Financial
intermediation services indirectly
measured (FISIM) in the national
accounts
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Citation
Statistics New Zealand (2012). Financial intermediation services indirectly measured
(FISIM) in the national accounts. Available from www.stats.govt.nz.
ISBN 978-0-478-40803-4 (online)
Published in November 2012 by
Statistics New Zealand
Tatauranga Aotearoa
Wellington, New Zealand
Contact
Statistics New Zealand Information Centre: info@stats.govt.nz
Phone toll-free 0508 525 525
Phone international +64 4 931 4610
www.stats.govt.nz
Contents
Contents .............................................................................................................................. 3
List of tables and figures ................................................................................................... 4
1 Purpose and summary .................................................................................................. 5
Purpose............................................................................................................................ 5
What is FISIM? ................................................................................................................ 5
2 The impact of FISIM on GDP ........................................................................................ 7
Previous measurement practice ...................................................................................... 7
3 How FISIM is measured ................................................................................................ 8
4 Which interest transactions include FISIM?............................................................... 9
Excluding interest on securities ....................................................................................... 9
Interbank lending ............................................................................................................. 9
Imports of FISIM .............................................................................................................. 9
5 The impact of FISIM on institutional sectors............................................................ 11
Business, government, and non-profit sectors .............................................................. 11
Household deposits and loans ...................................................................................... 11
Overseas customers ...................................................................................................... 11
6 FISIM values by sector ................................................................................................ 13
7 Adjustment of interest and other values .................................................................. 15
Total FISIM compared with the FSC ............................................................................. 15
8 Future releases to include estimates of allocated FISIM ........................................ 16
Balance of Payments ..................................................................................................... 16
Volume measures of FISIM within quarterly GDP......................................................... 16
Productivity .................................................................................................................... 16
9 FISIM within producer price indices .......................................................................... 17
Appendix 1: Data sources ............................................................................................... 18
Reserve Bank of New Zealand statistics ....................................................................... 18
Annual Enterprise Survey .............................................................................................. 18
Quarterly International Investment Survey .................................................................... 18
Pre-2001 backdated data .............................................................................................. 18
Future data sources: developments of international measurement standards ............. 18
3
List of tables and figures
List of tables
1 Supply of FISIM 1999 to 2012 ....................................................................................... 13
2 Use of FISIM. ................................................................................................................. 14
3 Impact of FISIM allocation on total GDP ....................................................................... 14
List of figures
1 Relationships between parts of interest. ......................................................................... 6
2 Percentage increase in GDP, year ended March............................................................ 7
3 Interest transactions with and without a FISIM dimension ............................................ 10
4 Interest flows with a FISIM component, allocated to institutional sectors..................... 12
4
1 Purpose and summary
Purpose
Financial intermediation services indirectly measured (FISIM) is now included in our
National Accounts (Income and Expenditure) and National Accounts (Industry
Benchmarks) statistics.
The releases, which include FISIM for the first time, are being published in November
2012.
This paper explains what FISIM is, how it affects these statistics, and what impact it has
on other economic statistics we will release in the future.
The inclusion of FISIM means that these outputs are more comparable with the results of
other countries, and therefore improves the relevance of our statistics. This is one of the
quality improvement initiatives within the Statistics 2020 Te Kāpehu Whetū programme of
work.
The key changes associated with measuring FISIM are:
• the level of GDP increases in all years
• most measurements of interest receipts and payments change
• the Finance Service Charge (FSC) is superseded by FISIM measurements.
These changes are in line with the recommended international measurement standards.
These standards are defined in the System of National Accounts 1993. Nearly all
countries within the OECD follow these recommendations.
What is FISIM?
FISIM is one way that banks and similar institutions charge for services. These
institutions can be collectively referred to as banking service providers. FISIM is included
within interest received and paid by banking service providers, and is measured indirectly
because the value is not explicit within an interest transaction. This part of interest
represents the value of the service associated with a loan or deposit.
There is also a part of interest paid and received which is a return to the owner of funds.
This is the more common notion of the economic significance of interest. In the case of a
loan from a banking service provider, the actual interest payments made by the borrower
include both the return to the owner of the borrowed funds and the service charge. In
contrast, the actual receipt of interest by deposit holders is after the service charge has
been deducted from the return on the deposited funds.
The relationship between these parts of interest, involving a banking service provider, is
shown in figure 1.
