Bank for International Settlements (BIS)

The Bank of International Settlements (BIS) is an international financial institution composed of central banks. BIS is located in Basel, Switzerland and facilitates the interaction of central banks in order to make international monetary policy more predictable and transparent. BIS does this by hosting meetings with central banks, conducting research and policy pertaining to monetary issues and financial stability, and acting as a counterparty for central banks with their transactions. They also serve as an agent with international financial operations and engage in dialogue with other financial actors. Their ultimate goal is to ensure monetary and financial stability among its 60 central bank members. "With regard to its banking activities, the customers of the BIS are central banks and international organisations. As a bank, the BIS does not accept deposits from, or provide financial services to, private individuals or corporate entities" (BIS.org). 

BIS' goals are explained in its 3 pillars:

• Pillar 1 (Regulatory capital): Credit risk, F-IRB, A-IRB, PD, LGD, EAD, opeartional risk, market risk, value at risk
  • The first pillar of regulation relates to capital adequacy, which applies to equity and capital assets. Since these two assets do not alway reflect the current market nor can they account for every risk present among every trading position, BIS is able to manage and change these when needed. BIS requires that members banks have capital/asset ratios to be above a prescribed minimum in order to keep banks strong against shocks. 
• Pillar 2 (Supervisory review): economic capital, liquidity risk, legal risk
  • Member banks are required to ensure liquidity and limit liability in order to reduce the risk of bank runs and to make borrowing safer for customers. BIS works to control asset inflation due to members rising fear of "bubbles". Furthermore, exporting countries are finding it difficult to manage a range of domestic monetary requirements while maintaing an export economy. Thus, BIS helps prescribe reserve levels for each countries style of exporting and domestic policy. 
• Pillar 3 (Market disclosure)
  • BIS makes its research and findings free to the public in order to help ensure financial and monetary stability. Their analysis covers monetary and financial policy along international banking statistics. 

BIS data covers a wide range of international banking and financial data. Pardee uses the following BIS data in its model:

Credit to the Non-Financial Sector

The series of credit to the non-financial sector cover advanced economies, emerging economies, as well as 43 individual state economies. "All series are published in local currency, in US dollars and as percentages of nominal GDP. The regional aggregates as percentages of GDP are calculated based on conversion to the US dollar at market and at purchasing power parity (PPP) exchange rates" (BIS.org). BIS records the outstanding amount of credit at the end of the each quarter. Credit to non-financial sector is provided by domestic banks. The term "credit" entails core debt, which is defined as loans, debt securities, currency, and deposits. 

Credit-to-GDP Gaps

Data Documentation: The data pulled from BIS are the Actual Trend (ratio) and Actual Data. Pardee does not use the HP filter. The HP filter is "the long-term trend of the credit-to-GDP ratio is calculated by means of a one-sided (ie backward-looking) HP filter. The filter is run recursively for each period, and the ex post evaluation of performance of the credit gap is based on this recursive calculation" (BIS.org). The HP filter data was not used because "the HP filter suffers from a well-known end point problem.16 This means that the estimated trend at the end point (the most recent observation) can change considerably as future data points become available" (BIS.org). 

The published series cover 43 countries with the earliest recorded data starting in 1951. "The credit-to-GDP gap is defined as the difference between the credit-to-GDP ratio and its long-run trend" (BIS.org). The credit-to-GDP ratio as published in the BIS database of total credit to the private non-financial sector, capturing total borrowing from all domestic and foreign sources, is used as input data. The BIS credit-to-GDP data captures total borrowing from all domestic and foreign sources and thus total credit to the private non-financial sector. 

It is important to note that the BIS publication of credit-to-GDP gaps data that is used may differ from national authorities' consideration of their own credit-to-GDP gaps because of their countercyclical capital buffer decisions. However, BIS advises national authorities to use good judgement when setting capital buffers and use the best information available for BIS' publication. 

