MBA, Co-founder, Envenure Ltd.
The ECB has recently distributed significantly improved fiscal and financial statistics, with the strategic aim to strengthen the set of various monetary and financial statistics types. These statistics are collected with the sole intent of acquiring a comprehensive and meticulous description of euro area financial sectors so that the ECB’s monetary policy and macro-prudential functions are supported.
The upgrades were activated by two principal elements in overall financial markets. In the first place, as financial innovation has changed the financial scenery in Europe, policy-makers have made extra requests for data gathering processes.
Second, new prerequisites have emerged from the implementation of the European System of Accounts 2010 (ESA 2010), a refit of the statistical standards, which constitute the methodological structure for the monetary and non-financial accounts in Europe.
MFI balance sheets
Although the role of monetary financial institutions (MFIs) has to some extent declined, they still count, as per the ECB, half of the balance sheet of the euro area financial sector at the end of June 2015 (Regulations ECB/2013/33 (statistical requirements for MFI balance sheet)). MFI balance sheet is meant to add statistics in a number of ways in the support of financial stability and monetary analysis. Considering the fact that banks represent the most significant root of financing for the non-financial private sector in the euro area, MFI balance sheet data offer timely information on likely modifications in financing available to the real economy.
Specifically, this consists of newly entered data on positions and transactions, such as loan repayments by borrowers that have been unrecognized from the balance sheets of MFIs owing to sales or securitization. Additionally, breakdowns now encompass the classification of MFI intra-group positions in restricted deposits and loans, loans to general government and financial vehicle corporations (FVCs) by original maturity, as well as holdings of debt securities issued by the governments with an original maturity of up to one year.
Bank interest rates
Bank interest rate statistics give vital information to monetary analysis. They give us the necessary information on rates applied to bank loans as well as loans vis-à-vis households and corporations (Regulations ECB/2013/34 (MFI interest rates)). This has been realized by the introduction of innovative gauges that refer to the renegotiation of loans to households and corporations. Bank interest rates on outstanding sums aggregate the data gathered in the MFI balance sheet statistics outline and support the analysis of income effects for changes in bank interest rates that influence the interest paid or collected by households and corporations, which affects their disposable income. Further, these statistics offer information regarding the level of integration across the European financial markets, thus enabling consumers to compare the rates charged and paid by banks throughout countries as well as essential input to monetary analysis.
Since 2009, the assets of investment funds used in the euro area have doubled, coming close to € 10 trillion in early 2015 (Regulations ECB/2013/38 (investment funds)). Because of this increase and the role played by investment funds in the financial intermediation process, it is essential to have accurate and timely data for this field. With a market share of an estimated 16 % in the second quarter of 2015, investment funds make up a significant part of the euro area financial system. The enhanced reporting of data on investment funds reflects on financial innovation. When investment funds buy shares and debt securities issued by the real economy they provide financing to companies even in times when banks are distressed.
This makes them not only relevant for the ECB’s monetary and economic analysis, but also an important factor in the assessment of the financial stability of the euro area. Significantly, data on funds set up as exchange-traded funds (ETFs) are collected as a sub-item of all funds. Although this is a small proportion, the importance of ETFs as a part of the investment fund sector has grown steadily in recent years: the new data allow this development to be monitored. As the newly collected data show, ETFs currently make up approximately 4.6 % of total assets of all investment funds. It is, therefore, important that the development of ETFs is monitored in the context of financial stability in the euro area.
Financial vehicle corporations
FVC’s are an important part of the financial system owing to their role in securitization transactions although they only represent 3 % of the euro area financial sector by total assets (Regulations ECB/2013/40 (financial vehicle corporations)). However, since the beginning of the financial crisis securitization has mainly been motivated by banks’ need to create collateral for central bank refinancing operations: rather than the debt securities issued by FVCs being purchased by investors, they have instead been retained by the originating banks. The new data collected because of the update of Regulation ECB/2013/40 on financial vehicle corporations have shed more light on activities not directly related to euro area banks, including loans originated by other sectors or non-euro area entities.
Although recently there have been several initiatives by central banks and other authorities to renew securitization as a market-based source of bank funding, securitization activities are still dominated by retained deals. Before the financial crisis, securitization was an important funding source for banks using an „originate and distribute“ model: banks provided loans, and through securitization, they could pass on the credit risk to investors. Further, new counterpart sector breakdowns, in particular for securitized loans transferred to FVCs, and new maturity breakdowns of deposits held by FVCs, or loans granted directly to or received from FVCs had been added to include transactions in which there are transfers of insurance or reinsurance-type risks from the insurance sector to FVCs.
- MFI balance sheets allow more definite breakdowns by counterpart sector and financial instrument, leveled with the ESA 2010, as well as the inclusion of intra-group positions in deposits and loans, which could provide a thorough analysis of financial stress.
- Bank interest rates statistics allow volumes and rates of lending to be derived by identifying individually loans to households, formulated for the purpose of the loan, and corporations. Overall, these new enhancements improve the understanding of the impact of monetary policy decisions on banks’ interest rates on income and interest rates paid by households and corporations by breaking down loans by original residual maturity, and the date of next interest rate reset.
- In investments fund statistics, alterations include a synchronization of data collected as of 2015 with that of ESA 2010 framework. Moreover, all euro area countries can now access the data on funds set up, as ETF’s are gathered as a sub-item of all funds and data on issues and redemptions of investment fund units/shares.
- Financial vehicle corporations’ features improvements on loans granted directly to or received from FVCs by improving information on securitized loans not originated by euro area banks. A number of institutional units are currently identified in securities issues statistics.
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Dieser Beitrag ist erschienen im Newsletter Banken-Times SPEZIAL AufsichtsEnglisch, Ausgabe Juni/Juli 2016.
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