VALUATION AND BREAKS
The consolidated Monetary and Financial Institutions' (MFIs') balance sheet shows their assets and liabilities as a whole in relation to third parties.
Data (levels and flows) are available quarterly from 1990 Q2 and monthly from April 1990. Data for the contributions are available only from April 1998. The data are available not seasonally adjusted and seasonally adjusted
Tables B2.3 and B2.4 show historical balance sheets for the "other banks" and "building societies" sectors respectively (see December 2009 Bankstats or earlier editions).To protect the confidentiality of reporting institutions data the publication of separate series for building societies has been discontinued from January 2010.
Publication of data will usually occur on the 21st working day following the end of the period in tables B2.1 to B2.5 in Bankstats (Monetary and Financial Statistics) or subject to the published schedule of releases.
The MFIs' consolidated balance sheet is provided by the following 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 Total assets (BT items £40 + E40 + C40) in excess of £3bn, or private sector holdings (BT items £2H + £3H or £29D) in excess of £1bn 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 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.
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.
Balance sheet data cover both the liabilities and assets of all UK resident banks and building societies.
Transactions within the MFI sector are netted out. Because the contributions of the central bank, other banks and building societies are consolidated at the MFI level, they do not, for instance, show banks' positions with building societies. As a result, the contributions of the central bank, other banks and building societies are not balance sheets in their own right, but show the contributions to the wider MFI balance sheet.
With effect from April 1998, UK statistics were brought into line with the standards of the European System of Accounts ('ESA95'). A new monetary financial institutions (MFI) sector was introduced comprising:
- the central bank;
- other banks; and
- building societies.
Further explanation of the link between the published monetary statistics and the MFIs' consolidated balance sheet is detailed in the July 1999 Bank of England: Monetary and Financial Statistics article 'Monetary statistics and the monetary financial institutions consolidated balance sheet'.
The instrument detail is consistent with that specified in ESA95. The full instrument breakdown is as follows:-
|currency, deposits and money market instruments
||securities other than financial derivatives|
|other securities issued
|other financial liabilities
||other financial assets|
Adjustments on consolidation
As noted above, in producing the MFI consolidated balance sheet, transactions between MFIs are netted. Any difference between reported liabilities to, and claims on, other MFIs is handled as follows.
The inter-MFI difference is allocated to sectors according to the results of a detailed investigation of its causes – for further details please see the September 2011 Monetary and Financial Statistics article ‘Estimation and allocation methods within money and credit data’ In particular, the allocation of the sterling inter-MFI difference is as follows:
- 35% added to OFC deposits, within wholesale M4;
- 15% added to non-resident deposits;
- 35% deducted from OFC loans, within M4 lending;
- 15% deducted from non-resident loans.
The allocation of the foreign currency inter-MFI difference is as follows:
- 30% added to OFC foreign currency deposits;
- 20% added to non-resident foreign currency deposits;
- 30% deducted from OFC foreign currency loans;
- 20% deducted from non-resident foreign currency loans.
Prior to September 2011, 95% of the sterling inter-MFI difference was allocated to OFC deposits, within wholesale M4, the remaining 5% being allocated to transits. In addition, 60% of the foreign currency inter-MFI difference was allocated to non-resident foreign currency deposits, and 40% to OFC foreign currency deposits. This was based on the results of an earlier investigation (see page 101 of June 1992 Economic Trends).
Currency, deposits and money market instruments. Currency includes notes issued by Scottish and Northern Irish banks (net of Bank of England notes held as backing) as well as notes issued by the Issue Department of the Bank of England. Holdings of currency by the private sector are the residual of the total issued less estimated holdings by all other sectors. (Coin is a liability of HMG and not included within currency in the MFIs' balance sheet.) Deposits and money market instruments include estimated holdings of MFIs certificates of deposit, commercial paper, bonds, FRNs and other instruments of up to and including five years' original maturity, and, from December 1995, liabilities arising from repos.
With the addition of its holding of UK coin, the private sector's holding of sterling bank notes, deposits and money market instruments equals M4.
Other liabilities comprise: MFI's net liabilities under financial derivatives; unsubordinated instruments of more than five years' original maturity; and other capital items, including retained profits. In the contributions tables these instruments are shown as one category 'other liabilities', whilst they are shown separately at the MFI balance sheet level.
Loans include all forms of lending by MFIs, other than holdings of securities. It includes holdings of non-bank bills, amounts receivable under finance leases, and, from December 1995, lending under reverse repos. A revised treatment of acceptances was introduced in September 1997 and backdated. Although acceptances are still reported off balance sheet by individual reporters, in aggregate in the consolidated balance sheet, and in the monetary statistics, they now count as on the balance sheet of the accepting reporter i.e. a bank accepting a bill is regarded as having a claim on the party on whose behalf the acceptance credit facility was opened, and a liability to the holder of the bill. Almost all sterling bank bills are held by other MFIs, so the resulting liabilities and claims net out on consolidation. For further details see articles in the September 1997 and February 1998 issues of Bank of England: Monetary and Financial Statistics.
MFIs' sterling loans to, and investments in, the private sector are equal to the sterling lending counterpart to M4.
Other assets include fixed assets, gold bullion beneficially owned, and other commodities.
Transit and suspense items
- Transit items appear in banks' and building societies' balance sheets both as credits and debits (e.g. standing orders or cheques in course of collection).
- Suspense items relate to customers' funds that are not held in customers' names.
