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Home > Statistics > Explanatory Notes - M4 Lending excluding lending to intermediate other financial corporations (OFCs)
 

Explanatory Notes - M4 Lending excluding lending to intermediate other financial corporations (OFCs)

Overview

 

M4 lending (M4L) excluding lending to intermediate OFCs (M4Lex) is a more economically relevant measure of credit than the headline measure of M4L.

Availability

Data are available quarterly, from 1997 Q4 onwards for amounts outstanding and from 1998 Q1 onwards for flows.  Data are seasonally adjusted (see Definitions for more detail).
A monthly version is available from July 2009 data onwards.

Sources

UK-resident banks and building societies report data directly to the Bank of England on form AL.  Approximately 100 banks and building societies with eligible liabilities over £400mn or private sector deposits or loans over £1,000mn report the data on a monthly basis.

Definitions

More information  is available at M4 lending. In the 2007 Q3 Quarterly Bulletin, the Bank of England set out a proposal to modify the measurement of UK M4 by excluding the money holdings of some OFCs, in order to obtain a better measure of those money holdings that are likely to be used as a medium of exchange.  Several types of OFCs mainly provide intermediation services to banks and building societies.  Banks' and building societies' loans and advances to these 'intermediate OFCs' are excluded from this measure of credit.  Intermediate OFCs are defined as: non-bank credit grantors; mortgage and housing credit corporations; bank holding companies; securitisation special purpose vehicles and other activities auxiliary to financial intermediation.  In addition to the loans and advances to these five types of OFCs, sterling loans and advances arising from transactions between banks or building societies and 'other financial intermediaries' belonging to the same financial group are excluded from this measure of credit. Until December 2010, estimates of these intra-group loans and advances were based on anecdotal information provided by a sample of banks.   From January 2011 onwards, these intra-group deposits are collected as part of the reporting on form AL. Banks' and building societies' holdings of securities issued by their own securitisation vehicles are also excluded from this measure of underlying credit to the UK economy.

The data on M4L excluding intermediate OFCs are constructed as follows:

M4Lex is calculated as households' M4L (seasonally adjusted) plus PNFCs' M4L (seasonally adjusted) plus non-intermediate OFCs (NIOFCs) M4L (seasonally adjusted). More details are available in the article published in the September 2010 Bankstats'Seasonal adjustment of quarterly M4 excluding intermediate OFCs (M4ex)'. Following a review of the seasonal adjustment method for non-intermediate OFCs once a sufficient run of monthly data was available, changes were made to the seasonally adjusted measures of M4 and M4 lending to bring them into line with the usual approach.  The changes are detailed in Bankstats, October 2013, ‘Modifications to the seasonally adjusted measures of M4 and M4 lending excluding intermediate OFCs’.

Valuation and Breaks

Building societies transition to Bank of England reporting 

Building societies' statistical reporting transitioned from the Financial Services Authority to the Bank of England on 1st January 2008, and some minor changes to the calculation of M4 and M4 lending have been implemented.  The effects of these have been removed from the flows data, and are small in terms of the amounts outstanding.

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, please see the April 2015 Bankstats (Monetary and Financial Statistics) article ‘Changes to the treatment of loan transfers and lending to housing associations’ by Zeeshan Akhtar and Alistair Strathern. 

Changes to AL form

Anecdotal information on banks' intra-group business is available back to 2005 Q1 only. From January 2011, this information is collected more formally as part of Form AL.
Form AL also now includes a separate item for securitisation special purpose vehicles. Prior to January 2011, these formed part of mortgage and housing credit grantors, non-bank credit grantors and other financial intermediaries. 
 

Treatment of securities

Data for MFIs’ holdings of securities issued by IOFCs and NIOFCs have been collected since January 2014. These data have been used to improve the calculation of the M4 lending excluding IOFCs measure, as securities issued by IOFCs were previously estimated. For further details, please see the March 2015 Bankstats ‘Improvements to the compilation of M4 lending excluding intermediate OFCs series and the publication of additional Monetary Financial Institutions’ data’.
 
From February 2014 data onwards, transfers of quoted shares were omitted from net securities flow series, bringing their treatment more into line with the Bank’s approach to transfers of loans. For more details about this change, please see the May 2015 Bankstats (Monetary and Financial Statistics), ‘Changes to the treatment of securities transactions in the Bank of England’s monetary statistics’, available at www.bankofengland.co.uk/statistics/Documents/articles/2015/2may.pdf
 

Break adjusted M4Lex

Break adjusted quarterly seasonally adjusted levels series for M4Lex are available from the Statistical Interactive Database.

Key Resources

 

Changes to the treatment of securities transactions in the Bank of England’s monetary statistics, Strathern, A (2015), Bankstats, (Monetary and Financial Statistics), May 2015 

 Changes to the treatment of loan transfers and lending to housing associations by Zeeshan Akhtar and Alistair Strathern, Akhtar, Z and Strathern, A (2015), Bankstats, (Monetary and Financial Statistics), April 2015

 
 
Proposed changes to 'lending to individuals' data and some M4 lending series: consultation with users’, Akhtar, Z, Bell, S and Owladi, J (2014), Bankstats (Monetary and Financial Statistics), September 2014
 
 'Seasonal adjustment of M4 excluding intermediate OFCs (M4ex) - an update', Hussain, F and Gilhooly, R (2010), Bankstats (Monetary and Financial Statistics) November 2010 
'Measures of M4 and M4 lending excluding intermediate other financial corporations', Janssen, N (2009), Bankstats (Monetary and Financial Statistics) May 2009

 'Proposals to modify the measurement of broad money in the United Kingdom: a user consultation', Burgess, S and Janssen, N (2007), Bank of England Quarterly Bulletin, Vol. 47, No. 3, pages 402 - 4
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