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Draft: March 2003
Chapter Thirteen
Peer group and descriptive statistics
Introduction
13.1.
Sector balance sheets and income and expense data can disguise important
trends. For example, the sector-wide capital to asset ratio for deposit-takers is essentially the
average capital to asset ratio for the system (derived by the summation of all institutions
capital divided by all institutions assets), and, if symmetrically distributed, would convey
information about the middle capital asset ratio (the median) as well as the most frequently
observed capital asset ratio (the mode). However, the ratio does not indicate whether the
individual institutions’ capital ratios are clustered in a narrow range around the average
value, or are spread over a wide range. Moreover, if one highly capitalized deposit-taker
offsets several other undercapitalized deposit-takers, the aggregate ratio may appear robust,
masking significant vulnerabilities from weak deposit-takers whose failures could lead to
contagion throughout the system. So in IMF discussions with both users and compilers of
FSIs, the need for peer group analysis, and dispersion analysis has been highlighted.
13.2.
A wide variety of meaningful peer groups can be created for comparison
purposes, and to examine the dispersion and concentration of the institutions in the peer
group or sector, descriptive statistics can be compiled. Such information can significantly
affect the conclusions about vulnerabilities or strengths of the financial system. This chapter
describes some types of peer groups that can be created, and discusses measures of
concentration and of dispersion. Issues to address in developing these data are set out, such
as the approach to weighting the contribution of the individual institutions, and some
explanation of how to analyze the results is also provided. While going beyond the
requirements of the agreed FSIs, some recommendations for peer groups and concentration
measures to compile are provided. Howeve