Calculating FISIM in Luxembourg Calculating FISIM in different currencies

Unité C1 – Comptes nationaux2 Internal reference rate calculation according to ESA – Step ASSETS Transactions between FIs (Loans and Deposits) - between resident FIs (S122+S123) between resident and non-resident FIs LIABILITIES Transactions between FIs (Loans and Deposits) - between resident FIs (S122+S123) between resident and non-resident FIs INTEREST RECIEVED Transactions between FIs (Loans and Deposits) - between resident FIs (S122+S123) between resident and non-resident FIs8 706 INTEREST PAID Transactions between FIs (Loans and Deposits) - between resident FIs (S122+S123) between resident and non-resident FIs7 950

Unité C1 – Comptes nationaux3 Internal reference rate calculation according to ESA – Step 2 Internal reference rate = 2’409 / 77’301 = 3.12 %

Unité C1 – Comptes nationaux4 Problem 1: Implausible FISIM Negative FISIM for subsectors of S13 alternatively on loans and deposits Large fluctuations of FISIM for subsectors of S14 and S11 on loans and deposits

Unité C1 – Comptes nationaux5 Problem 2: Currency composition of resident interbank loans and deposits Currency CHF9% 8%7%6%4% 3% DIV0% 3% 2% DKK1% 0% EUR58%56%58%62%68%67%63%60%77% GBP4% 3% 2% 3% 2%3% GRD1%0% JPY3% 2%1%2% 1% SEK1% 0%1%0% USD23%27%26%21%16%18%23%28%13%14% Total100%

Unité C1 – Comptes nationaux6 Problem 3: Currency composition of bank loans and deposits of resident sectors Year 2002 UCITS Fin. holding UnincorConsumOwner S11S1231S1232S124S125S1311S1313S1314S141S142S143S15 EUR79%64%73%78%71%99%100% 92%94%100%96% USD17%22%16%12% 1%0% 5%4%0%3% Other3%14%11%10%17%0% 3%2%0%1% Total100% 96%100%

Unité C1 – Comptes nationaux7 Problem 4: Differences to money market rates USD money market rate (Federal funds rate) : 1.67 % EUR money market rate (Euribor 3 month) : 3.32 % Internal reference rate (calculated according to ESA): 3.12 % (Year 2002)

Unité C1 – Comptes nationaux8 Problem 5: Timely differences of EUR and USD money market rates EUR money market rate (Euribor 3 month) 4.4%4.3%3.3%2.3%2.1%2.2%3.1%4.3%4.6%1.2% USD money market rate (Federal funds rate) 6.2%3.9%1.7%1.1%1.3%3.2%5.0% 1.9%0.2% Internal reference rate (calculated according to ESA) 5.0%4.3%3.1%2.4%2.2%2.6%3.4%4.4% 1.7%

Unité C1 – Comptes nationaux9 Solution: 2 different internal reference rates One « EUR-reference rate » for sectors dealing mainly in EUR One « mixed-reference rate » for the financial sectors dealing both in EUR and USD = internal reference rate according to ESA

Unité C1 – Comptes nationaux10 Solution step 1 Calculation of one « Composite internal reference rate » = (EUR money market rate * EUR part of interbank loans and deposits) + (USD money market rate * USD part of interbank loans and deposits) = (3.32 % * 74 %) +(1.67 % * 26 %) = 2.90 %

Unité C1 – Comptes nationaux11 Solution step 2 Discrepancy between Internal reference rate according to ESA and Composite internal reference rate = 3.12 % / 2.90% = 1.08 = Correction factor

Unité C1 – Comptes nationaux12 Solution step 3 Calculation of EUR-reference rate by applying the correction factor to the EUR money market rate = 1.08 * 3.32 % = 3.57 %

Unité C1 – Comptes nationaux13 Solution step 3 cont’d A similar USD reference rate could be calculated = 1.08 * 1.67 % = 1.80 % As a control a new « Composite internal reference rate » gives the internal reference rate = 3.12 % = (3.57 % * 74 %) + (1.80 % * 26 %)

Unité C1 – Comptes nationaux14 Solution final step Mixed reference rate for financial sectors = internal reference rate according to ESA = 3.12 % EUR-reference rate for S11, S 13, S14 and S15 = 3.57 %

Unité C1 – Comptes nationaux15 Time series of EUR-reference rate and mixed reference rate EUR reference rate 4.59%4.43%3.57%2.66%2.29%2.42% 2.98 % 4.17%4.77%1.96% Mixed reference rate (Internal reference rate according to ESA) 5.04%4.32%3.12%2.37%2.16%2.63% 3.41 % 4.37%4.40%1.72%

Calculating FISIM in Luxembourg Thank you for you attention Any questions?