CHAPTER 14
Financial intermediation services indirectly measured (FISM)
The concept of FISM and the impact of their user allocation on main aggregates
14.01
One traditional way in which financial services are provided is by means of financial intermediation. This is the process whereby a
financial institution such as a bank accepts
deposits
from units wishing to receive
interest
on funds, and lends them to units whose own funds are insufficient to meet their needs. The bank thus provides a mechanism to allow the first unit to lend
to the second. The unit lending funds accepts a rate of interest lower than that paid by the borrower. A 'reference rate' of interest is the rate at which
both lender and borrower would be happy to strike a deal. The difference between the reference rate and the rate actually paid to depositors and charged
to borrowers is a financial intermediation service charge indirectly measured (FISIM). The total FISIM is the sum of the two implicit fees paid by the
borrower and the lender.
14.02
However, it is seldom the case that the amount of funds lent by a financial institution exactly matches the amount deposited with
them. Some money may have been deposited but not yet loaned; some loans may be financed by the bank's own funds and not from borrowed funds. However, the
depositor of funds receives the same amount of
interest
and intermediation service whether or not his funds are lent, and the borrower pays the same rate of interest and receives the same intermediation service
whether his funds are provided by intermediated funds or the bank's own funds. For this reason FISIM are estimated for all loans and deposits offered by a
financial institution irrespective of the source of the funds. The amounts of interest recorded are calculated as the reference rate times the level of
loan or deposit in question. The difference between those amounts and the amounts actually received by or paid to the financial institution are recorded
as the indirect service charges paid by the borrower or depositor to the financial institution. The amounts recorded in the system as interest are
described as 'ESA interest' and the total amounts actually paid to or by the financial institution are described as 'bank interest'. The total implicit
service charge is the sum of the bank interest on loans less the ESA interest on the same loans plus the ESA interest on deposits less the bank interest
on the same deposits.
14.03
FISIM apply only to
loans
and
deposits
provided by, or deposited with, financial institutions. The financial institutions in question need not be resident; nor need the clients of the financial
institution be resident. Imports and exports of FISIM occur. The financial institution need not offer deposit-taking facilities as well as making loans.
The financial subsidiaries of retailers are examples of financial institutions that make loans without accepting deposits. A money lender who has
sufficiently detailed accounts to be treated as a corporation or a quasi-corporation can receive FISIM.
14.04
To consider the impact of the allocation of FISIM on GDP and national income, as compared with the situation where FISIM would not be
allocated, five cases have to be considered:
-
loans
are provided and
deposits
are taken by resident financial intermediaries (FIs) for
intermediate consumption
of
market producers
(including
households
as owners of unincorporated enterprises and of dwellings):
the FISIM output of FIs is counterbalanced by the intermediate consumption of market producers. Therefore, there is no impact on GDP and national income;
-
loans are provided and deposits are taken by resident FIs for intermediate consumption of
non-market producers
and for final consumption of households:
when FISIM is consumed by non-market producers, as intermediate consumption, the output of such producers is increased by the same amount since intermediate consumption is a part of the sum of their costs and the counterpart flow is an increase of final consumption expenditure. Therefore, GDP and national income increase by the amount of allocated FISIM.Also, when FISIM is consumed by households as final consumers, GDP and national income increase by the amount of allocated FISIM;
-
loans are provided and deposits are taken by resident FIs to non-resident non-FIs (exports of FISIM):
exports of FISIM are recorded, increasing GDP. But in the transition from GDP to national income, this increase is counterbalanced by a decrease of interest receivable less interest payable towards the rest of the world (as FISIM is deducted from interest receivable on loans and added to interest payable on deposits). Therefore, exports of FISIM do not impact national income;
-
loans are provided and deposits are taken by non-resident FIs for intermediate consumption of market producers, including households as owners of
unincorporated enterprises and of dwellings (imports of FISIM):
GDP decreases by the amount of this category of imports of FISIM, as their counterpart is intermediate consumption. But in the transition from GDP to national income, this decrease is counterbalanced by an increase of interest receivable less payable towards the rest of the world (as FISIM are added to interest receivable on deposits and deducted from interest payable on loans). Therefore, this category of imports does not impact national income;
-
loans are provided and deposits are taken by non-resident FIs for
intermediate consumption
of
non-market producers
and for final consumption of households (imports of FISIM):
imports of FISIM by non-market producers correspond to intermediate consumption. The output of such producers is increased by the same amount since intermediate consumption is a part of the sum of their costs and the counterpart flow is an increase of final consumption expenditure. When measuring GDP from the production approach, the increase in intermediate consumption is matched by the rise of output, leaving value added unchanged. When measuring GDP from the expenditure side, the increase in final consumption expenditure is neutralised by the increase of imports of services. But in the transition from GDP to national income, there is an increase of interest receivable less payable towards the rest of the world (as FISIM is added to interest receivable on deposits and deducted from interest payable on loans). Therefore, national income increases by the amount of this category of imports of FISIM.Also, when FISIM is imported by households as final consumers, there is no impact on GDP and national income increases as there is an increase of interest receivable less payable towards the rest of the world.By convention, FISIM are not calculated for interbank loans and deposits between resident FIs, nor between resident FIs and non-resident FIs. But interbank loans and deposits are used to calculate reference rates.
