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1993 SNA Update Information - Country comments for issue:
Financial services

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The business of financial corporations has undergone a structural transformation towards an increasing importance of portfolio management of financial assets with the aim of generating holding gains and a decreasing importance in simple intermediation. The definition of financial corporations and of financial services needs examining to ensure all the activities of financial corporations are adequately captured in the SNA. The review will also cover the easurement of production of financial services in volume terms.
Country comments
Number of country comments for selected issue:69
  Date postedSourceComment
 11/27/2006AustraliaWe agree with the recommendations made by AEG at its Jan-Feb 2006 meeting
 10/11/2006ArmeniaThe National Statistical Service of the Republic of Armenia agrees with the most recent AEG recommendations.
 10/10/2006SwedenAgreement with proposal
 9/29/2006Bank of KoreaWe broadly support the recommendations.
 9/15/2006United KingdomWe agree with all the recommendations made by the AEG. However, we hold the view that the inclusion of non-intermediary services in output measurement should logically spell the end of FISIM as a term.
 9/15/2006LatviaAfter deep discussions and expert consultations we basically support the 1993 SNA Update Issues.
 9/14/2006Bank of LithuaniaWe agree with the AEG recomendations.
 8/21/2006Central Bank of El Salvador m4cbElSalvador6a; m4cbElSalvador6a-english;
 8/18/2006NetherlandsWe generally support the recommendations made at the Frankfurt Meeting of the AEG.
 8/18/2006ItalyWe are in favour of the AEG recommendation.
 8/18/2006USAWe generally agree with the recommendations of the AEG. However, we wish to draw attention to a wording issue in the “Short Report”: The Task Force recommendation said, “Thus, in practice, FISIM may be limited by convention to loans and deposits.” The word “may” allows for the possibility that some countries may include FISIM on assets or liabilities other than loans and deposits. The “Short Report,” on the other hand, states “The AEG agreed that, by convention, FISIM would be restricted to (i) financial corporations, and (ii) loans and deposits.” The use of the word “would” appears to eliminate the flexibility intended by the Task Force’s recommendation. The recollection of BEA’s participant in the AEG was that the intention of the AEG was to endorse the Task Force’s recommendation on this point; he does not recall any discussion of changing the recommendation from flexible to prescriptive. Similarly, the long report does not indicate any discussion of making such a change. Consequently, we strongly recommend that the wording be made consistent with the Task Force recommendation and say that “by convention, FISIM may be restricted to loans and deposits.”
 8/18/2006SingaporeWe agree with the recommendation to define financial corporations based on the nature of their output (financial services) instead of activity. This recommendation is consistent with the rapid broadening of the scope of financial services. We also support the treatment of ancillary units (e.g. SPEs and financial and treasury centres of MNCs) as separate institutional units and financial corporations if they can keep a complete set of accounts, or is resident in a country other than any of the units to which it is providing the services.
We agree with the latest recommendations by the OECD Task Force on Financial Services for the computing of FISIM (Financial Intermediation Services Indirectly Measured) to include only loans and deposits using the reference rate method but exclude other shares and bonds due to both conceptual and practical reasons. Some of the reasons given which we agree with are:
(i) An important criteria to be able to earn a service charge or FISIM is the ability of the financial institution (e.g. banks) to be able to control the interest rates, in this case on loans and deposits but not on the other instruments.
(i) It is difficult to compute FISIM on shares as some holding gains and losses might be embedded.
(iii) For bonds, a decision has to be made on whether the current yield to maturity or the yield to maturity at the time of issue should be used and the higher probability of obtaining negative FISIM as shown from the study results in some countries.
We agree that expected holding gains should in-principle be incorporated in the output of financial services. The price at which some financial services are exchanged would be affected by expected holding gains. We note the AEG's decision to exclude holding gains from the measurement of financial services output given the conceptual and practical issues identified but not resolved. We support further studies and investigation of the role of expected holding gains throughout the System.
