2016년 2월 23일 화요일

[발췌: Peter Hill's] The services of financial intermediaries or FISIM revisited (1996)


출처: Peter Hill. “The services of financial intermediaries or FISIM revisited.” Paper presented to the Joint UNECE/Eurostat/OECD Meeting on National Accounts, Geneva, 30 April-3 May 1996. Submitted by the Australian Bureau of Statistics.


※ 발췌 (excerpt):

The Author's Note:

This paper has been stimulated by three other recent papers on the subject of calculating an allocating FISIM by Eurostat(1996) and Australian Bureau of Statistics (Carl Obst 1995 and 1996). These papers have moved the subject forward to the point at which it should be possible to reach consensus on these issues. There is much common ground between them, despite disagreement on one final point. The present paper seeks to take many of the arguments already advanced in the Eurostat and ABS papers to their logical conclusion and is intended as a further contribution and clarification. In order finally to settle the treatment of FISIM, it is necessary to go back and undertake a critical review of the basic principles underlying the measurement of FISIM in the SNA to expose a basic misconception about the productive activities of financial intermediaries that has dogged the subject for the last few decades.


Introduction

The measurement of the production and consumption of the services of banks, or financial intermediaries, has a long and troubled history in national accounts. There are two main reasons for revisiting FISIM at the present time and undertaking a critical review of the basic principles underlying its measurement. The first is that the treatment of FISIM was not in fact settled in the 1993 SNA. To quote the first two paragraphs of page xliii of the 1993 SNA:

  “The 1993 SNA ... represents a stage in the evolution of national accounting. To continue that evolution, further research will need be carried out. Consensus must be reached on certain topics before the can be incorporated into international guidelines and standards. ... In 1993, the Statistical Commission agreed that the highest immediate priority was to develop guidelines for the explicit allocation of financial intermediation services charges indirectly measured (FISIM) to specific users.” (emphasis added)

  Inter-Secretariat Working Group was charged with the responsibility of pursuing this and a few other topics in order to incorporate some improved guidelines and standards into the SNA without waiting 25 years for another comprehensive revision. In the meantime, and until an international guideline could be agreed on FISIM, the Statistical Commission recommended that countries should be permitted some "flexibility" with regard to the treatment of FISIM. This paper should not be construed as re-opening issues that were decided in the 1993 SNA. On the contrary, the treatment of FISIM is still very much on the agenda of unfinished business. There is no international standard as yer for FiSIM. 

  The expedient adopted in the 1968 SNA of treating the charge as the intermediate consumption of a "nominal industry" is no solution. It is debatable whether inventing an imaginary industy with negative value added is much better than recording negative value added for financial intermediaries. It is certainly much less transparent to users. Recording negative value added for financial intermediaries would, of course, understate GDP, but the 1968 expedient continues to understate GDP, although to a lesser extent. The major concern of many countries and the European Union, however, is that the 1968 expedient understates GDP to an extent that varies from country to country.

  If financial intermediaries are actually producing services, some other real institutional units must also be consuming those services. They cannot disappear into a black hole. If output is to be recorded in a comprehensive, integrated system of economic accounts the use of that output must also be recorded, a view felt strongly by many experts involved on the 1993 revision.

  The second reason why this unfinished business of the 1993 SNA needs to be finished quickly is the urgent need not merely to arrive at an agreed solution, but an economically defensible solution, within the context of the 1995 ESA. The calculation and allocation of FISIM affects GDP and has important policy and financial implications therefore.


The nature of the services produced by financial intermediaries

  There are presumably two points on which there is a consensus and which are taken for granted throughout this paper.

(1) Financial intermediaries are actually engage in production as defined in the SNA. They incur costs of production in the form of intermediate inputs, compensation of employees, and capital consumption in the same way as other producers. They are also profitable. However, the exact nature of some of their outputs is somewhat elusive and their value is difficult to estimate.

(2) Financial intermediaries perform a unique and highly important function in the economy by facilitating the flow of funds from lenders to borrowers. For this reason, financial corporations are distinguished from non-financial corporations at the first level of sectoring in the System, as explained in para. 4.77 of the 1993 SNA.

  However, lending out of own funds, as distinct from intermediated funds, is deemed in the SNA not to require any productive activity. It will be argued here that this restriction on the productive activity of financial institutions is based on a conceptual error that results from failing to distinguish the act of lending ^per se^ (which is not production whatever the source of the funds) from the activities that precede, accompany and facilitate it. The restriction is unjustified and unnecessary, and seems to be the main reason why it may be difficult, or even impossible, to reconcile the estimated total value of services provided to individual units or sectors with global FISIM calculating using the standard SNA definition.


Calculating FISIM at the level of individual institutions or sub-sectors

The 1993 SNA provides explicit guidance not merely on the nature of the services financial institutions produce and how they should be valued but also to whom they are delivered. Para. 6.124 makes the familiar point that financial institutions do not always "charge their customers individually for services provided" but charge higher, or pay lower, rates of interest "than would otherwise be the case"; that is, than if some 'pure' market rate of interest were used. Financial institutions choose to substitute higher or lower interest charges, or payments, for the direct payment of fees for many of the services they render to their customers. In order to charge indirectly in this way, they must be able to fix the interest rates they charge or pay, discriminating not only between lenders and borrowers but also between individual customers.

  The significant point in paragraph 6.124 is that it addresses explicitly not merely the question of how the services should be estimated and valued but ^to whom^ the services for which no explicit charges are made are delivered. If the guidelines given in paragraph 6.124 are followed, there are no great conceptual problems about estimating the production and consumption of the services, although there may be data problems, including the choice of an appropriate 'pure' rate of interest, generally called the 'reference' rate of interest.

  The description just given of the way in which financial intermediaries are considered to go about charging indirectly for many of their services is meant to be realistic. The fact that many of activities of financial intermediaries are finance by manipulating the interest rates they charge, or pay, their customers is widely accepted. For example, on page 9 of the Eurostat paper it is stated that "FISIM output is generated by the ^management^ by financial intermediaries of loans and deposits whose ^rates they control" ... (emphasis added).

  The customers to whom financial intermediaries are providing services consist of those institutional units who have made deposits with them or taken loans or advances from them. These units have ^continuing relationships^ with the intermediaries which go beyond pure creditor/debtor relationships.

  In practice, financial institutions engage in three broad groups of productive activities delivering different kinds of services to their customers:

  (1) taking, managing and transferring deposits;
  (2) making loans or other investments;
  (3) offering financial advice or other business services.

They often charge specific fees for some of these services, especially the third kind, but their customers are likely to be charged indirectly for the first two by reducing interest payments on deposits or increasing interest charges on loans. When they take deposits, financial intermediaries do not simply borrow funds. They provide security and convenience to their depositors and also perform the important function of managing the transferable deposits which are used as means of payment. Similarly, when they make loans or advances, they do not simply lend. They have to mobilize funds in order to be in a position to offer immediate and flexible creit facilities to their customers, most of whom would otherwise find it difficult, costly and time consuming to raise finance.

  Like many other producers, especially large producers, financial intermediaries are thus not engaged in just one type of production but in two or more different activities at the same time. In practice, financial intermediaries deliver two different kinds of services in parallel to their depositors and borrowers for which they charge separately. Of course, the activities complement each other and there are good economic and financial reasons to explain why intermediaries carry out both together. But each activity nevertheless remains productive in its right, delivering different services to different customers.


( ... ... )

Lending out of own funds

The definition of 'global' FISIM as given in para. 6.125 of the 1993 SNA is that "total value of FISIM is measured in the System as the total property income receivable by financial intermediaries minus their total interest payable, excluding the value of any property income receivable from the investment of their own funds, as such income does not arise from financial intermediation." The definition is carried over from the 1968 SNA (para. 6.33).

  This definition implies that the services that financial intermediaries actually provide to their customers are only to be recorded  and valued when the activities which produce the services are not only undertaken jointly but specifically linked to each other. When a financial institution lends funds, it is deemed to be engaged in production only if the funds it lends have been borrowed for the purpose, even though the institution itself may be incapable of identifying the origin of the particular funds in question and even though the activities involved may be the same whatever the origin of the funds. By implication, taking deposits is also deemed not to be productive unless the funds deposited are lent to others.

  The justification for excluding lending from own funds seems to be that lending is not itself a process of production in an SNA sense. If one institutional units lends to another the transaction is recorded in the financial accounts of both parties, and no entry is needed in the lender's production account. The newly created financial asset in the form of a loan is certainly not output. For example, when a household makes a deposit with, i.e., lends to, a financial institution, it is not producing anything. Nor does the household have to engage in production to make the deposit. It seems to follow from this that when a financial institution simply lends its own funds it cannot be engaged in production either. This is a fallacy, however, which results from failing to distinguish the lending from the productive activity in which an institutional unit is obliged to engage when it makes a business of lending to many customers.

  ( ... ... )

  The service charges demanded by lenders in the business of lending is a reflection of the fact tht they are engaged in production and providing services for which their customer have to pay if they want to obtain loans. These services are the same whether the lenders use their own funds or borrowed funds. In either case, the lending itself continues to be recorded in the financial accounts of both parties and does not involve the production account. It may be concluded that the fundamental distinction drawn in the SNA between lending out of own funds and intermediated funds is irrelevant and misconceived. It cause the production boundary to be drawn too narrowly and imposes an unnecessary restriction on the productive activities of financial institutions.


