Quality of Derivatives Statistics: the Australian Experience

1
Quality of Derivatives Statistics the Australian
Experience
OECD Working Party on Financial Statistics,
October 2007
2
What are derivatives?

• A contract whose value depends on other asset(s)
  or index values
• Swaps
• payments streams in A for US
• fixed interest for floating
• Options to buy or sell
• shares, physical assets, etc
• Futures, forward rate agreements
• Can be exchange traded or OTC
• Settled in cash or kind

3
SNA/BPM on derivatives

• tradeable or offsetable
• net value, not notional principal
• assets positions, liability positions, change
  over time
• most transactions are settlements
• revaluations is main item in stock reconciliation

4
Intertemporal reconciliation e.g a swap
Opening
Transaction
Reval
Closing
Comment
t1 (asset)
0
0
10
10
created
t2 (asset)
10
0
-5
5
reval
t3 (assetgtliab)
5
0
-5
0
reval -6
t3 (liab)
0
0
1
1
t4 (liab)
1
-1
0
0
settled
5
Implementation in BoP, 1997

• Direct collection attempted via IIS form 90
• Info paper
• "the information reported to the ABS ....
  represents a degree of netting in both the
  positions and transactions flows"
• expect improvement "as accounting standards
  develop and reporting systems are upgraded"
• Subsequent improvement
• provider coaching, IFRS

6
Implementation in ANA, 1998

• Modelling from direct collection data
• Info paper
• "the quality of reporting of transactions in
  surveys is lower than for other data items"
• "there is a significant amount of imputation in
  the estimates"
• Reporting burden causes subsequent (2001)
  abandonment of bank (APRA) data collection to
  meet SNA (draft form ARF 320.6)

7
Summary of issues for direct collection

• identification of net asset position and net
  liability position
• moving from a net asset to net liability
• identification of new and settled contracts
• partitioning changes in value into transactions,
  value changes and volume
• summarising by sector of counterparty
• separation of derivatives from assets/liabilities
  being hedged
• data by type of derivative contract

8
Modelling derivatives

• conservative market practices
• Non-Fin corp and Govt hedging not trading
• use of relationship banker, foreign parent
• market research and regulatory data
• AFMA turnover by type of contract
• APRA gross positions
• RBA report to BIS, infer counterparties
• BoP/IIP data taken as a given

9
Model boundaries
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Possible ways forward

• IFRS/IAS39
• commercial accounting is moving in SNA direction,
  improved direct collection?
• Stock/price modelling
• model trans and revals wrt asset prices
• needs "type of derivative" position classn
• Leverage market research/regulatory data
• not much enthusiasm
• Security by security reporting
• privacy, computing power

11
Future directions

• Not much net lending in derivatives (outside fin
  corps)
• what are the costs/benefits of increased data
  collection?
• What are the policy questions?
• foreign currency exposures and hedging surveys
  not addressed by SNA
• Aim to develop collection options which populate
  SNA framework suitably and allow analytical views