 8/2/2006European Central BankThe ECB generally supports the recommendations made by the AEG.
 8/1/2006Hong Kong, ChinaOn recommendation (g), we support the AEG’s proposal for the calculation of FISIM based on the reference rate method. We also support the recommendation that multiple reference rates be used, particularly for external transactions in other currencies. Indeed, the experience of Hong Kong shows that the use of relevant reference rates related to the currencies of external transactions help us obtain more reliable and meaningful estimates of exports of FISIM.
As regards recommendation (b), we consider that the recommendation that only loans and deposits involving FISIM is too restrictive and does not reflect adequately the financial intermediation services implicitly provided by financial corporations. Nowadays financial corporations (notably banks) do not just carry out traditional loans/deposits businesses. They diversify their portfolios to attract more funds for investment. In addition to loans, they hold increasing amount of other assets such as debt securities like Negotiable Certificates of Deposit (NCDs). In Hong Kong, negotiable debt instruments (including NCDs) account for around one-fifth of total assets of banks. Similarly, on the liabilities side, they also issue NCDs in addition to accepting deposits. The implicit values of financial services involved in the debt securities such as NCDs need to be taken into account in the calculation of value of financial services.
Regarding recommendation (h) on margins on buying and selling of foreign exchanges and securities by financial corporations, we support the AEG’s recommendation that the difference between the mid-price and the buy/sell price represents the implicit service charges of financial corporations. It would be useful if recommendation on (a) coverage of foreign exchanges to be included (e.g. whether to include foreign exchange derivatives) and (b) method of allocation of the implicit service charges into various types of users (e.g. non-residents, households) is also made.
 8/1/2006National Bank/ National Bureau for Statistics MoldovaNational Bank and National Bureau for Statistics of Moldova agree with the recommendations made at the latest meeting of the AEG.
 8/1/2006Reserve Bank of South AfricaWe carefully worked through all the issues and would like to give our general support to the recommendations made by the AEG.
 7/31/2006Macao SARStatistics and Census Service of Macao SAR agrees to the AEG recommendations and has no further comments.
 7/31/2006Bosnia and HerzegovinaWe agree with AEG recommendations on the update of the 1993 SNA and do not have any further comments.
 7/28/2006VietnamReferring to the measurement in volume terms, we would prefer to use CPI as deflator for the output of implicitly financial services than using GDP deflator.
 7/28/2006JapanComment: “The problem of how to deal with financial institutions, which procure their funds through borrowings rather than in the form of deposits, should be discussed.”
Reason: “Public-sector financial institutions in Japan procure the majority of their procurement funds through borrowings, rather than in the form of deposits. It is necessary to achieve consistent calculations of FISM for these institutions as well.
 7/28/2006National Bank of SlovakiaConcerning the results of the most recent AEG meeting, we fully support the conclusions and recommendations made by the AEG.
 7/28/2006LithuaniaIn general we support the recommendations.
 7/28/2006Bank of NorwayWe support the change in the calculation of the production of financial corporations. By allocating FISIM the financial corporation sector will contribute to the GDP. Contrary to the present SNA principle (property income receivable minus interest payable) which easily could give negative FISIM the reference rate principle will in most cases avoid possible negative FISIM values. Furthermore, by restricting the FISIM calculation to loans and deposits (and avoiding holding gains and losses) capture the most important intermediation activity of the sector.
However, it should have been emphasized that the recommended method is a bottom-up method where the total FISIM is calculated from the use of financial services by sectors based on allocated loans and deposits. Furthermore, it is unclear what is meant by “ …the reference rate used in the compilation of FISIM should be a risk-free reference rate that has no service element in it and that reflects the maturity structure of the financial assets and liabilities to which FISIM applies”. The intermediation involves transforming maturities from short term deposits to long term loans. A single observable reference rate can therefore not reflect maturity structures of both loans and deposits.
We also support the recommended method for calculation of the volume indicator for financial services. By using this method the implicit price change will encompass both the change in the general price level as well as the effects of changed loan margins and deposit margins.
