Speaking at an IMF/FSB joint conference in Basel, Herve Hannoun emphasized that there is a need to "see" consolidated balance sheets, both at the individual bank level and in aggregate, since it is across the whole balance sheet that stresses build up.
Speaking at the Conference for senior officials to help develop a concrete plan of action to implement the recommendations in the IMF-FSB report "The financial crisis and information gaps", in Basel, Hervé Hannoun, Deputy General Manager of the Bank for International Settlements said that the financial crisis exposed a number of gaps in our ability to monitor systemic risks. Addressing even a few of these may help to reduce the risk of future crises.
The crisis has revealed at least five elements which matter in the monitoring of systemically important financial institutions:
· Consolidation matters: There is a need to enhance the ability to "see" consolidated balance sheets, both at the individual bank level and in aggregate, since it is across the whole balance sheet that stresses build up.
· Liabilities matter: It was the collapse in funding markets which made the crisis global, and yet we cannot really see funding patterns in the available data.
· Currency matters: Monitoring maturity mismatch at the systemic level requires information on the currency of positions, since cross-currency financing can embed rollover risk into the balance sheet.
· Interconnectedness matters: The number and nature of an institution's bilateral relationships, and not only its size, are a key measure of its systemic importance.
· Non-banks matter: Off-balance sheet SIVs, as well as pension funds, insurance companies and large corporates, should not be excluded from systemic monitoring exercises.
© BIS - Bank for International Settlements
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