Further details about counterparts to M4 data

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Availability

Quarterly figures for M4 components and the alternative counterparts are available from 1963 Q1. Calendar monthly figures are available from June 1982. The earlier part of the series is of lower quality than from October 1986 onwards, after the introduction of end-calendar-month reporting by banks (see the Statistics article ‘Banking and monetary statistics: a change in reporting dates’. The full balance sheet counterparts are available both monthly and quarterly from 1990 Q2. We usually publish these data and the alternative counterparts on the twenty-first working day following the end of the period or in Components of M4 (Table A2.2.1), Monetary financial institutions' balance sheet counterparts to M4 (Table A3.1) and Counterparts to changes in M4: alternative presentation (Table A3.2).

Sources

M4 is derived from the consolidated balance sheet of UK monetary financial institutions (MFIs). These data are currently provided by:

UK-resident banks

All UK-resident banks report data to us quarterly on the Form BT. Banks with UK private sector deposits or loans over £1,000 million or eligible liabilities over £400 million report data on a monthly basis A further sector breakdown of business with UK residents is also provided monthly on the Form BE by the UK-resident banks that 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

Since January 2008, data from building societies have been collected on the same basis as for UK-resident banks, on the Forms BT and BE on a monthly basis. See the article ‘Transition of building society statistical reporting’ for more information. Before this, data for building societies were collected by the Financial Services Authority. 

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. Before 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.

All data are subject to revision if and when new information becomes available. For more information on revisions practices see further details about revisions.

Definitions

M4 is made up of specific liabilities of monetary financial institutions (MFIs) held by the non-MFI private sector. 

The counterparts to M4 are formed from the MFI consolidated balance sheet.

The M4 balance sheet counterparts are as follows:

M4 = M4 lending + net foreign currency lending to private sector + net lending to public sector (including coin) + net lending to non-residents + net other assets.

M4 lending

This is sterling lending by monetary financial institutions (MFIs) to the M4 private sector, including advances, acceptances, reverse repos (from December 1995), investments and holdings of short-term paper.

Acceptances, though still reported off balance sheet by individual reporters, are treated on balance sheet for the purposes of the aggregate financial accounts and monetary statistics. This treatment was introduced in September 1997 and backdated. For further details see the Statistics article ‘Outcome of the review of banking statistics, including effects on monetary and other banking statistics’.

Reverse repos include sale and repurchase agreements against marketable securities of all kinds, and include any claims of the Bank of England on the M4 private sector resulting from official money market operations. A reverse repo is a type of secured loan.

Since September 2011, 35% of the sterling inter-MFI has been deducted from other financial corporation loans, within M4 lending. For further details see the Statistics article ‘Estimation and allocation methods within money and credit data’.

Net foreign currency lending to private sector

This is foreign currency lending by MFIs to the M4 private sector less deposits from the M4 private sector. Lending is the foreign currency equivalent of M4 lending above. Deposits includes sight and time deposits, repos and short-term paper held by the private sector.

Net lending to public sector (including coin)

This is lending by MFIs to the public sector less deposits from the public sector, in all currencies. Sterling lending to the public sector includes coins in circulation. Coin is a liability of central government and therefore outside of the MFIs' consolidated balance sheet. But coin is a component of M4 and is therefore included here in order to reconcile the counterparts. Aside from the inclusion of coin, lending and deposits are constructed similarly to the above counterparts.

Net lending to non-residents

This is constructed similarly to ‘net lending to the public sector’ above.

Net other assets

This is MFIs’ other assets less other liabilities. Other assets include holdings of commodities, investments in MFIs including equities and long-term debt (greater than five years’ original maturity), fixed assets and accrued receivables. Other liabilities include long-term paper issued (greater than five years’ original maturity), capital and other funds. 

Counterparts to M4ex

Since May 2009, the aggregate M4 excluding intermediate other financial corporations (M4 – IOFCs or M4ex) has been our preferred measure of the broad money supply. More details about M4ex are available in the Statistics article ‘Measures of M4 and M4 lending excluding intermediate other financial corporations’.

M4 is replaced by M4 excluding intermediate other financial corporations (OFCs).

M4 lending is replaced by M4L excluding intermediate OFCs.

An extra counterpart, net lending to IOFCs (equal to M4 deposits from IOFCs less M4 lending to IOFCs), is included.

