FISIM: Current Research at Statistics Canada October 4th and 5th, 2010 Eurostat Task Force on FISIM Jim Tebrake – Statistics Canada
FISIM: Current Research at Statistics Canada
October 4th and 5th, 2010
Eurostat Task Force on FISIM
Jim Tebrake – Statistics Canada
23-04-21Statistique Canada • Statistics Canada2
FISIM – Current Research
The Canadian System of National Accounts is currently being revised to align with SNA 2008. Revised data will be released June 2012.
One of major revisions includes a change in how we measure and allocate FISIM.
Status of our research:• Problems with the current methodology• An alternative method for allocating FISIM• Data Sources
23-04-21Statistique Canada • Statistics Canada3
Current Methodology
Financial Institution Property Income Receivable
Interest Payable Global FISIM
Banks 1000 900 100 ….
1. Within the CSNA “Global FISIM” is defined as the difference between Property income receivable and interest payable. This includes FSIM from own-funds.
2. In the case of interest received from own-funds, we only want to include the service fee in our measure of FISIM. In order to do this we need to remove the ‘pure rate of interest measure – SNA Interest’ from the value of global FISIM calculated above.
Financial Institution
Effective Interest Rate on Loans
Effective Interest Rate on Deposits
Reference Rate (mid-point)
Total Interest Bearing Assets
Total Interest Bearing Liabilities
Own-funds Adjustment
Banks 6% 2% 4% 2000 1000 40 ….
23-04-21Statistique Canada • Statistics Canada4
Current Methodology (continued)
3. Net FISIM = Global FISIM minus the own-funds adjustment
4. The FISIM estimates are then distributed into a depositors portion and a borrowers portion, representing the service provided to both types of transactors. This distribution is carried out for each type of financial institution using their respective outstanding loans and deposits with the exception of sales financing companies where a margin approach is used directly
Financial Institution Global FISIM Own-funds Adjustment
Net FISIM
Bank sector 100 -(40) 60 ….
Financial Institution
FISIM Assets (Loans)
Liabilities (Deposits)
Total % Share Loans
% Share Deposits
FISIM Allocated to Loans
FISIM Allocated to Deposits
Banks 60 2000 1000 3000 66.7% 33.3% 40 20 ….
23-04-21Statistique Canada • Statistics Canada5
Current Methodology (continued)
6. The depositors portion is further divided into the following CSNA sectors using the assets of each sector (or liabilities from the financial sector’s perspective). Sector Deposits % Share FISIM
Persons 500 50% 10 Corporations and unincorporated businesses
300 30% 6
Governments 100 10% 2 Non-residents 100 10% 2
7. For lenders, a fixed margin is applied to short, medium and long-term loans to derive an estimate of FISIM for the financial institution. This is compared to the net FISIM for loans and the difference is prorated to the different loan categories
Loan Type Loans Outstanding Fixed Margin FISIM Allocated FISIM
Prorated Difference
Final FISIM
Short Term 200 3.4% 13.6 2.1 15.7 Medium Term 200 1.56% 6.2 2.1 8.4 Long Term 600 0.8% 9.6 6.3 15.9 Total 1000 29.4 40 10.5 40
23-04-21Statistique Canada • Statistics Canada6
Current Methodology - Shortcomings
There are three major shortcomings with the CSNA approach:• It assumes that the service margin is equal for both loans and
deposits. • It assumes that the service margin attributable to depositors is
the same, regardless of the sector. • The fixed margin, used in the calculation of loan FISIM by
sector, assumes the same service fee across loan types and through time.
23-04-21Statistique Canada • Statistics Canada7
Alternative Method
Financial Institution Property Income Receivable
Interest Payable Global FISIM
Banks 1000 900 100 ….
1. Global FISIM is defined as the difference between Property income receivable and interest payable as per the current methodology
2. An own-funds adjustment is still required, but rather than using a mid-point reference rate as in the current CSNA methodology, a series of reference rates for various loan and deposit types and terms to maturity would be computed.
Financial Institution Reference Rate Total Interest Bearing Assets
Total Interest Bearing
Liabilities
Own-funds Adjustment
Savings Deposits 1% 1000 Term Deposits 2% 1000 Total 1.7% 2000 Personal loans, unsecured (1 year term)
3% 1000
Non-residential mortgages (3-year term)
4% 2000
Total 3.5% 3000 Own-funds Adjustment 2.4% 3000 2000 24
23-04-21Statistique Canada • Statistics Canada8
Alternative Method
3. Net FISIM = Global FISIM minus the own-funds adjustment
Financial Institution Global FISIM Own-funds Adjustment
Net FISIM
Banking sector 100 -(24) 76 ….
23-04-21Statistique Canada • Statistics Canada9
Alernative Method
Effective Interest Rates Loan Category <1 year to
maturity 1 year >2 years
to maturity Personal lines of credit, secured
6%
Reference Rate Loan Category <1 year to
maturity 1 year >2 years
to maturity Personal lines of credit, secured
4.5%
Outstanding Loans Loan Category <1 year to
maturity 1 year >2 years
to maturity Personal lines of credit, secured
1000
FISIM Loan Category <1 year to
maturity 1 year >2 years
to maturity Personal lines of credit, secured
15
4. Independent of the measure of net FISIM, a value of FISIM is calculated for individual loan types and terms to maturity.
This is done by calculating an effective interest rate based on the interest revenue received over the corresponding average loan balances, for a given period, for individual loan types and maturities. A reference rate that is ‘service free’ is then selected for each loan type. The reference rate reflects the same risk and maturity profile as the outstanding loans from which the effective interest rates are calculated.
