Monetary Data Collection System at the Croatian National Bank

1. Monetary Data Collection System at the Croatian National Bank Igor Jemric Statistics Department

2. Outline • Introduction • Input side: The main record & side records • Output side: Statistical & supervisory reports • Legislation • Implementation • Operational functioning • Further development

3. Outline • Introduction: • Motivation for the micro database approach • Structure of the system

4. A.1. Motivation (1) • “old” statistical reporting system organized following IMF’s Money and Banking Statistics Manual – needed to be adapted to follow ESA 95 (new sectorization, instrument clasification, flows…) • EU statistical authorities ask for many differently structured data: • Eurostat (stocks and flows (balance of payments, foreign direct investment; structured by insturments, countries, international institutions, activities)) • European Central Bank (stocks and flows (balance sheet and specific reports; instruments, countries, currencies)) • CNB accepted responsibility to compile financial accounts that require additional details • similar situation with supervision reporting system (CEBS – Committee of European Banking Supervision has introduced new consolidated financial reporting (FINREP) and reporting on capital adequacy and various risks (COREP)

5. A.1. Motivation (2) We need a new system that will be: • methodologicaly updated • highly structured and rich with information on characteristics needed for both statistical and supervisory purposes • highly flexible for different aggregation needs (for recent and future requirements) • highly automated in data collecting, checking and compiling

6. NO A.1. Motivation (3) Sectorization of the clients - the key aspect that led to main decisions on the scope and the structure of the system: Should reporting institutions take care of the sectorization? • harmonization of sectorization among compilers of macroeconomic statistics • Working Group on Sector Classification of Institutional Units (ESA95) • static vs. dynamic approach That “NO” was the trigger to start thinking of a micro database. Statistics & FINREP share similar atributes – that was the trigger to start to think of the common reporting system.

7. A.2. Structure of the reporting system (1) Banking Supervision Monetary Statistics • total loansheld to maturity • total loansavailable for selling • total loans to households • total loans to nonfinancial • corporations Bank … loans to households held to maturity loans to nonfinancial corporations held to maturity loans to households available for selling loans to nonfinancial corporations available for selling …

8. A.2. Structure of the reporting system (2) Main reporting record AA Side records for Statistics Side records for Supervision

9. Outline • Input side: • Mainreportingrecord • Statistical side records • Supervisory side records • Otherinputs to thesystem

10. B.1. Main reporting record AA (1) The record AA is used for both statistical and supervision purposes, but with different timing: • For statistical purpose, the deadline is the 6th working day after the reporting date. • For supervision purpose, reporting institutions can send all the revisions of previously sent records as well as new records until the 25th of the month after the reporting date. • Statistics department has a discretion to decide what changes will be ignored and what will be accepted as a revision of the official monetary aggregate.

11. B.1. Main reporting record AA (2)

12. B.1. Main reporting record AA (3) Report indicators: Type of report (balance sheet, satelite reports…) Reporting period (end day of the period) Consolidated / non-consolidated report Preliminary report / report after external auditing Reporting institution indicators: ID (unique number given by the CBS) Tax Number (unique number given by the MoF)

13. B.1. Main reporting record AA (4) Client indicators: ID (unique for each resident legal entity; only 2 codes for physical persons; MFI nonresident from the ECB list; one code for other nonresidents) Tax Number County (code list provided) Country/International organization (ISO 3166; Annex 2 of the BOP Vademecum, code list provided and maintained by the CNB) Nonresident sector (ESA 95, ECB “MFI and Markets Statistics Sector Manual”; code list and explanations provided and maintained by the CNB) Relation with reporting institution (non-related, primary related (mother-daughter), secondary related (sisters) + the percentage of ownership (both ways))

14. B.1. Main reporting record AA (5) Instrument indicators: Type of instrument (over 160 codes and definitions provided, together with tables with all possible modalities of each indicator for each type of instrument) ISIN code (ISO standard + CNB code list provided for specific securities without ISIN codes, shares in investment funds and specific short-term papers) Currency (ISO 4217;code list provided by the CNB) Original maturity (+ grace period, both counted in months) Notice period (counted in months, to be filled only before the notice period has been initiated) Indexation (related to fc-indexed instruments – one code for 2-sided indexation and one for 1-sided indexation)

