EU Financial Accounts Quality Analysis Highlights Statistical Developments and Recommendations
A comprehensive review of the quarterly financial accounts of the euro area and national statistics reveals significant methodological improvements and ongoing discrepancies.
The European Central Bank (ECB) has released its biennial quality report reviewing the quarterly financial accounts for the euro area and its member nations, fulfilling its obligation under Article 7(2) of Guideline ECB/2013/24. This report covers statistics up to October 2024 and marks a significant review after the substantial amendments made to the ECB Guideline in 2021, which introduced new mandatory data requirements incrementally implemented in 2022 and 2023.
One notable change has been the comprehensive reporting framework that now integrates foreign direct investment (FDI) by sector and differentiates insurance and pension entitlements based on investment risks.
This restructuring aims to provide clearer insights into the financial interactions between various economic sectors, particularly with the ongoing integration of Other Financial Institutions (OFIs).
In 2024, the ECB mandated an enhanced detailing of OFIs to facilitate their analysis, following their recognition in the ECB’s 2020-21 monetary policy strategy review.
The most recent benchmark revision, which occurs every five years, has allowed many member countries to update and improve their financial accounts, enhancing the consistency of long-term data series.
This revision process has addressed several previously identified priority areas as part of ongoing efforts to boost the quality of statistical outputs.
Notably, the report acknowledges the persistence of discrepancies between quarterly financial accounts and balance of payments (b.o.p.) statistics, along with significant vertical discrepancies relative to non-financial accounts.
A comprehensive audit of the governance, risk management, and control processes related to quarterly financial accounts was conducted in 2023. The final report, submitted to the ECB’s Statistics Committee, indicated that these processes are fundamentally effective at the Eurosystem level.
In response, a follow-up audit was initiated to enhance the monitoring of recommendations established in this quality report.
The report offers critical data quality assurance for macroeconomic imbalance procedures (MIP), according to the established Memorandum of Understanding between Eurostat and the ECB.
It evaluates statistical outputs on various dimensions, such as methodological soundness, timeliness, reliability, internal consistency, and external consistency against comparable statistical domains.
The report notes that nearly all euro area nations submitted their required data to the ECB, with minor gaps in historical data prior to 2013. This data has generally been delivered consistently and in a timely manner, with member states providing selected quarterly data at t+85 days, metadata at t+87 days, and complete national accounts data at t+97 days.
As Croatia became a euro area member on January 1, 2023, this report includes its financial accounts for the first time.
It finds that national financial accounts generally align with the European System of Accounts (ESA 2010) standards, although limitations in data sources have necessitated the use of estimations in instances where source data are incomplete.
In 2024, most EU nations undertook coordinated benchmark revisions of their national accounts and b.o.p. data to introduce new methodologies and data sources.
However, the report highlights ongoing issues regarding discrepancies between quarterly financial accounts and balance of payments statistics which indicate a substantial need for enhanced alignment between these data sources.
The recommended improvements address several areas that require continuous attention, such as the completeness and accessibility of data from member states leading to various identified methodological gaps.
The ECB, in concert with Eurostat, has monitored the quality of output relevant to MIP indicators, resulting in changes that separate household and non-financial corporation debt flows for better analytical understanding.
Furthermore, the completion of the MIP indicators will include updated datasets and modifications to reflect more accurately the financial landscape of both households and corporations.
Statistical issues in the monitoring of MIP indicators persist, with ongoing discrepancies noted between the financial accounts and related b.o.p. statistics.
The report underlines that these issues may impact the overall reliability of data as countries aim to align their financial accounts with non-financial sector statistics for accurate economic assessments.
One notable change has been the comprehensive reporting framework that now integrates foreign direct investment (FDI) by sector and differentiates insurance and pension entitlements based on investment risks.
This restructuring aims to provide clearer insights into the financial interactions between various economic sectors, particularly with the ongoing integration of Other Financial Institutions (OFIs).
In 2024, the ECB mandated an enhanced detailing of OFIs to facilitate their analysis, following their recognition in the ECB’s 2020-21 monetary policy strategy review.
The most recent benchmark revision, which occurs every five years, has allowed many member countries to update and improve their financial accounts, enhancing the consistency of long-term data series.
This revision process has addressed several previously identified priority areas as part of ongoing efforts to boost the quality of statistical outputs.
Notably, the report acknowledges the persistence of discrepancies between quarterly financial accounts and balance of payments (b.o.p.) statistics, along with significant vertical discrepancies relative to non-financial accounts.
A comprehensive audit of the governance, risk management, and control processes related to quarterly financial accounts was conducted in 2023. The final report, submitted to the ECB’s Statistics Committee, indicated that these processes are fundamentally effective at the Eurosystem level.
In response, a follow-up audit was initiated to enhance the monitoring of recommendations established in this quality report.
The report offers critical data quality assurance for macroeconomic imbalance procedures (MIP), according to the established Memorandum of Understanding between Eurostat and the ECB.
It evaluates statistical outputs on various dimensions, such as methodological soundness, timeliness, reliability, internal consistency, and external consistency against comparable statistical domains.
The report notes that nearly all euro area nations submitted their required data to the ECB, with minor gaps in historical data prior to 2013. This data has generally been delivered consistently and in a timely manner, with member states providing selected quarterly data at t+85 days, metadata at t+87 days, and complete national accounts data at t+97 days.
As Croatia became a euro area member on January 1, 2023, this report includes its financial accounts for the first time.
It finds that national financial accounts generally align with the European System of Accounts (ESA 2010) standards, although limitations in data sources have necessitated the use of estimations in instances where source data are incomplete.
In 2024, most EU nations undertook coordinated benchmark revisions of their national accounts and b.o.p. data to introduce new methodologies and data sources.
However, the report highlights ongoing issues regarding discrepancies between quarterly financial accounts and balance of payments statistics which indicate a substantial need for enhanced alignment between these data sources.
The recommended improvements address several areas that require continuous attention, such as the completeness and accessibility of data from member states leading to various identified methodological gaps.
The ECB, in concert with Eurostat, has monitored the quality of output relevant to MIP indicators, resulting in changes that separate household and non-financial corporation debt flows for better analytical understanding.
Furthermore, the completion of the MIP indicators will include updated datasets and modifications to reflect more accurately the financial landscape of both households and corporations.
Statistical issues in the monitoring of MIP indicators persist, with ongoing discrepancies noted between the financial accounts and related b.o.p. statistics.
The report underlines that these issues may impact the overall reliability of data as countries aim to align their financial accounts with non-financial sector statistics for accurate economic assessments.
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