No other counterparts are affected. The aggregates required to construct such a table are available on the Database. The series codes for these aggregates are

Amounts outstanding (nsa)

RPM/RPQ B3DQ: M4 excluding intermediate OFCs
RPMRPQ  B3DR: M4L excluding intermediate OFCs
RPM/RPQ BG2C: Net sterling lending to IOFCs

Changes (nsa)

RPM/RPQ B3DS: M4 excluding intermediate OFCs
RPM/RPQ B3DT: M4L excluding intermediate OFCs
RPM/RPQ B9GX: Net sterling lending to IOFCs
Counterparts to Changes in M4: Alternative Presentation(Table A3.2)

The alternative presentation of counterparts to M4 is as follows.

M4 = Public sector net cash requirement + purchases of public sector net debt + external and foreign currency finance of public sector + M4 lending + external and foreign currency flows + net non-deposit sterling liabilities.

Public sector net cash requirement

This is the net balance between cash expenditure and cash receipts of the total public sector.

Purchases of public sector net debt

This is purchases by the M4 private sector of central government and other public sector debt. This includes gilts, treasury bills, tax instruments, National Savings and Investments, local government debt, public corporation debt and ‘other’ debt, which includes non-marketable debt and Northern Ireland government debt.

External and foreign currency finance of public sector

This includes non-residents’ purchases of gilts and treasury bills and other finance raised from non-residents, official reserves and changes in public sector foreign currency deposits with MFIs.

M4 lending

This is sterling lending by MFIs to the M4 private sector. 

External and foreign currency flows

The total of external and foreign currency flows in the counterparts to M4 is due to the current account of the balance of payments, and to the M4 private sector’s capital account and foreign currency transactions. The impact of external and foreign currency factors on broad money is described in the Financial Statistics Explanatory Handbook (see Office for National Statistics) and, in more detail, in the Statistics articles ‘External and foreign currency flows and money supply’and ‘External flows and broad money' (Quarterly Bulletin 1983, pages 525-529).

Net non-deposit sterling liabilities

This is made up of: 

• changes in the sterling component of capital and internal funds and reserves of all MFIs (i.e. essentially their retained profits and issues of securities of over five years original maturity) less MFIs’ sterling investments in UK MFIs and other non-financial sterling assets
• the difference between building societies’ sterling transactions with each other pre-September 1997 and pre-October 1986, between banks in the UK. 

The balance sheet version of the counterparts can be reconciled to the alternative version of the counterparts. The Public Sector Net Cash Requirement (PSNCR) and its non-MFI sources of financing (‘public sector contribution’) are replaced by MFIs' net sterling lending to the public sector. M4 lending is shown in both versions of the counterparts. The external and foreign currency counterparts are more disaggregated in the MFIs' balance sheet version and show the lending and deposits breakdown within non-residents’ sterling and foreign currency business and the private and public sectors' foreign currency business. Net non-deposit sterling liabilities are replaced by sterling net other assets. Foreign currency net other assets, previously part of external and foreign currency finance, are also shown separately. 

Supplementary details

The Public Sector Net Cash Requirement is equal to the sum of the Central Government Net Cash Requirement (CGNCR), the Local Government Net Cash Requirement (LGNCR) and the Public Corporations Net Cash Requirement (PCNCR).

The Central Government Net Cash Requirement (CGNCR) was previously known as the Central Government Borrowing Requirement (CGBR). The Local Government Net Cash Requirement (LGNCR) was previously known as the Local Authorities Borrowing Requirement (LABR) and the Public Corporations Net Cash Requirement (PCNCR) was previously known as the Public Corporations Borrowing Requirement (PCBR). The Central Government Net Cash Requirement on own account excludes on-lending to local government and public corporations. The LGNCR and PCNCR include this borrowing.

Valuation and breaks

The figures for transactions in liabilities and assets in foreign currencies (including gold) have been adjusted to exclude the effect of movements in exchange rates. Up to and including the third quarter of 1981, transactions in investments etc were entered as far as possible on a cash receipts/payments basis in the calendar quarter series. To the extent that these cash transactions differed from changes in book values, an adjustment was made to the reported change in non-deposit liabilities. Thereafter, the figures were largely based on reported changes in book value, until 1994 when flows for investments issued by non- residents are again based on transactions data.

The presentation of the alternative counterparts to M4 was detailed in the Statistics article ‘Measures of broad money’. In October 1998, further changes from the European system of national and regional accounts (ESA95) were adopted and backdated. These resulted in revisions to the Public Sector Net Cash Requirement, the M4 private sector’s net purchases of ‘other’ central government debt, ‘other’ external and foreign currency finance of the public sector and (to a lesser extent) banks’ net non-deposit sterling liabilities. The revisions netted out within the counterparts, so M4 itself was not affected.