Financial intermediation as a process of production

  Because lending itself is not production, and if lending is not differentiated from the activities which precede, accompany and facilitate it, a need may be felt to invent another form of productive activity, namely financial intermediation, to justify the inclusion of the activities of the major financial institutions concerned within the production boundary, as they obviously must be. Financial intermediation may be an extremely important function performed by many financial institutions but it is not a process of production. Moreover, as just noted, by insisting that financial institutions are only productive when they engage in intermediation, the SNA understates the contribution that financial institutions make to the production of the economy.

  Financial intermediation is defined in para. 4.78 of the 1993 SNA as "a productive activity in which an institutional unit incurs liabilities on its own account for the purpose of acquiring financial assets by engaging in financial transactions on the market." This definition is given in the chapter concerned with the definition and classification of institutional units and not in the chapter concerned with the concept and definition of production. It is intended not as a definition of a process of production in an SNA sense, but as a description, in an ISIC sense, of the distinctive nature, or characteristics, of the activities undertaken by financial intermediaries which enables the institutions concerned to be distinguished and classified separately from other institutional units at the first level of sectoring in the SNA. The description is needed and actually used to identify those corporations that should be classified as financial corporations and include in Sector S.12 (see para. 4.77 of the 1993 SNA).

  A process of production in an SNA, or general economic, sense has to have clearly specified inputs and outputs of goods and services (see para. 6.15 of the 1993 SNA). Financial intermediation cannot be interpreted as a production process in this sense.  Intermediation may perhaps be interpreted as the transformation of liabilities into assets, but this kind of transformation makes no sense as a process of production. It is totally different from the physical transformation of inputs into outputs. Financial assets and liabilities are not goods and services which are consumed as intermediate inputs or produced as outputs. Instead of being consumed by the intermediation process, the liabilities are actually created in the process and continues to exist alongside the assets after the production has taken place. The new assets, the loans, are no more 'outputs' than the newly created liabilities.

  In fact, of course, the outputs produced by financial intermediaries are neither assets nor liabilities but the services they provide to their customers─the borrowers and lenders involved in the intermediation process.


Property income from securities

  Why financial institutions buy and sell long or short term securities on the open market they are price takers who cannot manipulate, or control, the prices at which they buy or sell and hence the interest rates they receive or pay. They do not provide services to the units from whom they buy or to whom they sell. Their relationships with the latter are no different from those of any other units such as households, non-financial corporations or government units trading on financial markets.

  The same position is taken on page 9 of the 1996 Eurostat paper: "there is no intermediation service for securities other than shares since the relationship between a financial intermediary and another unit is the same as the relationship between two non-financial intermediary units. ... Thus, when financial intermediaries issue bonds, they do not render FISIM to the units acquiring those bonds. Likewise, when the financial intermediaries acquire bonds, they do not render FISIM to the issuers of those bonds either." The fact that financial institutions are unable to levy service charges on the units from whom they buy, or to whom they sell, securities on the open market has also been noted by other writers on FISIM.

  If a financial institution issues securities in oder to make loans, it may be engaged in intermediation but the only services produced are those provided to its borrowers. The interest paid on the securities is irrelevant and should not enter into the calculation of FISIM, either at the level of the individual institution or on aggregate for the economy as a whole. Conversely, if financial institutions purchase securities, the property income receivable should not enter into the calculation of FISIM, whatever the source of the funds. In any case, the interest payable or receivable on marketable securities may be so close to the reference rate that it may make little difference in practice whether they are included or excluded, but nevertheless it is conceptually wrong to include them. The same conclusion is reached in the Eurostat paper where it is stated on page 9: "Consequently, only loans and deposits (including loans and deposits internal to the FIs) are to be considered as generating a financial intermediation service."

  It may be concluded that the global definition of FISIM is conceptually wrong on two counts: (1) by including property income and interest on marketable securities in the calculation of FISIM and (2) by restricting the property income receivable to income from loans or other assets acquired out of borrowed (intermediated) funds. It is now necessary to turn to the actual calculation of the production and consumption of the services for which financial institutions charge indirectly, a task which is not the same as trying to find the the least bad way of allocating a global charge that is incorrectly defined in the first place.


Total service charges payable by depositors and borrowers versus global FISIM

  It is necessary to compare the sum of the service charges payable to financial institutions by their depositors and borrowers with global FISIM as defined in the SNA. Call the Sum of the Service Charges SSC to avoid confusion with global FISIM. SSC needs to be calculated for all financial corporations in sub-sectors S.122 and S.123 of the 1993 SNA. The treatment of the Central Bank may be deferred for separate consideration and the FISIM considered here should therefore be assumed to exclue the Central Bank.

SSC

  As explained in paras 6.124 to 6.128 of the 1993 SNA, [:]
  • the indirect or implicit service charge payable by a borrower from a financial institution is equal to the excess of the 'interest' payable over what would be payable if some 'pure' rate of interest, or reference rate, were to be charged
  • Similarly, the service charge payable by a depositor is the excess of the interest that would be receivable if the reference rate were used over the 'interest' actually receivable
  • Inverted commas are place about 'interest' in this context as a remainder that, on the assumptions made, the actual amounts of 'interest' receivable or payable are not true interest, in an SNA sense, but true interest plus or minus a service charge.
  As already emphasised, two facts (not assumptions) underlie this method of estimation. The first is that the indirect charges received by financial institutions must be paid by real institutional units in respect of services delivered to these units, who must be their customers. The second is that financial institutions can only levy charges indirectly when they are in a position to control the interest rates they pay or charge their customers. It follows that indirect service charges are only levied on depositors and borrowers in respect of their deposits and loans, as also argued by Eurostat.

  It is convenient to introduce some notation to explain the calculation of SSC and to see how it differs from global FISIM.


Let L=Total Loans, D=Total Deposits, OF=Own Funds, 
    R(L)='Interest' rate on loans, R(D)='Interest' rate on deposits, r=reference rate of interest.

The total value of the indirect service charges receivable by a financial institution from its customers, or its SSC, is given by the following expression:
SSC=[R(L)L-rL] + [rD-R(D)D]      (1)
     =[R(L)L-R(D)D] -  r[L-D]      (2)
The term in the first bracket in (1) is the total indirect service charge receivable from borrowers, while the second bracket is the total indirect service charge receivable from depositors. The charges are recorded as intermediate or final consumption expenditure of domestic customer, or as exports. Expression (1) appears to be identical with the formula proposed by Eurostat on page 17 of their paper for calculating the service charges for individual sectors. The formula follows inexorably from the way the charges are made.

  rL, loans multiplied by the reference rate, is true interest payable by borrowers, while rD is the true interest receivable by depositors. These are the interest flows to be recorded in the SNA's primary income accounts. It is also worth noting that when it is stated in the texts of the SNA and ESA that the global FISIM is equal to total property income receivable minus total interest payable, the terms 'property income' and 'interest' should, in principle, also be in inverted commas to draw attention to the fact that these flows are not actually the property incomes or interest recorded in the primary income accounts but the true property incomes or interest ^plus^ or ^minus^ the implicit service charges.

  Expression (2) is merely a rearrangement of (1) to which it is algebraically equivalent, but it is often convenient to be able to refer to this version of the SSC formula. It can be seen that SSC is independent of the reference rate only in the special case in which the total values of loans and deposits happen to be equal to each other, in which case SSC simplifies to total 'interest' receivable ^minus^ total 'interest' payable. (Assuming there is also no other property income on other assets or liabilities, SSC would also equal global FISIM as defined in the SNA in this simple special case, because all loans could be treated as being made out of the deposits, no deduction being needed for the interest received on own funds.) When loans and deposits are not equal, SSC depends not only on the reference rate selected but also on the size of the difference between loans and deposits. If loans are greater (less) than deposits SSC is less (greater) than total 'interest' receivable ^minus^ 'interest' payable. If loans exceed deposits, SSC varies inversely with the reference rate chosen, while if deposits exceed loans SSC increases as the reference rate increases.

  The value of the total indirect service charges receivable by all financial institutions in sub-sectors S.122 and S.123 must be equal to the total of the SSCs receivable by those institutions. Of course, as SSC is calculated as the sum of the indirect charges payable by all the customers of financial institutions, the consumption of the services is estimated simultaneously with the production.

  In general, loans need not equal deposits. In particular, a financial institution may make loans out of its own funds as well out of borrowed funds. It is necessary to bring in the rest of the balance sheet in order to analyse this case. In order to focus on the main issue, suppose initially that the institution does not have securities as assets or liabilities so that there are only four items in the balance sheet: fixed asset, denoted by FA, loans, deposits and own funds. The balance sheet can be written as an equation as follows:
FA+L=OF+D    (3)
Following the kind of reasoning used by Eurostat, assume that fixed assets are financed out of own funds, with only the residual own funds being available, and used, to make loans. In this case, lending out of own funds, denoted by L(OF) is given by:
L(OF)=OF-FA=L-D      (4)
Now, SSC is unchanged and continues to be calculated solely with respect to total loans and deposits using expressions (1) and (2) above. However, global FISIM as defined in the SNA requires the 'interest' received on own funds to be deducted from the difference between total 'interest' receivable and total 'interest' payable, because lending own funds is not intermediation. Thus, if follows from (4) that
FISIM=[R(L)L-R(D)D] - r(L)L(OF)
     =[R(L)L-R(D)D] - r(L)[L-D]     (5)
By comparing (2) with (5), it can be seen that the only difference between SSC and FISIM in this case is the term [L-D] is multiplied by r, the reference rate, in (2), whereas it is multiplied by R(L), the actual interest rate on loans, in (5). Or, to put the same point differently, if the deduction for the interest earned on own funds were to be estimated using the reference rate instead of the actual loan rate, there would be no difference between SSC and FISIM. However, the SNA definition of global FISIM clearly requires the use of the actual rate as the intention is to deduct "any property income receivable from the investment of ... own funds" (para. 6.125) and not the interest rate that would have been earned if own funds had been invested at the (lower) reference rate. It follows, incidentally, in this particular case that FISIM should be less than SSC, which is interpreted here as implying that FISIM would underestimate the total indirect service charges.

