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5232.0 - Australian National Accounts: Financial Accounts, Jun 2002  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 27/09/2002   
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  • About this Release
  • Notes on Impacts of Major Revisions June Quarter 2002 (Feature Article)

Feature Article - Notes on Impacts of Major Revisions June Quarter 2002


Introduction

1 In addition to revisions to data following normal quality assurance processes in the survey source data used in compiling the Financial Accounts there have been significant improvements in two important data sources: International Investment
statistics and the Australian Prudential Regulation Authority bank statistics.

Revisions to International Investment series

2 Data sourced from the ABS Survey of International Investment was revised back to September 1998 for the June quarter 2002. The revisions were the result of many reasons, but the major revisions arose from quality assurance work for assets managed by Australian fund managers.

3 The most significant impact of this work has been the identification of additional foreign portfolio assets, predominantly equity, managed on behalf of domestic life insurance companies and pension funds. In the Financial Accounts these assets had been attributed previously to life insurance companies and pension funds with an offsetting adjustment to other sectors, mainly financial institutions nec and private non-financial corporations, to maintain parity with the international investment position. The major impact on the financial accounts of the foreign portfolio revisions has therefore been to increase foreign equity holdings of private non-financial corporations through discontinuing the offset adjustments. Graph F1 shows private non financial corporation foreign equity assets before and after revisions for the quarters September 1998 to June 2002 inclusive.

Graph F1: Private non financial corporations foreign equity assets revisions


4 Additionally, inward portfolio investments in Australian assets (mainly equity) by resident fund managers on behalf of non-residents has been revised significantly upwards in the Survey of International Investment data. However, those revisions were largely offset by other revisions in International Investment data with little net impact on Financial Accounts series. For more information see Balance of Payments and International Investment Position (ABS cat. no. 5302.0) June quarter 2002.

Revisions resulting from modernised APRA data collections

General comments

5 The first results from the statistics modernisation program of the Australian Prudential Regulation Authority (APRA) are now available for Financial Accounts compilation. APRA data for Banks (from March quarter 2002) and Other Authorised Depository Corporations (Building Societies and Credit Unions, from December quarter 2001) have been used to compile this release of the Financial Accounts. As expected in introducing significantly revised data collections, a number of quality, classification and implementation issues have arisen. APRA, RBA and ABS undertook intensive consultation with data providers to clarify and address implementation issues. Because of the importance of banks in the financial economy, parallel data collections (in respect of the March quarter 2002 for the series used in the Financial Accounts) were conducted in order to measure series breaks and identify other issues. The consultation process and the bank parallel data collection identified and clarified a number of issues, and although there are a small number of problems remaining, ABS considers the quality and comparability of the statistics to have improved significantly.

6 ABS thanks the data providers, APRA and RBA for the cooperation and work involved in implementing the revised data collections.

Banks

7 The APRA bank data replace a special purpose ABS balance sheet survey of banks (form FB1) as well as the previously collected regulatory data (mainly APRA form D) used by the RBA for statistical purposes. The APRA data are collected in respect of the domestic books of the licensed bank (as was form D).

8 While this basis is sound for most economic statistics' purposes, the way in which Australian banks have structured their acquisitions of foreign banking and other subsidiaries, via intermediate Australian holding companies, created some classification issues for ABS in measuring foreign direct equity holdings of Australian banks. ABS has decided, after considering a number of alternatives, that the Australian holding company subsidiaries of licensed banks should be considered as banking ancillary enterprises (service companies), and thus classifiable as banks in accordance with System of National Accounts and Balance of Payments rules. There are some other differences in concepts applied by ABS to banking statistics which are discussed in the following paragraphs. Thus ABS banking statistics may differ from licensed bank statistics published by APRA and RBA.

9 The bank collection parallel run and consultations identified a number of improvements and changes for ABS purposes, as well as a small number of issues requiring future attention. A significant area of improvement in the new APRA data collection is in the detailed sectoring (by counterparty) of bank deposit liabilities and bank loan assets.

Bank deposit liabilities

10 Deposit liabilities of banks to pension (superannuation) funds have not been readily identifiable in previously collected banking data. Data reported in the new collection are significantly below bank deposit asset estimates for pension funds
in data reported by these funds to ABS, APRA and ATO. For Financial Accounts purposes ABS had assumed that deposit assets of employer superannuation funds were indistinguishable by banks from the employer deposit accounts, and adjusted private non-financial corporations' deposit assets downwards to accommodate pension fund asset estimates. Detailed consultation with banks indicated that this treatment is not correct, and pension fund deposit assets are likely to be indistinguishable from other types of "managed funds". Accordingly ABS has removed the adjustment to private non-financial corporations, and commenced using deposit asset data for pension funds and other types of managed funds rather than counterparty data reported by banks.

11 Additionally, reported bank deposit liabilities to private non-financial corporations showed a series break. Banks explained this as the result of reconsideration of account classification, mainly reclassification of business accounts previously reported as unincorporated businesses. Unincorporated businesses are classified to the household sector in the Financial Accounts. Thus Household sector deposit assets decreased even though personal deposits have remained almost the same.

