Looking to the analytical comparisons above and other analysis for Slovenia (see Bank of Slovenia, 2011), we can say that the most severe financial and economic crisis of the modern era hit Slovenia heavily. We can briefly tell the story with the following statements:
• Financial intermediation progressively moved away from MFIs to other financial institutions (leasing companies, financial holdings) before the financial crisis appeared in Slovenia. There was almost no
shift in intermediation pattern to other sectors (for example, move- ment towards market financing, intra-sector funding, and so on);
• Financial institutions were very vulnerable to subsequent asset price reversals (affecting, for example, mortgage loans, Mergers and Acqui- sitions, real estate as a main type of insurance). When this mate- rialised, financial intermediaries, particularly in banks, experienced a sharp increase in their leverage position and capital shortfalls rela- tive to regulatory requirements, which gave rise to acute deleveraging pressures;
• Accumulated debt (mainly loans by banks from abroad) during the boom had not been accompanied by a similar accumulation of cap- ital. However, the Bank of Slovenia has constantly been warning banks about higher risks taken on the basis of very granular and consistent data from the matrix system. The result is that there is a strong need for consolidation in the banking system (recapitalisation, responsible ownership);
• In Slovenia, there has so far been only modest deleveraging on a global scale, but a shift in sectoral structure (banks, government). ‘If history is a guide we would expect many years of debt reduction in specific sectors . . . and this process will exert a significant drag on GDP growth’ (Roxburg et al., 2010, p. 9).
Since supervision of the financial sector needs to be enhanced, and given the natural role of this sector as a intermediator of funds to the real sector of the economy, we need to place these very financial inter- mediators in the nucleus of our data model. The granulation of data requirements must, therefore, be the largest in this sector of the econ- omy, and at the same time this must constitute a basis for managing the risk of financial intermediators, on the one hand, and the foundations for consistent and comprehensive quarterly sectoral accounts, on the other hand.
Due to the need for fiscal consolidation in the EU at a time of finan- cial crisis, and for reliable public financial statistics, the Bank of Slovenia first ensured consistency in sector S.13 – general government, in terms of a robust system for checking data and the harmonisation of the item lending or borrowing on the part of financial and non-financial accounts. Given the key indicators of external imbalance, we need to dispose of a high methodological quality of the national balance of payments and the balance of international investments, and thereby of sector S.2 – rest of the world. This is followed by work in the sector of financial corporations – S.12 and then a perfection of data sources for
the main calculation of added value, especially via sector S.11 – non- financial corporations at the quarterly frequency. Here we need to focus on the fundamental components of calculating added value according to other dimensions (for example, investments and stocks by activ- ity) and to ensure a high responsiveness and statistical character of the reporters or reporting pattern. Due to the lower availability of regular direct data sources, alongside the development of register statistics and indirect sources of data, we are attempting to minimise sector S.14 as a
‘residual’ sector. In principle, this should mean the minimum statistical error, the difference between net lending/borrowing only of the house- holds and non-financial corporations sectors. All the deficiencies of sectoral accounts are supplemented in detail through the development of satellite accounts, for instance, for non-profit institutions (S.15).
The proposed development of a consistent information system for the individual EMU member is in essence, therefore, focused on the link between the real and financial parts of the economy, and seeks to anal- yse the imbalances by individual sector in Slovenia in a manner that is comparable within the EMU and with countries further afield. Here, in terms of the need for financial stability and in terms of economic policy (monetary, fiscal, income), we see the need to develop a data model for the information system that is supporting decision-making.
We have seen that, especially with the appearance of the financial crisis, the range of instruments is changing towards pursuing the other ultimate goal of monetary policy, which, in addition to price stability, is financial stability. As long as the financial crisis continues, this is, in our view, becoming the predominant objective – ‘the ultimate goal’
(Bofinger, 2001, p. 127) – of monetary policy.
Notes
1. Let us take as a decisive juncture the bankruptcy of Lehman Brothers bank in the USA on 15 September 2008, although in terms of monetary policy operations the ECB (2011a, p. 115) cites 9 August 2007, when loans overnight amounted to as much as C95 billion.
2. We stress the efficiency and systematic nature of making requests for data, which in the information sense represents a well-regulated multidimensional space. The concept of a data model takes into account just such a method of requesting data – the concept of a matrix.
References
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‘Instructions for compiling monthly reports of account balances’ in Official Gazette of the Republic of Slovenia, No. 28, 3755.
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http://kt.ijs.si/MarkoBohanec/PES/ML-KDD-6.pdf (Accessed 5 March 2002).
European Central Bank (2011a) The Monetary Policy of the ECB(Frankfurt am Main: European Central Bank).
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Lequiller, F. and D. Blades (2006)Understanding National Accounts(Paris: OECD).
Peeraer, M., Andolli, S., Cerjak, M.D., Filipˇciˇc, M., Kastelic, H., Kavˇciˇc, T., Lednik, A., Malalan, P. and M. Novak (2008)Spremljanje poslovnih dogodkov v skladu z MSRPGuidelines to International Financial Reporting Standards (Ljubljana:
Bank of Slovenia).
Roxburg, C., Lund, S., Wimmer, T., Amar, E., Atkins, C., Kwek, J., Dobbs, R. and J.
Manyika (2010)Debt and Deleveraging. The Global Credit Bubble and Its Economic Consequences(London: McKinsey Global Institute).
Schubert, A. (2011) ‘European Systemic Risk Board and the Excessive Imbalances Procedure’ in Statistical Office of the Republic of Slovenia, Statistics and the Management of Macroeconomic Risks(Ljubljana: Statistical Office of the Republic of Slovenia).
Teplin, A.M. (2001) ‘The U.S. Flow of Fund Accounts and Their Uses’, Federal Reserve Bulletin, July, 432–41.
Winkler, B. (2010) ‘Cross-checking and the Flow of Funds’ in L.D. Papademos and J. Stark (eds),Enhancing Monetary Analysis(Frankfurt am Main: European Central Bank), 355–80.
Part II
Flow of Funds and
Macroeconomic Imbalances in Europe
6
The Financial Crisis in the Light of the Euro Area Accounts:
Selected Issues ∗
Philippe de Rougemont and Bernhard Winkler