  This example can be taken one stage further. The difference between SSC and FISIM must get progressively larger as the proportion of the loans financed out of own funds increases. Consider the limiting case in which all loans are made out of own funds. In this case,
D=zero  and L=L(OF)
SSC=R(L)L-rL=[R(L)-r]L     (6)
whereas FISIM=R(L)L-R(L)L(OF)=zero     (7)
In principle, the first term in (7) denotes the total interest actually receivable while the second term denotes the deduction for interest earned on own funds, the two cancelling each other out. The SSC is equal to the total service charges payable by the borrowers, while FISIM is zero.

  Conceptually, the SNA seems to go even further by implying not merely that the estimated value of the output of the financial institution happens to be zero in this case, but that the institution is not even engaged in production. In the present example, the SNA position implies that if a financial intermediary progressively reduces the deposits it takes while maintaining the same level of lending by increasing use of own funds, it winds down its production of services to its borrowers at the same rate as it winds down its production of services to its depositors, eventually ceasing to provide any services to its borrowers when it stops taking deposits. This cannot be true if in fact it continues to provide exactly the same services to them and maintains the same client relationships with them as before. Using SSC, the total output of the institution also decreases as the services to depositors decline, , but it does not al to zero, the services provided to the borrowers continuing to be measured and valued as in (6), in effect as proposed in para 6.124 of the SNA.

  The next step is to introduce bills and bonds, i.e., securities other than shares, into the balance sheet. The calculation of SSC again remains unchanged in this case, as it equals the total value of the services provided to depositors and borrowers, no services being provided by the financial institutions to the units from whom they buy, or to whom they sell, securities (for reasons already explained). However, the introduction of bills and bonds begin to make the calculation of the global SNA FISIM more problematic as it becomes more difficult to pin down the precise way in which the own funds available for investment were actually invested and hence the precise amount of interest receivable from their investment. The technical problems are well spelled out on pages 10 to 13 in the Eurostat paper and need not be repeated, especially since they are interpreted here as not being real problems but pseudo problems created by adopting a defective definition of global FISIM. As the Eurostat paper shows, it may not be possible to derive a general formula which is satisfactory at a micro level without implicitly departing from the global SNA formula.

  In general, the total SSC for all financial institutions cannot equal global FISIM because of their different treatments of lending from own funds and interest on securities (and other property income, if any). If the service charges are calculated for individual institutions or sectors using the formula proposed here and by Eurostat (expression (2) above), they cannot add up to global FISIM. The conclusion that the global formula is flawed is inescapable. It should be ignored as irrelevant. The total services charge for the economy as a whole is given by the sum of its components, as with other aggregates in national accounts. By recognising this, the problem of allocating FISIM is solved, or rather disappears. The whole issue is to close to a satisfactory resolution that it ought not to founder by insisting on adhering to a global formula that has ^never actually be derived explicitly and rigorously form first principles^ and is seen to be exposed to serious conceptual deficiencies when examined in detail.

  There is, of course, no problem about 'allocating' SSC as the total SSC is the sume of its components. Eurostat suggests disposing of the discrepancy between global FISIM and total SSC by treating it as intermediate consumption of financial intermediaries. This might be the least bad way out of the impasse if the global SNA definition of FISIM were to be treated as a binding constraint, but the constraint is both unnecessary and unwarranted.

  It might be argued that the global definition of FISIM proposed in the SNA is not intended to yield a precise estimate of the aggregate indirect service charges receivable by financial institutions, but is meant to be a simple formula which provides a robust way of approximating to the total value of a set of services which is not easy to calculate in practice. However, lack of precision and rigour are not characteristic of the SNA and are not acceptable in other areas. The SNA seeks to provide precise concepts and definitions which are valid and consistent at both a micro and a macro level, putting practical estimation problems on one side until the concepts and definitions are settled.


References

Eurostat (1996). "Proposal for a Council regulation on the allocation of FISIM": the Working Party on National Accounts, Luxembourg, 28-29 March 1996.

Obst, C. (1995). Australian Bureau of Statistics, "Financial Intermediation Services Indirectly Measured (FISIM)", Paper presented to Eurostat, 6 Nov., 1995

Obst, C. (1996). Australian Bureau of Statistics, "Comments on the Proposal for a Method of Calculating and Allocating FISIM": Joint UN ECE/Eurostat/OECD Meeting on National Accounts, Geneva, 30 April-3 May 1996.

2016년 2월 22일 월요일

[발췌: H. Arndt's] Measuring Trade in Financial Services (1984)

출처: H. Arndt. “Measuring Trade in Financial Services.” ^Banca Nazionale del Lavoro Quarterly Review^, No. 149, June 1984.
자료: PDF Link


※ 발췌 (excerpt):

 There has always been trade in financial services.[n.1]  Bankers have provided financial intermediation, foreign exchange market and other financial services across national boundaries. But the importance of such trade has increased greatly in the past two decades withe internationalisation of banking and the growth of international financial centres as the bases for offshore currency markets and other activities linking national capital markets. The question naturally arises how to measure the value and the growth of this trade in financial services. The issue involved in this question are closely related to the difficulties that have been encountered in the treatment of financial enterprises in social accounts for national economies. It is best approached by going bank to these issues.
[n.1] This paper deals with financial services other than insurance.

Financial Services in Closed Economies

The crux of the problem was clearly explained in the 1947 memorandum by Richard Stone which laid the foundations for the original United Nations system of national accounts. "If we treated banks (and other financial intermediaries) like ordinary businesses, we should show their sales proceeds simply their charges to customers, as a consequence, a deficit rather than a surplus would appear on the other side of the operating account. In practice, this deficit would be so large that the property income generated in banking and even perhaps the whole income generated in banking would appear to be negative. This is clearly unsatisfactory."[n.2]
[n.2] ^Measurement of National Income and the Construction of Social Accounts^, "Appendix: Definition and Measurement of the National Income and Related Totals" By Richard Stone, United Nations, Geneva, 1947 (hereafter cited as "Stone Memorandum"), p. 40.
The solutions to this conundrum which have been adopted by social accountants fall into three classes corresponding to the three main functions of banks, the creation of money, the provision of payments mechanism and related services, and financial intermediation; or, in the words of an early contributor to the debate, "loan services, clearance or transfer of circulating medium services, and the creation and maintenance of circulating medium."[n.3]  Those who have put the emphasis on the creation of money function have regarded the services of banks as being provided to the community at large and have treated them, by analogy with government services, as final products and thus as contributing to gross domestic product (GDP). Those who have emphasised the payments mechanism function have regarded the services of banks as being rendered primarily to depositors and have divided them into those rendered to households, considered as final products and therefore included in GDP, and those rendered to enterprises, considered as intermediate products and therefore excluded from GDP. Those, finally, who have focused on the intermediation function have viewed bank services as being rendered mainly to borrowers and have therefore treated them wholly intermediate products used as inputs by enterprises (except sometimes for those associated with consumer loans, considered as a service to households).[n.4]

Services to the Community. The first approach has not been widely used. But it was proposed in Australia by H. P. Brown and was employed in the Australian national accounts from 1947 until 1972.[n.5]  Brown argued that the function of banks was essentially similar to a major functin of government, "oiling the wheels of industry and the community generally".[n.6]  He therefore proposed that "as for governments, the contribution of banks to the national income is equal to the wages and salaries paid by banks."[n.7] In effect, though not in rationale, Brown's approach was similar to the "aggregation of individuals" approach originally proposed by Kuznets and used by the US Department of Commerce until 1947, except that Brown excluded bank profits on the ground that they were merely a channel through which surplus of trading enterprises was passed on to shareholder-depositors, so that their inclusion would have involved double counting."[n.8]  The crucial feature of both versions was that the output of banks, valued at factor incomes (including or excluding profits) in banking, was included in national income without any deductions in other parts of the economy. In treating the whole output of financial enterprises as final products, this approach certainly involved double counting (though not more so than in the case of government services) and has therefore been generally discarded.

Services to Depositors. The second approach was first worked out in the US Department Commerce and then adopted in the first United Nations system of national accounts on the recommendation of a committee chaired by Richard Stone. Its rationale was explained by Stone as follows: “Financial enterprises require special treatment in view of the different functions they perform and the method they adopt in charging for services. Consider commercial banks as a typical example. On the one hand, they provide services to their customers in the form of keeping their accounts for them and providing advice on various financial matters. For this they make a charge which, in many cases, is inadequate. On the other hand, they lend the money deposited with them, whether as a result of their own activities or not, and from this receive a net return large enough to enable them to subsidise the other aspect of their business.”[n.9]

  To overcome this difficulty, he proposed the following procedure: (a) An income is imputed to bank depositors for the use of their money equal to the excess of interest and dividends received by banks over interest paid out and (b) this income is assumed to be used in ‘paying’ for uncharged banking services
  • In the case of persons, this imputed income and outlay appears on either side of the revenue account of persons, 
  • but, in the case of enterprises of all kinds, the imputed outlay is charged to operating account, thus diminishing the surplus of the enterprises, while the imputed income is credited to the appropriation account, thus restricting the effect of the adjustment to the operating surplus alone... 
The allocation of the total amount imputed between persons and businesses can only be based on knowledge of the bank expenses incurred in respect of, but not charged to, these two types of depositors.[n.10]  In effect, depositors were regarded as receiving, in return for depositing their money with banks, an income in kind in the form of payments mechanism and other services, in much the same way as factory workers may receive, in addition to their cash wages, free canteen meals.