 7/28/2006Bank of PolandPlease find our general support for the AEG recommendations made during its recent meeting in Frankfurt.
 7/28/2006Bank of PortugalBanco de Portugal would like to express general support for the recommendations made in the Frankfurt meeting of the Advisory Expert Group on National Accounts (AEG).
 7/27/2006Bank of Sierra LeoneWe agree with the recommendations made by the AEG.
 7/27/2006EgyptWe agree with the AEG recommendations concerning the financial services FISIM in constant prices need more practical price index.
 7/25/2006Central Bank of Costa RicaWe consider appropriated the idea of enhancing the definition of financial corporations, as well as the recommendation to include own funds in the measurement of production, nevertheless, we think that the issue must be analyzed further and treated consistently along the system.  Regarding the reference rate, we welcome its use conceptually, although we are facing some difficulties of implementation right now.
 7/25/2006Bank of ItalyWe broadly support the conclusions.
 7/24/2006National Bank of the Republic of AzerbaijanWe have analyzed the “Comment on the recommendations of the most recent Advisory Expert Group on National Accounts (AEG) meeting (January 30 – February 8, 2006) in Frankfurt” within the scope of our responsibilities and I am pleased to inform you that we are in agreement with the AEG recommendations.
 7/24/2006Switzerland m4Switzerland6a;
 7/24/2006GermanyWe congratulate the Task Force “Financial Services” for its valuable work and welcome the conceptual recommendations of the AEG in general.

Especially we appreciate recommendation f), which leads to a better consistency be-tween SNA93 rev.1 and the ESA 95.
The recommendation g) concerning different external reference rates seems very rea-sonable from our experience. A further amendment which would exclude “negative FISIM” by definition would be welcomed as well.

From a practical point of view, we would like to mention that the separate compilation of the FISIM at current prices and the volume of FISIM often results in an implicit price index which is extremely difficult to understand and to explain publicly. This could be avoided for instance by accepting in this case a simple volume compilation like dividing the FISIM at current prices by some kind of general price index.
 1/6/2006State Bank of PakistanThe expansion in the definition of "financial corporation" focusing on the nature of output as well as the activity of intermediation would introduce certain inconsistencies in the present framework, particularly relating to (i) treatment of interest in operating surplus of producing unit, and (ii) consumption loans by the households from money lenders. Financial sector in Pakistan is fully documented, therefore, we have accurate statistical data to calculate FISIM, but the multiple reference rate approach is not applicable in our case. At present we are not using FISIM but based on our experiences we are of the view that the revised definition will generate number of inconsistencies in the current framework. We suggest a more in-depth discussion on the issues to come up with a workable definition in the next meeting of task force.
 1/3/2006Singapore(i) The expansion of statistical coverage to include financial entities which do not have intermediation as their primary activity, more accurately reflects the rapidly changing financial landscape, which has increasingly broadened to include such activities in financial advisory and risk management. We consider that the term "financial intermediation and risk management" more comprehensively captures the range of activities to be included in the SNA.
(ii) The recommendation to include financial institutions' "own funds" as a valid source of funds for the provision of financial services, is conceptually desirable. Banks' financing operations have increasingly extended beyond their deposit base, and may be generated through other activities associated with their retained earnings. This is particularly important given the growing role of treasury income for many large financial institutions, which have thus far not been factored into the SNA. More information on the extent to which such "own funds" are to be included would be helpful, such as whether or not any distinction is made between security holdings of different maturity profiles.
(iii) The choice of the reference rate of interest will have considerable impact on both the measured output of financial services, as well as the allocation of FISIM across different sectors. Pending more details on the selection of the reference rate, we are unable to comment on the usefulness of this approach.
 12/19/2005KenyaAgreed in principle
 12/13/2005CanadaCanada looks forward to more discussion on the measurement of financial services. While we were generally in agreement with the new definition of financial corporations, and the inclusion of own funds up to but not including own issued equity, the use of a single reference rate was tested for Canada and found to add volatility to the estimates.