Debt Service Ratios for the Private Non-Financial Sector

Data Documentation: BIS' statistical publication of Debt Service Ratios (DSRs) covers 17 countries and entails 3 categories which is collected from national accounts:

1. End of quarter debt service ratios (DSR) for Households and NPISHs (percent ratio)
2. Private Non-Financial Sector (percent ratio)
3. Non-Financial Corporations (percent ratio) 

Some countries were categorized by all 3, some only 2, some with only 1. Pardee has captured each category by averaging the 4 quarters within a year, and produced the average annual DSR for each category. 

The DSR illustrates the portion of income used to pay for debt and is a good indicator of real-time financial status of banks, which can serve as an early signal of crisis. Furthermore, if DSR is high then there is a negative correlation on low consumption and investment in the respective country. 

Consumer Prices

Data Documentation: The data used from BIS is the year-on-year percentage changes. The year-on-year changes capture the rise and fall of consumer prices more accurately than the 2010-100 index. Some of the BIS data goes back to the 1800s. 

The consumer price data for the most recent periods correspond to the consumer price index published by national statistical offices. Proxy indicators, such as a consumer price index with limited coverage or a retail price index, were used to extend the series backward as far as possible.

The average length of the monthly series is close to 55 years. Some annual series go back to the middle of the 19th century - or even earlier for several countries. The BIS constructed long consumer price index series by joining the series available for consecutive periods. In undertaking this work, the BIS worked in close coordination with national authorities with the aim of providing the most accurate data possible..

Effective Exchange Rates

​Data Documentation: BIS published the data in broad and nominal data. However, Pardee has pulled Real Broad EER and Nominal Broad EER. The broad data covers the widest range of countries consistently since 1994. The BIS publication displays the EERs quarterly. Pardee has taken the average of the 4 quarters per year to create an annual average EER.

The BIS effective exchange rate (EER) covers 61 states' economies. These include EU member countries and the EU as an exclusive entity. The most recent weights are based on trade in the 2011-13 period, with 2010 as the indices' base year. Pardee does not include the EU entity in its data because the EU as an entity is not part of our country listings. The EERs are recorded with their respective currencies. 

"Nominal EERs are calculated as geometric weighted averages of bilateral exchange rates. Real EERs are the same weighted averages of bilateral exchange rates adjusted by relative consumer prices. The weighting pattern is time-varying (see broad and narrow weights). The EER indices are available as monthly averages. An increase in the index indicates an appreciation" (BIS.org). 

Consumer Prices

Data documentation: Pardee uses the year-on-year changes by per cent (ratio) shows more detailed changes in consumer prices compared to the 2010=100 index. 

The BIS’s data set for consumer prices contains long monthly and annual time series for 60 countries. Pardee uses the annual series for the 60 countries because the International Futures model uses annual data. Each country's data is produced by the respective country and correlates with the most recent index of consumer price. Some of the annual series go back to the 19th century, and some go back into the 17th century. The BIS was able to construct these long consumer price index series by joining available series for consecutive periods by working with national statistical offices. 

Credit to the private nonfinancial sector (needs data)

Data Documentation: The BIS publication is presented in quarterly datasets with subsets. The Pardee coder averaged the four quarters within a year and used the result as the data.  that include:

• Non-financial sector corporations, or sectors or all sectors banks, households, NPISHs, non-financial corporations, corporations, market value, respective country currency, domestic currency in US Dollars, adjusted for breaks, not adjusted for breaks, and GDP
• Percentage of GDP adjusted for breaks or US Dollar adjusted for breaks or Domestic currency not adjusted for breaks

All series on credit to the non-financial sector cover 43 economies, both advanced and emerging. They capture the outstanding amount of credit at the end of the reference quarter. Credit is provided by domestic banks, all other sectors of the economy and non-residents. In terms of financial instruments, credit covers the core debt, defined as loans, debt securities and currency & deposits.

All series are published in local currency, in US dollars and as percentages of nominal GDP.[which did you pull? there is only one series in the excel you sent] The regional aggregates as percentages of GDP are calculated based on conversion to the US dollar at market and at purchasing power parity (PPP) exchange rates.