  When this approach was adopted by the US department of Commerce the allocation of the imputed bank service charge between households and enterprises, and thus between final and intermediate products, was based on deposit ownership.[n.11]  When the same approach was adopted in the first UN system of national accounts (SNA), the same procedure was recommended, though the difficulty of inadequate statistics of deposit ownership in many countries was acknowledged. The contribution of banks, etc. to gross domestic product is here evaluated by imputing to depositors a service charge equal to the excess of investment income accruing to these institutions and by imputing at the same time a corresponding amount of income to depositors. Thus these imputations do not change the income of banks or of other enterprises, but they result in a change in the industrial classification of domestic product (from other enterprises to banks) in so far as the imputation is made in respect of business deposits, and in an increase in the domestic product to the extent that the imputation is made in respect of the deposits of household, etc. The main problem in applying this rule is of a statistical character, but the total amount involved in most countries is small and inaccuracies hardly serious.[n.12]
[n.11] U.S. Department of Commerce, ^National Income 1951 Edition^, cited R.E. Speagle & L. Silverman, op. cit., p. 130.
[n.12] ^A System of National Accounts and Supporting Tables^, United Nations, New York, 1953, [ST/STAT/SER F./No.2], p. 32.
  In the following years, the second approach came under heavy criticism, chiefly on the ground that it misconceived the functions of banks. One exposition of this view criticised the Department of Commerce interpretation of banking function as “primarily a matter of keeping accounts for depositors, including the mechanical operation of monetary transfers... As far as these lending institutions are concerned, lending and investing functions are performed free of charge to borrowers. The creation of purchasing power through the lending process is passed over.”[n.13]  In the view of these critics, "the chief business of commercial banks ... consists of two things: the expert management and investment of funds belonging to the banks' owners and creditors and, of equal importance under a fractional reserve system, the simultaneous creation of money." Since the capacity of banks to provide credit depends on their ability to maintain the convertibility of deposits, even "the expense of an elaborate clearing machinery set up expressly to keep deposit money freely convertible" should be regarded as part, indeed "a major part of lending costs."[n.14]

  Apart from its complexity and its neglect of bank service to borrowers, the Department of Commerce (and old SNA) approach was criticised also on the ground that ownership of deposits was a very inadequate guide to the relative costs of services provided by banks to household and business depositors, if only because of economies of scale.[n.15]

Services to Borrowers. The third view, that bank services should be regarded as rendered primarily to borrowers rather than depositors, because the primary function of banks is financial intermediation, prevailed in the 1960s. In 1968 it was incorporated in a revised UN system of national accounts. “The imputed service charge is to be treated as intermediate consumption of industries for a number of reasons” of which the first was that “a key service performed by banks and similar institutions is to channel the savings of other economic agents into loans to industries.”[n.16] Or, as it was put by the Australian government statistician who changed over to the new SNA procedure in 1973, the imputed bank service charge “measures the expenses associated with organising borrowing and lending.”[n.17]

  The Australian explanation gives a clear account of the mechanics of this approach. Interest received is viewed as consisting of a pure interest component and a service charge for oranising the funds. It is not practicable to allocate all the service charge to customers [i.e. among borrowers by industry]
  • The part relating to consumer loans (including hire-purchase) is treated as being paid by the customer and included in private consumption expenditure. 
  • The remainder, termed the imputed bank service charge, is not allocated to customers but treated as being paid by a ‘nominal industry’ which accordingly has a negative operating surplus of this amount.[n.18]
[n.17] ^Australian National Accounts: Concepts, Sources and Methods^, Australian Bureau of Statistics, Canberra, p. 108.
[n.18] Ibid., p. 109.
  Thus, whereas on the second approach{SNA 53} the output of banks (other than services explicitly charged for) is divided between final products (included in GDP) and intermediate products (excluded from GDP) in proportion to household and business ownership of deposits, on this third approach{SNA 68}, most of the output of banks (and other financial intermediaries) is treated as consisting of intermediate products which enter into the costs of enterprises and are therefore excluded from GDP, the only exceptions being services to household depositors for which banks make explicit charges and services to household borrowers for which banks receive interest on consumer loans.


The Primacy of the Financial Intermediation Function.  Two surprising facts stand out from this summary history of the treatment of financial enterprises in national accounts. One is that each school of thought focused on only one of the three major functions of banks, ^either^ services rendered to the community at large, such as the creation of money, ^or^ services to depositors, such as keeping accounts an providing payment facilities, ^or^ services to borrowers, such as financial intermediation. It would seem obvious that banks perform all three functions and, more particularly, provide services to both depositors and borrowers. Ideally, therefore, one would look for an allocation of the imputed bank service charge between these two main categories of bank customers and then, within each category, between services which some part of the cost of bank administration as a payment to demand deposits in lieu of interest.

( ... ... )

2016년 2월 20일 토요일

[발췌: Itsuo Sakuma's] A Note on FISIM (2011)


출처: Sakuma, Itsuo. "A Note on FISIM." 2011.


※ 발췌 (excerpt):


Introduction

( ... ... )


Banking imputation before the introduction of FISIM

In this section, some banking imputation methods and measure before the introduction of FISIM approach will be described. Naturally, the focus is on those in the successive Systems of National Accounts (SNA) because they are widely recognised as established international statistical standards.

  Despite their varieties, most known methods for measuring banking output use some kind of interest spreads. In the SNA 1953[n.2], the first international statistical standard recommended by the United Nations, it was assumed that banks (and similar financial intermediaries) produce services to depositors and their measure (namely, imputed banking services) may be the difference between the property incomes receivable and the deposit interest payable. If for the sake of simplicity, the deposit balance and the loan balance are set to be equal, the difference between the two rates plays the role of "price" and the balance plays the role of "quantity" so to speak. It was assumed that the depositors were entitled to acquire the whole interest flows the bank receive for lending the funds to the borrowers (imputed interest in addition to actual deposit interest) and they are obliged to return part of them (imputed interest) to the banks for the services received on their deposits. If the depositor is a consumer, banks' service outputs may be deemed to be included in final consumption expenditures. One consequence may be that GDP will be affected because of this treatment to the extent that the services are for the final users.

  On the other hand, in the SNA 1968[n.3], which is the first major revision to the SNA 1953, it was considered that banking imputation should not affect the total GDP measure, so as to not cause any disturbance to judgement about the state of the economy.[n.4]. Thus, although the measure of banks' ouput were the same as that of the SNA 1953, the output imputed for banks and other similar financial intermediaries (imputed bank services) were regarded as constituting intermediate consumption (of the nominal industry, not individual industries) rather than finaal expenditures. Imputed interest ceased to exist. This treatment is still being used in official national accounts statistics in some countries including Japan because it was permissible in the SNA 1993 to continue the use of the treatment in the previous SNA. However, it was not so satisfactory to some contries which are small but have internationally active financial sectors.[n.5] Because their GDP's were in was claimed, vastly underestimated by this method.


FISIM and criticism

It was in this context that in the SNA 1993[n.6], a new method of banking imputation based on a newly introduced concept of the ^reference rate of interest^, in which banks' outputs can be final as well as intermediate. It was presumed that the reference rate of interest could be ^the^ pure cost of borrowing funds without any risk premium element or service chages involved. As a practical recommendation, the interbank rate or the central bank lending rate may be used as proxies for the reference rate.

  

[발췌: OECD] FISIM (1998)

출처: OECD. "FISIM" 1993 System of National Accounts: Five Years On. JOINT OECD/ESCAP MEETING ON NATIONAL ACCOUNTS, Bangkok, 4-8 May 1998.


※ 발췌 (excerpt): 

FISIM

Note by the OECD Secretariat


Historical Background

1. Banks in most countries finance a large part of their operating costs by charging higher rates of interest on the loans they make than they pay on the deposits they hold. The pioneers of national accounts soon realized that if they calculated the value added for banks in the same way as for other producers, the operating surplus for banks would be very low and even negative. To avoid "the paradox of a prosperous industry showing a negligible positive, or even negative, contribution to the national product"[n.1] the convention was adopted of imputing an additional component of the gross output of banks which consisted of the 'free" services that Banks were assumed to be providing to their customers.

OEEC and 1953 United Nations Systems

2. The first system of accounts developed by the OEEC recommended that these non-market services should be valued as the "excess of investment income accruing to banks over deposit interest accruing to their depositors" and the first United Nations manual on national accounts, which was published in the following year, adopted the same convention.[n.2] These early systems both required that the value of these services should be estimated and should be shown as being purchased by the two sectors─households and businesses─that were assumed to be consuming them. It was considered that all these services were provided to the ^depositors^. Broadly they consiste of services such as cheque clearing and keeping customers informed of their receipts and payments. It is interesting to note that, contrary to the 1993 SNA, these early systems did not regard the tasks that banks undertake in connection with their lending activities as constituting the provision of services to lenders [??; corresponding borrowers ??]; these tasks were presumably seen as intermediate costs of bank production.

3. Both these early systems recommended that the imputed value of bank services should be allocated to households and enterprises, and to different kinds of activities within the enterprise sector, according to the levels of outstanding deposits. If there was information available only on the split between households and enterprises as a whole, the allocation of these services to different kinds of activities should be made on the basis of value added. If there was no information at all on the ownership of deposits, the whole amount of what commonly called "imputed bank service charges" was to be allocated to the enterprise sector with the distribution by kind of activity to be again based on relative share of value added.

4. ...

[메모] 국민계정과 금융업 산출액 추정


출처: 우리나라의 국민계정 체계. 한국은행. 2015.



※ 발췌: 13쪽.

