Agenda item 6c
Update on Work of
ISWGNA Task Force on FISIM
Herman Smith
UNSD/DESA
Workshop on the Implementation
of the 2008 SNA,
Kiev, 29 November – 2 December 2011
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Outline of Presentation
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Background to FISIM issue
Terms of Reference of ISWGNA Task Force on
FISIM
Update on work of ISWGNA Task Force
Conclusions
Way forward
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Background to FISIM Issue
Calculation of FISIM
• Refined with every SNA revision
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Financial services are defined in paragraph 4.98 of
the 2008 SNA:
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The production of financial services is the result
of financial intermediation, financial risk
management, liquidity transformation or
auxiliary financial activities
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Background to FISIM Issue
Calculation of FISIM
• Broad international consensus to investigate further
• On 2008 SNA Research Agenda
(a) Composition of FISIM
(risk management and
liquidity transformation)
Clarification
(b) Financial instrument and Research
unit scope of FISIM
(c) Connection between
Research
FISIM and income
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Background to FISIM Issue
Calculation of FISIM
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ISWGNA Task Force to deal with clarification issue
and focus on determining at most one reference rate
per currency for calculating FISIM
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Coordination with regional Task Forces
∙ European
∙ Latin American
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Terms of Reference of
ISWGNA Task Force on FISIM
ISWGNA Task Force to address 4 clarification
questions
∙ Risk management
∙ Liquidity transformation
∙ Consistency of FISIM in international trade
∙ Implications for price and volume measures
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Terms of Reference of
ISWGNA Task Force on FISIM
Risk management (How to characterise and reflect
risk management/mitigation activities, including
exchange rate risk, in FISIM?) – 2 views
∙ 1st view – Include risk premium in FISIM
∙ Covers risk mitigation activity
∙ Do not match reference rate to risk profiles of
loans/deposits
∙ 2nd view – Exclude risk premium from FISIM
∙ Represents distributional flows, not payment for
services
∙ Use risk-matched reference rates
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Terms of Reference of
ISWGNA ask Force on FISIM
Liquidity transformation (How to reflect
transformation of short-term deposits into long-term
loans in FISIM?) – 2 views
∙ 1st view – Include this element in FISIM
∙ Use reference rate not matched to specific maturities
of loans/deposits
∙ 2nd view – Exclude this element from FISIM
∙ Use maturity-matched reference rates
∙ Question of whether FISIM should cover cost of
hedging term risk arising from deposit-taking
corporations lending long-term and borrowing shortterm
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Terms of Reference of
ISWGNA Task Force on FISIM
Consistency of FISIM in international trade
∙ How is equality of exports and imports of FISIM
between economic territories affected by
∙ Conversion between domestic and foreign
currencies?
∙ Choice of reference rate?
∙ Link to idea of using different reference rates for
different currencies
∙ Need for national accounts compilers to provide
exports and imports of FISIM by institutional sector
(including the rest of the world) to improve coherence
between national accounts and balance of payments
statistics
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Terms of Reference of
ISWGNA Task Force on FISIM
Implications for price and volume measures
∙ How will the clarification of above issues, including the
choice of reference rate, affect price and volume
measures of FISIM?
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Update on work of ISWGNA
Task Force
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Two meetings held
• March 2011
• July 2011
Attended by wide range of experts from various
countries and international organisations
Intense and extensive discussions on the four
clarification questions
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Conclusions
Risk Management
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General agreement that credit default risk
should excluded from FISIM
However, by convention, it may not be
excluded due to lack of information
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Conclusions
Liquidity transformation
• Term premium should be included in FISIM, but a
single reference rate should be used
• Tests will be conducted on the following various
methods to calculate reference rate
• Single reference rate using inter-bank lending
rates
• Matching reference rate using different rates for
short-term and long-term deposits and loans
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Conclusions
Liquidity transformation
• Reference rate calculated using the midpoint of
interest rates on deposits and interest rates on
loans
• Average reference rate (weighted by the stocks of
short-term and long-term loans and deposits)
calculated using different rates for the short-term
and long-term reference rates
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Conclusions
Consistency of FISIM in international trade
• Single reference rate should be used to calculate
domestic FISIM
• Appropriate reference rates for should be used to
calculate FISIM for each underlying currency
• When stocks of deposits and loans are not available
to allocate FISIM to industries, shares of value added
could be used
• International cooperation is needed to obtain
information on FISIM imports using mirror statistics
on the exports of FISIM
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Conclusions
Price and volume measures
• In principle, output indicators could be used to
calculate volume measures of FISIM
• However, method is data intensive
• Also, difficult to determine weights for the output
indicators
• Deflated stocks approach preferred
• To use general price indices (excluding FISIM) as
deflators
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Way forward
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Draft preliminary report
Detailed guidance, including formulae, on tests
Decision on need for additional meeting
Final report to include results of tests
Timeline for completion of reports to be determined
after evaluation of time needed for tests
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Thank you
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