 5/23/2005IsraelWe support the approach of a broader definition of financial services. We would propose to have an item of “FISIM + risk management”, where income from bonds, securities and other financial instruments was taken into account to cover all services to be indirectly measured. From the point of view of the users, who deposit money in banks, it is not possible to distinguish between financial intermediation and risk management.
As part of the discussion on FISIM we suggest to deal with the sub-issue of allocation of FISIM to exports and imports in the balance of payments. It is one of the remaining differences between the SNA and the BoP manual, and was mentioned some times, but does not seem to appear in the discussions.
We would also like to change the approach for registering interest on non-performing loans (see detailed comments under that issue). The current treatment of NPL’s leads to an excess valuation of prices for FISIM and does not reflect the actual prices received for the services.
 5/19/2005Bank of IndonesiaBI suggests that treatment for financial services should be the same method as for commercial banks.
 5/10/2005Bank of BotswanaIt is clear that updates are needed for this rapidly developing sector; and the lack of current consensus on the way forward indicates the complexities involved. The principle of allowing the use of own funds to be included is supported. The documentation provided on some of the issues to be considered is insufficient at this stage.
 5/10/2005Central Bank of ParaguayParaguay está de acuerdo con las recomendaciones realizadas por el grupo de Expertos en relación al tratamiento de los servicios financieros. Dadas las innovaciones financieras, se hace necesaria una revisión de la definición del concepto y alcance de la corporación financiera, así como de los métodos de estimación para determinar los Servicios de Intermediación Financiera medidos Indirectamente (SIFMI), componente principal de la producción bruta de estas instituciones.
 5/9/2005Central Bank of IranWe agree with the new definition for financial corporations regarding financial market development. The issue of including return on all securities in the estimation of financial services should be more clarified in order to avoid including holding gains / losses for securities, bonds, etc. As the AEG recommended, since the reference rate approach in measuring FISIM may not be applicable in many developing countries, it is necessary to consider alternative approaches especially for The Islamic banking system like Iran.
 4/25/2005Central Bank of West African States cb_WesternAfricanStates6a;
 11/3/2004Bank of Tanzania/National Bureau of StatisticsWe welcome the AEG provisional recommendations on updating the production of financial services. However as the work is still on progress and no formal AEG recommendations presented, we do not have the firm comments at the moment.
 10/20/2004Central Bank of SyriaWe agree with the recommendations of the AEG.
 10/19/2004Central Bank of RussiaWe agree with a broader definition of non-insurance financial corporations. But we suggest using the term of financial risk management. We consider that this term conveys the specific character of financial corporations` activities more precise. We agree with the arguments that the own funds shouldn`t be excluded as a source for the providing of financial services. We consider that the money lenders provided the financial services exclusively with own funds should be included in financial sector that is in compliance with the proposed definition of non-insurance financial corporation. We don`t agree with the position of those economists who suggest treating shares as a carrier of financial services. We consider that the existent approach in treatment shares in the SNA is rather reasonable as it describes their economic essence as the instrument for attraction funds for the expansion of production. Therefore issuing shares can`t be classified as a financial service. But as regards the situation where shares are held for achieving short-term trading gains it is worthy of further discussion. Concerning the reference rate for the allocation of financial sector output we suppose that there is no need for setting a single rate for all the countries, but it is necessary to determine the requirements, which the reference rate has to meet.
 10/18/2004National Bank of Tajikistan The National Bank of Tajikistan agrees with the recommendations of the AEG.
 10/12/2004Bank of ColombiaEstamos de acuerdo con las recomendaciones del grupo AEG. Dadas las innovaciones financieras, se hace necesaria una revisión de la definición de la corporación financiera, así como de los métodos de estimación para determinara los FISIM.
 10/7/2004European Central BankThe ECB has significant reservations on the proposal discussed by the AEG in February 2004, and in particular does not agree with the proposed changes to the definition of financial corporations. It is expected that a new proposal will be submitted to the AEG on this sub-issue by 2005.
