The 2007-09 financial and economic crisis started with a collapse in the US housing market which triggered defaults on subprime mortgages. The trouble quickly spread to other financial markets, leading to great financial instability and multiple defaults of financial corporations, not only in the United States but throughout the world. This in turn ushered in the deepest recession since the 1930s. Economic growth turned significantly negative in many countries and unemployment rates increased sharply, especially among younger people. An important indirect impact was the sovereign debt crisis in Europe, with Greece as the most prominent example.

All these developments underlined once again, and more forcefully, the importance of financial accounts and balance sheets to timely, reliable and comprehensive monitoring of financial and economic developments, including their interconnections across sectors and countries. The framework of financial accounts and balance sheets, which is part of the system of national accounts, brings coherence to hundreds of statistical sources available in countries. It delivers essential macro-economic information to monitor financial risks and vulnerabilities, and analyse links between the world of finance and the “real” economy. As such, it can make an important contribution to policy making.

This publication aims to show the richness of the information contained in the financial accounts and balance sheets – and the system of national accounts more generally – and to demonstrate their usefulness for economic research, analysis, and policy formulation. It also explains the concepts and statistical sources underpinning the financial accounts and balance sheets, and the complexities involved in compiling a fully consistent set of statistics on finance and wealth. The overall objective is to offer a better understanding of the framework of financial accounts and balance sheets in an accessible, yet rigorous, format.

Understanding Financial Accounts extends and deepens the analysis in Chapter 8 of the publication Understanding National Accounts. It responds to the renewed interest in monetary and financial stability issues, and in monitoring financial risks and vulnerabilities, including their impact on growth and employment. It therefore places special emphasis on the links between the financial accounts and balance sheets and the non-financial accounts section of the system of national accounts which deals with the “real” economy. Often these are treated as separate systems, partly because they are compiled by different national statistical authorities.

But while Understanding National Accounts was primarily an OECD product, with some outside contributions, this publication is a fully co-operative effort with colleagues from the OECD and the Bank for International Settlements (BIS), the European Central Bank (ECB), Fondazione AIB, the International Monetary Fund (IMF), National Central Banks (Austria, Italy and Portugal) and National Statistical Offices (Australia and Canada) and the Treasury of Canada.

We recommend this guide to young statisticians, students, journalists, economists, policy makers and all citizens who want to know more about the statistics at the heart of the analysis of financial developments in OECD economies.