12 The Financial Accounts series have been backcast in the light of the new information. The graphs below illustrate the impacts of removal of the pension fund adjustment and the reclassification of some accounts from households to private non-financial corporations.

Graph F2: Private non financial corporations deposits with banks

Graph F3: Household bank deposits

Bank loan assets

13 The loan assets of banks, when dissected by counterparty, showed a number of series breaks caused by the reconsideration of account classification, mainly from unincorporated business to private non-financial corporations. By comparison with deposit liabilities the impacts are less severe, as no overadjustment of data has been discovered. While the series breaks are less severe on the sectoral aggregates published in the Financial Accounts, the impacts on some of the detailed underlying series have been substantial, with reconsideration of accounts classified as owner occupied housing, personal and non profit institutions serving households, which are all classified to households in aggregate. The graphs below illustrates the main impacts on loan aggregates.

Graph F4: Private non financial corporations loans from banks

Graph F5: Household loans from banks

Bank security assets and liabilities

14 Liabilities of banks in the form of securities showed some reclassification from short- to long- original term to maturity following discovery of data classified by remaining term to maturity by some providers. Previously published data have
been revised to take the reclassification into account.

15 Bank security assets are little changed under the new arrangements except for some further clarification of accounting for bills of exchange, and new data on repurchase agreements as described below.

Repurchase agreements

16 An innovation of the APRA data collection is the systematic treatment of securities purchased or sold under agreements to re-sell or repurchase at a future date, so-called "repo" contracts. Repo contracts may be entered into for very different motivations by the participants: one party may be seeking to borrow cash using securities as collateral, while the other may be covering a short sale by acquiring securities in order to settle. Treatments recommended by accounting standards, while providing correct outcomes on the bottom lines of transactors irrespective of motivation, result in asymmetric outcomes in detail such that more than one party can record beneficial ownership of the one parcel of securities, leading to double-counting in aggregate security asset holding estimates. Double-counting is particularly pronounced in periods where the underlying security is in short supply. ABS has determined that for statistical purposes repo contracts should be treated as security trades in all cases, and not as collateralised loans, thus preserving detail and eliminating double-counting.

17 While ABS has in the past made some adjustment to securities data, particularly with regard to national general government securities, based on partial information, the APRA dataset includes both repos on the main balance sheet form and in a supplement detail about counterparty transactors, types of securities and nature of transaction. These data provide insight into the double counting, and in principle could be used to adjust reported security holdings to either symmetric collateralised loan or symmetric security trades treatments.

18 The APRA repo data have been assembled into sectoral supply and demand matrices for both national general government securities and state central borrowing authorities' securities. These data are then considered with regard to the rules applied in reporting security assets subject to repo in the data sources for security asset holdings. For many data sources this is the accounting standard, but for other data sources specific treatments are in force, such as reporting securities held in custody on behalf of non-residents by Australian custodians where data are recorded on a security trade basis.

19 The following table shows the reported data for national general government securities for the June quarter 2002, the adjustments made to reported data resulting from "buy repos", "sell repos" and the net impact in accordance with reporting rules. Note the original data resulted in a double-count of $7 540 million. Some imputations have been made for repos where neither party was a bank.


F8 NATIONAL GENERAL GOVERNMENT SECURITIES: DATA AND REPO ADJUSTMENTS, JUNE 2002 ($M)


Reported data
Repo adjustments
Adjusted data

Buy
Sell
Net

$m
$m
$m
$m
$m
Liabilities of National General Government
64,155
n.a.
n.a.
n.a.
64,155
Total assets
71,695
18,326
-25,866
-7,540
64,155
Held by
Reserve Bank
12,554
n.a.
-1,064
-1,064
11,490
Banks
1,807
14,440
-13,528
912
2,719
Other depository corps
3,616
1,062
-4,143
-3,081
535
Life insurance
6,723
449
-389
60
6,783
Pension funds
11,721
1,361
-1,614
-253
11,468
General insurance
8,571
0
-2,566
-2,566
6,005
Central borrowing authorities
708
0
-51
-51
657
Financial intermediaries n.e.c.
2,786
1,014
-2,511
-1,497
1,289
General government
0
0
0
0
0
Households
73
0
0
0
73
Rest of world
23,132
n.a.
n.a.
0
23,132
Residual
-7,540
0

20 The Bond time series have been revised to take into account impacts of repos.Some data reported by the RBA and banks and analysis of residuals in bond market tables have been used for this backcasting.

Other authorised depository institutions

21 The data used in this release of the Financial Accounts for Building Societies and Credit Unions are consistent with data published in Tables B7 and B8 of the Reserve Bank Bulletin. We experienced no special difficulties in using these data aggregated for Financial Accounts purposes, although there are some offsetting series breaks and issues in the detailed underlying series.

22 Contact Derick Cullen (02 6252 6244 or d.cullen@abs.gov.au) for further information on series breaks, adjustments and backcasting.

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