VALUATION AND BREAKS
The Divisia index for money weights the growth rate of each of the M4 component assets according to the extent to which they provide transaction services. These weights are a function of the interest rate on the asset, such that assets with a higher interest rate are assumed to provide fewer transaction services.
Data are available quarterly from 1977 Q1 and monthly from September 1997. With the exception of rates of return, all components are seasonally adjusted. Levels are non break-adjusted whereas flows are break-adjusted. Publication of data will usually occur on the 21st working day following the end of the reporting period in Table A6.1 in Bank of England Bankstats (Monetary and Financial Statistics) or subject to the published schedule of releases.
Non-seasonally adjusted monthly data of the amounts outstanding and changes in the Divisia Money components are now also available via the Bank's Interactive Database.
The sources for Divisia are the same as those for the ‘Sectoral analysis of M4 and M4 lending’:
- UK-resident banks; a sample of UK-resident banks report data directly to the Bank of England on the form BE. Banks with private sector holdings (BT items £2H and £3H or £29D) in excess of £1bn report data on a monthly basis. All data are reported in sterling, with foreign currency data converted to sterling at the middle spot sterling exchange rate at 4pm on the last working day of the month.
- UK-resident building societies; From January 2008, data from building societies are collected on the same basis as for UK-resident banks, on the forms BT and BE on a monthly basis (see the article on ‘Transition of building society statistical reporting’ in the January 2008 edition of Bank of England Bankstats (Monetary and Financial Statistics)). Prior to this, data for building societies were collected by the Financial Services Authority. These figures were based on a sample of societies, which were grossed up to achieve full coverage of the building society population in the published data.
All data are subject to revision if and when new information becomes available. For more information on revisions practices see the Explanatory Note on revisions, available here.
Divisia money is a weighted average of the growth rates of the M4 component assets. The components are weighted according to their usefulness for making transactions, which is proxied by the user cost of holding these components. The weights are two-period moving averages. The user cost is measured by the difference between the interest rate paid on component balances and a benchmark rate, which should in turn be the rate paid on balances with no transactions value. The calculation for Divisia is done in house at the sectoral and aggregate level.
From February 2005, the data series for Divisia money have been calculated using a method described in the article ‘A new measure of Divisia money’ in the January 2005 Bank of England Bankstats (Monetary and Financial Statistics).
From January 2010, the presentation of Divisia money series components split by banks and building societies was discontinued and changed to show the split by banks excluding mutuals (non-mutually owned monetary financial institutions) and mutuals (mutually owned monetary financial institutions). This was described in the article ‘Changes to the Publication of Bank and Building Societies Statistics’ in the January 2010 Bank of England Bankstats (Monetary and Financial Statistics).
From December 2013, Divisia money series were made available for total monetary financial institutions (MFIs) following a change to the publication of data for mutually owned MFIs. This was described in the article ‘Changes to publication of data for mutually owned monetary financial institutions’ in the December 2013 Bank of England Bankstats (Monetary and Financial Statistics). These series are available from January 2008 when building societies data were collected on the same basis as UK-resident banks.
Definitions of the sectors can be found under definitions for Table A4 ‘Sectoral analysis of M4 and M4 lending’ of Bank of England Bankstats (Monetary and Financial Statistics).
Notes and coin
Consists of sterling notes and coin in circulation outside the Bank of England. The sectoral holdings of sterling notes and coin in circulation are based on an estimated distribution of the known private sector holdings.
Non interest-bearing deposits
From January 2008, non interest-bearing deposits at building societies are included in this series. Previously, only non interest-bearing deposits at banks were included.
This series consists of credit balances on customers’ accounts where interest is not payable.
Interest-bearing sight deposits
This series consists of credit balances on customers’ accounts where the entire balance is accessible without penalty, either on demand or by close of business on the day following that on which the deposit was made, and where interest is payable.
Interest-bearing time deposits
Those deposits where part of the balance is not accessible without penalty, either on demand or by close of business on the day following that on which the deposit was made, and where interest is payable
Interest-bearing Building Society deposits
From 1999 to December 2007 inclusive, building society household sector deposits were broken down into ‘instant access’ and ‘notice and term’ deposits. Prior to 1999, there was only one household sector deposits component.
