Banking system indicators11/25/2023 These differences between the two episodes affected financial stability in a number of ways. Public investment spending also grew strongly leading up to both depressions, but was lower on average during the 1880s than during the 1920s – 7 per cent compared with about 9 per cent of GDP. Through both depressions investment fell rapidly, though the fall in the 1890s was larger and lasted longer than was the case during the 1930s. Investment reached a seven-year high of about 13 per cent of GDP in 1888, coinciding with the peak of the property price boom (see below). Although highly volatile, private investment averaged about 11 per cent of GDP from 1875 to 1891, compared with an average of just under 9 per cent from 1920 to 1930. Private investment as a share of GDP was sustained at a higher level, and over a longer period, prior to the 1890s depression than it was prior to the 1930s depression. These compositional differences had implications for the relative stability of the financial system over these episodes. Moreover, what distinguished the 1880s from the 1920s was the composition of investment, in terms of both the split between public and private investment, and the nature of this investment (Figure 8). It had been above 15 per cent of GDP for 17 consecutive years to 1891, whereas it had been above this level over only 10 consecutive years to 1929. However, investment had remained relatively high over a longer period leading up to the 1890s. As a share of GDP, investment was not that much higher through the 1880s compared with the 1920s – averaging around 18 per cent in both decades. Total national investment grew strongly leading up to both depressions, and then fell dramatically at the outset of each depression. Even so, we choose investment as a starting point for the discussion since it relates to many other indicators and points to the source of the initial positive shock that triggered the expansion and subsequent instability. Arguably the level of credit and the speed at which credit is expanding are the key factors behind many episodes of financial instability. These indicators are of course closely related, and it is not clear that there exists an obvious ranking of their importance for system stability. The indicators we focus on include:ĭegree of risk management within the financial system andĬompetitive pressures in the financial sector. In this paper we focus on indicators that relate mostly to the degree of credit risk in the financial system, although we also discuss the related issue of liquidity risk. We refer to financial instability in terms of the ex ante probability of a financial system disturbance of sufficient size that it implies noticeable macroeconomic effects (Kent and Debelle 1999). This is demonstrated by comparing six broad indicators of financial system stability across the decade or so prior to each depression. As the indicators are calculated by the IMF, their parallel publication on the CNB website has been discontinued.The central thesis of this paper is that the variation in the performance of the financial system across the 1890s and 1930s stems mainly from differences in the condition of the financial systems that were evident well before the economic downturn in each episode. Aggregate underlying data are now sent to the IMF instead of the compiled indicators that were previously submitted. In 2022, a new mapping was introduced according to the FSI Guide. The Czech National Bank is involved in this International Monetary Fund project and provides available data relating to the banking sector with a quarterly frequency (the data are updated no later than three months after the end of the quarter). The financial soundness indicators are presented on the IMF website ( ). in accounts, evaluation methods, the extent of consolidation) as well as specific conditions (the unavailability of some items in national reporting systems and so on) for individual countries, which permits an evaluation of the comparability of the individual countries. In addition to concrete data, detailed metadata has also been processed, describing the differences in basic assumptions (e.g. These indicators are composed of two parts: the core set, which includes basic indicators for the banking sector, and the additional set, which also includes, apart from additional supplementary indicators for the banking sector, selected indicators characterising other financial and non-financial institutions, households, market liquidity and the real estate market. The financial soundness indicators have been created by the International Monetary Fund in the interest of supporting international comparisons and supporting macroprudential analyses of the financial market.
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