Breaks in series

Details of breaks in monetary series and temporary distortions to the data up to December 1988 are described in Technical Series paper No 23 entitled ‘Breaks in Monetary Series’ published by the Bank in February 1989. This paper was updated in Part 2 of the ‘Bank of England Statistical Abstract 1993’, and in section B of subsequent Statistical Abstracts.  

Differences between tables

Changes in the money stock may not equal the differences in the amounts outstanding because of adjustments placed to the flows data. These remove the effects of reclassifications, exchange rate changes, write-offs and other non-transaction factors which may affect the amounts outstanding.  

Gilt repo open market

In January 1996, a change in market rules was introduced allowing all market participants to borrow and lend gilts, where previously this was only available to gilt-edged market makers (GEMMs). This structural market change resulted in breaks to repo series in January 1996.

Change in reporting forms

The change in Bank of England reporting forms in September 1997 led to breaks in certain aggregate series.

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 some minor changes to the calculation of M4 counterparts were implemented. The effects of these have been removed from the flows data, and are small in terms of the amounts outstanding.  

Securitisations reporting

Since January 2010, all loans that have been securitised by MFIs are included on the institutions’ balance sheet for statistical reporting purposes. Some institutions reported securitisations on balance sheet before 2010, so their reporting did not change. However, other institutions brought back onto their balance sheets loans that had been securitised in the past. When these loans came back on balance sheet, an additional liability to the special purpose vehicle was also brought on balance sheet, to balance out the increase in loans. This caused a level shift in various series in January 2010, as well as changing the coverage of various series from January 2010 data onwards. For more details, see the Statistics article ‘Statistical reporting of securitisations’.

Changes to treatment of loan transfers

The treatment of loan transfers was changed from May 2015 to exclude their effects from all measures of net lending and include their effects in all measures of amounts outstanding from January 2010 data onwards. This affected the M4 lending (M4L, which was renamed as ‘M4L (historical measure)’) net lending measures and the ‘M4 lending excluding the effects of securitisations and loan transfers’ (M4Lx, which was renamed as M4L), amounts outstanding measures. As both measures became identical from January 2010 data onwards, the ‘M4L (historical measure)’ ceased after March 2015 data. For more details about this change, see the Statistics article ‘Changes to the treatment of loan transfers and lending to housing associations’.

Treatment of securities

Since February 2014, transfers of quoted shares have been omitted from net securities flow series, bringing their treatment more into line with our approach to transfers of loans. For more details about this change, see the Statistics article ‘Changes to the treatment of securities transactions in the Bank of England’s monetary statistics’. 

Further information

Changes to the treatment of securities transactions in the Bank of England’s monetary statistics, Strathern, A (2015), Statistics article, May
Changes to the treatment of loan transfers and lending to housing associations by Zeeshan Akhtar and Alistair Strathern (2015), Statistics article, April
Proposed changes to 'lending to individuals' data and some M4 lending series: consultation with users, Akhtar, Z, Bell, S and Owladi, J (2014), Statistics article, September
Seasonal adjustment of UK monetary aggregates: direct versus indirect approach,  Burnett, M (2006), Statistics article, February
Suspense items – allocations within aggregates banks’ data, Docker, S (2006) Statistics article, February
Seasonal adjustment of monetary data: annual review, Daines, M (2005), Statistics article, April
A comparison of the industrial analysis of bank lending to and deposits from UK residents and sectoral M4 and M4 lending Golcher, R and Walls, S (2005), Statistics article, January
Impact of securitisations and loan transfers activity on M4 lending Hall, L (2004) Statistics article, November 2004
UK monetary aggregates: main definitional changes Bank of England (2003), Statistics article, July
Compilation methods of the components of broad money and its balance sheet counterparts Westley, K and Brunken, S (2002), Statistics article, October
Monetary statistics and the monetary financial institutions consolidated balance sheet Docker, S and Willoughby, D (1999), Statistics article, July
Measures of broad money Bank of England (1987), Bank of England Quarterly Bulletin, May, pages 212-219
External flows and broad money Bank of England (1983), Bank of England Quarterly Bulletin, December, pages 525-529
External and foreign currency flows and money supply Miles, C M and Bull, P.A (1978), Bank of England Quarterly Bulletin, December, pages 523-529