15. B.1. Main reporting record AA (6) Portfolio (17 different codes (related to IAS and ISFR) that fit the banking supervision needs, detailed explanations provided) Marketability (loans: nonmarketable, occasionally traded; securitized) Capital characteristics (related to subordinated debt instruments that show some characteristics of equity instruments – code list provided to fit the needs of banking supervision) Risk group (code list and explanations provided to fit the needs of banking supervision) Built-in derivative (0-1 indicator; not related to derivatives that can be separated by contracts or that are contracted with different clients than the main instrument) Related variable (variable to whose value relates the derivative (including built-in derivatives) – code list with 12 modalities)

16. B.1. Main reporting record AA (7) Amount and record indicators: Type of the amount - principal, accrued interest, principal or interest arrears - code list and detailed tables connecting types of amount with particular instruments, together with their portfolio classification provided Record number Status (new record, storno, corrected record – to be filled by the CNB)

17. B.2. Statistical side records (1) • Additional reporting records for statistics: • Changes in stocks (AB), • Providers of collaterals and guarantees (IZ), • Remaining maturity (AD), • Opportunity of interest rate reset (AK)(q), • Overdue receivables (AE), • MFI Interest rates (KS).

18. B.2. Statistical side records – Changes in stocks (1) • The structure of the record is the same as AA, but there are specific types of amounts: • principal or interest writeoff (Ct), • price adjustment (Pt). • Exchange rate changes are calculated from AA: • St – end-period t stock in currency c, • ect -end-period t exchange rate of currency c againstHRK , • ē ct,t-1 -averageexchange rate of c againstHRK for period t.

19. B.2. Statistical side records – Changes in stocks (2) • Calculation of Flows (Ft): • From records AA for reporting dates t and t-1: • St and St-1– end-period stocks • From record AB for reporting date t • Ct – principal and interest writeoffs, • Pt – price adjustments. • Calculation from both AA for t and t-1 and AB for t: • ERA – exchange rate adjustments, • Part of Ct – coverage adjustments, reclassification adjustments...

20. B.2. Statistical side records – Providers of collaterals and guarantees • Part A (identification) of the record AA is the same, and from part B (instrument specification) only the type of instrument is required, • In addition, it contains the identification of the provider of the guarantee (ID, tax number, country and nonresident sector) and the type of the guarantee (mortgage, deposit, securities, uncoditional guarantees), • As a type of amount it can be the total net amount of the instrument or the part of it that is covered by the gurantee.

21. B.2. Statistical side records – Remaining maturity (1) • Part A is the same as in the main record, except that both the consolidation and county are not requried. • From part B it contains the type of instrument, currency, indexation, type of portfolio and capital characteristics. • In addition, the information on both the original maturity of the instrument and the remaining maturity of each flow (both classified in 13 different intervals) is required. • As a type of amount it can be gross/net principal or interest payment.

22. B.2. Statistical side records – Remaining maturity (2) • Maturity intervals (upper limit included): • Up to 15 days, • From 15 days to 1 month, • From 1 to 2 months, • From 2 to 3 months, • From 3 to 6 months, • From 6 to 12 months, • From 12 to 18 months, • From 18 to 24 months, • From 2 to 3 years, • From 3 to 5 years, • From 5 to 10 years, • From 10 to 20 years, • Over 20 years.

23. B.2. Statistical side records – Opportunity of interest rate reset • Part A is the same as in the Remaining maturity, except that also the country of nonresident and the relation with the reporting institution are not requried. • Part B is also the same as in the Remaining maturity, except that the indexation is not required. • In addition, the information on the remaining maturity of the opportunity of interest rate reset (classified in the same 13 intervals) is required. • As a type of amount it can be gross receivable or payable.

24. B.2. Statistical side records – Overdue receivables • Part A is the same as in the Oportunity of interest rate reset. • Part B requires only the type of instrument. • In addition, the information on the overdue time of the particular payment, classified in the same 13 intervals, is required. • As a type of amount it can be gross receivable of principal or interest.

25. B.2. Statistical side records – MFI Interest rates • Part A is the same as in the AA, except that the county and the relation with the reporting institution are not required and for the country only RH and EU are asked for. • Part B has somewhat different structure: • The type of instrument modalities cover all loans and deposits. • The type of amount can be the nominal/effective interest rate on outstanding amount/new business or the amount of new business (the outstanding amounts are taken from AA).

