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Financial Intermediation Review
Richard Morrison
David Jack
Sandy Stewart
Euan Smith
Financial Intermediation in the
Standard Industrial Classification
65 Financial Intermediation, Except Insurance and
Pension Funding
65.1 Monetary intermediation
65.11 Central banking
65.12 Other monetary intermediation
65.12/1 Banks
65.12/2 Building societies
65.2 Other financial intermediation
66 Insurance and Pension Funding, Except
Compulsory Social Security
67 Activities Auxiliary to Financial Intermediation
Current Banking Measures
• UK (ONS) use aggregate data for whole of
UK from Bank of England Sources
• Producing a fully tartan measure is not
straightforward
• Currently Scottish Estimates use fees and
commission and net interest measures
from the CSCB and augment with some
Bank of England data for the rest.
Aim
• Build a robust model that uses as much
data as we can lay our hands on.
– Which can also inform SNAP?
• Three main initiatives
– Carry on with CSCB relationship
• But take over their data collection to allow us more
resolution in our estimation
– Initiate new survey of Non CSCB banks
– Exploit ONS initiative on Welsh Index of
Finance
CSCB Relationship
• Committee of Scottish Clearing Bankers
aggregate two variables from their four
members
• We will now take over their collection and
provide them with their aggregation and
use the raw data in our model
– They will also provide raw data back to 2007.
New Survey
• We have now written to all Banks and
Building Societies who have substantial
operations in Scotland
• We requested a basic P&L return –
modelled on the statutory Profit and Loss
collection by BoE
• Developed the form with advice from the
industry and the Bank of England
ONS/BoE Methodology
• The ONS have been developing a “Welsh
Index of Finance” which has a number of
strands.
• Includes banking estimates with
methodology which is consistent for all
NUTS regions
• So there is a Scottish Series
ONS/BoE Methodology
The basic underlying methodology is:
• A regional profile is provided to Bank of England
– Based on employment share
• Fees and Loan Stock variables are compiled
– For both Banks and Building Societies
• The fees data deflated using the Average Earnings Index (AEI) for
workers in the finance industry.
• Loan Stock Variables are multiplied by aggregate margin rates
calculated from quarterly data from the BoE. This provides FISIM
• FISIM estimates deflated using an implied deflator obtained from the
UK GDP(O) system
Mash Up
• Our model will use the Scottish estimates
from the BoE/ONS methodology, adjusted
where we have primary data.
On Aggregation
• Historically we have published “Banking” as an individual
GVA series
• This is not consistent with UK (or most other national)
GDP estimates or the SIC
• The British Bankers Association recommend not
publishing at this level
• Bank of England will not allow us to publish at this level if
using their estimates
• CSCB have accepted that Financial Services will be the
lowest level disaggregation
• We will no longer separately identify Banking from
2010Q2 onwards