Proceedings of the IFC - Central Bank of the Republic of Turkey Workshop on the "Use of financial accounts", Istanbul, Turkey, 18-20 March 2019.
The development of financial accounts (FA) is high on the global policy agenda. These accounts have become an essential element of the Systems of National Accounts (SNA), drawing from the traditional description of real economic aggregates but augmented to present information on financial flows and positions. Several steps have been taken in recent years to refine important aspects of this framework, with the ultimate goal of building “integrated sectoral financial accounts”.
To this end, two areas of focus are important. One relates to collecting the statistics that are needed to “fill” standard economic accounts. Large data collections have been undertaken since the 2007–09 Great Financial Crisis (GFC) to build better-quality, more comprehensive and flexible data sets, which can greatly facilitate the actual compilation of FA. A second important issue is to highlight how these statistics can be useful; in particular, to show how the wealth of information provided by FA can support public policy.
These areas are of particular relevance for central banks, as both producers and users of data. As producers, they have been highly involved in the statistical exercises launched to address the challenges highlighted by the GFC – and they are de facto in charge of the compilation of FA in most countries. As data users, central banks have a steadily increasing demand for information in order to understand, and act on, the financial system in pursuing monetary and financial stability policy objectives. FA represent a key opportunity to address these information needs.
Against this backdrop, a workshop on the “Use of financial accounts” was organised by the Central Bank of the Republic of Turkey (CBRT) with the BIS’s Irving Fisher Committee on Central Bank Statistics (IFC). Convening in March 2019 in Istanbul, Turkey, this workshop was attended by officials from central banks, international organisations and national statistical offices from almost 30 jurisdictions across the globe, as well as by representatives from other public agencies, the financial sector and academia. This proved a useful opportunity to take stock of the initiatives conducted by the central bank community and other parties to enhance the actual use of FA information in conducting financial stability and monetary policy.
Feedback from the workshop highlighted the following points:
- The system of financial accounts has become a key building block of economic statistics, reflecting the growing importance of finance in today’s life. Important steps have been taken in recent years to refine this framework. In particular, the various post-crisis initiatives for better quality, more comprehensive and flexible granular data sets have proved instrumental.
- As a result, significant progress has been made in major advanced and emerging market economy countries. Yet many jurisdictions are still struggling with FA compilation in practice – which requires important human, IT and financial resources. These difficulties can be mitigated by setting up carefully defined steps for progressively enhancing compilation and by following a long-term prioritisation plan.
- Once initial compilation efforts have been made, the focus should turn increasingly to the user side. This is of particular relevance for central banks in their dual role of producers and users of data. From this perspective, FA may not be sufficiently explored despite their vast potential. In particular, this information can usefully support central bank work in, for example, statistical compilation, macroeconomic analysis and monitoring, forecasting, and monetary and financial stability.
- For instance, the FA framework has proved instrumental in assessing financial intermediation and the role of non-traditional providers of financial services. It also provides a wealth of information for the analysis of the financial positions of economic agents that use financial services. National experience shows that this can be particularly valuable when seeking to understand the behaviour of households and corporates as well as in detecting potential fragilities.
- A key issue is to make sense of the data collected and ensure that the insights gained can support policy effectively – by transforming data into information and then knowledge. The challenges include, first, to ensure that FA information is consistent with the other types of statistics available. Second is to facilitate the combination of micro- and macro-level statistics. And a final one is to make sure that statistics based on the residency concept remain relevant in an increasingly globalised economy.
- To address these challenges, it is important to enhance the interaction between users and compilers as well as to strengthen internal and external communication. In addition, the compilation of national, residency-based FA can be usefully complemented by the production of global flow-of-funds data, the development of database on multinational enterprises (MNEs), the setup of consistent distributional indicators, the linking of micro- and macro-data sets, and the provision of nationality statistics.
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The increased availability of FA is likely to trigger new demands from users that may be difficult to predict at the current stage, putting a premium on collecting and combining granular data in a flexible way.
The related presentations, referred to in this overview and included in this IFC Bulletin, focused on various aspects related to the use of FA. They covered (1) ongoing compilation exercises to develop the FA framework; (2) FA’s effectiveness as a tool to support public policy in various areas, with a focus on central bank activities; (3) the richness of this framework to address issues of current relevance in the global financial system, namely the evolving patterns of financial intermediation and the assessment of economic agents’ balance sheets and associated vulnerabilities; and (4) the main challenges faced, especially as regards the combination of the real and the financial sides of the national accounts, micro and macro-level data integration, and the impact of globalisation.