Long series on total credit and domestic bank credit to the private nonfinancial sector

 The “private non-financial sector” includes non-financial corporations (both private-owned and public-owned), households and non-profit institutions serving households as defined in the System of National Accounts 2008[what is this? is that a report you are referencing? add a link to it or citation.]. In terms of financial instruments, credit covers loans and debt securities. The series have quarterly frequency and capture the outstanding amount of credit at the end of the reference quarter [copied from above]. Table 1[there is no table 1] below shows the list of financial instruments, borrowers and lenders covered by the series.

To encompass as long a period as possible, the construction of the long series required combining data from several sources, such as the financial accounts by institutional sector, the balance sheets of domestic banks, international banking statistics, and the balance sheets of non-bank financial institutions. In turn, some of these statistics were compiled in past periods according to earlier methodological frameworks (eg the System of National Accounts 1968, which was replaced by the System of National Accounts 1993). Where original data were published at annual frequency, the intra-annual observations were interpolated.

The combination of different sources and data from various methodological frameworks resulted in breaks in the series. The BIS is therefore, in addition, publishing a second set of series adjusted for breaks, which covers the same time span as the unadjusted series. The break-adjusted series are the result of the BIS’s own calculations, and were obtained by adjusting levels through standard statistical techniques described in the special feature on the long credit series of the March 2013 issue of the BIS Quarterly Review. 

The data for each country include (i) credit to private non-financial sectors by domestic banks and (ii) total credit to private non-financial sectors. Moreover, for most countries, total credit is broken down into (iii) credit to non-financial corporations and (iv) credit to households and non-profit institutions serving households. [so which did you pull?] Tables 2 and 3 below [where?] contain more information about the methodology followed in the compilation of each time series, as well as links to websites where the most recent national data can be found. For more information, see the above-mentioned article about the long credit series.

Since March 2016, the BIS has added the regional aggregates in the data set. Four aggregates are available: G20, advanced economies, emerging market economies and all reporting economies.2 [same comments as above] The data in billions of US dollars are calculated using market exchange rates and the percentages of GDP are calculated based on conversion to US dollars at market and at purchasing power parity (PPP) exchange rates.

This data set on credit to private non-financial sectors combined with the one on general government debt can provide a useful picture of the aggregated indebtedness of all non-financial sectors.[sounds good, but we only pulled, it looks like, one series, and it's unclear what that series is]

Debt service ratios for the private non-financial sector

Overview

"The debt service ratio (DSR) is defined as the ratio of interest payments plus amortisations to income. The DSR reflects the share of income used to service debt and has been found to provide important information about financial-real interactions" (BIS.org). The DSR is useful for detecting banking crisis and can help forecast the crisis early on. Furthermore, a high DSR has a strong negative impact on consumption and investment. The DSRs data is collected from national accounts. 

"The BIS publishes debt service ratios (DSR) for the household, the non-financial corporate and the total private non-financial sector (PNFS) for 17 countries. Total PNFS DSRs are also available for 15 additional countries, using different income and interest rates measures, due to data availability at the national level. As such, the DSR provides a flow-to-flow comparison – the flow of debt service payments divided by the flow of income. To derive the DSR on an internationally consistent basis, the BIS applies a unified methodological approach and uses, as much as possible, input data that are compiled on an internationally consistent basis" (BIS.org). 

Data Documentation: BIS' publication captures different subsets for the 32 countries listed in the report. These subsets include Households and NPISHs, Non-Financial Corporations, and Private Non-Financial Sector. Pardee uses the 32 private non-financial sector countries datasets because it captures the sum of the two income measures from the household and NFC sectors that comprise the income of the total PNFS. This provides a holistic look at the data. 