5. 금융기관의 산출액인 금융중개서비스(이하 FISIM)[주]15 추정시 2008 SNA에 따라 시장이자율을 이용하는 방식으로 개선[주]16하여 금융시장 상황 변화를 더욱 잘 반영할 수 있게 되었다. 한편 FISIM 산출시 시세차익 목적의 거래성격이 강한 금융기관의 유가증권 투자는 FISIM 대상 자산에서 제외[주]17되었다.

[주]15. 은행 등 금융중개기관이 수탁자로부터 예금을 받아 자금차입자에게 필요자금을 중개하는 서비스를 금융중개서비스(FISIM: Financial Intermediation Services Indirectly Measured)라고 한다.
[주]16. III장 제2절 p. 116 참조.
[주]17. 금융기관이 발행하는 금융채는 기존과 마찬가지로 FISIM에 포함된다.


※ 발췌: 115쪽 ~


나. 기준년 추계 방법

(1) 중앙은행 및 예금취급기관

총산출

  중앙은행의 기준년 총산출은 비용접근법으로 측정한다. 즉 지급수수료, 화폐제조비, 퇴직급여, 일반관리비 등 제반 경상적 비용을 모두 합산하여 총산출로 계상한다.

  예금취급기관의 총산출은 금융중개서비스(FISIM)와 실제서비스로 구분할 수 있다. 금융중개서비스는 자금잉여자(예금)와 자금부족자(대출)의 중간에서 자금중개기능을 수행함으로싸 자금이 효율적으로 배분되도록 하는 기능을 말하며, 대출과 관련된 대출 금융중개서비스와 예금과 관련된 예금 금융중개서비스로 구분된다.

  • 대출 금융중개서비스는 수입이자 등 수입재산소득에서 대출잔액에 기준이자율을 곱한 금액을 차감하여 산출하며,
  • 예금 금융중개서비스는 예금잔액에 기준이자율을 곱한 금액에서 지급이자 등 지급재산소득을 차감하여 산출한다. 

여기서 수입재산소득은 금융중개기능과 관련하여 발생되는 제반 수익으로 수입이자, 대출금상환익 등이 있으며, 지급재산소득은 금유중개기능과 관련하여 발생하는 제반 비용으로 지급이자, 대출금상환손 등이 있다. 한편 실제서비스는 예금취급기관이 제공하는 금융서비스의 대가로 수취하는 수수료를 말하는데 수입수수료, 보증료, 신탁보수 등으로 구성된다.

[좀 더 알아보기] 금융중개서비스(FISIM)

은행과 같은 금융기관은 자금 잉여 부문의 자금을 예수하여 자금 수요 부문에게 대출하는 금융중개서비스를 주된 기능으로 하고 있으나 이용자에게 수수료와 같은 형태의 서비스 요금을 청구하지 않는다. 대신 자금 대여자에게 지급하는 이자보다 자금 차입자에게 수취하는 이자를 많이 받아 그 차액을 암묵적으로 수익으로 인식한다.

금융중개서비스는 실제서비스와 달리 직접적으로 측정하기 어려워 간접적으로 계산되는데 이를 FISIM(Financial Intermediation Services Indirectly Measured)이라 한다.

금융중개서비스의 산출액은 다음과 같이 계산된다.
대출 금융중개서비스, FISIM(L)=L×[L(r)-r(*)]=R(L)-[L×r(*)]
예금 금융중개서비스, FISIM(D)=D×[r(*)-D(r)]=[D×r(*)]-R(D)
L(r): 수입이자율, D(r): 지급이자율, r(*): 기준이자율
R(L): 대출 수입이자(수입재산소득), R(D): 예금지급이자(지급재산소득)
L: 대출금 잔액, D: 예금 잔액

한편 금융중개서비스를 이용한 경제주체는 이를 중간투입(중간소비) 또는 최종소비지출로 처리하고 있는데 금융자산부채잔액표, 산업별대출금, 기업경영분석, 국세청 과세자료 등을 이용하여 경제주체별로 금융중개서비스 금액이 배분된다.


중간투입

중앙은행의 기준년 중간투입은 총산출에서 인건비, 고정자본소모 등 부가가치성 항목을 차감하여 산출한다.

예금취급기관의 기준년 중간투입은 손익계산서의 지급수수료, 임차료, 접대비, 광고선전비 등을 합산하여 산출한다.


부가가치

( ... ... )

[발췌: Bryan Haig's] The Treatment of Interest And Financial Intermediaries in the National Accounts of Australia (1986)




※ 발췌 (excerpts): 
ABSTRACT: This paper is divided into two main sections. The first part summarises briefly the main points which have arisen in the lengthy debate over the treatment of banking intermediaries in the national accounts. The discussion emphasises the method adopted in the early Australian accounts when banks were treated in the same way as the general government. It is argued that this method is simpler and provides a more realistic account of the functions of banks than the current SNA proposal.
  The second part of the paper examines the functions of banks in Australia. It uses data of interest and administration cost for separate banking institutions to examine the incidence of bank costs. It is concluded that the costs do not fall on borrowers or lenders but are a charge in providing a communal service in the establishment and maintenance of the financial system.


1. Introduction [n.1]

The treatment of interest and banking has been one of the most widely debated issues in the Australian national accounts. in recent years, at least four major contributions have been made to this debate [1, 3, 10, 13]. In all cases, they represent a reaction to the conventions proposed by the SNA. An early contribution, by H. P. Brown, criticised the first SNA approach largely on the grounds that it did not provide a realistic picture of the activities of banks [3]. The more recent articles have commented on particular difficulties raised by the current SNA approach.
[1] Arndt, H., Measuring Trade in Financial Services, ^Banca Nazionale del Lavoro Quarterly Review^, No. 149, June 1984.
[3] Brown, H. P., Some Aspects of Social Accounting─Interest and Banks, ^Economic Record^, 25, Supplement, August 1949, 73-92.
[10] Covick, O. E., Productivity-Geared Wages Policies: Some Problems Arising from the Growth in Financial Enterprises, ^Journal of Indusrial Relations^, June 1982
[13] Haig., B. D., The Treatment of Banks in the Social Accounts. ^Economic Record^, 49, December 1973, 624-628.

  Reflecting the interest in the treatment, the Australian Statistician has adopted three different methods to handle the activity of banks in the official estimates of national income and expenditure. In the early estimates, for 1946 and 1947, banks were treated in a similar fashion to other businesses. Interest has always been treated as a transfer item, and this method of handling banks led, therefore, to a negative product of banks. In a comment on the first official estimate it was suggested that this resulted from the failure to charge bank costs against the income of trading businesses, and it was noted that a major objection to this approach was that it was not possible to sub-divide total product into industries or sectors [3, p. 87].

  The method was changed in 1948 and a new approach was adopted which treated banks in the same way as governments. The contribution of banks to national income was measured by the payment of wages, and national expenditure included an item for "the net expenditure of financial enterprises". It was explained that banks were regarded as "providing financial services to the economy as a whole, comparable in type to a number of government services such as the administration of justice" [4, p. 5]. In a subsequent paper, the then Director of National Accounts, H. P. Brown, spelt out at some length the reasons for this approach [3].

  Finally, in 1973 the then Australian Statistician adopted a treatment similar to the current (1968) SNA treatment. This approach divides interest into a pure interest component and a service charge for organising funds. Part of the service charge (on consumer debt) is treated as final expenditure and included in personal consumption. The remainder (the imputed bank service charge) is treated as a cost of a nominal industry, which has a negative operating surplus of this amount.

  The changeover in 1973 to the UN System provoked an exchange of views in the Economic Record [13, 14, 23]. The author of the present paper suggested that the previous approach adopted in the Australian accounts had a number of advantage over the new treatment, and that no reason were given for the change in treatment. In reply to criticism of the change it was argued that one factor was the need for international comparability, but it was also claimed that the new approach correctly treated bank cost as an intermediate expense of business.

  However, comparisons shows that there is little difference between the new proposal and the first Australian treatment of banks. The product of industries is the same and GNP is not very different. The difference is that in the early Australian treatment, banks earned a negative product which was not distributed to industries whereas in the new SNA treatment the negative income of banks is avoided but only be showing a negative income for another (imaginary) industry.

  The more recent criticism fall into two main groups. First, it has been claimed that the imputation of bank costs complicates the interpretation of the national accounting figures and does not reflect the function of banks. Secondly, it is argued that the deduction of the imputed bank service charge (IBSC) from total product reduces usefulness of the accounts. It has been pointed out, for example, that the neglect of any final output from banking understates GDP [n.2], and that this understatement has become relatively more important, leading to an error in the trend of product.

  It has also been argued that the present treatment has resulted in errors in estimating product of particular industries and sectors[10]. The lack of an industry or sector division of the IBSC has led to the total amount being charged against the product of a particular sector. This has resulted in a large error because the deduction includes the final expenditure component was as well as amounts attributable to other sectors. In a recent calculation made by the Australian Treasury, for example, all the IBSC was attributed to and deducted from the product of the non-farm marketed sector of the economy. It was subsequently estimated that the amount deducted was nearly 50% greater than the ^total^ interest paid by the sector[10, p. 184]. The result of the calculation made by the Treasury have been used in annual wage determinations by the Australian Arbitration Court, and the error therefore had implications for economic policy. Not only was the deduction for the IBSC greatly overstated, but the trend in the resulting product of the sector was also incorrect.