Building society instant access deposits
Building society instant access deposits were defined as deposits available within 0-7 days, accounts from which withdrawals incur no penalty as long as 7 days’ notice had been given, and deposits from which immediate withdrawals can be made at 7 days’ interest penalty or less.
Building society notice and term deposits
Building society notice accounts required a notice period of between 8 and 90 days to withdraw funds without penalty or were accounts from which immediate withdrawals can be made at a penalty of at least one month’s interest. Term accounts were those accounts that required investment for a fixed term during which no withdrawals could be made or from which withdrawals were permitted by giving at least three months’ notice.
Tax-exempt special savings accounts (TESSAs)
Until April 2004, TESSAs were treated as a separate component of Divisia with its own rate of return. Bank time deposits and building society notice and term deposits held by the household sector were adjusted for the availability of TESSAs by subtracting the respective published levels of TESSAs from these components. Proceeds from maturing TESSAs deposited in TESSA-only ISAs (TOISAs) were captured within the ISAs component.
From April 1999, it was not possible to open new TESSA accounts, though deposits continued to be made until these accounts matured five years after opening. From April 2004, therefore, there are no deposits recorded in TESSA accounts.
Individual savings accounts (ISAs)
From January 2008 onwards, time deposits held by the household sector at monetary and financial institutions are adjusted for ISAs by the subtraction of the respective published levels of ISAs from these components.
Between the introduction of ISAs in 1999 Q2 and the end of 2007, bank time deposits and building societies instant access deposits held by the household sector were adjusted for ISAs by subtracting the respective published levels of ISAs from these components.
Rates of return
From January 2008, rates of return on deposits held with all MFIs by the household sector are effective interest rates (see notes to Table G1.4 for further details). Prior to January 2008, this only applied to banks, as data for building societies were weighted averages of gross interest rates received by savers, derived from a monthly return of all building societies provided by the Financial Services Authority (FSA). Prior to January 1999, rates of return on deposits with banks were averages of quoted rates. Quarterly rates are calculated as averages of monthly rates. Interest rates for household sector time deposits exclude rates on TESSAs and cash ISAs.
From January 2008, rates of return on deposits held with all MFIs by the corporate sector are effective interest rates (see notes to Table G1.4 for further details). Prior to January 2008, this only applied to banks, whilst rates of return on deposits by the corporate sector held with building societies are assumed to be similar to the rates on time deposits by the corporate sector held with banks. Prior to January 1999, rates of return on deposits with banks were averages of quoted rates. Quarterly rates are calculated as averages of monthly rates.
Cash ISA (and TESSA) rates
From January 2011, rates of return on ISAs held with banks and building societies are effective interest rates. For further details see the article ‘Amendments to Divisia money series’. Prior to January 2011, rates of return were averages of quoted rates.
The Divisia index uses an envelope approach, which assumes that, within the household sector and the corporate sector, the benchmark asset is the component of M4 that pays the highest interest rate after tax is taken into consideration.
For more details on the theory behind the Bank’s Divisia money series, see the article ‘Divisia measures of money’ in the May 1993 Quarterly Bulletin (pages 240-55), and ‘Divisia money’ in the Spring 2005 Quarterly Bulletin.
VALUATION AND BREAKS
In constructing Divisia, the rates of return, except those on TESSAs and ISAs, are adjusted for tax using:
- the basic rate of income tax rate for interest-bearing household sector deposits
- the corporate tax rate for corporate interest-bearing deposits
The indices are also adjusted for the changes in the population of the monetary financial instittutions (see notes to Table A5 for more detail) by incorporating the relevant break-adjusted flows for sight and time deposits.
Adjustments are also made to take account of the re-classification of the Channel Islands and the Isle of Man as non-resident following the Banking Statistics Review of September 1997. For further details see the article ‘Outcome of the review of banking statistics, including effects on monetary and other banking statistics’ in the September 1997 edition of this publication (pages 1-7).
Prior to September 1997, sectoral data for a short period were reported monthly on the Q1(M) form. Prior to July 1996, sectoral data were reported to the Bank on a quarterly basis only on the Q1 form.