 10/5/2004Bank of KoreaWe agree with the expansion in the definition of "financial corporation" focusing on the nature of output as well as the activity of intermediation.
Regarding the treatment of holding gains, we defer our decision. We also reserve our decision whether own funds should be included as a source of financial services or not. We think that above all else the consistent treatment of holding gains or the income from own funds should be established in the provisions of 1993 SNA, because these issues arise again in the discussion of the measurement of the output of non-life insurance services.
We have no objection to using the reference rate approach.
 10/5/2004National Bank of BelgiumProvisional recommendations on the measurement of the production of (non-insurance) financial corporations.
En ce qui concerne la mesure de la production des services financiers, les propositions modifient la définition d`entreprise financière et la frontière de production du secteur financier.
Dans l`état actuel et, compte tenu de la règlementation européenne en la matière, nous ne sommes pas en mesure de prendre position et préfèrons attendre. Des discussions doivent notamment avoir lieu prochainement lors de la réunion du Groupe de Travail OCDE sur les Statistiques Financières qui se tiendra en octobre 2004.
 10/4/2004National Bank of KazakhstanThe National Bank of Kazakhstan (NBK) supports work on updating 1993 System of National Accounts.
The NBK agrees with changes in the definition of financial corporations, as it underlines the nature of financial corporations activities.
However, taking into account that the NBK is responsible for monetary statistics compilation, we would like to clarify what impact the adoption of this definition will have on the classification of financial assets and on further compilation of monetary statistics accounts.
The NBK also supports the provisional recommendation that own funds of financial corporations should not be excluded as a source of funds for the provision of financial services, but this needs further clarification.
 10/4/2004South African Reserve BankSouth Africa has reliable data to calculate FISIM as far as the banking sector is concerned. We are not against more than one reference rate, but in our circumstances we would prefer to work with a single rate. On the other issues, we would like to withhold an opinion until more detail becomes available related to portfolio managers and other role players, particularly regarding the position of services charges and net interest payments. The latter, could be a data problem for us, while the allocation issue of the output of these services requires more clarification.
 9/30/2004Central Bank of Madagascar- Madagascar accepte la nouvelle définition des entreprises financières par le fait qu`elle est cohérente avec le développement récent du secteur financier en mettant l`accent sur la nature de la production (service financier) au lieu de la nature de l`activité et surtout en considérant les prêteurs de fonds propres comme des entreprises financières. Cette nouvelle définition facilite les travaux des comptables nationaux dans la ventilation des activités.
- Madagascar est également favorable à l`adoption de l`approche par le taux de référence comme instrument de mesure de la production des entreprises financières pour une harmonisation de la méthodologie adoptée et donc une facilité de la comparaison internationale.
 9/30/2004Macao, SAR ChinaWe are pleased to express our agreement with the proposal.
 9/30/2004USAThe United States strongly supports the initiatives to improve the accounting for financial services. There have been important changes in the economic environment in this area, and improving the national accounting treatment is important to the national accounts and its users.
 9/30/2004Germany m1(c)de6;
 9/30/2004Bank of LatviaLatvia is in agreement with the recommendations of the AEG and we do not have any particular comment at this stage.
 9/30/2004National Bank of Switzerland m1(c)nb_sw6;
 9/30/2004Bank of GuyanaThe definition for income in national accounts should be reviewed, taken into consideration the rapid financial changes.
 9/30/2004Lesotho - Central Bank".. This generates holding gains and losses, that, typically, national accounts exclude from the production boundary and therefore income". Comment: Services delivered at cost price must be included -then the unit cost must be measured not by dividing fixed cost (Services) net profit must remain as income.
 9/20/2004IndiaWe welcome the expansion in the definition of financial corporations which puts importance on the nature of output (financial services) rather than the activity of intermediation. It emphasizes that capturing the activities of “Risk Management” and “Liquidity Transformation” represent in a better way the financial business today, which has come a long way from its traditional loan-deposit business. Thus it takes into account the other elements in the balance sheets of the financial corporations. We appreciate this broad definition for recognizing the financial enterprises.