26. B.3. Supervisory side records (1) Additionalreportingrecords for supervision: • Additionalinformation on overallbusiness • Clientspecificadditionalinformation

27. B.3. Supervisory side records (2) • Additionalinformation on overallbusiness • Cummulativechangesofvalueadjustmentsandprovisions (AS, related to AA)(q), • Currencyinduced credit risk (AW, related to AA) (q), • Profit andlossaccounts (RA) • Otherinformation (OI).

28. B.3. Supervisory side records (3) Additionaltypesofamount: AS: cummulativechangesofvalueadjustments or provisionsrelated to credit risk change, cummulativechangesinwrite-offs, AW: 6 differenttypesof (hedgedandunhedged) exposures (related to principal andinterest) to exchange rate induced credit risk RA: positionofthe PLA + 10 differenttypesofcummulative (interest, non-interest...) earningsandcostsfromJanuary 1st to thereporting date New instruments: RA: 40 new instruments, related to thestructureofthe PLA

29. B.3. Supervisory side records (4) • Group of records related to specific clients: • Lists of groups, physical persons & related legal persons (PO), • Balance sheet and off-balance sheet items (AF – physical persons, AN - nonresidents), • Cummulative changes of value adjustments and provisions (AP, from AF/AN)(q),

30. B.3. Supervisory side records (5) • Group of records related to specific clients (cont.): • Currency induced credit risk (AV, from AF/AN)(q), • Exposure to related clients (AI) (q), • Investments in capital (AU)(q), • Tangible assets including those acquired in exchange for claims (AM)(q),

31. B.3. Supervisory side records (6) Additional fields in the client part of the record: • Counterparties on individual basis – detailed information for the aggregate from the main record AA (tax number, official or internal ID, MFI ID for EU MFIs), • Basis for identification – type of special relation with the reporting institution (direct/indirect ownership relations, special relations for physical persons, protection provider or fiduciar owner, previous owner of acquired nonfinancial asset etc) , • Type of institution – code list for 12 financial and 1 nonfinancial institutions • Details on counterparty – additional descriptive information

32. B.3. Supervisory side records (7) For records AI, AU and AM there are also: • some additional instruments (i.e. different kinds of exposure relating to different financial instruments and different guarantees), • some new fields in the instrument part of the record (i.e. “Acquiring” relating to the number of days of excessive exposure in AI or to the number of days after acquiring capital (in AU) or intangible assets (in AM), • some additional types of amount (in AI, relating to different kinds of exposure).

33. B.4. Other inputs to the system Code lists: • Register of institutional units, • Sector classification of institutional units (daily input from the CBS), • Classification of activities (NACE 2002 and NACE2 2007 versions), • List of non-resident MFIs and other institutions, • List of currency codes, • Lists of counties in the Republic of Croatia, • List of countries and international institutions.

34. Content • Output side: • Statisticalreports • Supervisoryreports

35. C. Output side: old vs. new Methodologicaly – 2 parallel approaches: • Construction of the bridging tables that ensure the reconstruction of the old monetary statistics output from the new set of data • this is only partially possible since the old system relied on banks’ discretion regarding sectorization of clients, • so we prepared 2 versions of that bridging output: with old sectors (including the guessing of how banks followed the methodological instructions for sectorization in the old system) and with new sectors (but otherwise structured according to the old system). • Preparation of new output that is completely in line with ESA95 and ECB requirements (both for our dissemination and for ECB puposes).

36. C. Output side: relational db vs. dwh Technicaly – 2 parallel approaches: • Preparing fixed reports in the relational database (chosen for the bridgeing reports). • Pro: it can be done by the CNB’s IT Department • Con: not flexible enough to cover all the possibilites offered by the new system and it’s granularity • Using DWH (chosen for the new ESA 95 output). • Pro: possibility of using (via interactive dashboards) predefined reports with flexible filtering, navigation and data decomposition to the lowest level of detail, as well as tailor-maid answers that could cover all the needs from the bank and other users of monetary statistics. • Con: not supported by the CNB staff, so the outsourcing is needed and it implies extremely slow public tender procedures and quite ambigous maintenance arrangements.

