Finding New Data

• Author: Adelheid Burgi-Schmelz
• Position: Director of the IMF’s Statistics Department. Robert Heath, Andrew Kitili, and Alfredo Leone of the IMF’s Statistics Department assisted in the preparation of this article.

THE recent global financial crisis demonstrated the lack of data in key areas that might have helped authorities measure and understand the risks to the international system that arose from increasingly integrated economies and financial markets. Statistics that are timely, internally consistent, and comparable across countries are critical to monitoring financial stability. Better information on the connections among financial institutions through channels such as interbank lending, securities lending, repurchase agreements, and derivatives contracts is critical to helping authorities ensure financial stability.

But in the run-up to the recent crisis, data systems failed to capture comprehensibly the deepened integration of economies and markets and the strengthened linkages among financial institutions. There is overwhelming evidence that credit risks were made worse by heavy borrowing (leverage), much of which took place outside traditional depository institutions (such as banks) through the use of commercial paper, repurchase agreements, and other similar market instruments. The heavy use of short-term finance to purchase long-term assets (maturity transformation), which led to a mismatch in the maturity structure of corporations’ assets and liabilities, was a key problem in the crisis. But because of a paucity of data, regulators, supervisors, and market participants could not fully measure the degree of maturity transformation or the extent to which financial institutions and markets were interconnected.

A key lesson for financial stability

One key lesson is that supervisors, policymakers, and investors should have sufficient data and information to more quickly evaluate the potential effects, for instance, of possible failure of a specific institution on other large institutions through counterparty credit channels, and on financial markets, payment, clearing, and settlement arrangements, Federal Reserve Board Governor Daniel Tarullo noted recently (see Tarullo, 2010). The need for comprehensive, high-frequency, and timely data to monitor systemic risks associated with operations of the systemically important financial institutions was underscored by IMF Managing Director Dominique Strauss-Kahn, who observed in a recent interview (Schneider, 2010), “We need more data, including from a rather small number of the large financially systemic institutions.... The mandate of the Fund is to have surveillance of countries, but today you have...