23-04-21Statistique Canada • Statistics Canada10
Alternative Method
5. This process is repeated for all types of financial institutions and for both loans and deposits. The total value of loan FISIM and deposit FISIM are then added together and compared to the aggregate measure of net FISIM. The difference between the two is allocated to both depositors and lenders based on their respective FISIM.
23-04-21Statistique Canada • Statistics Canada11
Some Results
Year 2008 Current Methodology
Net FISIM (New
Methodology)
Multiple Reference
Rate (MRR)
Difference (MRR –
Net FISIM)
MRR - with
Proration (A)
Difference Current vs
New Methodology
FISIM - Personal loans 8,514
6,720
6570 -1943
FISIM - Business loans 3,221
3,562
3483
261
FISIM - Mortgage loans 3,501
6,545
6399 2898
FISIM - Government loans 53
55
54 1 FISIM - Loans to Non-
residents 430
463
453 23
Total Loan FISIM 15,719 17,345 16959 1240
FISIM - Personal Deposits 7,817
7,952
7775 -42
FISIM - Business Deposits 9,481
8,578
8387 -1094
FISIM - Government Deposits 144
156
153 9 FISIM - Deposits From Non-
residents 1,984
2,177
2129 144
Total Deposits FISIM 19,426 18,863 18443 -983
Net FISIM 35,145 35,402 36,208 -806 35,402 257
Final Demand 18,941 17,084
Revision to Final Demand
-1808
While the proposed methodology does not have a large impact on the overall level of FISIM it does have a significant impact on the distribution among borrowers and lenders and between final demand and intermediate inputs.
23-04-21Statistique Canada • Statistics Canada12
Data Sources – New Lending by type and maturity
In order to implement the above methodology Statistics Canada plans to complement our existing data sources with information currently being collected by the Bank of Canada (Canada’s central bank). In the first quarter of 2010, the Bank of Canada began collecting lending information from the largest Canadian chartered banks, on a monthly basis. The Bank of Canada collects both new lending for various loan categories, and terms to maturity as well as the interest rate charged on those loans for the given month.
Interest rates charged on selected asset categories
All Variable Rate
<1 year 1 to <3 years
… 7 years and over
New funds advanced to individuals for non-business purposes in the reporting month
Personal loan plans …..
New funds advanced to the business sector in the reporting month
To regulated non-bank financial institutions
Lease receivables ….
Total selected business loans
Funds advanced - Canadian dollar assets
New funds advanced to individuals for non-business purposes in the reporting month
Personal loan plans …..
New funds advanced to the business sector in the reporting month
To regulated non-bank financial institutions
Lease receivables ….
Total selected business loans
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Data Sources – Reference Rates reflecting terms and maturity
Calculating the Weighted Reference Rate and Effective Rate Period New Lending Effective Rate Reference Rate January 1000 5.0% 3.0% February 2000 5.5% 3.5% March 3000 6.0% 3.5% April 2000 5.5% 3.25% Total 8000 5.6% 3.4%
Value of Loans
Effective Rate Reference Rate FISIM
Outstanding loans 8000 5.6% 3.4% 176 New lending (May) 500 6.0% 3.25% 13.75
Statistics Canada will be able to generate weighted average reference rate that will have the same implied risk and maturity profile as the effective interest rate (or a least be a close approximation).
Given we have limited information on repayments, we will prorate them based on the outstanding loan balances.
23-04-21Statistique Canada • Statistics Canada14
Data Sources – Reference Rates
2008 Effective
rate Reference Margin Note for Reference Rate Personal Loans - Credit Card 11.56% 6.56% 5.00% [Fixed 5%]
Personal Loans - Other 6.15% 4.25% 1.90% [75% 3 month BBB Corporate Paper, 25% 3 year BBB Corporate Bond]
Government Loans 4.53% 2.83% 1.70% [3 month T-bill + 0.15% spread for Municipal & School]
Business Loans - Short-Term 4.61% 3.38% 1.24% [Over Night Money Market] Business Loans - Lease 6.04% 4.45% 1.59% [3 year A Corporate Bond] Business Loans - Other 4.92% 4.06% 0.85% [3 month Bankers' Acceptance]
Mortgage Loans 4.70% 3.34% 1.36% [Weighted Average Mortgage Backed Securities]
Loans to Non-Residents 4.88% 3.91% 0.97% [Weighted Average Business Reference rate]
Personal Deposits - Saving & Demand 1.80% 3.11% 1.31% [Over Night Money Market]
Personal Deposits - Fixed Term 3.59% 5.38% 1.79%
[60% 1 year AA Bank sub.debt, 30% 3 year AA Bank , 10% 5 year AA Bank ]
Business Deposits - Saving & Demand 1.92% 3.23% 1.31% [Same margin as the Personal Deposit] Business Deposits - Fixed Term 3.72% 5.50% 1.79% [Same margin as the Personal Deposit]
Government Deposits - Saving & Demand 1.53% 2.85% 1.31% [Same margin as the Personal Deposit] Government Deposits - Fixed Term 3.63% 5.42% 1.79% [Same margin as the Personal Deposit]
Non-Resident Deposits - Saving & Demand 1.95% 3.26% 1.31% [Same margin as the Personal Deposit]
Non-Resident Deposits - Fixed Term 3.72% 5.50% 1.79% [Same margin as the Personal Deposit]
We assume that market rates represent the service free rate. For a firm to access the market any associated costs such as underwriting, accounting and legal fees are explicitly charged ex-ante. Therefore we deem such an interest rate as “service free”.
A similar assumption is made for deposits where the reference rate represents the cost the financial institution would face if it was required to borrow on the market.
23-04-21Statistique Canada • Statistics Canada15
Some Results
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Some Results
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Some Results
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Some Results