37. C. Output side:supervisory reports (1) Once the input is in the system, supervisors produce “Supervisory reports” from those records and send it to the management of the reporting bank to approve it. There are two types of reports: • fixed (with fixed structure), • variable (with variable structure, depending on the number of specific clients)

38. C. Output side:supervisoryreports (2) Fixed reports: • Balance sheet (BN, from AA) • Report on off-balance sheet items (IBS, from AA) • Report on credit risk exposure by risk categories (RS2, from AA) • Report on tangible assets (MIKI, from AM and OI) • Report on exposure to currency induced credit risk (VIKR2, from AW)

39. C. Output side:supervisory reports (3) Fixed reports (cont.): • Report on past due receivables (DNP, from AE) • Report on remaining maturity of assets and liabilities (ROC, from AA and AD) • Report on changes in value adjustments and provisions (PIV2, from AA and AS)

40. C. Output side:supervisory reports (4) Variable reports: • Report on large exposures (VIKI, from AA, AF, AN, AI, IZ, OI & PO) • Report on exposures to persons in special relationship with the credit institution (POKI, from AA, AF, AN, AI, IZ, OI & PO) • Report on investment in companies' capital (UKT2, from AU, OI &PO) • Report on tangible assets acquired by the credit institution in exchange for its claims (PIKI, from AM, OI and PO)

41. C. Output side:supervisory reports (5) • Report on exposures to debtors (ID2, from AA, AF, AN, AP, AS, AV, AW and PO) • Report on exceeding the exposure limits (POVI, from AI and PO) • Report on exposure to protection providers (IDZ, from IZ, OI and PO) • Report on borrowers whose debt exceeds HRK 5m (D5M2, from AA, AF, AN and PO) • Report on credit institution shareholders with 3% or more of shares and persons connected with them (PD32, from AA, AF, AN, IZ and PO)

42. D. Legislation Law on credit institutions, Decision on reporting for statistics and supervision, Instructions for the implementation of the Decision… (includes descriptions of all possible modalities for all attributes) Methodological Annexes: Explanatory notes for reporting records (addendum to instructions) List of compulsory and optional entries of attribute modalities by instruments, List of compulsory entries of attribute modalities by records, Possible combinations of modalities for 4 attributes: type of record, type of instrument, type of amount and type of portfolio (dynamic approach, cca 800 pages), List of instruments for which the reporting institution is a counterparty, Classification of granted loans (explication of criteria – by purpose vs. by specific structure), Deadlines for data submission by reporting records, Identification numbers for counterparties without identifier (Jugobankas), List of government units as providers of collaterals and guarantees (extract of the sector classification needed for IZ).

43. E. Implementation The project was approved by the Governor at the end of 2006. Preliminary actions: • Preparation of methodological freamework, communication with the management and colleagues from IT and legal departments, • Survey on the organization of the reporting function in the banks, • 2 workshops with 10 biggest banks; 2 seminars for other banks, • Communication with colleagues in the Accounting department of the CNB

44. E. Implementation Step-by-step implementation : • 1) main record • 2) side records (except for interest rates and PLA) • 3) higher (10days) frequency for main record • 4) interest rates • 5) profit and loss account • The content of each step: Draft regulation with methodological notes • Discussion with the biggest banks • Final regulation + seminar for small banks • Testing period (12-18 months) • Official reporting requirement • First data published as of 31st of March 2013, back series constructed since end 2010.

45. F. Operational functioning of the system • statistical AA comes 3 times a month: 5 days after 1st and 2nd decade and 6 days after the end of month, • KS arrives 10 days after the end of month, • other statistical records (AE, AD and IZ) and monthly supervisory records (AA, AB, PO, AF and AN) come 25 days after the end of month, • quarterly records (AS, AP, AW, AV, AI, AK, AU, AM and RA) arrive 25 days after the end of the quarter, • audited annual records (all except AB and KS) arrive 4 months after the end of the year, • consolidated records (AA, PO, AF, AN, AI, AU, AM, IZ and RA) arrive on Sept 30th and 4 months after end-y.

46. F. Operational functioning of the system • Since the data enters the system automaticaly, we have introduced a ramp that blocks the entrance after the deadline for each report. • The Reporting Committee has been established, in order to discuss on allowing late entrance on case-to-case basis. • The committee comprises of representatives of both statistical and supervisory functions, as well as from the legal and IT departments and different users of the data within the bank.

47. G. Further development • ECB output for consolidated balance sheet and interest rates (expected as of end 2013), • data on MMF balance sheets should be incorporated (already incorporated in the output for the ECB, for the CNB official output expected as of end 2013), • tax-number system still doesn’t work perfectly (establishing close cooperation with tax authority is in progress), • automatic links with other statistics - BOP, external debt statistics, FA etc. (work in progress, postponed to avoid overburdening of the IT department).

48. Comments and questions?