Important definitions provided by BIS.org

• Sectors DSRs are derived for the household sector, non-financial corporations (NFCs) and the total private non-financial sector (PNFS).
• Frequency DSRs are compiled at quarterly frequency.
• Data The ratio uses input data from the national accounts. If these data are not available, alternative sources are used.
• Stock of debt Debt is defined as credit (in terms of loans and debt securities) from all sources to the PNFS, as compiled by the BIS. This includes information for the household and NFC sectors.
• Average interest rate on the existing stock of debt: To accurately measure aggregate debt servicing costs, the interest rate has to reflect average interest rate conditions on the stock of debt, which contains a mix of new and old loans with different fixed and floating nominal interest rates attached to them.
  • The average interest rate on the stock of debt is computed by dividing gross interest payments plus financial intermediation services indirectly measured (FISIM) by the stock of debt. FISIM is an estimate of the value of financial intermediation services provided by financial institutions. When national account compilers derive the sectoral accounts, parts of interest payments are reclassified as payments for services and allocated as output of the financial intermediation sector. In turn, this output is recorded as consumption by households and NFCs. As the aim is to identify the total burden of interest payments on borrowers regardless of their economic function, FISIM is added back to interest payments reported in the national accounts to derive effective interest payments.
• Income: Income in this context corresponds to the amount of money available to economic agents to pay debt service costs. Gross disposable income (GDI) is a close approximation. GDI measures the income available to households and NFCs after interest payments and, in the case of NFCs, dividends. Hence, to accurately reflect the amount of money available to service debt, GDI has to be augmented by interest payments (and dividends for the NFCs). Excluding SDR allocations, deposits and other accounts receivable, which include trade credits. GDI complemented with these other items is called “augmented GDI”. Below is the definition of augmented GDI for each sector.
• Average remaining maturity: The maturity of the total PNFS is the average of the remaining maturities of the two subsectors, weighted by the stock of debt of each sector. 
• Smoothing of some components of income: Four-quarter moving averages are applied to GDI and dividends paid.
• Interpolation and extrapolation: Some data in a number of countries are originally compiled at an annual frequency. In these cases, quarterly series are derived by interpolating the annual data with the Chow-Lin method (Chow and Lin (1971)),6 using nominal GDP for GDI as well as dividends, and average bank lending rates for the average interest rate on the stock of debt. To derive the most recent quarters following the last available annual data point, series are extrapolated using the growth rate of nominal GDP for both GDI and dividends, and the change in average bank lending rates for the average interest rate on the stock of debt.

<BIS Data Not Pulled by Pardee>

Property Prices

The residential and commercial property price statistics collate data from different countries. With the assistance of its member central banks, the BIS has obtained approval from various national data providers to disseminate these statistics, so long as the original national sources are clearly indicated.

Securities

The BIS compiles and publishes three sets of statistics on borrowing activity in debt capital markets.

Derivatives

Exchange-traded derivatives

The BIS compiles and publishes one set of statistics on exchange-traded derivatives and two sets on over-the-counter derivatives markets.

