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Home > Statistics > Explanatory Notes - M3 (estimate of EMU aggregate for the UK)
 

Explanatory Notes - M3 (estimate of EMU aggregate for the UK)

Overview

The M3 aggregate (estimate of EMU aggregate for the UK) comprises monetary liabilities of Monetary and Financial Institutions (MFIs) in the UK vis-à-vis non-MFI UK residents excluding central government. 

Availability

Data are available from April 1993 on a monthly basis, both seasonally adjusted and non seasonally adjusted. Publication of data will usually occur on the 21st working day following the end of the period or subject to the published schedule of releases in table A2.3 in Bankstats (Monetary and Financial Statistics) and on the Statistical Interactive Database.

Sources

The estimate for M3 is compiled using components of M4, which in turn is derived from the consolidated balance sheet of Monetary and Financial Institutions in the UK. These data are sourced from three types of monetary and financial institutions:

  • UK-resident banks; All UK-resident banks report data to the Bank of England on the form BT on a quarterly basis. Currently banks with UK private sector deposits or loans over £1,000mn or eligible liabilities over £400mn report data on a monthly basis. Prior to September 1997 balance sheet data were reported on the BS form. A further sector breakdown of business with UK residents is also provided on the form BE on a monthly basis, by UK-resident banks who report the form BT 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 (19KB) in the January 2008 edition of 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.
  • UK Central Bank; Data from the Bank of England Banking Department and Issue Department are collected on the same basis as for other UK-resident banks, on the forms BT and BE on a monthly basis. Prior to March 1998 the Banking Department of the Bank of England was included in the banks sector, whilst the Issue Department was included as part of central Government, and hence did not appear on the MFI consolidated balance sheet.

Definitions

The European Central Bank's (ECB's) broad monetary aggregate is M3.  This encompasses also two narrower aggregates, M1 and M2. 

Euro-area M3 comprises:
Monetary liabilities of euro-area MFIs and central government (Post Office and Treasury) vis-à-vis non-MFI euro-area residents excluding central government, in all currencies:

- currency in circulation (M1)
- overnight deposits (M1)
- deposits with agreed maturity up to 2 years (M2)
- deposits redeemable at notice up to 3 months (M2)
- repurchase agreements
- money market fund shares/units and money market paper
- debt securities up to 2 years.

The estimate of M3 compiled by the Bank of England for the UK comprises monetary liabilities of MFIs in the UK vis-à-vis non-MFI UK residents excluding central government, in all currencies. The UK reporting system does not currently identify the maturity breakdowns used in the euro-area definition; these are therefore estimated.

The euro-area aggregate does not include the adjustments for transit items and the inter-MFI reporting difference, which are made for UK M4 (see definition of M4). A reconciliation table which illustrates the differences between M4 and this estimate of M3 is available on request.  

These data therefore provide an estimate of M3 for the UK. These data replaced the M3H European harmonised aggregate, which was previously published to facilitate international comparisons between EU member states.
 

M3H comprised the components of M4 plus:

 
- foreign currency deposits held by the M4 private sector with MFIs in the UK; and
- sterling and foreign currency deposits held by UK public corporations with MFIs in the UK.
 
For further information on the compilation of these aggregates see 'Euro area monetary aggregates and their role in the Eurosystem's monetary policy strategy' in the February 1999 edition of the ECB's Monthly Bulletin.
 

Valuation and Breaks

Data are subject to the same valuation and break adjustments as M4 counterparts data. More information on these can be found within the M4 counterparts explanatory notes.

Building Societies transition to Bank of England reporting

Building societies' statistical reporting transitioned from the Financial Services Authority to the Bank of England on 1 January 2008, and more detailed information about the composition of building societies' deposits has become available. The estimates used in the calculation of M1, M2 and M3 have been updated to reflect this. The effects of this change have been removed from the flows data.

Key Resources

 

UK monetary aggregates: main definitional changes,  Bank of England (2003) Monetary and Financial Statistics, July

 

Euro area monetary aggregates and their role in the Eurosystem's monetary policy strategy, European Central Bank (1999) ECB Monthly Bulletin, (February)

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