5
Financial intermediation services indirectly measured (FISIM) in the national accounts
Figure 1
Relationships between parts of interest
6
2 The impact of FISIM on GDP
Measuring FISIM within specific interest receipts and payments leads to an increase in
total GDP.
By identifying the service value within each interest transaction, the value can be
allocated to the bank’s customer receiving or paying the interest. Allocating the value of
FISIM to the customers involved in the interest transaction allows the service to be
classified according to how the service is used. The allocation reveals information of
additional economic significance. An example of this is the value of charges for
management services on household deposit accounts, which is classified as household
consumption.
Previous measurement practice
In contrast, the practice up until now has been to measure the service charge within
interest flows as one total. The previous measurement of total financial services within
interest flows has been known as the finance service charge (FSC). The FSC was treated
as a cost of production for determining value added within the production measure of
GDP, all of which was deducted from the total output of the economy.
This resulted in an understatement of GDP because not all interest transactions are
connected with a production process. FISIM associated with interest on household
deposits is one instance of a service charge which is not a cost of production within the
New Zealand economy. FISIM on interest receipts and payments involving non-residents
usually has no connection to production in New Zealand, and represents exports and
imports of services.
The total of FISIM that is not a cost of production leads to an increase in GDP. Figure 2
shows the annual increase in GDP as a proportion of total GDP. The markedly higher
proportion in 2010 reflects a wider margin between loan and deposit interest rates
following the global financial crisis.
Figure 2
Percentage increase in GDP
Year ended March
1999–2012
1.0
Percent
0.8
0.6
0.4
0.2
0.0
1999
2000
2001
2002
2003
2004
2005
2006
Year ended March
Source: Statistics New Zealand
7
2007
2008
2009
2010
2011
2012
3 How FISIM is measured
As figure1 shows, the value of FISIM is the difference between the return on funds and
the actual interest received or paid. The return on funds is determined by calculating the
interest applying to the deposit and loan using a reference rate. The reference rate is
without a service element.
The midpoint between the loan and deposit rate is used as the reference rate. Using the
midpoint means that the service element is equally shared between the borrower and
depositor.
There are other ways of determining the reference rate, with interbank and government
bond rates having been considered. International practice varies, although a number of
other countries, for example Australia and Canada, also use midpoints in the calculation
of FISIM.
Midpoints also have practical advantages. Most notable is that differences between
actual and reference rates are less volatile. This has the benefit of FISIM values with
greater transparency and being more closely connected to the value of loans and
deposits held by banking service providers.
8
4 Which interest transactions include FISIM?
There is a FISIM element within interest transactions when the payment or receipt
involves a banking service provider, and only when the interest is associated with a loan
or deposit.
Banking service providers also receive and pay interest on assets and liabilities other
than loans and deposits. These assets and liabilities are generally held in the form of a
security, which have no FISIM element within the interest flow.
Excluding interest on securities
The exclusion of interest on securities from the scope of FISIM is a convention within the
international measurement standards. The rationale for treating securities differently
relates to services delivered specifically to holders of loans and deposits. For example,
banking service providers guarantee deposit values and are obliged to settle their deposit
liabilities on demand.
The situation is different for the owner of a security issued by a banking service provider.
In issuing securities, banking service providers have a liability over a set term for a set
interest rate. Should the owner of the security wish to recoup the value of the security
prior to the end of the set term, there is an option to on-sell the security to a third party.
The market price of the security may be more or less than the original value, and the
security owner carries this valuation risk. These features mean that the key services
delivered to deposit holders are not available to security owners.
Interbank lending
Individual banking service providers within the New Zealand banking system also borrow
and lend between each other, frequently and in large amounts. These transactions are
described as interbank lending. Interbank lending between New Zealand banking service
providers is effectively outside the scope of FISIM measurement. This is because the
interest transactions are expected to occur at a rate very close to the reference rate.
Interbank lending also involves non-resident banking service providers. New Zealand
banking service providers have large values of assets and liabilities involving other
banking service providers overseas. The majority of interbank lending involving nonresidents results in a liability for the New Zealand banking service provider. A large part
of this interbank lending is between associated banks. In these circumstances the
international measurement standard is to also exclude these interest flows from the
scope of FISIM measurement.