14.05
From the five cases presented in paragraph 14.04, the impact of allocating FISIM on GDP and national income can be summarised in
the following way:
- GDP increases by the amount of FISIM produced by resident FIs and allocated to sectors S.13 (general government), S.14 (for households as consumers), S.15 (NPISHs) and S.2 (rest of the world);
- GDP decreases by the amount of imported FISIM allocated to S.11 (non-financial corporations), S.12 (financial corporations) excluding S.121 (central bank), S.122 (deposit-taking corporations except the central bank) and S.125 (other financial intermediaries, except insurance corporations and pension funds), and S.14 (for households as owners of dwellings and unincorporated enterprises);
- national income increases by the amount of FISIM (produced by resident FIs or imported) allocated to sectors S.13 (general government), S.14 (for households as consumers) and S.15 (NPISHs).
Calculation of FISIM output by sectors S.122 and S.125
14.06
FISIM are produced by FIs: the central bank (S.121);
deposit-taking corporations except the central bank
(S.122); and
other financial intermediaries, except insurance corporations and pension funds (S.125).
Statistical data required
14.07
For each of the subsectors S.122 and S.125, data is needed in the form of a table of stocks of
loans
and
deposits
categorised by user sectors, and averaged over a four quarter period, and the corresponding accrued
interest. The interest is calculated after reallocation of interest rate
subsidies
to the recipients.
Reference rates
14.08
In the
balance sheets
of financial intermediaries included in subsectors S.122 and S. 125,
loans
and
deposits
with resident units have to be broken down to differentiate between loans and deposits:
- which are interbank (i.e. within the institutional units providing FISIM included in subsectors S.122 and S.125),
- which are undertaken with the user institutional sectors (S.11 - other S.12 subsectors - S.13 - S.14 - S.15) (except with the central banks).
Internal reference rate
14.09
To obtain the FISIM
output
of the resident FIs by resident user institutional sector, the internal reference rate is calculated as the ratio of
interest
receivable on loans within and between subsectors S.122 and S.125 to stocks of loans within and between subsectors S.122 and S.125 as follows:
interest receivable on loans within and between subsectors S.122 and S.125 stock of loans within and between subsectors S.122 and S.125
stock of loans within and between subsectors S.122 and S.125
In theory, the internal reference rate is the same when using deposits data rather than loans data. Due to data inconsistencies, the
estimate from the deposits data will be different from the estimate from the loans data.
When the deposits data is more reliable, the internal reference rate should be calculated on interbank deposits as the ratio of:
interest payable on deposits within and between subsectors S.122 and S.125
stock of loans within and between subsectors S.122 and S.125
If the loans and deposits data are equally reliable, the internal reference rate should be calculated on interbank loans and deposits
as the ratio between interest receivable on loans incurred plus interest payable on deposits held between FIs, and the stock of loans plus the stock of
deposits held by FIs on behalf of other FIs.
In cases where resident FIs, for their resident customers, provide loans and take deposits expressed in foreign currencies, several
'internal' reference rates by currencies or groups of currencies are to be calculated if this improves the estimates significantly. This would require
splitting by
currency
or groups of currencies both the calculation of the 'internal' reference rates and the loans and deposits from resident FIs towards each resident
user sector.
External reference rates
14.10
To determine FISIM imports and exports, the reference rate used is the average interbank rate weighted by the levels of stocks in the
headings 'loans
between resident FIs on the one hand, and non-resident FIs on the other hand' and 'deposits
between resident FIs on the one hand, and non-resident FIs on the other hand', which are included in the balance sheet of the FIs. So the external
reference rate is calculated as the ratio of
interest
on loans plus interest on deposits between resident FIs and non-resident FIs, to the stock of loans plus the stock of deposits between resident FIs and
non-resident FIs.
Several external reference rates are to be calculated for different currencies or groups of currencies, if the data is available for
each currency or group of currencies for the following categories, and if this improves the estimates significantly:
- loans and deposits from non-resident FIs towards each user sector;
- loans and deposits from resident FIs towards non-resident users.