  A final criticism is that the present SNA treatment reflects only one activity of financial enterprises─that of organising funds for borrowers. Arndt, for example, has proposed that banks perform three major functions, comprising services rendered to the community at large, services to depositors and services to borrowers.[n.3]
"It would seem obvious that banks perform all three functions and, more particularly, provide services to both depositors and borrowers. Ideally, therefore, one would look or an allocation of the imputed bank service charge between these two main categories of bank customers and then, within each category, between services which meet final demand and thus contribute to GDP, such as those rendered to households, and those which enter into the costs of production of enterprises (and government) and should therefore be excluded from GDP as intermediate products. If this makes unmanageable demands on statistical services, it becomes a question of which simplification is conceptually to be preferred."

  In addition to the theoretical and conceptual issues raised in the treatment of banks, the practical considerations have become very important. It has been noted earlier that the current treatment leads to misinterpretation and errors in using the data of product of industries. To the extent, also, that the current treatment understates final output of banks it leads to error in measurement of the growth of GDP. In recent years the Australian finance sector has increased significantly. In 1949, when the question of the treatment of banks was first raised, financial intermediaries accounted for about 5% of GDP; now they account for about 14%. In recent years the annual rate of increase in employment of the financial intermediaries has been about 20%, compared to about zero change for the non-farm sector of the economy as a whole.[n.4]  The financial enterprise sector is now nearly half the size of the government sector. The financial sector will, relatively and absolutely, increase in the near future as a result of further changes envisaged in the scope of the sector[n.5] and a resolution of the various problems encountered in the present treatment is of some urgency.

  In this paper I renew the criticism of the various SNA proposals. It is argued that neither proposal reflects the function of the banks. It is proposed that an evaluation of the service provided by banks leads the conclusion reached, in 1949, by H. P. Brown, and used in the 1950s and 1960s in the Australian National Accounts. That is, that banks provide a communal service and their cost cannot either in principle or in practice be allocated to users of bank services.

  The next part of this paper reviews briefly the various methods proposed for handling banks in the national accounts. The following part considers the types of activities undertaken by banks and the allocation of the cost of these activities.


2. The Treatment of Interest and Financial Intermediaries

The crux of the problem of evaluating the contribution of banking enterprises to aggregate output lies in the fact that typically the services of banks are not sold to customers at clearly recognisable market prices. Banks (and other financial enterprises) levy various charges and commissions, but the excess of these receipts over the relevant enterprises' expenditure on goods and services purchased from other enterprises is typically small and generally insufficient to cover their wages, salaries and supplement payments. As the notes to the British National Accounts explain:

The reason for this peculiarity is that banks derive their income by lending money at a higher rate of interest than they pay on money deposited with them; payments are regarded as transfers and not as receipts and payments for a financial service. This income in a sense subsidises the provision by banks of those services for which inadequate payment is received in the form of bank charges and commissions. Other financial companies are analogous to the banks in the way in which they derive their income, many of them doing so almost entirely from the difference between the rates of interest which they charge and the rates which they themselves pay [19, p. 204]

Hence problems arise in treating the banks as ordinary enterprises. In the discussion of these problems two main approaches have been developed. One proposes the relaxation of the rule that interest is a transfer. It is proposed that interest is a factor cost (as with wages), or a charge for services [28, 30]. In this case the net administrative cost is a difference between "real" transactions. The alternative approach is to adapt various approaches (or models) used to incorporate expenditure of other activities which are financed by transfers.

  The various treatments proposed to handle banks may therefore be classified first according to the treatment of interest, and secondly, according to types of models available in the national accounting conventions for different views of interest. A classification along these lines is set out as follows.

    1. Interest as a transfer:
       (a) the non-profit model, e.g. Kuznets [17], SNA [26];
       (b) the government model, e.g. Brown [3].

    2. Interest as a cost
       (a) a service cost
           (i) part only, e.g. SNA [33];
          (ii) fully, e.g. Ruggles [27], Sunga [30];
       (b) a factor payment

  The basic distinction is between interest as a cost and as a transfer item. If interest is a cost there is no problem in measuring the output of banks─the treatment of banks follows that used for other businesses (although there are problems in recording the transactions in the social accounts─see Sunga [31]). If interest is a transfer, then it is necessary to look to other models used in national accounting to record expenditure financed by transfers. These models fall into two groups, depending on whether the activity can be regarded as benefiting specific transactions, or whether the activity can be regarded as a communal benefit (or results in a communal cost). In the former case, the model is "non-profit making bodies"; in the latter case it is "government". At various times national accountants have treated interest as a cost (at least in part) and have also adopted the two different models where interest is viewed as a transfer.

  1. The arguments for and against treating interest as a transfer are well known. The main arguments in favour of the transfer conventions are as follows: First, it is difficult to have one rule for some interest payments and a different rule for others. But if government and household debt interest payments are treated as expenditure on services, gross product estimates will be distorted according to the extent of the National Debt and of consumer indebtedness existing during the particular period─characteristic, it is argued, of past financing decisions rather than of the current level of "production".[n.6] Secondly, there is the problem of where to draw the line distinguishing an enterprise's interest payments from it dividend payment.[n.7] Thirdly, there is the question of trying to keep the level of production recorded for an enterprise or indusry invariant with respect to the method by which that enterprise or industry is financed.[n.8] Fourthly, differences between interest rates are largely conventional and dependent upon the institutional framework of a particular place and time"[3].

  1(a). The non-profit making model for banks has a long history, dating from the estimates of bank output by King and including the early estimates by Kuznets [17]. The 1958 SNA treatment also follows this model, with the expenditure of banks being allocated jointly to variouos sectors depending on holding of bank deposits. This treatment was developed from an analysis of the activities of deposit banks. It was argued that these banks provided free services to depositors which were balanced by the ommission of interest payments on deposits.

  The approach has been criticised as applying only to deposit banks, and for the methods of allocating administrative costs according to deposits. It has been argued that the free services of banks (keeping accounts, and so on) are related to the turnover of accounts rather than the size of the balance at any time. Some writers have also objected to the imputation procedure particularly since there are no prices available for comparable products. This point is discussed below where it is argued that banking services are a public good and the valuation at cost price must be treated as an arbitrary valuation.

  1(b). The government model was adopted by Brow, and formed the basis of the early Australian treatment. Brown considered that the operating costs of banks could not be allocated to either borrowers or lenders, but were a communal service, the provision of a banking system, which was equivalent to the communal services provided by governments.

  Brown reached his conclusion ( ... ... ).

  The secondary thrust in Brown's case was that the value of financial enterprises' services should be assessed at their costs to the financial enterprises themselves. Thus no allowance was to be made for any property income to originate in the financial enterprise sector. ( ... ... ).

  ( ... ... )
  ( ... ... )

  2. Both these approaches (the old SNA and Brown's method) depend on the assumption that interest is not a cost for services or the payment to a factor of production. Granted that the current convention for the treatment of interest developed out of debates over several decades, however, it should not be lightly abandoned. In fact, however, the 1968 SNA treatment does involve the treatment of interest (at least in part) as a service cost. It is suggested that the difficulties which have arisen over this treatment are at least partly due to a mistaken view of the nature of the activity of banks.

  ( ... ... )

  2(a)(i). In the 1968 SNA interest is regarded as comprising a pure interest component and a service component. The IBSC measures the service component which in imputed as a cost to trading activities. It has been claimed that the imputation of baking cost improves the measurement of product of banks and of total product and leads to a more useful division of product between industries.[n.10] The current SNA convention does not seem to have any of these advantages, however, as compared to the Brown treatment or, in fact, to the earlier SNA approach.

  It could be objected that the imputation is a highly imaginary notion, which cannot be implemented because neither business firms nor banks regar interest as being divided into a service component, along the lines proposed, and a residual pure interest component.

  While it does treat bank costs as an intermediate expense it overstates this cost by ignoring saless to final buyers. ( ... ... ).

  2(a)(ii). Treating all of interest as a service cost alters the product of industries and total output, but the effect on product compared with the earlier SNA approach is, however, not clear. ( ... ... )

  ( ... ... )

  2(b). The treatment of interest as a factor payment would also avoid the problem of the bank imputation and would seem to conform to long-standing national accounting views of the concept of value added of industries. It raises, however, problems in distinguishing the payment of interest to persons and for this reason this approach seems to have been discarded [15, p. 121].

  To summarise briefly, the problem raised in the treatment of interest and bank raises a number of issues. They concern (1) the nature of interest flows; (2) the meaning of total product and value added of industries; (3) the use of the national accounts, and (4) the need for simplicity in recording transactions in contrast, in particular, to the complexity raised by imputation.

  ( ... ... )


3. The Allocation of Administration Costs

( ... ... )

2016년 2월 19일 금요일

[발췌: B. Christophers's] Making Finance Productive (2011)


출처: Brett Christophers. “Making finance productive.” Economy and Society. 40:1, pp. 112-140. 19 Feb 2011.


※ 발췌 (excerpt):

ABSTRACT: Western governments' response to ongoing economic crisis has demonstrated that the financial services sector is seen to perform a critical and productive function in today's capitalist economies. This paper explores how this politically potent perception of productiveness has come to achieve the hegemony that it now enjoys. A principal forum or the 'making' of finance sector productiveness, it shows, has been the tradition of national accounting and its reporting of key economic metrics such as gross domestic product. By placing different activities on different sides of a pivotal 'production boundary', national income statisticians effectively dictate what counts as productive─as adding value to the economy─and what does not. Finance's contemporary representation as productive is predicated, the paper shows, on a long and contested history of boundary negotiation.

( ... ... )

Banking Problem

( ... ... )

Their[national accountants'] and our concern, rather, is with how the banking sector comes to be represented in the production account if intermediation is treated as a service. ( ... ... ) One possible solution is some sort of imputation of the value realized through intermediation. But, in the absence of such a solution, it must be assumed─following the model used in accounting for other sectors, where earnings from interest are not considered part of corporations' output or value added─that because no service-specific payment has been rendered, then no value has been generated. In such a scenario, therefore, the only banking activity to register a positive output entry in the national production account is the first of our three categories: services for which banks are explicitly paid fees.