Triennial OTC derivatives

• Reason for not pulling data: 
• Selected data fields: Quarterly, Amounts outstanding/stocks, country, domestic banks, immediate counterparty basis, total claims, all instruments, total (all maturities), all currencies, all sectors, all countries excluding residents
  • Reasoning: the selected fields holistically capture the variables associated with the country’s assets and liabilities in relation to all other countries and sectors that capture all instruments (e.g. loans, deposits, bills, bonds, notes, negotiable certificates of deposit, commercial paper, debentures, asset-backed securities, money market instruments and similar instruments normally traded in financial markets.). Furthermore, this data set has the largest range of documentation
  • The CBS capture the worldwide consolidated positions of internationally active banking groups headquartered in reporting countries. The data include the claims of reporting banks’ foreign affiliates but exclude intragroup positions, similarly to the consolidation approach followed by banking supervisors. For example, the positions of a German bank’s subsidiary located in London – which in the LBS are included in the positions of banks in the United Kingdom – are consolidated in the CBS with those of its parent and included in positions of German banks. Currently, banking groups from 31 countries report the CBS.
  • Like the LBS, the CBS are reported to the BIS at an aggregate (banking system) level rather than individual bank level. A central bank or another national authority collects data from internationally active banks in its jurisdiction, compiles national aggregates and then sends them to the BIS to calculate global aggregates. No currency breakdown is available for the CBS, and thus the BIS does not calculate adjusted changes. Comparisons of amounts outstanding between periods are thus affected by movements in exchange rates.8
  • The CBS are compiled in two different ways: by immediate counterparty and by ultimate risk.
    • The immediate counterparty is the entity with whom the bank contracts to lend or borrow. 
    • Ultimate risk takes aasfccount of credit risk mitigants, such as collateral, guarantees and credit protection bought, that transfer the bank’s credit exposure from one counterparty to another. 
  • Banks’ foreign exposures
    • The CBS are designed to analyse the exposure of internationally active banks of different nationalities to individual countries and sectors. Exposures can take many forms: for example, cross-border claims, local claims of banks’ foreign affiliates, derivatives, guarantees, or credit commitments. The CBS provide information on each of these, and the most appropriate measure of exposure will depend on the issue being analysed. The benchmark measure in the CBS is foreign claims, which capture credit to borrowers outside the bank’s home country, including credit extended by banks’ foreign affiliates (but excluding derivatives, guarantees and 8 This complicates analysis of flows using the CBS: for instance, a depreciation of a given currency against the US dollar will result in a decline in the reported US dollar value of outstanding claims denominated in that currency (and an appreciation an increase in the reported value). 116 BIS Statistical Bulletin, September 2016 credit commitments).9 Foreign claims are the most comparable measure across banks of diverse nationalities because differences in accounting standards complicate the comparability of other measures of exposures, especially derivatives.
  • The CBS on an ultimate risk basis are widely used to gauge reporting banks’ exposures to different countries and sectors. For example, they have been used to measure foreign banks’ exposures to US borrowers on the eve of the Great Financial Crisis of 2007–09, and to contrast the evolution of euro area banks’ sovereign portfolios with those of banks from the rest of the world. 10
  • 'CBS Glossary amount outstanding': Value of an asset or liability at a point in time.  domestic bank: Bank whose controlling parent is located in the respective BIS reporting country – for example, a bank with a controlling parent located in the United States is a US domestic bank.  immediate counterparty basis: Methodology whereby positions are allocated to the primary party to a contract. In the CBS, claims on an immediate counterparty basis are allocated to the country and sector of the entity to which the funds were lent.  ultimate risk basis: Methodology whereby positions are allocated to a third party that has contracted to assume the debts or obligations of the primary party if that party fails to perform. In the CBS, claims on an ultimate risk basis are allocated to the country and sector of the entity that guarantees the claims (or, in the case of claims on branches, the country of the parent bank).  total assets Sum of financial assets and non-financial assets.  derivative Instrument whose value depends on some underlying financial asset, commodity or predefined variable.  debt instrument Instrument that requires the payment of principal and/or interest at some point(s) in the future. Debt instruments may refer to liabilities or claims, and include the following: currency and deposits, debt securities, loans, provision for calls under standardised guarantees, and other accounts receivable/payable. debt security Negotiable instrument serving as evidence of a debt. Debt securities include the following instruments: bills, bonds, notes, negotiable certificates of deposit, commercial paper, debentures, asset-backed securities, money market instruments and similar instruments normally traded in financial markets.  loans and deposits Non-negotiable debt instruments that are created when a creditor lends funds directly to a debtor. In the LBS, no distinction is made between loans and deposits; they are treated as economically equivalent. Loans and deposits include the cash leg of securities repurchase agreements, working capital and inter-office business.  remaining maturity Period from the reference date until the final contractually scheduled payment.  counterparty Entity that takes the opposite side of a financial contract or transaction – for example, the borrower in a loan contract, or the buyer in a sales transaction.  counterparty country Country where the counterparty resides.  claim A financial asset that has a counterpart liability. In the CBS, claims exclude financial derivatives. See also “financial asset”.  Debt Security instruments: bills, bonds, notes, negotiable certificates of deposit, commercial paper, debentures, asset-backed securities, money market instruments and similar instruments normally traded in financial markets.  