Detailed breakdown of FISIM by institutional sector
14.11
By convention, no interbank FISIM have to be calculated between resident FIs, nor between resident FIs and non-resident FIs. FISIM are
calculated in respect of non-bank user institutional sectors only.
| N.A. |
Stocks |
Interest receivable by resident FIs |
N.A. | N.A. |
Stocks |
Interest payable by resident FIs |
|
Loans granted by resident FIs (S.122 and S.125) |
N.A. | N.A. |
Deposits with resident FIs (S.122 and S.125) |
N.A. | N.A. |
The total FISIM by institutional sector is obtained as the sum of FISIM on loans granted to the institutional sector and of FISIM on
deposits of the institutional sector.
FISIM on the loans granted to the institutional sector is estimated as interest receivable on loans less (loan stocks multiplied by the
internal reference rate).
FISIM on the deposits of the institutional sector is estimated as (deposit stocks multiplied by the internal reference rate) less
interest payable on deposits.
Part of the
output
is exported; on the basis of the balance sheet of the FIs we observe:
| N.A. |
Stocks |
Interest receivable by resident FIs |
N.A. | N.A. |
Stocks |
Interest receivable by resident FIs |
|
Loans to non-resident non-banks |
N.A. | N.A. |
Deposits with non-resident non-banks |
N.A. | N.A. |
Exports of FISIM are estimated using the external interbank reference rate, for loans granted to non-residents (excluding FIs), as
interest
receivable less (loan stock multiplied by the external reference rate).
Breakdown into intermediate and final consumption of FISIM allocated to households
14.12
FISIM attributable to
households
are broken down into the following categories:
- intermediate consumption of households in their capacity as owners of dwellings;
- intermediate consumption of households in their capacity as owners of unincorporated enterprises; and
- final consumption of households.
Loans
to households as owners of unincorporated enterprises and dwelling loans are generally shown separately in the various breakdowns of lending in
financial and monetary statistics. Other loans to households are obtained as a residual item by subtracting the two previously mentioned categories of
loans from the total. FISIM for loans to households should be distributed amongst the three categories on the basis of information on stocks and
interest for each of the three groups. Dwelling loans are not identical to mortgage loans, as mortgage loans can have other purposes.
Household
deposits
are broken down into:
- deposits of households as owners of unincorporated enterprises; and
- deposits of households as consumers.
Stocks of deposits are calculated by assuming that the ratio of stocks of deposits to
value added
observed for the smallest size corporations applies for unincorporated enterprises.
Stocks of deposits are calculated by assuming that the ratio of stocks of deposits to turnover observed for the smallest size
corporations applies for unincorporated enterprises.
FISIM on the deposits of households must be distributed between FISIM on the deposits of households as owners of unincorporated
enterprises and FISIM on the deposits of households as consumers on the basis of the average stocks of those two categories, for which, in the event of
lack of further information, the same interest rate may be used.
As an alternative, where detailed information on loans and deposits of households is absent, FISIM to households are allocated to
intermediate consumption and final consumption assuming that all loans are attributable to households as producer or as owners of dwellings and that all
deposits are attributable to households as consumers.
Calculation of imports of FISM
14.13
Non-resident FIs grant
loans
to residents and receive
deposits
from residents. Data according to the following table is needed for each institutional sector.
| N.A. |
Stocks |
Interest receivable by non-resident FIs and payable by resident users |
N.A. | N.A. |
Stocks |
Interest payable by non-resident FIs and receivable resident users |
|
Loans granted by non-resident FIs |
N.A. | N.A. |
Deposits with non-resident FIs |
N.A. | N.A. |
Imports of FISIM for each institutional sector are calculated as follows:Imports of FISIM for loans are estimated as the
interest
receivable by non-resident FIs less (loan stocks multiplied by the external reference rate).
FISIM in volume terms
14.14
Volume estimates of FISIM are calculated using stocks of
loans
and
deposits
deflated to base period prices using a general price index such as the implicit price deflator for domestic final demand.
Base period margin on loans is equal to the effective interest rate on loans less the reference rate.
The price of FISIM has two components: the first is the difference between the bank rate of interest and the reference rate (or the
reverse in the case of deposits) which represents the margin earned by the financial intermediary; the second is the price index used to deflate the
stocks of loans and deposits to base period prices.
FISIM in volume
on the loans granted to the
institutional sector
=
FISIM on the loans granted
to the institutional sector
price index
X
base period margin
effective margin
FISIM in volume
on the deposits of the
=
FISIM on the deposits of
the institutional sector
price index
X
base period margin
effective margin
Base period margin on deposits is equal to the reference rate less the effective interest rate on deposits.