   All of which leads to the crystallization of the 'banking problem'. For if no imputation in respect of intermediation output value is attempted, a large component of banking sector revenue is disregarded in the production account, with inevitable adverse consequences for the calculation and representation of the value added by a sector whose entire cost base (its 'input') is incorporated.  ( ... ... )


Border-crossing

In reviewing the history of how, in Western national accounts, finance in general─and intermediation in particular─became productive, it is suggested that the process of border-crossing that this involved can be divided into three main sequential stages. To do so is, of course, to oversimplify; not all countries, by any means, have passed through each of the stages identified; and , where they have, they have tended to do so at different times and at different rates. But the sequencing does, nonetheless, capture the ^overall^ direction and substance of the movement towards productivity in the treatment of financial intermediation services in the Western national accounting canon. ( ... ... )


(1) Intermediation as unproductive 

The first of the three stages is that in which financial intermediation revenues are explicitly or implicitly excluded from the finance sector's output: national accounts thus representing intermediation services as essentially unproductive. To be sure, there exist countries that, identifying early on the gravity of the 'banking problem', pioneered methods for imputing an output value to banks' interest-based revenues and for including this value within the reported sector product, and which hence skipped this unproductive stage altogether. But a central aim of this paper is to emphasize that many countries did not, and that these were not just those Eastern Bloc nations using the material product system.  Instead, in such Western countries, for varying periods of time, the product/output method for estimating GDP treated the net revenues earned by banks through financial intermediation not as produced wealth but as de jure or de facto transfer items.

  Taking the former, de jure type first, one example of a country that passed through this stage is Australia. Prior to 1948, all output-based estimates for Australian national product treated interest flows in the banking sector, as in other sectors of the economy, as pure transfer items─resulting in the country's banks, collectively, being represented as loss-making (Arndt, 1996; Studenski, 1958, p. 192). But the more prominent, enduring and important example is unquestionably France. For there, too, until 1975, all revenues derived from financial intermediation were omitted from the calculation of value-added and thus from national output (Vanoli, 2005, p. 154).

  Where France and, more briefly, Australia, have both treated intermediation services as de jure mechanisms of wealth transfer─regarded as ‘contributing’, as Shelp wrote of the French system, ‘to the redistribution of income rather than to the generation of output’ (1981, p. 61)─a larger number of countries have, at points, considered them as de facto methods of transfer. Here, the revenue flows associated with these services are not excluded from the production account altogether, as they are in the de jure scenario. Rather, an output value is imputed to such services, typically by deducting banks' interest payments on liabilities acquired from third parties (e.g. cash deposits) from their third-party-derived interest income (e.g. on loans). But, instead of treating this net interest revenue as an input (or, in the lexicon of national accounting, 'intermediate consumption') of one or more other sectors of the economy, it is considered, somewhat perversely, to be an input of the finance sector itself. In other words, net interest receipts feature here as both outputs and inputs of the same sector, thus cancelling each other out in the process─with the result that the reported value added by the finance sector is the same as if those interest flows were treated as actual transfers and simply excluded from the production account accordingly.

  Perverse it may be, but this, nevertheless, was the approach to financial intermediation services long utilized in the UK (Feinstein, 1972, p. 142; Haig, 1973, p. 626)─until, in fact, the early 1980s. Hence only financial services for which UK banks explicitly charged their customers made a net positive contribution to the national production account. (Pre-1980s chancellors would have struggled, then, to acclaim the value-added by the finance sector in the manner of a Darling or Brown, for the simple reason that the national accounts rarely documented any, and then only of very modest proportions.)[n.8]  Other countries to have pursued the same approach, with same outcome of a minimal or negative deemed output for the banking sector, include Denmark, Germany and Greece. All three, moreover, were still employing this approach as late as the year 2001 (OECD, 2001, p. 8).

  All of which is to say that, in these countries, there have been long periods of time when the banking 'problem' was either not recognized as such or was deemed less problematic than the statistical machinations─which we turn to presently─required to nullify it. As the UK's Central Statistical Office put it, a hypothetical allocation of banks' net interest revenues to other economic sectors, making those net revenues an output of the former and an input of the latter, ‘would be more misleading than the paradox of financial concerns appearing to make steady annual loss’ (1968, p. 205). Much of the subsequent history of re-engineering of accounting for financial intermediation in those countries can be read as a reversal of this perspective: the paradox, or 'threat', of a seemingly unproductive banking sector ultimately coming to be seen as much the greater concern.

  Equally, and as already indicated, there are countries that have never experienced this 'problem' of representing their banks as marginal or negative contributors to national output. In these countries, the 'banking problem' was quickly recognized as such and ways were immediately found to mitigate it. The US is probably the most important example of such a country. Up to 1947, it used a treatment of finance that was, and remains, unique (Arndt, 1996), whereby the financial sector's overall contribution to national product was considered to be equal to the sum of its profits and of wages paid.[n. 9]  For more than half a century, the US then followed a method for treating intermediation services that also came to be used through much of the rest of the Western world. This was the method recommended in the original (1953) SNA. And if the treatment of banking intermediation as unproductive represents the first of the three stages of our 'border-crossing', then SNA 1953 represents the one of the two main treatments of intermediation as implicitly productive that comprise the second stage.
CF. Arndt, H. (1996). Measuring trade in financial services. In Essays in International Economics 1944-1994 (pp. 215-32). Aldershot: Ashfate.
[n. 9] A somewhat similar approach was used in Australia from 1948 to 1972, except that there profits were excluded from the calculation of banking output on the grounds that they were deemed transfer items. 
(2) Intermediation as implicitly productive

The approach recommended by the 1953 SNA differed in one central and critical respect from the de facto transfer approach described above for the UK and others. Specifically, the net interest revenue derived from intermediation services, termed now the imputed bank service charge (IBSC), was to be treated as an input not of the finance sector but of other economic units. These units included both other business sectors and consumers, with the allocation between the two based upon respective levels of deposit ownership. The upshot, in terms of the representation of sectoral value-added in the production account, was twofold. 
  • First, other business sectors were each shown to generate less value than where no value was imputed to financial intermediation (France) or where such value was netted off against bank profits (the UK), since, aside from that component deemed consumed by the public, banks' collective net interest revenue was apportioned between those other sectors as inputs
  • Second, and most importantly for our purposes, value added by the finance sector was commensurately greater to the tune of the entire IBSC
  ( ... ... ) 

  In most countries where SNA 1953 had been employed, it was replaced, in the shape of SNA 1968 (UN, 1968), by a second approach to financial intermediation services that is considered in this paper under the heading of 'implicitly productive'. This recommendation, too, separated out the IBSC on the basis of the differential between banks' intermediation-derived interest earned and interest paid. But it suggested yet another different placement in the national production account for this imputed net interest income: not as an input of the finance sector itself and not as a distributed input of the consumer and other business sector accounts, but, rather, as the input of a new, notional industry sector with no output. That is to say, the IBSC was still to be considered a valuable output of the finance sector, but, instead of being traceable to other, tangible parts of the national economy, it is now disappeared into what was effectively the black hole of a dummy industry with a negative value-added equal to (but opposite in sign) to the IBSC.

  Thus, if one consults national product accounts where this method has been used, what one finds is a list of GVA figures for all the different recognized industries (including finance), together with a single anomalous negative entry for the notional sector that the treatment recommended by SNA 1968 introduced. Take, as an example, the figure for the UK in 2003.[n.10] These showed total national GVA for the year of £981.7bn at current prices (compared with an estimated GDP of £1,099.9bn). Within the mix, they showed a GVA of £39.8bn for the 'banking and finance' sector─a healthy 4.1% contribution, on the face of it. But they also showed, on the very last line, a negative GVA of £45.9bn for the IBSC[n.11]  In other words, had the UK still been using its previous approach, whereby financial intermediation net revenues were treated as implicit transfer items and effectively excluded from sector value-added, the banking and finance sector would have been reported as making a £6.1bn negative contribution to the national economy in 2003─a vastly different picture from the one painted in the quotations reproduced in the first section of this paper. Adopting SNA 1968 had, in effect, made UK finance productive.

  This method of ascribing a negative income to an imaginary industry sector, it should be noted, has probably been the most used for financial intermediation services in the entire history of Western national accounting. The UN only came up with a new official recommendation in 1993 (see below), meaning that SNA 1968 was in place for 25 years. ( ...... )

  In this discussion of both SNA 1953 and 1968, however, one key issue remains unaddressed. Why have these treatments of financial intermediation been discussed under the heading implicitly productive? By making net interest revenue an output but not an input of the banking sector, both approaches, it could be argued, paced financial intermediation firmly within the production boundary. But there are, it is submitted here, important reasons for entering a caveat about the extent to which the treatment in question effected the border-crossing that concerns us. For the issue of accounting for intermediation clearly remained, in 1968 as much as in 1953, a highly and explicitly troublesome one. Neither SNA reads as if the authors, and the statisticians who contributed to its formulation, had come to consensus that intermediation services were productive and that the methods for showing this were self-evident. It would take until 1993 for something resembling such a consensus to crystallize. In contrast to this subsequent iteration, SNA 1953 and 1968 give the cumulative impression of intermediation being nudged tentatively─if not quite covertly─towards the productive domain, not lodged there by right. Writing in 1986, Bryan Haig perfectly captured this sense of intermediation services having been 'made' productive not so much because they were genuinely and unanimously believed to be so, but because their representation as unproductive was so discomfiting. The arguments hitherto advanced for treating interest as anything other than a transfer item, he argued, 'amount often little more than the assertion that a change in treatment of interest is necessary in order to solve the banking problem' (1986, p. 415).

