Non-residents are defined as economic units that have a centre of economic interest outside the domestic economic territory. UK economic territory excludes the Channel Islands and the Isle of Man.
Direct investment relationships arise when a direct investor directly owns equity that entitles it to 10 per cent or more of the voting power in the direct investment enterprise.
Trade in services
Trade in services are defined as:
Net Commissions and fees: examples include commissions and fees related to foreign exchange transactions, new issues of securities, portfolio management, derivative transactions etc.
Net spread earnings from business with non-residents. Net spread earnings aim to capture the service income from dealing activities. They reflect the margin earned from a banks’ dealing transactions between the transaction price and the mid-market price at the time of the transaction.
Exports of financial services indirectly measured (FISIM). FISIM is estimated by the Bank of England to account for the implicit revenue received by banks for providing loans and deposits. It is calculated as the difference between the amount of interest charged on loans and deposits and the interest that would have been charged at a risk-free reference interest rate.
Direct investment income: A direct investment relationship is defined as where one company owns 10 per cent or more of the equity capital in another company.
An operation is defined as a branch of a company where it is part of that legal entity but operating in a different company.
A subsidiary is a direct investment enterprise in which an investor owns more than 50 per cent of its voting power i.e. it is controlled by the investor or where the reporting entity has Control of the Board of Directors.
An associate is a direct investment enterprise in which an investor owns directly at least 10 per cent of the voting power and no more than 50 per cent.
Investment income comprises:
Direct investment income on outward investments comprises:
- profits(+) or losses(-) of non-resident branches and subsidiaries of UK-owned MFIs earned over the period
- dividends received from subsidiaries
Direct investment income on inward investments similarly comprises:
- profits(+) or losses(-) of banks operating in the UK that are themselves branches or subsidiaries of non-resident companies
- dividends paid to those non-resident companies
Portfolio investment income (receivable): this mainly comprises;
- dividends received from holdings of equity issued by non-residents (not included in direct investment income)
- income receivable on bonds and notes, floating rate notes (FRNs), certificates of deposit, commercial paper and other paper issued by non-residents
Other investment income: this mainly comprises;
- loans and advances (or deposits)
- all interest receivable from (or payable to) non-residents on repo/reverse repo transactions
- From 1999 Q1, other income payable includes payments by UK banks on their security lending from non-residents
Other income receivable/payable excludes FISIM charged by UK banks on their loans to and deposits from non-residents.