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Developing Database on Securities Holders Information: The Case of Japan

Developing Database on Securities Holders Information: The Case of Japan. Yoshiko Sato Financial Statistics Section Research and Statistics Department Bank of Japan. WPFS Workshop on Securitization, 27-28 May 2010. 1 /17. Who holds securities ?.

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Developing Database on Securities Holders Information: The Case of Japan

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  1. Developing Database on Securities Holders Information:The Case of Japan Yoshiko SatoFinancial Statistics SectionResearch and Statistics Department Bank of Japan WPFS Workshop on Securitization, 27-28 May 2010 1/17

  2. Who holds securities ? － the need to identify the final holder or the holding sector is increased, especially after the recent financial crisis. Motivation • But identifying the exact holder is always one of the most challenging tasks for statistical compilers. － Balance sheets are useful but not always available. (Non-financial corporations, Other financial inst., Households) • How can we know who holds securities ? CSD data is a strong candidate to shed light on the unknown sectors. 2/17

  3. Existing statistics for holding sector Example: Structured-financing instruments in the flow of funds account statistics (FFA) Balance sheets of non-financial corporations and some of other financial institutions arenot always available. The figure of other financial institutions is estimated with low accuracy. 3/17

  4. An institution that offers safekeeping and book-entry transfer services of securities in a centralized network. Central Securities Depository (CSD) － In some countries, it offers dividends payment services or it engages in securities lending (not in Japan). • One and only platform • Two advantages in data collection (1) centralized information(2) wider universe than that of the administratively collected data (Information gaps may exist outside the scope of authorities.) 4/17

  5. Today’s focus • Background: Dematerialization is almost completed in 2009. － CP(2002-), Corporate bonds(2003-), Investment trusts(2007-), Stocks(2009-). • CSD in Japan • JASDEC (Japan Securities Depository Center) Central Securities Depository (CSD) － deals with general securities such as CP, Corporate bonds, Investment trusts, Stocks, etc. • The Bank of Japan － deals with central government bonds. 5/17

  6. Distinctive features Recent exploration of the CSD data (1) Chain of accounts(2) Finality of ownership(3) Security by security • Statistical improvements in FFA (4) ABCP(5) Local government bonds(6) Privately placed asset-backed securities 6/17

  7. Accounts for B Accounts for E Accounts for D Accounts for A Accounts for C Self Self Self Self Self Customer Customer Customer Customer Customer Investor J B (Direct AMI) A (Direct AMI) D (Indirect AMI) C (Indirect AMI) Investor H Investor I Investor K Investor G Investor F (1) Chain of accounts CSD 1 Direct AMI: Direct account management institutionIndirect AMI: Indirect account management institution 89 407 E (Indirect AMI) 7/17

  8. CSD CSD custodian custodian custodian custodian investor investor (seller) (buyer) investor investor (seller) (buyer) (2) Finality of ownership Direct system Indirect system U.S. and U.K Japan and some other countries A custodian legally holds assets and an investor keeps equitable interest or securities entitlement to these assets. A custodian is just keeping an investor’s account and does not take over the ownership of securities. 8/17 Notes: The chart is made by the author based on Kanda (2009).

  9. An example of a search result in the JASDEC website (corporate bond) Identifier: ① Name of the issue or ② ISIN code (3) Security by security 9/17

  10. By communicating with JASDEC, we confirmed definition of several series of CSD data. (4) ABCP (5) Local government bonds (6) Privately placed asset-backed securities Statistical improvements in FFA － The figures were once estimated by assuming that ABCP was a part of other structured- financing instruments (Sato[2009]). － “CP issued by SPC” released by the JASDEC is now used for the outstanding of ABCP. － The information on the outstanding amount of local government bonds was not centralized.－ The amount held by non-residents is now used for the ROW sector. － The CSD’s aggregate data is the most centralized and reliable primary source. － Still under examination. It is a remaining part of the structured-financing instruments after ABCP. － Classification by type of collateral is required (financial/real). － Improvement is expected next year. 10/17

  11. There are general challenges pertaining to CSD dataas a statistical source to identify final holders of securities. Challenges for statistical development of CSD data (1) Cascade structure of accounts (2) Confidentiality of customer accounts (3) Cooperation with CSD and with securities-related industry • We looked at the cases of OECD countries. Here we would like to express special gratitude to the six countries (U.S., U.K., Australia, Germany, Spain, Chile) for cooperating on our research. 11/17

  12. CSD data usage in OECD countries 12/17

  13. (1) Cascade structure of accounts • Most countries have access to supplementary source data other than CSD. ・ CSD data are selectively used (e.g. for ABCP) or not used. ・ Sometimes they are supplemented by the data given byintermediate institutions (custodians or issuing and paying agents). • Approach in Japan To obtain supplementary information about customer accounts in DAMI 13/17

  14. Accounts for A Accounts for B Accounts for E Accounts for D Accounts for C Self Customer Self Self Self Self Customer Customer Customer Customer Investor J B (Direct AMI) A (Direct AMI) D (Indirect AMI) C (Indirect AMI) Investor H Investor I Investor K Investor G Investor F (1) Cascade structure of accounts CSD CSD and DAMI do not know the change of ownership. E (Indirect AMI) Supplementary information on customer accounts in DAMI will help us estimate the holding sector in the entire market. 14/17

  15. (2) Confidentiality of customer accounts • Confidentiality clause will help ・ A contract with confidentiality clause allows compilers to use only aggregate data. ・ Compilers do not need firm level information as far as the sector of final holders are correctly reported. 15/17

  16. (3) Cooperation with CSD and with securities-related industry • General understanding for the statistical value of CSD data is important. － CSD is a private company. － Four countries using CSD data have already had a contract, which implies there is general understanding. • In Japan, a conference was held in late 2009 and discussed that the availability of additional CSD data could increase understanding about securities market. Participants: CSD, securities companies, securities dealers association, etc. Observers: Bank of Japan, Financial Services Agency 16/17

  17. Conclusion • CSD data will continue to be a strong candidate to shed light on sectors such as households, non-financial corporations, or some other financial institutions. There are general challenges for statistical development of CSD data as a statistical source of securities holders information. But they can be overcome. • Sharing experiences among OECD countries is important. － Thank you for your attention－ 17/17

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