Specification of Financial Soundness Indicators for Other Sectors

Pages:88-90
SUMMARY

Introduction. Calculation of Financial Soundness Indicators. Other Financial Corporations. (i) Other financial corporations' assets to total financial system assets. (ii) Other financial corporations' assets to gross domestic product. Nonfinancial Corporations. (i) Total debt to equity. (ii) Return on equity. (iii) Earnings to interest and principal expenses. (iv) Net foreign exchange exposure to ... (see full summary)

 
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Page 88

Introduction

7.1 Drawing on the definitions and concepts set out in Part I of the Guide, this chapter explains how FSIs for the other financial corporations sector, the nonfinancial corporations sector, and the household sector are to be calculated.

Calculation of Financial Soundness Indicators

7.2 As with the deposit-taking sector, most FSIs for the other sectors are calculated by comparing two underlying series to produce a ratio. For some FSIs, when one or both of the underlying series can be defined in alternative ways, these alternatives are explained. As described in Chapter 5, data for the other financial and nonfinancial sectors should be compiled on a consolidated-based approach, and data for households ought to be compiled on an aggregate residence basis.

7.3 For the corporate sectors, the Guide encourages the calculation of FSIs on a consolidated basis to eliminate double counting of income, assets, and capital of entities in the same group. As with deposit takers, data might be compiled on both a domestically controlled cross-border consolidated basis and a domestic consolidated basis. Given the general paucity of information on the non-deposit- taking corporate sectors in many countries, in the first instance compilers may well focus on developing sectoral balance sheet information on a domestic basis. But where domestically controlled cross-border consolidated data are available (such as provided by annual corporate income statements and balance sheets) and cover a substantial part of the sector, their use in compiling the FSI is encouraged.

Other Financial Corporations

7.4 The list of encouraged indicators includes two indicators for other financial corporations to indicate their relative importance to the domestic economy:

- Other financial corporations' assets to total financial system assets, and

- Other financial corporations' assets to GDP.

7.5 These two indicators are described below. Unless otherwise stated, all the line references in this section refer to Table 4.2. The data to be used to calculate FSIs should be adjusted at the sector level, as described in Box 5.2.

(i) Other financial corporations' assets to total financial system assets

7.6 This FSI measures the relative importance of other financial corporations within the domestic financial system. The indicator is calculated by using financial assets owned by other financial corporations (line 3) as the numerator and total financial system assets as the denominator. The latter is the total of financial assets owned by deposit takers (line 16, Table 4.1), other financial corporations, nonfinancial corporations (line 17, Table 4.3), households (line 11, Table 4.4), general government, and the central bank. 1 Financial assets are defined in paragraph 4.38.

(ii) Other financial corporations' assets to gross domestic product

7.7 This FSI measures the size of the other financial...

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