When reporters' figures are aggregated, these items may give rise to double-counting of deposits received from customers outside the banking system or, where overdrawn or loan accounts are concerned, to the under-recording of total lending made to such customers. The data for deposits and loans are therefore, adjusted with slight variations between banks and building societies to take account of the different types of activity these sets of reporters are predominant in. For banks, these adjustments are effective from February 2006 and for building societies from January 2008. Prior to January 2008, no similar adjustments were required for building societies' transit items because they represented 'uncleared cheque' business with banks and did not therefore give rise to double-counting (as detailed above).
For banks (and building societies respectively):
- 70.4% (84%) and 3.6% (8%) of sterling credit transit items are added to non- interest-bearing deposits from the UK private and public sectors respectively. The remaining 23.6% (8%) and 2.4% (0%), for UK private and public sectors respectively, is subtracted from advances.
- 72% (91%) of sterling debit transit items are subtracted from non-interest-bearing deposits from the UK private sector and 28% (9%) are added to advances to the UK private sector.
- 71% (90%) of sterling credit items in suspense are added to the UK private sector's non-interest-bearing deposits. The remaining 29% (10%) is subtracted from advances to the UK private sector.
- 67% (88%) of sterling debit items in suspense are subtracted from the UK private sector's non-interest-bearing deposits. The remaining 33% (12%) is added to advances to the UK private sector.
- For foreign currency transit items, the difference between credit and debit items is added to deposits from non-residents.
- 39% (39%) of foreign currency credit items in suspense are added to non-residents’ deposits and 23% (23%) to UK private sector deposits. The remainder is subtracted from advances, 26% (26%) non-resident and 12% (12%) UK private sector.
- 36% (36%) of foreign currency debit items in suspense are subtracted from non-residents' deposits and 24% (24%) from UK private sector deposits. The remainder is added to advances, 24% (24%) non-resident and 16% (16%) UK private sector.
VALUATION AND BREAKS
The central bank sector is made up of the Banking Department of the Bank of England (whose assets and liabilities were previously included in the banks sector) and the Issue Department (previously classified as part of central government). The other banks sector is made up of all banks operating in the UK other than the Bank of England. Banks within the United Kingdom consist of offices in Great Britain and Northern Ireland of institutions authorised under the Banking Act 1987. From 1983, it includes the Banking Department of the Bank of England (until March 1998), and from 1 January 1993, in accordance with the Second Banking Co-ordination Directive, UK branches of "European Authorised Institutions" - see Press Notice of 4 January 1993. The building societies sector consists of all building societies operating within the UK.
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 the MFIs' consolidated balance sheet have been implemented. The effects of these have been removed from the flows data, and are small in terms of the amounts outstanding unless otherwise footnoted.
Exchange rate adjustments
The figures for reporters' transactions in liabilities and assets in foreign currencies (including gold) have been adjusted to exclude the estimated effect of movements in exchange rates. Prior to January 2008, building societies' non-sterling assets and liabilities were not adjusted for exchange rate changes.
Building society conversions
The transfer of business of a number of building societies to the bank sector has affected both bank and building society flows and levels data for tables B2.3 and table B2.4. From the month of transfer, the business of these societies is included in the bank rather than building society sector. Flows for the month of transfer have been adjusted for the change in both populations; levels data however are not break-adjusted.
- Cheltenham & Gloucester Building Society joined the Lloyds Bank Group in August 1995.
- National & Provincial Building Society transferred its business to Abbey National plc in August 1996.
- Alliance & Leicester Building Society converted to public limited company status in April 1997.
- Halifax Building Society converted to public limited company status in June 1997.
- Woolwich Building Society converted to public limited company status in July 1997.
- Bristol & West Building Society joined the Bank of Ireland Group in July 1997.
- Northern Rock Building Society converted to public limited company status in October 1997.
- Birmingham Midshires Building Society joined the Halifax Group in April 1999.
- Bradford & Bingley Building Society converted to public limited company status in December 2000.
From January 2010 data onwards, all loans that have been securitised by MFIs will be included on the institutions' balance sheet for statistical reporting purposes. Some institutions reported securitisations on balance sheet prior to 2010, so their reporting did not change. However, other institutions brought back on to their balance sheets loans that had been securitised in the past. When these loans came back on balance sheet, an additional liability to the SPV 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, please see the February 2010 Monetary and Financial Statistics article "Statistical Reporting of Securitisations" by Jennifer Owladi.
- Kirkham, L (2011), ‘Estimation and allocation methods within money and credit data’, Bankstats (Monetary and Financial Statistics) September 2011.
- Owladi, J (2010), 'Statistical Reporting of Securitisations', Monetary and Financial Statistics, February.
- O'Connor, P (2008), 'Transition of building society statistical reporting', Monetary and Financial Statistics, January.
- Bank of England (2006) 'The implications of money market reform for data' Monetary and Financial Statistics, June.
- Docker, S (2006),'Suspense items - allocation within aggregate banks' data', Monetary and Financial Statistics, February.
- Bigwood, J (2004), 'Data cleansing for Banking and monetary statistics', Monetary and Financial Statistics, May.
- Westley, K and Brunken, S (2002),'Compilation methods of the components of broad money and its balance sheet counterparts', Monetary and Financial Statistics, October.
- Docker, S and Willoughby, D (1999), 'Monetary statistics and the monetary financial institutions consolidated balance sheet', Monetary and Financial Statistics, July.
- Brown, H (1998), 'Impact of the review of banking statistics: changes and additions to published data', Monetary and Financial Statistics, February.
- Thorp, J (1997), 'Outcome of the review of banking statistics, including effects on monetary and other banking statistics', Monetary and Financial Statistics, September.
- Dooks, D and Finbow, G, (1992) 'Investigating the domestic interbank difference' Economic Trends, June, page 101-104.