To Plug the Gaps Finance & Development, March 2016, Vol. 53, No. 1
Evrim Bese Goksu and Robert Heath
The postcrisis effort to identify and address missing information about the global economy heads into its second phase
The recent global financial crisis revealed gaps in economic and financial data that hindered detection of a buildup of economic risks. Eight years after the beginning of the crisis, policymakers and statisticians have made progress in identifying and addressing missing information. But more work is needed to complete the data enhancements envisioned in 2009 by the Group of 20 (G20) advanced and emerging market economies.
The so-called data gaps initiative, whose first phase ended in September 2015, dealt with missing information that is important to monitoring both financial institutions and global developments (a process called surveillance). It involved many organizations that gather economic and financial statistics. The G20 (which comprises Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and the European Union) has authorized a second phase of the data gaps project.
Regulatory reformThe initiative deals with missing information that is essential to implementing global regulatory reforms to protect against problems in financial institutions that could spill across borders and affect the stability of the international financial system. Information was needed in the following areas.
Soundness of the financial system: The IMF has long produced a set of statistics, Financial Soundness Indicators, essential for monitoring and assessing the health and soundness of the financial sector overall. The data previously focused primarily on banks’ health. Because of the rapidly changing financial environment and postcrisis global regulatory reforms, the list of indicators was updated in 2013, with an increased focus on nonbank financial institutions. The number of countries covered since 2008 has grown from 45 to more than 100.
Shadow banking: Financial institutions, such as investment firms, that are not banks but assume bank-like risks in providing funding to borrowers have been growing in importance in global financial markets. Typically, these institutions borrow heavily short term while investing in long-term assets that are hard to sell quickly. This exposes them to cash flow...