Real Financial Services
UN STATISTICS DIVISION
Economic Statistics Branch
National Accounts Section
UNSD/ECA National accounts workshop November 2005
1
Identifying financial services
Financial institutions charge for some services explicitly
and some implicitly.
Deposits and loans attract implicit charges and these
instruments are included in the calculations of FISIM.
Other instruments may attract FISIM but will not be
included unless a clear allocation to users is possible.
Thus, in practice, FISIM may be limited by convention
to loans and deposits.
Calculating FISIM
Old FISIM =
the total property income receivable by financial
intermediaries
minus total interest payable,
excluding own funds
New FISIM = (rL-rr)yL + (rr - rD)yD
Where :
rr
rL
yL
rD
yD
=
=
=
=
=
including loans from own funds
Calculated as: FISIM = (rL-rr)yL
reference rate
Rate on loans
Stock of loans
Rate on deposits
Stock of deposits
Prices and volumes : FISIM
• For measuring the volume of output of financial
services implicitly charged it is necessary to identify
those services that form the set of output.
• No directly observable price or quantity representative
of the output of financial services indirectly measured
Prices and volumes : FISIM
Ideally a direct deflator of the output at current prices
should be constructed as a PPI that reflects the margin
measure of FISIM.
However the nature of financial services cannot easily be
connected to price and quantity units.
Besides, the change in quality is an important issue in
financial services. The length of opening hours for bank
branches, the proximity of a local branch, the quality of
investment advice are some central quality features of
financial services.
Prices and volumes : FISIM
In the absence of direct deflators, one of the following
approaches is recommended:
• The rate of change of the volume indicator can be derived using
the rate of change of stocks of loans and deposits deflated by a
general price index (e.g. the GDP deflator) on which the base
year margin can be applied.
• Direct output indicator method. Break down the different
characteristics linked to financial services (e.g. numbers and
value of loans and deposits). For each of the characteristics an
appropriate volume indicator is to be derived. The volume
indicators are then weighted together.
Prices and volumes :
insurance services
The measurement of the output of non-life insurance
services at current prices is obtained using a formula
based on the difference between premiums (plus
adjusted premium supplements) and adjusted claims.
Ideally a direct deflator of the output at current price
should be constructed as a PPI. However, this margin
measure of the output of non life insurance does not
lead to any easy interpretation of the nature of the
quantity and price and, thus, this ideal index is generally
not available.
Prices and volumes :
insurance services
Statistical offices do calculate price indices for non-life
insurance services included as a PPI or as a CPI.
These price indices, called here “premium price
indices”, measure the change in the price of insurance
policies with fixed characteristics. They are different
from the ideal index, and should not be used to deflate
the current price output unless there is evidence that
the deflator for claims moves with the premium price
indices.
Prices and volumes :
insurance services
In the absence of this ideal deflator, it is recommended
to compile a direct volume indicator using one of
the methods proposed, and obtain the price index as
the ratio between the current price series and the
volume series:
Prices and volumes :
insurance services
Direct volume measure
Obtain a direct volume measure of the output (and by
extension, the consumption) of non-life insurance
services by extrapolating the current price measure of
the base year by the rate of change of a volume index,
which is obtained deflating gross premiums earned
by a premium price index (PPI or CPI, depending of
the context). When the premium price index covers
premium supplements, it is advisable to use the rate
of change of a volume index compiled as gross
premiums plus adjusted premium supplements
deflated by this extended premium price index.
Prices and volumes :
insurance services
Deflated premium method
In the absence of adequate premium
price indices, a volume indicator can
be compiled using quantity indicators
such as the number of policies, by line
of product (house-owner insurance,
motor vehicle insurance, third party
liability, etc.) appropriately weighted
preferably by net premiums or, when
not possible, by gross premiums.
Prices and volumes :
insurance services
For some countries the data requirements for the
above methods cannot be met and so, it may be
necessary to resort to simplistic measures; for
example, estimating the rate of change of the volume of
output as equal to the rate of change of the volume of
inputs to the industry. The inputs should cover labour,
intermediate consumption, and capital services .
Thank You