FISIM

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FISIM
UN STATISTICS DIVISION Economic Statistics
Branch National Accounts Section
UNSD/NA/MR
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Background

• Developments in the financial markets have
  changed the way financial corporations operate
• Is the 1993 SNA recommendation for calculating
  output of financial corporation services still
  relevant?

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Current SNA definition of financial intermediaries

• Financial corporations are defined as all
  resident corporations or quasi-corporations
  principally engaged in financial intermediation
  or in auxiliary financial activities which are
  closely related to financial intermediation
  (Paragraph 4.77).
• Financial intermediation itself is defined as
• a productive activity in which an
  institutional unit incurs liabilities on its own
  account for the purpose of acquiring financial
  assets by engaging in financial transactions in
  the market. The role of financial intermediaries
  is to channel funds from lenders to borrowers by
  intermediating between them.
• They collect funds from lenders and transform, or
  repackage, them in ways that suit the requirement
  of borrowers. They obtain funds by incurring
  liabilities on their own account, not only by
  taking deposits but also by issuing bills, bonds
  or other securities. They use these funds to
  acquire financial assets, principally by making
  advances or loans to others but also by
  purchasing bills, bonds, or other securities.

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Current SNA

• By the current SNA definition, financial
  intermediaries exclude own-funds.
• Own-funds by banks and money lenders are not
  supposed to generate services.
• Interest payments paid on own-funds are pure
  interest.
• Consequently, output of financial intermediaries
  is calculated as
• Fisim explicit service charges
• Fisim Propety income receivable (not including
  those on own-funds) less interest payable.

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Change in financial environment

• Financial corporations, even banks, currently
  operate in broad ranges of activities, besides
  liquidity transformation. They incur liabilities
  like deposits, but also other securities (bills,
  bonds, mutual funds, market funds, etc.) and then
  acquire assets such as loans but also other
  financial assets (stocks, bills, bonds and other
  securities).
• Financial corporations are involved in risk
  management, liquidity transformation and/or
  auxiliary financial activities.
• Thus, financial corporations are redefined and
  recommended by the AEG as resident corporations
  or quasi-corporations principally engaged in
  providing financial services to other
  institutional units. The production of
  non-insurance financial services is the result of
  risk management, liquidity transformation and/or
  auxiliary financial activities.

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Output of financial corporations

• Output of financial corporations is recommended
  by the AEG to be broadly termed financial
  services instead of only intermediation.
• Therefore
• services provided by using own-funds should be
  also taken into account.
• Returns from all financial investments including
  shares should be used in calculating Fisim.

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Fisim calculation

• Though broadly defined, fisim is still
  conservatively measured on the basis of deposits
  and loans using the reference rate.
• fL fD (rL rr)L (rr rD)D
• fL fisim on loan, fD fism on deposits
• rr reference rate, rL interest rate on loans,
  rD interest rate on deposit
• L stock of loans, D stock of deposits.
• Fisim on own funds
• (rL rr)L
• Advantage fisim can be easily allocated to
  borrowers and depositors.

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Reference rate

• a rate that has no service element in it and
• reflects the risk and maturity structure of the
  financial assets and liabilities to which
  indirect service charges applies.
• single reference rate should be used but, when
  relevant, a country could choose to use multiple
  rates.
• different reference rates should be used for
  transactions in other currencies.
• Reference rate can be simply calculated as
  follows

9

• Thank You

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Central bank (CB) output

• Separate establishments should be established for
  units in the CB undertaking market and non-market
  production when market is significant.
• Non-market activities are treated as collective
  services consumed by general government with a
  matching income transfer from CB to general
  government so that there is no net cost to the
  government.
• Market output is provided on an individual basis
  to all sectors against their payment for these
  services.
• When interest rate set by CB is so high or so
  low, the difference with average interest rate
  should be treated explicitly as tax or subsidy by
  government.