1. Measurement of Production of Financial Institutions
Draft final report
OECD Task Force on financial services (banking services) in national accounts
OECD National Accounts Expert Meeting
8 October 2003

2. Background and introduction
Overview
Background and introduction
Identifying financial corporations
Identifying financial services and measuring the production of financial corporations
Conclusions

3. Background and introduction
Overview
Background and introduction
Identifying financial corporations
Identifying financial services and measuring the production of financial corporations
Conclusions

4. Background and introduction
Overview
Background and introduction
Identifying financial corporations
Identifying financial services and measuring the production of financial corporations
Conclusions

5. Financial corporations :
Identifying financial corporations: Current treatment
Financial corporations :
“… all resident corporations or quasi-corporations principally engaged in financial intermediation or in auxiliary financial activities which are closely related to financial intermediation”.

6. Financial corporations :
Identifying financial corporations: Current treatment
Financial corporations :
“… all resident corporations or quasi-corporations principally engaged in financial intermediation or in auxiliary financial activities which are closely related to financial intermediation”.

7. Financial Intermediation
Identifying financial corporations: Current treatment
Financial Intermediation
“… productive activity in which a unit incurs liabilities on its own account for the purpose of acquiring financial assets by engaging in financial transactions on the market (….)”.
Financial corporations “…. collect funds from lenders and transform, or repackage, them in ways that suit the requirement of borrowers”.
“…. A financial intermediary does not simply act as an agent for other institutional units but places itself at risk by incurring liabilities on its own account”.

8. Identifying financial corporations: Current treatment
Points of analysis
Definition of financial corporations puts emphasis on activity (financial intermediation).
Activity characterized by two elements, “risk-taking” and “repackaging”.
No particular services or any particular composition of assets and liabilities are specified.
Ambiguity about role of “own funds”.

9. Financial corporations (1):
Identifying financial corporations: A proposed definition
Financial corporations (1):
“… all resident corporations or quasi-corporations principally engaged in providing financial services to other institutional units. The production of non-insurance financial services is the result of risk management, liquidity transformation and/or other auxiliary financial activities”.

10. Financial corporations (1):
Identifying financial corporations: A proposed definition
Financial corporations (1):
“… all resident corporations or quasi-corporations principally engaged in providing financial services to other institutional units. The production of non-insurance financial services is the result of risk management, liquidity transformation and/or other auxiliary financial activities”.

11. Financial corporations (1):
Identifying financial corporations: A proposed definition
Financial corporations (1):
“… all resident corporations or quasi-corporations principally engaged in providing financial services to other institutional units. The production of non-insurance financial services is the result of risk management, liquidity transformation and/or other auxiliary financial activities”.

12. Financial corporations (1):
Identifying financial corporations: A proposed definition
Financial corporations (1):
“… all resident corporations or quasi-corporations principally engaged in providing financial services to other institutional units. The production of non-insurance financial services is the result of risk management, liquidity transformation and/or other auxiliary financial activities”.

13. Financial corporations (1):
Identifying financial corporations: A proposed definition
Financial corporations (1):
“… all resident corporations or quasi-corporations principally engaged in providing financial services to other institutional units. The production of non-insurance financial services is the result of risk management, liquidity transformation and/or other auxiliary financial activities”.

14. Financial corporations (2):
Identifying financial corporations: A proposed definition
Financial corporations (2):
„Risk management and liquidity transformation are productive activities in which an institutional unit incurs financial liabilities for the purpose of acquiring mainly financial assets. Corporations engaged in these activities obtain funds, not only by taking deposits but also by issuing bills, bonds or other securities. They use these as well as own funds to acquire mainly financial assets by making advances or loans to others but also by purchasing bills, bonds, or other securities“.

15. Financial corporations (2):
Identifying financial corporations: A proposed definition
Financial corporations (2):
„Risk management and liquidity transformation are productive activities in which an institutional unit incurs financial liabilities for the purpose of acquiring mainly financial assets. Corporations engaged in these activities obtain funds, not only by taking deposits but also by issuing bills, bonds or other securities. They use these as well as own funds to acquire mainly financial assets by making advances or loans to others but also by purchasing bills, bonds, or other securities“.

16. Financial corporations (2):
Identifying financial corporations: A proposed definition
Financial corporations (2):
„Risk management and liquidity transformation are productive activities in which an institutional unit incurs financial liabilities for the purpose of acquiring mainly financial assets. Corporations engaged in these activities obtain funds, not only by taking deposits but also by issuing bills, bonds or other securities. They use these as well as own funds to acquire mainly financial assets by making advances or loans to others but also by purchasing bills, bonds, or other securities“.

17. Identifying financial corporations: A proposed definition
Summary of points :
1. Financial corporations are defined via the services they provide.
2. Risk management and liquidity transformation are the main characteristics of activity.
3. Production must be delivered to third parties.
4. All sources of funds treated symmetrically. Once unit identified as financial corporation, immaterial whether own funds are used in provision of financial services.

18. Conclusions and recommendations
Identifying financial corporations: A proposed definition
Conclusions and recommendations
1. The Task Force supports the definition for non insurance financial services but also recommends an extension to insurance services so that a comprehensive definition of financial services and institutions is considered for the forthcoming revision of the SNA.

19. Conclusions and recommendations
Identifying financial corporations: A proposed definition
Conclusions and recommendations
2. While implicit in the definition, the treatment of own funds constituted a separate point of discussion by the Task Force. There was wide agreement that own funds should not be excluded as a source of funds for the provision of financial services. The Task Force recommends that this point be considered for the forthcoming revision of the SNA:

20. Background and introduction
Overview
Background and introduction
Identifying financial corporations
Identifying financial services and measuring the production of financial corporations
Conclusions

21. Background and introduction
Overview
Background and introduction
Identifying financial corporations
Identifying financial services and measuring the production of financial corporations
Conclusions

22. Overview