  Where SNA 1968, in particular, concerned, the introduction of a fictitious sector was undeniably awkward, bearing all the appearance of an fudge, and it was castigated as such by many practitioners, particularly those of the US and Canada. Peter Hill echoed a large number of his peers in later calling it an 'expedient' an, hence 'no solution' to the banking problem. He continued: 'It is debatable whether inventing an imaginary industry with negative value added is much better than recording negative value added for financial intermediaries. It is certainly much less transparent to users' (1996, p. 2). Yet, arguably, even Hill misses the most important point of all here. Inventing this imaginary industry to 'absorb' value-added in order for the value shown to be added by finance to be inflated accordingly may not be conceptually superior (Hill's worry). But, in an environment where the banking industry wields considerable political influence, it is, patently, politically superior, and the lack of transparency referred to by Hill is, in this regard, of little or no import.


(3) Intermediation as explicitly productive

SNA 1953 and 1968 made financial intermediation only 'implicitly productive', then, in the sense that, while these banking services now counted as productive, there remained a certain hesitancy and unsatisfactoriness both about the treatments through which they did so and about the intellectual justification thereof. This is perhaps most evident in the language used to discuss what financial intermediation services actually were. At no point did either SNA actually describe and define those services as explicitly productive. This changed decisively, however, with SNA 1993, the third and latest UN System (United Nations, 1993)[n.12] Paragraph 4.78 of this SNA begins as follows (emphasis added), leaving no reader in any doubt as to how the service of intermediaton is now to be considered.
Financial intermediation may be defined as a productive activity in which an institutional unit incurs liabilities on its own account for the purpose of acquiring financial assets by engaging in financial transactions on the market. The role of financial intermediaries is to channel funds from lenders to borrowers by intermediating between them.
With SNA 1993, in other words, no ambiguity─outwardly, at any rate─remained.

  Methodologically, the treatment of financial intermediation services recommended in SNA 1993 was, in one respect, something of a throwback to the past (though one would be unlikely to find many national accounting practitioners who would ever describe it as such). Specifically, its suggestion for how the output of such intermediation services should be allocated between users, as those users' respective inputs, harked back directly to SNA 1953. The latter, we saw above, advised that the IBSC should be apportioned to both consumers (as final demand) and other business sectors (as intermediate demand) according to relative levels of deposit ownership. SNA 1993 recommended much the same approach─a consumer allocation, having been eliminated in SNA 1968, thus retaking a place in the preferred SNA treatment. Where SNA 1993's recommendation for allocation differed from the 1953 method was primarily in the fact that the split of the IBSC between consumers and business─and, within the business category, between industries─was now to factor in respective levels of borrowing from, as well as lending to, financial intermediaries.

  This issue of allocation made the recommended SNA 1993 treatment an especially contentious one. Based on work carried out in large part by the International Monetary Fund, the proposal to allocate the output of intermediation services in such a manner was first presented to the UN Statistical Commission in 1991. The presentation caused, it has been said, 'upheaval' among European Union national accountants, who claimed the methodology was 'too complicated, too imprecise' (Vanoli, 2005, p. 155). The most important implication of this hostile reception was that, by threatening not to vote in favour of the recommendation, these practitioners secured a compromise position: SNA 1993 would allow countries to continue to use the 'nominal industry' treatment of SNA 1968 if they preferred. The granting of this alternative treatment helps to explain why many countries, the UK included, had still not switched to the favoured SNA 1993 methodology a decade or more later.

  Unfortunately, the contentious nature of this approach to allocation recommended in SNA 1993 has tended to divert critical attention away from what was, arguably, the new guidelines' more important suggested change to accounting for financial intermediation services. This concerned not the allocation but the derivation of the imputed value of the banks' output. With both SNA 1953 and 1968 having based this value on the difference between interest earned from borrowers and that paid to lenders, SNA 1993 now recommended a new derivation. And a new name: FISIM (financial intermediation services indirectly measured).

  This new name was, in some ways, no less important than the new methodology─for both were indicative of a considerably greater confidence in what SNA 1993 newly asserted: that financial intermediation was a productive activity.
  • The phrase ‘imputed bank service charge’ was now regarded as altogether too tentative: it intimated that banks performed valuable services, but it did not specify what those services were, and in requiring a value to be ‘externally’ attributed to those services it communicated the fact that this value could not simply be measured. 
  • 'FISIM' was subtly, but crucially, different. Not only were the services in question now labelled, but a rather abstract and cautious exercise in 'imputation' had now became a putatively robust and transparent process of measurement─albeit, still, an 'indirect' one.

  This shift was most clearly manifested in the recommended new methodology for deriving FISIM.[n.13]  Instead of assessing banks' borrowing and lending activities together, and intimating that the combination constituted a portfolio of services whose collective value could be imputed by deducting interest paid on the former from interest generated by the latter, SNA 1993 separates the two functions and defines each─independently─as a productive activity whose output can be measured.
  • It does this by introducing the pivotal idea of a ‘reference’ rate of interest, which is defined as ‘the pure cost of borrowing funds’, and for which, it is suggested, either the inter-bank lending rate or the central bank repo rate could serve as a meaningful proxy. 
  • The productive output of financial intermediaries's borrowing activities (which consist not only of taking deposits, of course, but also ‘issuing bills, bonds, or other securities’) is then defined as ‘the difference between the interest [creditors] would receive if a reference rate were used and the interest they actually receive’; 
  • and the output of the banks' lending activities becomes ‘the difference between the interest actually charged on loans, etc. and the amount that would be paid if a reference rate were used’.

  This mobilization of a ‘reference rate’, enabling the output of borrowing and lending activities to be measured independently of one another, is absolutely fundamental to the attempt, in SNA 1993, to show intermediation services as explicitly productive. For the very notion of ‘production’ requires a base of some kind against which the extent of the productive activity can be assessed. In the world of material goods production, this base is the raw commodities whose transformation into final goods constitutes the productive process. SNA 1993 claims that financial intermediation represents something similar: the quantum of ‘production’ effected by banks is represented by the differential between the reference rate and the actual rate of interest, because the former is the rate that would be payable/receivable were no ‘productive work’ performed.

  But this still leaves one open question─a question that returns us to the very genesis of the ‘banking problem’. If this interest rate differential represents the quantum of productive output, what is the essential nature of the productive work herein performed? What is the underlying service for which intermediaries are being paid, and which justifies that interest rate spread?
  • It is, SNA 1993 says, the taking of risk. ‘Financial intermediaries ... intermediate between lenders and borrowers by channelling funds from one to the other, putting themselves at risk in the process’ (para 6.121). 
  • And the reference rate of interest is that ‘from which the risk premium has been eliminated to the greatest extent possible and which does not include any intermediation services.’. 
  • Financial intermediaries contribute to economic output, in other words, by assuming financial risk; and we are able to measure the amount of such output because the gap between actual and ‘base’ interest rates signals the level of risk and hence ‘the extent of intermediation supplied’ (Begg, Bournay, Weale & Wright, 1996, p. 455).


Conclusion─or perhaps not

What is most striking about the SNA 1993 approach to defining and measuring the services of financial intermediation is how far things had come since contemplation of such services first led to the emergence of the 'banking problem' in the mid-20th century. By conspicuously disentangling the activities of borrowing and lending, and thus muddying the links between them, SNA 1993 was able to define each as explicitly productive in its own right. Forty years previously, by contrast, it had been perceived that, given the profits they generated, intermediation services ^must^ be in some way productive, but that it was difficult enough to identify the nature of this output, let alone value it. To fully appreciate the distance travelled in the course of the subsequent border-crossing, one need only compare SNA 1993's analysis of how intermediation make money─by assuming risks, of varying scale, on both borrowing and lending activities─with analysis offered by Studensk in 1958. Studenski, note, was no critic of banking; as we saw above, he believed that showing banks as a drain on the economy made 'no sense'. Nevertheless, his pithy conceptualization of banks' profitable ^modus operandi^, one shared by the national accounting community about which he wrote, was that of 'withholding all or a large part of the interest earned on the loans and investments made with their depositor' uds' (1958, p. 192). Through the mutations effected by SNA 1953, 1968, and, most importantly, 1993, 'withholding' had thus been transformed  into 'producing'.

  ( ... ... )

  Yet it is evident that, where accounting for financial intermediation services is concerned, questions do remain. Some of these, moreover, are 'big' questions. Thus, although national accounting statisticians are generally agreed that these services are productive and need to be reported as such, some still query the very essence of the SNA approach to this matter. Three years later SNA 1993 was published, for example, the influential Peter Hill (1996, pp. 3-4) continued to argue that what made financial intermediation 'productive' was the ancillary services provided (e.g. security and convenience for depositors, timeliness and flexibility for borrowers) and ^not^ the fact─a la SNA 1953, 1968 ^and^ 1993─that the interest earned and paid was on 'intermediated' rather than 'own funds'. After all, as he pointed out, it seems curious to insist that lending constitutes production ^only^ if a bank lends third-party funds, when 'the institution itself may be incapable of identifying the origin of the particular funds in question and even though the activities involved may be the same whatever the origin of the funds'. (One might also note, as Frits Bos [2006, p. 194] does, the oddity that 'lending money by a bank is production' while 'lending money by non-financial producers or households is no production.') Alongside these large questions, a number of 'niggles' also linger, in the practitioner community, concerning the specific treatment of FISIM contained in SNA 1993.[n.14]

  ( ... ... )