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Country experience: Estonia: calculating FISIM

14.308.        For Estonia, external FISIM is less important compared with internal FISIM because most of the banking sector belongs to foreign banks, and loan resources for the local economy are made available through interbank transactions. The latter form the overwhelming majority in external transactions of loans and deposits. Having considered the size of the external FISIM, a cost-effective approach has been taken and simplifications have been made in compilation practice, instead of additional data collection with its increase in burden for data providers. 

14.309.        The compilation process is based on the stock and interest income figures available through BOP surveys and banking statistics. To compile FISIM, the average interbank rate is needed to calculate and apply for stock figures. FISIM is the margin between the interest actually charged and the adjusted interest. 

14.310.        For stocks data, the balance of loans and deposits is needed. In the case of assets related to loans and liabilities related to deposits, stock data are needed only for institutional sectors S.122 and S.125 of the European System of National and Regional Accounts (ESA 2010). 

14.311.        The main difficulty is that assets and liabilities between financial intermediaries should be excluded from the stock data. Therefore, the counterpart data must be taken into account when determining the stock from which FISIM is derived. This does not concern banking sector statistics that already have data from counterpart sectors. For other financial intermediaries (S.125), no loan data are available from counterpart sectors or the aggregation of the data is too great (leasing companies). The compilation of stocks for S.125 includes the assumption that they have loan liabilities against financial intermediaries. On the asset side of loans, all stocks of S.125 are taken into account, reflecting those with other financial intermediaries. 

14.312.        Another issue concerns stock data of households for which the main data source is the ITRS, which does not give a good indication of positions. One solution is to use mirror data, i.e., banking sector statistics of other countries by counterpart sector. However, the household sector continues to be estimated. 

14.313.        The reference rate is derived from the credit institutions report on the balance of loans and resources from which the stocks against non-resident financial intermediaries are taken by currency and maturity. Each stock is multiplied by the corresponding contractual interest rates from the same reports. The amounts to be paid or received are then divided by the stocks. The result of that compilation is an average weighted interbank rate that is used as a reference rate. 

14.314.        Before multiplying stocks with the reference rate, both the stocks and unadjusted interest income are distinguished by counterpart sectors. That step is taken to exclude the stocks and interest income between financial intermediaries. Data by counterpart sectors for both items could be derived by using the credit institutions report on the balance of loans and resources. However, the stocks and income cannot be divided for other financial intermediaries due to the lack of proper data sources.

14.315.        Experiences up to the present indicate that preconditions still exist to eliminate stocks and income between financial intermediaries properly. Therefore, data sources have to include data by currency and by counterpart sector for other financial intermediaries as well. For the household sector, further estimations for stocks must be developed. Additional estimations are also needed in the case of negative FISIM. This usually occurs with large transactions in deposits by the general government sector,  in which the stocks at both the beginning and the end of the period were zero, while at the same time interest was earned. In order to keep a cost-effective approach for data providers, detailed sectorized data in different currencies are not required. Instead, the weighted average reference rate itself reflects the weights of the currencies and maturity.