Imports of FISIM
New Zealand residents can import FISIM when transacting with overseas banking service
providers. Consistent with interest flows involving New Zealand banking service
providers, there is a FISIM component of only loan and deposit interest. New Zealand
banking service providers can import FISIM from overseas, however only on interest
receipts from deposits. This is a measurement standard to ensure that for cross-border
interbank transactions, only one banking service provider produces FISIM.
Figure 3 illustrates which interest transactions have a FISIM dimension and which do not.
9
Financial intermediation services indirectly measured (FISIM) in the national accounts
Figure 3
Interest transactions with and without a FISIM dimension
Interest received by
Interest paid by
Deposit taking
banking service
provider
Central
bank
Central bank
Deposit taking
banking service
provider
Securities/
other
Non deposit
taking banking
service provider
Securities/
other
Non deposit taking New Zealand sectors
banking service
using banking
provider
services
Securities/other
Securities/other
Interbank
transactions
Securities/other
Loans
Securities/
other
New Zealand
sectors using
banking services
Loans
Overseas
sectors using
banking services
Loans
Overseas
banking service
providers
Deposits
Interbank
transactions
Deposits
Overseas sectors
using banking
services
Securities
Securities/
Securities/
Deposits
Deposits
/other
other
other
Securities/other
Securities/other
Securities/
Securities/
Loans
other
other
Securities/other
Securities/other
Securities/
Securities/
Loans
other
other
Securities/other
Securities/
Securities/
Securities/
Deposits
Deposits
other
other
other
Interest with a FISIM element, generating output by
a New Zealand banking service provider.
Interest without a FISIM element.
Interest with a FISIM element involving an overseas
banking service provider (imports).
Not measured, or there is zero or negligible interest
flow.
10
Overseas banking service
providers
Securities/other
Loans
Loans
from
associates
Loans
from
associates
Securities/other
5 The impact of FISIM on institutional sectors
Allocating FISIM to the customer involved in the interest transaction reveals information
of additional economic significance. The treatment of the value of FISIM within the
National Accounts depends on the institutional sector within which the customer
operates.
Business, government, and non-profit sectors
When the customer is a business, the FISIM element of interest is a cost of production.
This cost of production is referred to as intermediate consumption. FISIM is included in
the measurement of output of the government and non-profit sectors. The non-market
output is final consumption of the non-market sectors.
Household deposits and loans
The FISIM associated with interest on household deposits is a service consumed by
households. The FISIM component of interest on loans to households for consumption
purposes, for example credit card debt, is also a service consumed by households.
There is different treatment of interest on housing loans, and consequently a different
treatment of FISIM associated with the interest. This service charge is a cost associated
with producing rental services by households owning and occupying their own home.
Therefore the FISIM component of interest on mortgages is also intermediate
consumption. This treatment is a long-standing measurement standard for the purposes
of being able to compare countries with differing rates of home ownership, and to
compare results over periods of time when home ownership rates change.
Mortgage loans on residential properties are to both landlords and households that own
and occupy their home. Because the available data currently makes no distinction all
FISIM on residential mortgages is treated as intermediate consumption of households
owning and occupying their home.
Overseas customers
The FISIM on deposits and loans involving overseas customers are services exported by
New Zealand banking service providers. The FISIM on deposits and loans provided by
overseas banking service providers are imports of services. The institutional sector
importing the service leads to the equivalent treatment as if the FISIM was from a New
Zealand banking service provider.
Figure 4 illustrates the treatment of the FISIM component on deposit and loan interest
flows. The interest flows illustrated are between banking service providers and the other
institutional sectors.