Regarding role of own funds for providing of financial services by financial corporations, we support the task force view that they should be included. A corollary to this would be the case of moneylenders who provide financial services exclusively from their own funds. Adoption of the recommended definition would, however, introduce certain inconsistencies in present framework, particularly relating to (i) treatment of interest in operating surplus of producing unit, and (ii) consumption loans taken by the households from money lenders. It would also require revision of the definition of “gainful work” of the ILO. In respect of use of equity/shares further deliberations are needed in view of the different views on the treatment of holding gains/losses, although it appears that their exclusion from the production boundary appears to be an appropriate solution. The inclusion of holding gains/losses of portfolio management of financial assets in the production boundary will result in significant volatility in GDP estimates. Similarly, issues underlying the reference rate approach as a tool for measuring the production of indirectly priced financial services also need to be examined in detail.
 8/12/2004AustraliaRecognising that further work is required on this issue, Australia agrees with the direction that this work is taking.
 8/11/2004CanadaCanada agrees with the provisional recommendation to change the definition of financial corporations and that the term financial intermediation be replaced with a broader term. Canada agrees with the provisional recommendation to include own funds in the measurement of output – but this needs further clarification. Canada agrees with the multiple reference rate approach for measurement of FISIM.
 8/11/2004Slovak RepublicAs regards treatment of financial services, Slovakia prefers harmonization with the methodology stated by the Commission Regulation 1889/2002 (with planned entrance into force from the 1st January 2005) and the ESA 95 methodology.
 8/11/2004NorwayFor the other proposals on financial services, we welcome a more comprehensive presentation of the issues. In general, we think that co-ordination with international business accounting standards and recommendations is important.
 8/11/2004DenmarkStatistics Denmark partially supports the definition for non-insurance financial corporations. The distinction between the actual service provided and the activity behind the provision of this service (i.e. risk management and liquidity transformation) is appreciated. Also the distinction between the services provided and the underlying instruments is clarifying. However, Statistics Denmark is not convinced of the reasoning of the inclusion of own funds as a source of funds for provision of financial services. Statistics Denmark would like to put emphasis on the importance of a consistent treatment of own funds in the system, for instance the majority do not support the inclusion of own funds in the calculation of production of non-life insurance services. As far as the measurement of financial services is concerned, Statistics Denmark supports the concept that the provision of financial services can be attached to all kinds of assets and liabilities. A more explicit recommendation from the OECD Task Force with a list of potential financial services is, nevertheless, awaited. Anyway, the return of instruments other than loans and deposits (securities, equities etc.) should only be included in the measurement of the production of financial services if the return is connected to the financial services provided. The reference rate approach can not be accepted as the general method for the measurement of production indirectly priced. In particular, Statistics Denmark can not support the usage of a single reference rate. On the contrary, it would be preferable to include in the SNA other methods to measure the output of financial corporations in cases where the reference rate method fail or in cases of scarce information about the pricing of the financial services provided. In line with the recommendation on the measurement of the production of central banks (SNA revision issue 6.a), a measurement of the production of other financial corporations as the sum of costs should be a possibility in cases where other (from a theoretical point of view) more preferable methods fail.
 8/11/2004JordanIt is difficult to decide on this issue unless more information are provided. Nevertheless, DOS agrees that the term “financial intermediation” shouldn`t disappear from the definition. Also no objection on introducing the reference rate approach, since the SNA is concerned about the concept more than practical issues.
 8/11/2004The NetherlandsIn relation to the the provisional recommendations on the measurement of the production of (non-insurance) financial services (paper SNA/M1.04/15), we first would like to have a more in-depth discussion of the relevant issues at the meet-ing of the relevant task force (October 2004, Paris). In our opinion, the issues are too much interrelated to have an opinion on one or two parts.
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