By Elias Razak
This article provides an update on the work outlined in this publication in April 2014.ONS and Bank of England staff continue to work together closely to achieve the work programme objectives. There are periodic meetings to review progress and to plan forthcoming work, complemented by regular contact between staff at the two organisations. This article continues to focus on the work programme in monetary and financial statistics; similar updates on ongoing projects in regulatory data may be published in the future. One of the main drivers behind many of the projects detailed in this article is the on-going implementation of the new European System of Accounts 2010 (ESA 2010), by both the ONS and the Bank of England. This is the newest internationally compatible EU accounting framework for a systematic and detailed description of an economy.
Flow of Funds
The Barker Review of National Accounts and Balance of Payments published in July 2014 made an explicit recommendation for the Bank and ONS to work together to develop Flow of Funds datasets for the UK. A joint project has therefore been initiated to work towards this, with dedicated resources from both organisations. This project looks to develop full ‘from-whom-to-whom’ data for both financial account transactions and balance sheet levels for the ESA 2010 sectors. ONS plan to publish new Flow of Funds matrices incrementally over the coming years as experimental tables, with a view to implementing these fully into the National Accounts by 2019.
Influencing international statistical standards
This project will consider methodological issues to be addressed in the next iteration of international guidelines. The Bank and the ONS will work together to identify areas where current reporting guidelines should be reviewed or where further clarification is needed.
Other Financial Corporations Sectorisation
Due to the long lead times required to introduce some of the ESA 2010 methodological changes to statistical collection processes, the ONS sought and were granted derogations from Eurostat. These derogations delay the provision of some of the changes from between 2017 and 2018. One of the derogations related to the implementation of the new sub-sector breakdown for other financial corporations (OFCs). The OFC sectorisation project will look to address the additional reporting requirements for the various OFC sub-sectors and aim to deliver the additional data before the derogation expires in 2017.
Central Bank Sector
A further requirement of ESA 2010 is to produce separate financial accounts for the Central Bank sector (S121). This is also subject to derogation until 2017.
Currently the ONS publish financial accounts for the combined Central Bank (S121), Other Deposit-Taking Corporations (S122) and Money-Market Funds (S123) sub-sector. This project will ensure the appropriate data flows are available for the ONS to produce separate sets of financial accounts for both the Central Bank
sector (S121) and the combined Other Monetary Financial Institutions (S122+S123) taking into account a need to lag the Central Bank data supplied to ONS to meet BoE disclosure requirements.
Rolling review of forms
The rolling review of forms is a Bank project that covers the review of each reporting form within a five-yearly cycle:
- The reviews of the derivatives form (DQ) and capital expenditure and finance leasing form (CX) have now been completed and reporting commenced from Q1 2015.
- The new version of the lending to businesses form (LN) will be reported for January 2016 data following a review last year. The changes are designed to provide additional detail on lending by business size such as an industrial split of gross lending, repayments and overdrafts by size.
- The rolling reviews of the profit and loss forms (PL and BG) are complete and new reporting forms and definitions were published on the Bank’s website in January 2015. The new forms come into effect from Q1 2016. The main changes are to collect additional information on employee stock options and separately identify business with captive financial institutions (albeit not until Q1 2017).
- The rolling review of the holding company form (HC) identified the need for wholesale changes: so much so that Form HC was discontinued and Form BH introduced. The main differences are to increase the frequency of reporting from annual to quarterly, and to collect a more comprehensive suite of information to comply with the latest National Accounts and Balance of Payments requirements. The new reporting form and definitions were published on the Bank’s website in January 2015. The new form comes into effect from Q1 2016.
- The rolling review of the coordinated direct investment form (DI) and the foreign affiliates form (FT) are now on-going: little in the way of change is expected.
- The industrial breakdown of loans and deposits data (Forms AD and AL) are currently under review, with updated forms due to be published in December 2016 and first reported for January 2017 data.
Securities issuance statistics
The Bank continues to work on the data quality management of UK data stored on the European Central Bank’s Centralised Securities Database (CSDB), and is working closely with the ONS to help assess potential data sources for flow of funds analysis.
Changes in MFIs’ holdings of securities
Further improvements to the calculation of credit measures are being developed, in order to ensure that the measure more accurately reflects flows of funding from MFIs to the M4 private sector. Currently, changes in the M4L measures include the effects of changes in MFIs’ holdings of securities. However, changes in the holdings of securities often reflect transfers of securities rather than real new lending. Such transactions cannot easily be separated from real flows of funding, so the proposed improvements are to exclude the effects of transfers of quoted securities. The proposals are detailed in a Bankstats article published on 29 September 2014.
Implementation of ESA 2010 and BPM6
The ONS implemented the new ESA 2010 and the new Balance of Payments Manual Sixth Edition (BPM6) in September 2014. Adoption of the new international standards included a raft of changes sourced from the Bank. Changes to GDP and the Balance of Payments Current Account were included in a Bankstats article published at the same time. The ONS had previously sought derogation from Eurostat on some changes, which has initiated the new OFC sectorisation project.
The precious metals form (PM) was introduced from March 2013 to collect allocated holdings of non-monetary gold, silver platinum and palladium. These data are now provided to the ONS on a monthly basis for inclusion in the UK Trade dataset.
FISIM development project
As part of the suite of changes introduced when the UK implemented ESA 2010, the methodology used to derive Financial Intermediation Services Indirectly Measured (FISIM) was amended, to bring it more into line with the international statistical guidelines. Agreement was also reached with Eurostat to deviate from the guidelines for FISIM earned on business with non-residents.
Treatment of loan transfers and housing associations
Improvements have been made to the treatment of loan transfers and lending to housing associations in lending data. All loan transfer effects are now removed at the contributor level. The change in method by which the effects of loan transfers are removed also means that the measures of M4L and M4Lx are now entirely consistent from January 2010, so a rationalisation of the available measures has been possible. In addition to this, housing associations are no longer included in the ‘lending to individuals’ measure, bringing it into line with National Accounts classifications (where housing associations are classed as PNFCs and not households). Details of the changes made are available in a Bankstats article published on 1 May 2015.
Beyond the bounds of the formal statistical work programme, the Bank is working to identify and address information gaps with other organisations internationally, co-ordinated by the Inter-Agency Group on Economic and Financial Statistics (comprising the Bank for International Settlements (BIS), the European Central Bank, Eurostat, the IMF, the Organisation for Economic Co-operation and Development, the United Nations Statistics Division and the World Bank). Most of the identified data gaps relate to the Bank’s financial stability objective. For one of the identified data gaps, the Bank began collecting additional data from reporting institutions, in order to complete Stage 2 of the work to enhance the usefulness of the BIS International Banking Statistics. This additional data collection, commenced in Q1 2014, will enable the Bank to provide the BIS with enhanced sector granularity and an increase in the scope of the existing BIS Locational and Consolidated International Banking Statistics.
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