In nominal terms, the effective margin is equal to the ratio of FISIM to stocks, so replacing the effective margin by this expression
in the two above formulas gives the following:
FISIM in volume
on the loans granted to the
institutional sector
=
stocks of loans granted to the
institutional sector
price index
X
base period margin
FISIM in volume
on the deposits of the
institutional sector
=
stocks of deposits of the
institutional sector
price index
x
base period margin
Calculation of FISIM by industry
14.15
The allocation of FISIM among user
industries
is based on the stocks of
loans
and deposits of each industry and, if this information is not reliable, on the
output
of each industry.
THE OUTPUT OF THE CENTRAL BANK
14.16
The output of the central bank is, by convention, to be measured as the sum of costs, i.e. its
intermediate consumption,
compensation of employees,
consumption of fixed capital
and other taxes less subsidies on production. FISIM do not have to be calculated for the central bank.
Commissions and fees for directly measured services invoiced by the central bank both in respect of resident and non-resident units
should be allocated to these units.
Only the part of the total central bank output (sum of costs less commissions and fees) which is not sold has to be, by convention,
allocated to the intermediate consumption of other FIs - subsectors S.122 (deposit-taking corporations except the central bank) and S.125 (other financial intermediaries, except insurance corporations and pension funds) - in proportion to the respective
value added
of each of these subsectors.
To equilibrate the accounts of subsectors S.122 and S.125, the amount of their respective intermediate consumption of the service
provided by the central bank is to be counterbalanced by a current transfer (classified under D.759 'other miscellaneous current transfers') received from
the central bank, for the same amount.
List of abbreviations and acronyms
ABO
accrued benefit obligation
ABS
asset-backed security
BPM6
Balance of payments manual, sixth edition
CCP
central counterparty clearing house
CDS
credit default swap
CIF
cost, insurance and freight
COFOG
Classification of the Functions of Government
COICOP
Classification of Individual Consumption by Purpose
COPNI
Classification of the Purposes of Non-Profit Institutions Serving Households
COPP
Classification of Outlays of Producers by Purpose
CPA
Classification of Products by Activity
EAA
economic accounts for agriculture
EAFRD
European Agricultural Fund for Rural Development
EAGF
European Agricultural Guarantee Fund
EC
European Commission
ECB
European Central Bank
EMU
economic and monetary union
ESA
European System of Accounts
ESO
employee stock option
ESSPROS
European System of Integrated Social Protection Statistics
EU
European Union
EURIBOR
European interbank offered rate
EUROSTAT
the statistical office of the European Union
FDI
foreign direct investment
FISIM
financial intermediation services indirectly measured
FOB
free on board
FRA
forward rate agreement
FVC
financial vehicle corporation
GAB
general arrangements to borrow
GDP
gross domestic product
GFS
government finance statistics
GNI
gross national income
GVA
gross value added
IAS
international accounting standards
IASB
International Accounting Standards Board
IASC
International Accounting Standards Committee
IC
insurance corporations
ICLS
International Conference of Labour Statisticians
ICPF
insurance corporations and pension funds
ICT
information, communications and telecommunications
IFRS
International Financial Reporting Standards
IIP
international investment position
ILO
International Labour Organisation
IMF
International Monetary Fund
IMTS
international merchandise trade statistics
IMTS
international merchandise trade statistics
INTRASTAT
statistical collection system
I-O
input-output
IPO
initial public offering
IPSASB
International Public Sector Accounting Standards Board
ISIC
International Standard Industrial Classification of all Economic Activities
ISIN
international securities identification number
KAU
kind-of-activity unit
KLEMS
capital, labour, energy, materials and services
LIBOR
London interbank offered rate
MFI
monetary financial institution
MMF
money market fund
MSITS
Manual on statistics of international trade in services
N.E.C.
not elsewhere classified
NAB
new arrangements to borrow
NACE
general industrial classification of economic activities within the European Union
NDP
net domestic product
NOS
net operating surplus
NPI
non-profit institution
NPISH
non-profit institution serving households
NUTS
nomenclature of territorial units for statistics
OECD
Organisation for Economic Cooperation and Development
OMFI
other monetary financial institution
OTC
over the counter
PAYE
pay as you earn
PBO
projected benefit obligation
PF
pension funds
PIM
perpetual inventory method
PPP
purchasing power parity
PPP
public-private partnership
PPS
purchasing power standard
PRGF
Poverty Reduction and Growth Facility
R&D
research and development
ROW
rest of the world
SAM
social accounting matrix
SDR
special drawing right
SEEA
System of Environmental-Economic Accounts
SNA
System of National Accounts
SOCX
Social Expenditure Database
SPE
special-purpose entity
SPV
special-purpose vehicle
STRIPS
Separate Trading of Registered Interest and Principal Securities
UCITS
undertakings for collective investment in transferable securities
UN
United Nations
VAT
value added tax
