Credit risk transfer statistics – gaps and possible scope for improvement

1. Credit risk transfer statistics –gaps and possible scope for improvement Presentation to the IMF-FSB Users Conference Michael Chui 1

2. Plan • Publicly available information on CDS markets; • Closing the data gaps: • Objectives; and • Data gaps and possible scope for improvement.

3. Publicly available information on CDS • BIS OTC derivatives statistics; • International Swaps and Derivatives Association (ISDA); • Depository Trust & Clearing Corporation (DTCC); and • BIS consolidated banking statistics. Available information Global market size Transfer of credit risk Improvement

4. BIS semiannual OTC derivatives markets statistics (1) Available information Global market size Transfer of credit risk Improvement

5. BIS semiannual OTC derivatives markets statistics (2) Available information Global market size Transfer of credit risk Improvement

6. DTCC’s Trade Information Warehouse data Available information Global market size Transfer of credit risk Improvement

7. Closing the data gaps – objectives • Improve understanding of the structural changes of global CDS markets; • Obtain better information on the transfer and ultimate distribution of credit risk via CDS; and • Monitor short-term CDS market developments. Available information Global market size Transfer of credit risk Improvement

8. Understanding the structural changes: size of global CDS markets Survey participants – end 2008 ISDA: half-yearly, starting from H1 2001; BIS: half-yearly, starting from H2 2004; DTCC: weekly, starting November 2008. Total number of reporters are in brackets. Sources: DTCC; ISDA; BIS. Available information Global market size Transfer of credit risk Improvement

9. Comparing DTCC with BIS CDS data (end-2008) • Perfectly matched for “between dealers”; • Much larger BIS amounts outstanding in single-name instruments; and • BIS data show considerably larger on deals with non-dealer counterparties. Available information Global market size Transfer of credit risk Improvement

10. Information gaps on the transfer and distribution of credit risk • Data quality – consistent counterparty and sectoral definitions; • New counterparty categories and instruments; • Counterparty and reference entity geographical breakdowns; • Market values; and • Timeliness and frequency. Available information Global market size Transfer of credit risk Improvement

11. Data quality • Consistent definition: eg, EU guideline on hedge funds; • Insurance company Available information Global market size Transfer of credit risk Improvement

12. New counterparty and instrument; and market values • Central counterparties; • Index products; • Asset-backed securities; and • Net market values. Available information Global market size Transfer of credit risk Improvement

13. Linking with other credit derivatives statistics • Gauging a country’s derivatives exposures to foreign counterparties; and • Measuring the geographical distribution of a country’s credit risk exposures. Available information Global market size Transfer of credit risk Improvement

14. Possible improvement in the BIS OTC derivatives statistics and hanging issues CGFS working group on credit risk transfer statistics recommendations and further work; • Extension of the current data reporting template; • Providing more consistent guidelines; and • Exploring the linkages with other statistical sources. Available information Global market size Transfer of credit risk Improvement