By Zeeshan Akhtar and Alistair Strathern
These were discussed in the Bankstats article ‘Proposed changes to 'lending to individuals' data and some M4 lending series: consultation with users’, September 2014. The changes will be implemented for April 2015 data, available in the next Bankstats publication. They will not significantly affect headline data and will improve consistency across lending flows data published by the Bank, rationalising the available lending measures.
The consultation article published in the September 2014 Bankstats invited users to comment on two proposals to improve the treatment of loan transfers and lending to housing associations. The improvements to be implemented have taken into account comments from the consultation, and are as follows:
- Changing the treatment of loan transfers, to exclude their effects from all measures of net lending from January 2010 data onwards. This will affect the M4 lending (M4L) measures that will be published in future and, as M4L and M4 lending excluding the effects of securitisations and loan transfers (M4Lx) will become identical for January 2010 data onwards, only one of these series - M4Lx (renamed as M4L) - will be published regularly in future. The changes and how these relate to the series before and after January 2010 are outlined in Table 1.
- Removing lending to housing associations data from ‘lending to individuals’ series.
The implementation of these changes will not significantly affect headline data and will improve consistency across lending data published by the Bank of England, rationalising the available lending measures.
The series published in the Money and Credit statistical release and Bankstats tables that are affected by these changes are detailed in Annexes 1 to 7.
Loan transfers will be excluded from all measures of net lending (changes) from January 2010, to make their treatment consistent across all lending series. These loan transfers are sales and purchases of loans between monetary financial institutions (MFIs) and other institutions.
This change in the treatment of loan transfers will not affect the ‘lending to individuals’ series included in the Money and Credit statistical release, as these series consist of lending data for MFIs, specialist mortgage lenders (SMLs) and other lenders. The effects of loan transfers made between MFIs, SMLs and other lenders will, therefore, cancel out.
As loan transfers will no longer have an effect on net lending series, the Bank will cease publication of Bankstats Table A5.7. This table showed the value of monthly loan transfers made by each type of lender, to allow users to adjust the effects of loan transfers for the various components of net lending.
Effect upon the M4L, M4Lx and M4Lxex measures
The change in the treatment of loan transfers from January 2010 will mean that the M4L and M4Lx series will become identical in construction from this point onwards. The two series had already been closely aligned from this point, as from 2010 the treatment of securitisations was made consistent across both series by a reporting change to bring securitised loans back onto MFIs’ balance sheets. M4L flows will now be adjusted for loan transfers, and the loan transfer adjustment made to the M4Lx amounts outstanding will be removed. As a result, the Bank is taking the opportunity to rationalise its range of published lending measures. This will mean that from April 2015 data, published in the next Money and Credit statistical release and Bankstats, the current M4L series will no longer have new observations added. These series will be relabelled as M4L ‘historical measure’. They will, however, continue to be revised as appropriate. At the same time, the current M4Lx series and associated M4Lxex series will lose the ‘x’ suffix, becoming M4L and M4Lex respectively. This will bring their naming in line with other series, and will simplify the presentation of lending series to users. Charts A and B show that the alignment of M4L and M4Lx from January 2010 onwards will result in small changes to the data on amounts outstanding and flows. For the periods since January 2010 affected by loan transfers, the average amount was £194 million.
Treatment of housing associations
The Bank will be removing lending to housing associations from the ‘lending to individuals’ data from the publication of April 2015 data in the May Bankstats. This change will apply to the entire time series. Annex 8 illustrates how the new ‘lending to individuals’ series will be presented in comparison to the current construction. It shows that under the new construction, the treatment of lending to housing associations will become consistent between the ‘lending to individuals’ data and the households’ M4Lx measure, which already excludes lending to housing associations. This is because housing associations are classified as a type of private non-financial corporation (PNFC); they will continue to be included within the PNFCs’ M4Lx measure. The removal of lending to housing associations from ‘lending to individuals’ data will have a small effect on data. Since January 2010, lending to housing associations has accounted for an average of 3.8% of the amounts outstanding of MFIs’ secured lending to individuals and housing associations combined. The corresponding figure for lending by SMLs is less than 1%.
Data on MFIs’ amounts outstanding and net lending to housing associations will continue to be published separately. The Bank will publish new series for SMLs’ amounts outstanding and net lending to housing associations.
Where the changes will be seen
The changes outlined in this article will affect a number of the Bank’s published series. Annexes 1 and 2 present a full list of series in the Money and Credit statistical release and Bankstats publications respectively which will be renamed as a result of the loan transfer changes as well as those that will no longer have new observations added.
Annexes 3 to 5 present a list of the ‘lending to individuals’ series affected by the removal of lending to housing associations data and those that will cease to be published. Annex 6 lists the lending to housing association series that will be published separately from the ‘lending to individuals’ data.
As noted above, the change in treatment of housing associations data will make ‘lending to individuals’ data consistent with the households’ M4L measure; this means that some ‘lending to individuals’ series in Bankstats Table A5.3 will become identical to series in Bankstats Table A4.1 (which shows the ‘Sectoral analysis of M4 and M4 lending’). Some unsecured ‘lending to individuals’ series shown in Bankstats Table A5.6 are already identical to series shown in Bankstats Table A4.1; Annex 7 lists the series in Table A4.1 which will be allocated a new code in order for them to continue to be published without additional observations.
The changes outlined in this article will take effect from the next edition of Bankstats, published on 2 June 2015.
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