Transcript FISIM Developments in the National Accounts and implications for the CPI* Kim Zieschang IMF ECE-ILO CPI Meeting Geneva Workshop on Financial Services in the CPI May 10, 2010 *The.

FISIM Developments in the National
Accounts and implications for the
CPI*
Kim Zieschang
IMF
ECE-ILO CPI Meeting
Geneva
Workshop on Financial Services in the CPI
May 10, 2010
*The views expressed herein are those of the author and should not be attributed to
the IMF, its Executive Board, or its management
Overview
• Financial services in the System of National
Accounts 2008 (2008 SNA)
– Directly measured
– Indirectly measured (‘financial intermediation services
indirectly measured’, or FISIM)
• Risk and insurance within indirectly measured services
• Loan valuation and the loan interest rate
• The reference rate
• FISIM in the PPI
• FISIM in the CPI
Financial services in the System of
National Accounts 2008 (2008 SNA) [1]
Directly measured (fee for
service)
Indirectly measured (no explicit
fee)
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• All services charged indirectly
through the spread between
the rate earned on assets and
the rate paid on liabilities
• Can cover some of the same
services that are partly or
wholly directly charged
depending on the institution
and the deal offered,
particularly to depositors
Mortgage origination
Portfolio management
Tax advice
Estate management
Initial public offerings of stock (shares)
Corporate restructuring
Credit card transaction fees
Others, such as
–
–
•
Safe deposit box services
Check clearing
Financial services associated with the
acquisition and disposal of financial
assets and liabilities in financial markets
(price times transactions processed)
Financial services in the 2008 SNA [2]
• Directly measured services
– No particular difficulty in principle, as price and
quantity are clear
– The usual issues with determining service
characteristics and controlling for quality change
Financial services in the 2008 SNA
[3.1]
• Indirectly measured services
– In principle, the SNA methodology for measuring
indirect financial services can be applied to each
account within the Loans financial instrument class
(2008 SNA asset code AF4) and Transferrable and
Other deposits instrument classes (AF22 and AF29) for
each financial corporation having these instruments
on its balance sheet
• Loans: FISIM = interest receivable on the loan account –
interest cost of funds at a ‘reference rate’ of interest
• Deposits: FISIM = interest cost of funds at a ‘reference rate’
of interest – interest payable on the deposit account
Financial services in the 2008 SNA
[3.2]
• Indirectly measured [cont.]
– The 2008 SNA applies FISIM only to loans and deposits
and not to other financial instruments (unlike the
1993 SNA, which made no such limitation)
– Traditionally, the SNA has only applied FISIM to
financial instruments on the balance sheets of
financial corporations, and to these same instruments
on the balance sheets of the counterparties to
financial corporations
• Household to household loans are out of scope, for example
• Counterparties to financial corporation financial instruments
are nonfinancial corporations, general government units,
households, and nonprofit institutions serving households
Risk and insurance within FISIM [3.2.1]
• Loans (AF4) are charged at an interest rate that includes a risk
premium that varies with, among other things, the lender’s
assessment of the borrower’s risk of default
• Current discussion among national accountants focuses, among
other things, on whether the risk premium itself is payment for
services or not and, if not, whether it should be deleted from the
loan rate in applying FISIM
– Banking service output price and volume considerations may suggest
that there is no need to exclude risk premia from FISIM, even if not
payment for service by themselves, because the risk premium can be
viewed as part of the price of the service but not part of the volume
– Another argument is that the risk premium pays for risk mitigation
activities undertaken by holders of loans, and thus is a payment for
service and should be part of FISIM; the risk mitigation services thus
involve an internal default insurance operation, or purchased
insurance (e.g., via purchase of and paying premiums on credit default
swap contracts)
• Possible issue: can swap contracts be considered sources of insurance services
in the SNA?
Risk and insurance within FISIM [3.2.1]
• A similar issue is being discussed on maturity premia, with a similar
point-counterpoint
– Point: Maturity premia are not a payment for service and should be
deleted from the loan rate when applying the SNA FISIM formula
– Counterpoint: Maturity risk premia are a payment for the cost of (1)
liquidity or term risk mitigation activity (matching a portfolio of longduration loans with short duration liabilities such as Transferrable
deposits [AF22]), or (2) purchased insurance against term risk (e.g., via
purchase of, and paying premiums on, interest rate swap contracts)
• Possible issue: can swap contracts be considered sources of insurance services
in the SNA?
– Price-volume point: maturity premia may be left in the value of
output, regardless of the point of view taken, and dealt with as either
price (non-service) effects or volume (service) effects
Loan valuation and FISIM [3.2.2]
• Though not widely discussed as yet, another feature of
the SNA, including the 2008 SNA, bearing on the value,
price, and volume of FISIM is the valuation of loans at
contract or book value rather than market value
– Contract loan rate refers to an earlier, loan origination
period rather than the current period
– FISIM is generally calculated using a current period
reference rate, such as the interbank rate
– Mismatch in reference periods
– Can lead to volatile and seemingly perverse results
(negative FISIM)
– Should loans be market valued for the specific purpose of
calculating FISIM?
Risk, insurance, and loan valuation effects within FISIM
Example from publicly available Federal Deposit Insurance Corporation and MarkIt [CDS] data on
the USA
Estimated Market Values of the Term and Default Risk Insurance Components of the Loan
Rate
0.5
0.45
0.4
0.35
Average estimated market rate on loans
0.3
0.25
0.2
Total of interbank rate, term insurance, and
default insurance
Total of interbank rate and term insurance
Interbank (Federal Funds) rate
Average contract interest rate on loans
0.15
0.1
0.05
0
FISIM in the PPI
• Scope: Loan asset and deposit liability accounts on the books of financial
corporations
• Base quantity: accounts
• Quality: account services
• Item specification: account number with specified services included at no
separately charged cost (other than interest)
• Service price per account: user cost price = user cost rate × amount on
account
– Loans
• User cost rate = (market?) loan rate – reference rate
• Amount on account = (market?) value of loan
– Deposits
• User cost rate = reference rate – deposit rate
• Amount on account = value of deposit account
• Weights are deposit and loan FISIM receivable by financial corporations by
account number/account class
FISIM in the CPI
• Scope: non-business deposits owned by, and non-business loans owed by
households as counterparties to financial corporations
– Excludes mortgages, which the SNA would consider business loans, the
services from which are intermediate consumption of the household real
estate services industry (within, e.g., ISIC, Rev. 4, 6810, see
http://unstats.un.org/unsd/cr/registry/regcs.asp?Cl=27&Lg=1&Co=681)
• Base quantity: accounts
• Quality: account services
• Item specification: account number with specified services included at no
separately charged cost (other than interest on loans or foregone interest
on deposits)
• FISIM price per account is calculated same as for PPI, except it applies to
household loan and deposit accounts as noted
• Weights are deposit and loan FISIM payable by households by account
number/account class.
National Accounts Prospects
• The Inter-Secretariat Working Group on
National Accounts (ISWGNA) is planning to
convene a Task Force this fall (2010) to
address the FISIM questions touched on in
this presentation, among others, as part of the
2008 SNA research agenda
Thank you