Statistics for the international financial system
Speech by José Manuel González-Páramo, Member of the Executive Board of the ECBat the Seminar entitledInforming markets: statistical challenges facing the global economySingapore, 18 September 2006
Ladies and gentlemen,
It is a pleasure for me to address you on the occasion of this seminar on the statistical challenges facing the global economy. As you will agree, the timely availability of comprehensive, credible and consistent international statistics is an essential foundation both for monetary policy and other tasks of central banks, and for the international financial system in general. In this respect, despite the remarkable progress achieved over the last few years, in my view, which represents the European Central Bank view, there is no reason to be complacent. Much can be improved and must be improved. As a matter of fact, the further enhancement of international statistics was also the subject of the ECB’s third conference on statistics, held earlier this year, which yielded some useful new insights.
Clearly, the availability of international economic and financial statistics has greatly improved during the last decade. This is not least thanks to an initiative by the International Monetary Fund (IMF) in the 1990s, namely the launch of a General Data Dissemination System (GDDS) and a Special Data Dissemination Standard (SDDS) for countries with high levels of international financial activity, which are also expected to have sound and reliable statistics.
During the same period, the euro area came into existence as an economic entity in its own right, and concomitantly the complex, yet crucial, task of developing appropriate statistics was undertaken by the ECB, together with the national central banks, and by Eurostat, jointly with the national statistical institutes. A rather comprehensive set of methodologically sound euro area statistics is now regularly released for use by decision-making bodies and the general public. These statistics are founded on – but go beyond – the national data provided by the euro area countries, as is also evident from the consolidated euro area accounts that were recently published by the ECB and Eurostat.
This first release of a comprehensive and consistent set of “national accounts” for the euro area is definitely an important milestone. They will allow in-depth analysis of economic developments of the institutional sectors in the euro area, the interactions between them and their relations with the rest of the world to be carried out – particularly once they are supplemented by a similar system of quarterly accounts, as is scheduled to commence next spring. Since these statistics comprise complete non-financial and financial accounts and financial balance sheets for households, non-financial corporations, financial corporations, the government and the rest of the world, they also enable the IMF to apply a fully-fledged financial balance sheet approach in its surveillance of the euro area. For financial stability analyses, these accounts must be combined with additional information on the corporate sectors and the household sector, and with consolidated group data for banking corporations.
In the rest of my speech, I would like to make a few remarks on four themes:
the SDDS initiative of the IMF;
the statistical aspects of globalisation;
the need for internationally comparable financial stability statistics, and
global statistical governance.
The SDDS initiative of the IMF
I agree with the IMF’s own assessment that the SDDS initiative has enhanced the range, quality and timeliness of country data available to the public and has thus provided better information to underpin the operations of international financial markets. We would therefore welcome a further extension of the list of SDDS subscribers and would like to set a good example in this regard.
All in all, euro area statistics have now been developed to the point that the euro area may be included in the SDDS “country” list that is available on the IMF’s Dissemination Standards Bulletin Board. This may also support the IMF in the conduct of its so-called Article IV missions for the euro area and would further enhance the transparency of these statistics. In turn, that may improve knowledge of the characteristics of the euro area as a single economy on the part of the financial markets and the public at large. With the same objective, the ECB will launch a user-friendly statistical data warehouse on its website next week.
Concerning the content of the SDDS, and of data reported to the IMF more generally, the ECB particularly welcomes the IMF’s efforts to improve the accuracy of its data on the global currency composition of foreign exchange reserves. In June this year the ECB started publishing the full currency composition of its reserves on an annual basis.
The statistical aspects of globalisation
The analysis of the causes and consequences of globalisation requires the availability of high quality, internationally comparable statistics. This has been achieved to a large extent, but further improvements are required. For instance, there is a need for full adherence, at least by OECD countries and important emerging economies, to international statistical standards such as the System of National Accounts (1993 SNA) and the fifth edition of the IMF Balance of Payments Manual. The ECB attaches a great deal of importance to the current work on updating these global standards, as is illustrated by its hosting of this year’s meetings of both core expert groups involved. In substance, the updated SNA should reflect the fact that modern economies are knowledge-based economies, in which the quality of the labour force is a key factor for success. This requires the regular compilation of disaggregated labour accounts as an integral part of the national accounts. In turn, that would substantially enhance the analysis of productivity growth and shed more light on the evolving global distribution of labour, in which skill levels play a crucial role.
More generally, the statistics based on these standards should depict economic reality as reflected in monetary transactions and not impute an artificial price to non-monetary transactions, nor recognise assets and liabilities that are not viewed as such by the economic actors themselves. At the same time, it should be acknowledged that welfare cannot be adequately captured by any single statistic, including GDP.
The statistics most widely used to analyse globalisation are the balance of payments and international investment position. The ECB publishes these statistics for the euro area every month and every quarter, respectively. In this context, the IMF’s initiative to organise annual Coordinated Portfolio Investment Surveys deserves special mention. On the one hand, these surveys provide a very valuable source for assessing cross-border creditors’ holdings, but on the other hand their usefulness for the regular compilation of statistics is still somewhat limited because they are only completed annually and their results become available only after a long delay. Another key indicator is foreign direct investment, and the ECB actively supports the initiatives of the IMF and OECD to improve the corresponding conceptual framework, in particular as regards the treatment of “Special Purpose Entities” and identifying the ultimate host and/or investing country.
