Summary of Guidance for Each Financial Soundness Indicator
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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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