Financial Soundness Indicators (FSIs)
FSI Data Comparability

Countries reporting FSIs to the IMF are encouraged to follow the Financial Soundness Indicators: Compilation Guide (FSI Guide) and its Amendments to foster comparability of data across countries. However, there may be deviations of a country's compilation methodology from the FSI Guide and its Amendments, as well as differences among countries' compilation practices. Several aspects should be taken into account while comparing data across countries, which are explained in detail in the extensive metadata. Before using FSI data, users could usefully read the following explanation regarding different aspects of FSI compilation as a primer for the description of metadata.

A number of FSIs can be compiled in more than one way using different definitions of either the numerator and/or the denominator. For example, capital used either as numerator or denominator in some FSIs can be the balance sheet concept of capital and reserves or the supervisory concepts of total regulatory capital and Tier 1 capital, or even the concept of narrow capital and reserves. Other underlying series in which variations may be observed are: net income (before extraordinary items and taxes; after extraordinary items and taxes); and liquid assets (core measure; broad measure). The choices made by countries in these areas are provided in the metadata. These choices significantly affect the magnitude of FSIs and are an important determinant of comparability among different countries’ FSIs.

Another important aspect to be taken into account in comparing data across countries concerns the type of consolidation basis used by countries to compile particular FSIs. The Amendments to the FSI Guide recommend using in the compilation of FSIs for the sector of deposit takers the domestically controlled cross-border, cross-sector consolidation basis (DCCBS) and/or the cross-border, cross-sector basis for all domestically incorporated consolidation basis (CBCSDI); and countries may choose to compile FSIs using one or both of these recommended consolidation bases to be fully consistent with the FSI Guide. In addition, countries may chose to use consolidation bases that are different from those recommended ones.

Preliminary information from the data collected in the Fund’s pilot project for FSIs (CCE) presented in the 2007 IMF Board Financial Soundness Indicators: Experience with the Coordinated Compilation Exercise and Next Steps: Background Paper indicates that the choice made on consolidation basis can have significant effects on the magnitude of FSIs and would in many cases be an important criterion to consider in identifying FSIs that are comparable across countries. More information on each type of consolidation basis is provided in the description of metadata.

It is also important to note that the adoption of a certain consolidation basis does not necessarily imply that the consolidation adjustments that are possible within the population implied by this consolidation basis are actually carried out. In some countries, some or all of these potential adjustments take place, while in others they do not (i.e., "solo" data are simply aggregated to produce the sector-level FSI data). Therefore, comparability of data could be affected by the extent to which countries carry out consolidation adjustments.

There are two levels of potential consolidation adjustments—(i) intra-group consolidation adjustments (i.e., elimination of positions and flows between the parent institution and its subsidiaries), which are recommended by the FSI Guide and its Amendments, and (ii) inter-group consolidation adjustments (i.e., elimination of all flows and some positions between the reporting groups in the population), for which the FSI Guide leaves open the option to countries to implement them if it suits their circumstances. The consistency with the recommendations of the FSI Guide and its Amendments regarding intra-group consolidation adjustments as well as information about inter-group adjustments that may have been carried out by countries are also indicated in the metadata. These adjustments could be quantitatively material in some countries and the presence of adjustments may therefore need to be considered in deciding which countries’ FSIs are comparable. Some preliminary information on these matters is provided in the 2007 IMF Board Financial Soundness Indicators: Experience with the Coordinated Compilation Exercise and Next Steps: Background Paper

There are other possible reasons for which FSIs that are reported under the same name can differ, such as definitional, accounting, and statistical reporting differences across countries regarding, inter alia, instrument coverage, recording of gains and losses, accrual of interest, institutional coverage, principles of valuation, timing of recognition of assets and liabilities, exchange rates, etc. There can also be differences on account of the application of national supervisory guidance on the compilation of supervisory-based FSI data (such as regulatory capital, risk-weighted assets, nonperforming loans, and provisions). The metadata compiled by countries for the FSIs reported describe the choices countries have made in these areas. These choices and practices are likely to evolve over time affecting comparability of FSI data series across time. This is why the metadata available in the IMF's FSI database are specific to each data point and will change reflecting changes in the compilation of a given FSI over time.

For a more detailed discussion of the potential methodological differences in the compilation of FSIs across countries see the description of metadata.