5310.0.55.002 - Information Paper: Implementation of new international statistical standards in ABS National and International Accounts, September 2009
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 28/10/2009 First Issue
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Banks and other financial intermediaries earn income not only through explicit fees and charges but also on margins between interest paid to depositors and charged to borrowers. This margin is know as Financial Intermediation Services Indirectly Measured (FISIM). FISIM is a service flow which is the difference between the reference rate and the actual interest rate charged on loans and offered on deposits by banks and other financial institutions. The reference rate represents the service-free rate.
The Balance of Payments fifth edition referred to FISIM as an indistinguishable part of investment income which diverged from the treatment in the System of National Accounts 1993 (SNA93). FISIM is covered in greater detail and recognised as a service in the Balance of Payments and International Investment Manual sixth edition (BPM6), and is defined as the interest margin derived by offering rates of interest to their depositors that are lower than the rates that they charge to their borrowers.
FISIM payable by both depositors and borrowers will be calculated by using the concept of a 'reference' rate of interest. The reference rate should contain no service element and reflect the risk and maturity structure of deposits and loans. The rate prevailing for interbank borrowing and lending may be a suitable choice as a reference rate. A single rate should be used for transactions in the domestic currency, whereas different rates should be applied for loans and deposits in other currencies. The reference rate will change over time with market conditions.
Updated BPM6 standards recommends that FISIM calculations be derived from stock levels of loans and deposits. The recommended BPM6 formula is:
[(Loan rate - reference rate)*Stock of loan] + [(reference rate - deposit rate)*Stock of deposit]
The recommended methodology will be to determine the rates implied by interest payable/receivable reported on the relevant instruments (loans and deposits) and from this, subtracting/adding a reference rate in order to calculate the FISIM service charge. The net interest figure remaining will then be published as investment income in the relevant instrument. The service charge will then be included as a financial services credit or debit in services.
IMPLEMENTATION AND METHODOLOGY
The ABS will base the calculation of FISIM in the international accounts on reported income flows rather than reported asset and liability levels to ensure that calculated FISIM is consistent with reported income.
The methodology for calculating FISIM by income flows is:
[(Loan rate - reference rate) * interest flow on loan/loan rate] + [(reference rate - deposit rate) * interest flow on deposit/deposit rate]
Exports of FISIM
Exports of FISIM are generated through two transactions:
Imports of FISIM
Imports of FISIM are generated through two transactions:
IMPACT ON INVESTMENT INCOME AND TRADE IN SERVICES
As interest flows paid and received by financial institutions will contain both FISIM and pure interest, other interest income in the primary income account will have to be adjusted downwards for loans and upwards for deposits.
Below are the adjusted FISIM credits and debits as a proportion of current financial services' credits and debits as published in Balance of Payments and International Investment Position, (cat. no. 5302.0) for illustrative purposes only.
FURTHER ISSUES IN FISIM MEASUREMENT
FISIM is an issue which is attracting a great deal of international attention as a result of volatility during the Global Financial Crisis. Since SNA08 and BPM6 have been published, there is still no international consensus as to how FISIM should be measured. With Australia being one of the first countries to adopt SNA08 and BPM6, there is much interest in the results presented. FISIM and its measurement is not expected to be fully resolved internationally for some time to come.
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