More generally, it is somewhat unfortunate that the statistics of the euro area’s main trading partners on their flows and positions vis-à-vis the euro area do not exactly mirror the related statistics published by the ECB, and international efforts may be stepped up to solve this so-called asymmetry problem. In addition to some analytical work, this may involve a more comprehensive exchange of basic information among the compilers of these statistics, for instance concerning foreign direct investment and household holdings of securities.
The need for internationally comparable financial stability statistics
In a world of ever more integrated financial markets, internationally comparable financial statistics play an ever larger role. The ECB compiles a wide range of macro-prudential indicators covering the euro area and the European Union as a whole, drawing on a variety of supervisory and statistical data sources. In this regard, the ECB supports the IMF initiative to measure financial stability at a global level by means of a harmonised set of Financial Soundness Indicators, and based on a Guideline that may develop into a standard for the regular compilation of these statistics. In addition, convergence between supervisory, business accounting and statistical standards is needed, if only to limit the administrative burden. Furthermore, whereas at present the IMF rightly focuses its attention on “core” indicators relating to the banking system, it is essential to also identify potential risks to stability emanating from outside the banking sector. In this context, but also more generally, a key ECB objective for the near future is to develop more timely and more comprehensive euro area statistics for insurance corporations and pension funds and for other financial intermediaries, such as hedge funds and financial vehicle corporations engaged in asset securitisation.
Global statistical governance
The credibility of statistics worldwide hinges on the quality and integrity of statistical output and processes, which in turn depend on an appropriate institutional environment for the development, collection, compilation and dissemination of statistics. In this respect, the IMF has made a substantial contribution by setting up a sophisticated data quality framework (DQAF). The ECB also welcomes the current efforts at the international level to increase convergence among the various data quality frameworks that are currently in use.
The ECB, represented by its Directorate General Statistics, actively contributes to global statistical standards and governance. For instance, it is one of the seven international organisations sponsoring the Statistical Data and Metadata eXchange (SDMX) initiative, which aims at exploring common electronic standards that would facilitate more efficient worldwide exchange and sharing of data and metadata. Of course, these sponsors should set a good example by fully implementing these standards in their own domain.
At the same time, the current arrangements for the global statistical governance of official financial statistics are still somewhat incomplete, perhaps because these statistics require the involvement of both central banks and statistical institutes and currently no worldwide body exists that can coordinate both these constituencies. The consideration given by the IMF to the founding of an Inter-Secretariat Working Group on Finance Statistics are therefore very welcome.
To summarise, in today’s global economy, timely and reliable official statistics play a key role in policy-making as well as in investors’ decisions. Such statistics and especially external statistics require close international cooperation, if only to avoid the possibility that the same statistics compiled by different countries or economic areas might point to different outcomes, which would in turn lead to different policy conclusions. Above, I have also given various examples of the important role the IMF has played in enhancing statistics for the international financial system at the worldwide level. At the same time, the ECB remains committed to contributing to the further global enhancement of statistics, particularly financial, monetary and external statistics.
Thank you for your attention.
 Financial Statistics for a Global Economy, third ECB conference on statistics, May 2006. All contributions are available at www.ecb.europa.eu/events/conferences/html/eastats3.en.html.
 See www.ecb.europa.eu/press/pr/date/2006/html/pr060531.en.html.
 See J. Mathisen and A. Pellechio, “Using the Balance Sheet Approach in Surveillance: Framework, Data Sources and Data Availability”, IMF Working Paper No WP/06/100, International Monetary Fund.
 See R. Mink, P. Sandars and N. Silva, “Financial and non-financial accounts for monitoring financial stability”, paper presented at the joint workshop of the Bank of Canada and the Irving Fisher Committee in June 2005, European Central Bank.
 See the 30 June 2006 entry on the “What’s new in Statistics” page of the ECB website (http://www.ecb.europa.eu/stats/html/index.en.html).
 See the article entitled “Comparability of statistics for the euro area, the United States and Japan”, in the April 2005 issue of the ECB Monthly Bulletin.
 See S.J. Keuning, “Interaction between National Accounts and Socio-Economic Policy”, The Review of Income and Wealth, Series 44, No 3, September 1998.
 See, for example, R. Mink and P. Rother, “‘The statistical recording of implicit pension liabilities and its impact on household wealth and general government obligations”, paper presented at the Irving Fisher Committee Conference on Measuring the Financial Position of the Household Sector, August 2006, European Central Bank.
 See, for example, C. Sánchez Muñoz and J.M. Israël, “The difficulties attached to the collection of information on households’ holdings of securities: third-party reporting”, paper presented at the Irving Fisher Committee Conference on Measuring the Financial Position of the Household Sector, August 2006, European Central Bank.
 See L. Mörttinen, P. Poloni, P. Sandars and J. Vesala, “Analysing banking sector conditions – how to use macro-prudential indicators”, Occasional Paper No 26, April 2005, European Central Bank.
 In effect, statistical surveys cause only a very small part of the administrative burden on business. See, for example, I. Pfeiffer and R. Stäglin, “Statistikbelastung der Unternehmen: Reduzierung der Berichtspflichten kann nicht viel zum Bürokratieabbau beitragen”, DIW Wochenbericht, Volume 73, 26 July 2006, DIW Berlin.
 The other institutions are the Bank for International Settlements, Eurostat, the IMF, the OECD, the UN and the World Bank. Please refer to www.sdmx.org for more information on this important project.
 In the EU, the Committee on Monetary, Financial and Balance of Payments statistics is making a rather successful contribution to the coordination of statistical activities of central banks and statistical institutes.
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