11
Financial intermediation services indirectly measured (FISIM) in the national accounts
Figure 4
Interest flows with a FISIM component, allocated to institutional sectors
Interest received by
Interest paid by
NZ banking service
providers
NZ banking service
providers
Financial businesses
outside the banking
sector
Businesses
(producer
enterprises)
Government sector
(non market
producer)
Non profit sector
(non-market
producer)
Household sector
Intermediate
consumption
Intermediate
consumption
Government final
consumption
Non profit final
consumption
Household final
consumption
Non-bank overseas Overseas banking
sector (rest of world service providers
(rest of world sector)
sector)
Export of services
Export of services
Financial businesses
outside the banking
sector
Intermediate
consumption
Imported services –
intermediate
consumption
Businesses (producer
enterprises)
Intermediate
consumption
Imported services –
intermediate
consumption
Government sector
(non market producer)
Government final
consumption
Imported services –
government final
consumption
Non profit sector (nonmarket producer)
Non profit final
consumption
Household sector consumers
Household final
consumption
Imported services –
household final
consumption
Household sector housing
Intermediate
consumption
Imported services –
intermediate
consumption
Non bank overseas
sector (rest of world
sector)
Export of services
Overseas banking
service providers (rest
of world sector)
Imported services –
intermediate
consumption
Interest flows without a FISIM
component
Imported services – Imported services Imported services – Imported services – Imported services –
– intermediate
government final
non profit final
household final
intermediate
consumption
consumption
consumption
consumption
consumption
12
Imported services –
non profit final
consumption
6 FISIM values by sector
Measurements of FISIM by institutional sectors determine the economic significance of
service charges within interest transactions. Up until this release, all of the service charge
derived from interest flows was treated as intermediate consumption and deducted from
the total output of the economy. However, services which are used for a purpose other
than intermediate consumption are termed as final consumption. The values of FISIM
allocated to final consumption increases the level of GDP because they are not deducted
from output as intermediate consumption.
Table 1 shows the total of FISIM output and FISIM imports, which are the components of
the total supply of FISIM.
Table 1
Supply of FISIM 1999 to 2012
Year
FISIM output of NZ
banking service
providers
Total FISIM imports
Total supply of
FISIM
($ million)
1999
2,199
118
2,317
2000
2,410
127
2,537
2001
2,448
124
2,572
2002
2,684
135
2,818
2003
3,033
142
3,175
2004
3,247
119
3,366
2005
3,450
125
3,575
2006
3,546
131
3,677
2007
3,788
159
3,947
2008
3,663
160
3,824
2009
4,489
181
4,671
2010
6,155
256
6,411
2011
5,298
221
5,518
2012
5,212
186
5,398
Source: Statistics New Zealand
The FISIM allocated to institutional sectors shows the values of intermediate and final
consumption, and represents the total use of FISIM.
13
Financial intermediation services indirectly measured (FISIM) in the national accounts
Table 2
Use of FISIM
Year
Intermediate
consumption
Household
final
consumption
Non-market
sector final
consumption
Exports of
FISIM
Total use
of FISIM
88
174
2,317
($ million)
1999
1,442
615
2000
1,580
632
99
226
2,537
2001
1,611
623
101
237
2,572
2002
1,757
684
104
274
2,818
2003
1,974
758
121
321
3,175
2004
2,154
782
129
300
3,366
2005
2,340
811
142
281
3,575
2006
2,483
795
142
257
3,677
2007
2,687
842
146
271
3,947
2008
2,632
820
140
231
3,824
2009
3,228
1,026
159
258
4,671
2010
4,416
1,422
217
354
6,411
2011
3,765
1,241
209
304
5,518
2012
3,639
1,257
212
290
5,398
Source: Statistics New Zealand
The increase in GDP can be derived from table 1 and table 2, which is the sum of
household final consumption, non-market sector final consumption, and exports net of
imports.
Table 3
Impact of FISIM allocation on total GDP
Year
Total increase in
GDP due to FISIM
allocation
Expenditure on
GDP ($ million)
Percentage
increase in GDP
($ m illion)
1999
758
105,647
0.7%
2000
830
112,033
0.7%
2001
837
118,377
0.7%
2002
927
127,282
0.7%
2003
1059
133,906
0.8%
2004
1092
143,138
0.8%
2005
1110
153,188
0.7%
2006
1063
161,645
0.7%
2007
1101
169,869
0.6%
2008
1031
183,997
0.6%
2009
1262
185,555
0.7%
2010
1738
189,718
0.9%
2011
1533
198,525
0.8%
2012
1573
206,058
0.8%
Source: Statistics New Zealand
14
7 Adjustment of interest and other values
The allocation of FISIM has a direct impact on interest values on loans and deposits,
although has no impact on savings.
For sectors using banking services, interest receipts on deposits have increased to be
equal to the return on funds for those deposits. Interest payments on loans made by
banking service providers have reduced to also be equal to the return on funds, as
illustrated in figure 1.
The change to the value of interest will be equal to the FISIM associated with the loans
and deposits. The allocation of the value of FISIM increases the categories of use
associated with the institutional sector. For example the household sector account has
increased household final consumption from the service charge on deposits and
consumer loans. Within the household sector account there is also increased
intermediate consumption from the service charge on housing loans.