  • Detailed Data Set
    Contains nominal residential property prices for 58 countries. For each country, several original series are available at different frequencies. The data differ significantly from country to country - eg in terms of type of property, area covered, property vintage, priced unit, compilation method and seasonal adjustment.
  • Selected Series (nominal and real)
    Contain data for 58 countries at a quarterly frequency (real series are the nominal price series deflated by the consumer price index), both in levels and in growth rates (ie four series per country). These indicators have been selected from the detailed data set to facilitate access for users and enhance comparability. The BIS has made the selection based on the Handbook on Residential Property Prices and the experience and metadata of central banks. An analysis based on these selected indicators is also released on a quarterly basis, with a particular focus on longer-term developments in the May release.
  • (Long Series)
    Provide nominal residential property prices compiled by the BIS for 18 advanced economies at a quarterly frequency starting in 1970. In February 2015, five emerging market economies were added to the data set. A single series is available for each country.
  • Commercial Property Prices
    Contains nominal commercial property prices for 12 countries at various frequencies. The BIS aims to expand substantially the country coverage in the coming years. The data differ significantly from country to country - eg in terms of type of property, area covered and compilation method. 
  • International debt securities (IDS)
    IDS are debt securities issued in a market other than the local market of the country where the borrower resides. They capture issues conventionally known as eurobonds and foreign bonds. IDS are compiled from a security-by-security database built by the BIS using information from commercial data providers.
  • Domestic debt securities (DDS)
    DDS are debt securities issued in the local market of the country where the borrower resides, regardless of the currency in which the security is denominated. They are compiled from data reported to the BIS by central banks, with the exception of a few countries in which the BIS collects data via publicly available sources. The BIS calculates exchange rate-adjusted changes in stocks by assuming that amounts outstanding are denominated in the currency of the local market.
  • Total debt securities (TDS)
    TDS are debt securities issued by residents in all markets (the sum of international and domestic debt securities). The BIS does not calculate TDS. This is due to potential overlaps between IDS and DDS statistics. TDS statistics are published only for countries whose central banks report the relevant data to the BIS (some central banks report only DDS or TDS, while others report both).
  • Exchange-traded derivatives
    The exchange-traded derivatives statistics complete the coverage of the derivatives markets by providing information about the size and structure of organised futures and options markets. The statistics are compiled by the BIS from commercial data sources, and capture the turnover and open interest of interest rate and foreign exchange derivatives traded on derivatives exchanges. 
  • Semiannual OTC derivatives statistics 
    The semiannual survey is conducted under the auspices of the Committee on the Global Financial System and provides information about the size and structure of the largest OTC derivatives markets. It captures notional amounts outstanding, gross market values, gross credit exposures and Herfindahl concentration measures. Central banks and other authorities from the following 13 jurisdictions currently participate in the survey: Australia, Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United States.
  • Triennial OTC derivatives statistics
    The Triennial Central Bank Survey enhances the semiannual survey by collecting data from a much broader sample of derivatives dealers - as many as 53 jurisdictions participate in the survey. Like the semiannual survey, the Triennial Survey captures notional amounts outstanding and gross market values. In addition, it captures turnover in OTC interest rate and foreign exchange derivatives markets.
  • == Global Liquidity Indicators ==

  External Debt

  The Joint BIS-IMF-OECD-World Bank statistics on external debt - developed jointly by the BIS, the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), and the World Bank (WB), disseminate data on the external debt of developed, developing and transition countries and territories, as well as statistics on selected foreign assets.

  The joint statistics - which include quarterly data obtained by creditor and market sources, as well as national sources - provide a breakdown by instrument and, importantly, show measures of short-term debt not easily available from other sources. The BIS banking and securities market statistics are a vital element in this joint effort. Although the joint statistics are unable to provide a fully comprehensive and consistent measure of total external debt in each country, they bring together the most relevant international comparative data currently available in this area.