Summary of Guidance for Each Financial Soundness Indicator

Pages:180-202
SUMMARY

Core FSIs. Deposit Takers. Regulatory capital to risk-weighted assets. Definition. Issues for compilers. Sources of data. Regulatory Tier 1 capital to risk-weighted assets. Definition. Issues for compilers. Sources of data. Nonperforming loans net of provisions to capital. Definition. Issues for compilers. Sources of data. Nonperforming loans to total gross loans. Definition. Issues for compilers. Sources of data. Sectoral distribution of loans to total loans. Definition. Issues for compilers. Sources of data. Return on assets. Definition. Issues for compilers. Sources of data. Return on equity. Definition. Issues for compilers and sources of data. Interest margin to gross income. Definition. Issues for compilers. Sources ... (see full summary)

 
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Page 180

1. This appendix brings together in summary form the guidance outlined in the Guide for each agreed FSI. The main purpose of this appendix is to support the work of compilers by bringing together in one place the various elements of guidance relating to each FSI, not least to help compilers locate the relevant detailed advice in the main text. The summaries are of one page length or less, and there is some cross-referencing among them. In addition, for ease of reference, an index of the FSI summaries is provided (Box A2.1).

2. For many of the agreed FSIs, the Guide recommends that the data series be drawn from sectoral financial statements; therefore, even though FSIs are described individually below, the compiler needs to remain aware of the broader context. In other words, the FSIs are a body of data with interrelationships that may not be apparent in the short summaries. Where relevant, the appropriate lines in the sectoral financial statements (Tables 4.1, 4.2, 4.3, and 4.4 in Chapter 4) are referenced.

3. Each summary below has the following three sub- headings.

- Definition: provides the definition of the FSI and, where appropriate, guidance on where the component series are defined in the Guide.

- Issues for compilers: draws out specific issues of which compilers should be aware.

- Data sources: provides information on where the information can be obtained. Relevant to this sub- heading is Chapter 11, which provides a detailed discussion of sources of information and additional data series that might be required. Also relevant is Appendix IV, which reconciles the Guide 's methodology with the national accounts and commercial accounting frameworks. As outlined in Chapter 11, it is not possible to generalize as to what information is available from supervisory sources, but some of the key differences in methodology between national accounts and supervisory information should be explored in compiling cross-border consolidated data for deposit takers.

4. For deposit takers, it is assumed that data from supervisory sources are available on a consolidated basis, but the nature of the consolidation should be compared with the Guide 's recommendations (see Chapter 5). If countries decide that domestic consolidated data (see paragraph 5.25) can also be derived from supervisory sources, then the references under cross-border consolidated information also apply to domestic data, but in general the summaries assume that the national accounts will be the source for domestic based data.

5. In reviewing the summaries below and determining the need to collect new data (and incur increased resource costs), authorities must make a judgment as to the importance of the additional data series for compiling and monitoring FSI data.

6. To summarize the guidance in Chapters 2 and 3. - The definitions of deposit takers and other sectors are provided in Chapter 2 (paragraphs 2.4 to 2.19).

- Transactions and positions should be recorded on an accrual basis, and only existing, actual assets and liabilities should be recognized (paragraphs 3.3 to 3.9).

- The Guide prefers valuation methods that can provide the most realistic assessment at any moment in time of the value of an instrument or item. Market value is the preferred basis of valuation of transactions as well as of positions in traded securities. For positions in nontradable instruments, the Guide acknowledges that nominal value (supported by appropriate provisioning policies) may provide a more realistic assessment of value than the application of fair value (see paragraphs 3.20 to 3.33).

- Residence is defined in terms of where an institutional unit has its center of economic interest (see paragraphs 3.34 to 3.36).

- Transactions and positions in foreign currency should be converted into a single unit of account based on the market rate of exchange (see paragraphs 3.44 to 3.48).

- Short-term maturity is defined as one year or less (or payable on demand), with maturities over one year defined as long term (see paragraphs 3.49 and 3.50).

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Box A2.1. FSIs: Index of Summaries

Core FSIs Deposit takers

Regulatory capital to risk-weighted assets

Regulatory Tier 1 capital to risk-weighted assets

Nonperforming loans net of provisions to capital

Nonperforming loans to total gross loans

Sectoral distribution of loans to total loans

Return on assets

Return on equity

Interest margin to gross income

Noninterest expenses to gross income

Liquid assets to total assets (liquid asset ratio)

Liquid assets to short-term liabilities

Net open position in foreign exchange to capital

Encouraged FSIs Deposit takers

Capital to assets ratio

Large exposures to capital

Geographical distribution of loans to total loans

Gross asset and liability position in financial derivatives to capital

Trading income to total income

Personnel expenses to noninterest expenses

Spread between reference lending and deposit rates

Spread between highest and lowest interbank rate

Customer deposits to total (noninterbank) loans

Foreign-currency-denominated loans to total loans

Foreign-currency-denominated liabilities to total liabilities

Net open position in equities to capital Other financial corporations

Assets to total financial system assets

Assets to GDP Nonfinancial corporations

Total debt to equity

Return on equity

Earnings to interest and principal expenses

Net foreign exchange exposure to equity

Number of applications for protection from creditors Households

Household debt to GDP

Household debt service and principal payments to income Market liquidity

Average bid-ask spread in the securities market

Average daily turnover ratio in the securities market Real estate markets

Real estate prices

Residential real...

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