For all sectors the allocation of FISIM has no effect on saving. For banking service
providers, the effect on savings from the changes in interest is offset by changes to
output. For users of banking services the effect of changes on interest are offset by
changes to a category of use.
Total FISIM compared with the FSC
The total FISIM output of New Zealand banking service providers is a lower value than
the FSC. This is because the FSC was derived from the interest flows of all interest
bearing assets and liabilities while FISIM is derived from only loans and deposits.
15
8 Future releases to include estimates of allocated
FISIM
The National Accounts include annual measurements of FISIM in current prices. Other
macro-economic statistical releases will include FISIM measurements consistent with the
National Accounts as follows.
Balance of Payments
Balance of Payments and International Investment Position: September 2012 quarter, to
be published on 19 December 2012, will include quarterly measurements of imported and
exported FISIM. In general, exports of FISIM are slightly higher than imports, and
therefore this leads to either a reduced balance of service deficit or an increased surplus.
However there is no effect on the current account balance because the changes to
imports and exports will be offset by changes in interest flows.
Volume measures of FISIM within quarterly GDP
Quarterly constant and current price measurements of FISIM will be accounted for in the
next quarterly GDP release. Indicators of quarterly volume change will reflect changes in
the real value of deposit and loan balances. Further information on the impact and basis
of FISIM measurements within the quarterly GDP results will be included in Gross
Domestic Product: September 2012 quarter, to be published on 20 December 2012.
Productivity
The GDP volume measures will feed through to the overall measured sector productivity
results, and the industry breakdown. The results, accounting for allocated FISIM, will be
included in the productivity releases to be published in March 2013:
• Productivity Statistics: 1978–2012
• Industry Productivity Statistics: 1978–2011.
16
9 FISIM within producer price indices
It has been normal practice for producer price indices (PPIs) to adjust coverage in line
with changes in the National Accounts. However, the impact of FISIM will be considered
in light of a wider review to be concluded in 2013, and changes to the PPI coverage will
be dependent on the outcome of this review. Further details of the PPI measurement of
financial service prices can be found in Producers Price Index: September 2012 quarter.
17
Appendix 1: Data sources
Reserve Bank of New Zealand statistics
Balance sheet values of assets and liabilities held by registered banks and non-bank
lending institutions (NBLIs) are published by the Reserve Bank of New Zealand (RBNZ).
Registered banks and NBLIs are representative of New Zealand banking service
providers. These balance sheet results form the basis of measuring the values of loans
and deposits for calculating FISIM.
Measurements of interest rates applying to all assets and liabilities held by registered
banks are also published by RBNZ. These interest rates are used to model actual and
reference rates, which have been applied to all loans and deposits for calculating FISIM.
Annual Enterprise Survey
The balance sheet data published by RBNZ provides high-level institutional sector and
industry breakdowns of assets and liabilities. A more detailed breakdown of institutional
sectors, and industries within the sectors, is modelled using interest receipts and
payment data from the Annual Enterprise Survey.
Quarterly International Investment Survey
The Quarterly International Investment Survey (QIIS) is run by Statistics NZ.
Measurements of loan and deposit values from QIIS are used in the calculation of FISIM,
however interest values from QIIS are not. Interest rates modelled from domestic loans
and deposits are used for this purpose. Loan and deposit values from QIIS are used for
measuring FISIM exports, which are on the balance sheet of New Zealand banking
service providers. The QIIS loan and deposit values are also used as the basis for
measuring FISIM imports, which are held by overseas banking service providers and
involve New Zealand residents.
Pre-2001 backdated data
The data sources described above have been available from 2001 onwards, which is
when the QIIS was established. Prior to 2001, non-resident loans and deposits could be
modelled from values of non-resident assets and liabilities published by RBNZ.
Consistent measurements of NBLI assets and liabilities are not available prior to 1999.
The annual changes in the FISIM values from 1972 to 1998 have been broadly aligned to
changes in the previously published FSC. Data to indicate proportions of FISIM
components in these early years has been used when available.
Future data sources: developments of international
measurement standards
There are ongoing developments that influence international standards for measuring
financial services. There has been increased attention to this subject in recent years,
particularly since the global financial crisis in 2008. These factors will be closely
monitored and taken into account in developing the Official Statistics System in line with
future data needs.
18