Results of the AEG ediscussion on Nonperforming loans impact on FISIM

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Results of the AEG e-discussion on Non-performing
loans impact on FISIM
UN STATISTICS DIVISION Economic Statistics
Branch National Accounts Section
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Non-performing loans impact on FISIM

• Introduction
• The issue was unresolved
• 3 options were suggested
• Continue to estimate FISIM on NPLs and allocate
  it to the corresponding borrowers but consider
  how unpaid FISIM is recorded in the accounts in
  such a way as to increment principal outstanding
  
• Estimate FISIM on interest received (rather than
  receivable) and on interest payable so that FISIM
  is not attributable to NPLs
• Estimate FISIM on a basis including NPLs but
  allocate the whole amount of FISIM only to those
  borrowers servicing their loans

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Non-performing loans impact on FISIM cont

• Comments
• Some participants regarded option 1 as closest to
  the 'correct' option in a system that records
  NPLs at nominal, rather than market, values.
• However, there are significant reservations about
  recording FISIM on NPLs for loans that are 'dead
  and buried', The view is that there is no service
  provided on such loans.
• Option 2 says switch to cash accounting, but that
  creates excess lumpiness and it doesnt always
  give a reliable picture of the banks situation.
• Option 3 is internally inconsistentwe cant say
  that the interest is there for some purposes, but
  not for others.
• Option 4 also results in inconsistencies.

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Non-performing loans impact on FISIM cont

• Results Total Yes No No opinion
• 1. Option 1 Same as 93 SNA, any FISIM
• on unpaid interest must be accrued
• as part of the principal outstanding 22 21
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• 2. Option 2 Record interest on a cash
• rather than an accrual basis 12 1 11
• 3. Option 3 the implication is that (SNA)
• interest can not be derived by the
• reference rate and stock of perf. loans 12
  12
• 4. Option 4 when the valuation of loans
• change from nominal to market value 12 11 1
  
• 5. Alternative option? 4 1 1 2

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Non-performing loans impact on FISIM cont

• Conclusion
• The consultation shows that most of the AEG
  members participating support Option 1 on the
  treatment of FISIM on NPL

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• Thank You