by the NCB on behalf of the NSA in MT and FR  Statistics have access to the supervisory data in the NCBs of EE and FI  In Banque de France, access to supervisory data is limited to statistical use Consequent working assumption (to be validated):  data flows can be organised via (Statistics Departments of) NCBs in the euro area

46. 46 Organisation chart for supervisory data flows: MFI balance sheet statistics: a model for SSM? Monetary analysis MFIs NCBs ECB Other statistical purposes: National accounts Balance of payments Other statistical purposes: National accounts Balance of payments Minimum reserves Economic and financial stability analysis Individual Individual & aggregated Individual & aggregated Euro area and EU perspective National perspective

47. 47 SSM – Other data-related issues (1/2) Coverage: About 130 Banking groups in the euro area based on the thresholds in the draft Regulation Ca. 2,000 Credit institutions –pertaining to these banking groups and financial conglomerates, or –stand-alone banks Reporting The banking groups will fall under the micro-supervision of the ECB, and will still remain subject to EU law (likely from mid-2014) – e.g. single rule book will apply, as set up and maintained by the EBA The ECB may need additional, more specific and timely information

48. 48 SSM – Other data-related issues (2/2) Scope: Initial pilot based on data available For supervision of ‘significant’ cross-border groups, ECB staff will need to adequately receive, store and disseminate highly sensitive information based on the existing (not fully comparable) and forthcoming (harmonised) FINREP / COREP The ECB will also make available a wide range of (available or new) information on » groups’ composition (for mapping purpose, and combining various datasets) » very granular securities (issues and holdings), » loans (from credit registers, etc.), » derivatives (e.g. CDS)

49. 49 Many outstanding questions arising from SSM How will the task related to data collection be shared with national authorities? Access by supervisors to ECB statistical data? Uses of information for macro-prudential or monetary policy analysis? Internal ECB organisation: integration of supervisory/statistical data processes? Sharing of tasks will have an impact on scope of individual information collected by the ECB National discretion in current supervisory reporting (e.g. Pillar II and FinRep for non-IFRS banks)? How many banks will be supervised under the SSM and from when? Data flow to/from EBA/ESMA/ESRB? Which data from banks not supervised by ECB? List of significant banks and their maintenance?

50. 50 Thank you for your attention! Questions? ☺