MFS - Lesson 2 - 14 September 2022

Monetary and Financial Statistics
LESSON #2

Postgraduate Program in Statistical Systems 2022|2023
Lesson 2: 14 September 2022
1. [Warm-up quiz]
2. Sectorization of the economy
3. The financial corporations sector
4. Monetary financial institutions (MFI)

Postgraduate Program in Statistical Systems, 2022|2023 2
Sectorization of the economy

Institutional sectors
 The economy of a country is a system whereby institutions and people interact through
exchanges and transfers of goods, services and means of payment for the production
and consumption of goods and services
 In the economy, the units interacting are economic entities that are capable of owning
assets, incurring liabilities and engaging in economic activities and in transactions with
other entities. They are known as institutional units
 Macroeconomic analysis does not consider the actions of each institutional unit
separately — it considers the aggregate activities of similar institutions
 Therefore, units are combined into groups with a similar type of economic behaviour.
These groups are called institutional sectors, some of which are divided into subsectors

Institutional sectors
 Resident units of the economy are grouped into the following five mutually exclusive
institutional sectors:
 S.11 - Non-financial corporations (NFC) Units from these sectors

can be further classified
 S.12 - Financial corporations (FC) as Public or Private
 S.13 - General government (GG)
 S.14 - Households (HH) In MFS these 2 sectors are

generally aggregated
 S.15 - Non-profit institutions serving households (NPISH*)
* Examples of NPISH: trade unions, professional societies, consumers’ associations, political parties, religious societies, social,
cultural, recreational and sports clubs…
Criteria for classifying institutional units
 Each institutional unit belongs to only one institutional sector
 The following table presents the classification by type of producer of the institutional
units belonging to each institutional sector
Sector Type of producer Principal activity and function
S.11 NFC Market producer Production of market goods and non-financial services
Financial intermediation including insurance
S.12 FC Market producer
Auxiliary financial activities
Production and supply of non-market output for collective and individual consumption,
S.13 GG Public non-market producer
and carrying out transactions intended to redistribute national income and wealth
S.14 HH Market producer or private Consumption
(as consumers + as entrepeneurs) producer for own final use Production of market output and output for own final use
S.15 NPISH Private non-market producer Production and supply of non-market output for individual consumption
Source: European System of Accounts – ESA 2010

Concept of residency
 An institutional unit is resident in a country when it has its centre of predominant

economic interest in the economic territory of that country, irrespective of its
nationality
 Centre of predominant economic interest indicates that a location exists within the
economic territory of a country where a unit engages in economic activities, either
indefinitely or over a finite but long period of time (a year or more)
 In the compilation of euro area statistics residents are all economic agents resident in
any of the euro area countries
 In the compilation of national statistics residents are all economic agents resident in
that country
 The set of non-resident economic agents vis-à-vis a given economic territory is called
Rest of the World (RoW)
Decision tree for the allocation of units to sectors
Source: European System of Accounts – ESA 2010

The financial corporations sector

Financial corporations
 The financial corporations sector consists of institutional units whose

principal activity is the production of financial services
 There is a wide range of financial services:
 Accepting deposits
 Granting loans
 Issuing and acquiring securities
 Insurance and pension services
 Trading services such as foreign exchange and securities
 …
 With such a variety of financial activities we need to define subsectors in
order to group units with similar (financial) activities and purposes
Financial intermediaries vs. auxiliaries
 Financial corporations are principally engaged in financial intermediation or in

auxiliary financial activities
 Financial intermediaries channel funds between third parties with a surplus and those
with a lack of funds. A financial intermediary does not only act as an agent for other
institutional units, but places itself at risk by acquiring financial assets and incurring
liabilities on its own account
 Financial auxiliaries do not put themselves at risk by acquiring financial assets or
incurring liabilities. They simply facilitate financial intermediation
 Also included in the financial corporations sector are institutional units providing
financial services, where most of either their assets and liabilities are not transacted
on open markets. These are neither intermediaries nor auxiliaries

The financial corporations sector
Financial corporations S.12

Central bank S.121
Monetary financial Deposit-taking corporations
Other monetary financial S.122 MONETARY
institutions (MFI) except the central bank INSTITUTIONS
institutions (OMFI)
Money market funds (MMF) S.123
Non-MMF investment funds S.124
Other financial intermediaries, except insurance
Financial corporations S.125
corporations and pension funds
except MFI and ICPF NON
Financial auxiliaries S.126
MONETARY
Captive financial institutions and money lenders S.127 INSTITUTIONS
Insurance corporations Insurance corporations (IC) S.128
and pension funds (ICPF) Pension funds (PF) S.129
S.xxx: financial intermediaries
Each of the subsectors from S.122 to S.129 can be broken
down into Public, National private and Foreign controlled S.xxx: financial auxiliaries
S.xxx: neither intermediaries nor auxiliaries
Size and composition of the financial sector
in the euro area and Portugal
Total assets – end-2021 (EUR billions)

Total assets of the financial sector by subsector
(end-2021)
PT = 0.91%
Number of financial corporations in PT – August 2022
S121 S122 S123 S124 S125 S126 S127 S128 S129 TOTAL
1 143 3 603 280 6148 3619 90 240 11127
Source: ECB and BdP
Monetary financial institutions
(MFIs)

Digging into MFIs
 Monetary statistics, as the name suggests, focus on the institutions

belonging to the subsectors of the financial corporations sector that have
a monetary nature – this means that they are able to create money
 The following slides will focus on the monetary financial institutions
(MFIs) that correspond to the grouping of 3 subsectors:
 S.121 + S.122 + S.123

Defining MFIs
 The name monetary financial institution (MFI) was coined during the
preparations for the Monetary Union which occurred between the
adoption of the Treaty on European Union (Maastricht Treaty) in 1992 and
the start of the Monetary Union in 1999
 This designation covers those financial institutions with at least some
monetary liabilities
 The principal aim of the definition of the MFI sector for statistical
purposes is to provide the ECB with a comprehensive statistical picture of
monetary developments in the euro area

Why MFIs and not simply ‘banks’
 The term was chosen in preference to the familiar ‘bank’ or ‘depository corporation’ in
order to include, in addition to central banks and commercial banks, a group of
institutions called money market funds (MMFs), which are not considered to be banks
and do not take deposits
 MMFs and some other, e.g. electronic money institutions, issue liabilities which may
be seen as close substitutes for deposits due to its high degree of liquidity and price
certainty
 Therefore, the units or shares issued by MMFs should be included in the euro area
broad money concept (this concept will be explained in lesson #8)

MFIs: central bank
 The central bank subsector (S.121) consists of all financial corporations

whose principal function is to issue currency, to maintain the internal and
external value of the currency and to hold all or part of the international
reserves of the country
 Subsector S.121 does not include agencies and bodies, other than the
central bank, which regulate or supervise financial corporations or
financial markets. These are classified in S.126 (financial auxiliaries)
 Usually a country has only 1 institution in S.121. One exception is France
where, besides the Central Bank, also an institution in charge of monetary
issuance in the overseas departments of France is classified in S.121
MFIs: deposit-taking corporations
 The deposit-taking corporations (except the central bank) subsector

(S.122) includes all financial corporations, except those classified in the
central bank and in the MMF subsectors, which are principally engaged in
financial intermediation and whose business is to receive deposits and/or
close substitutes for deposits from institutional units and, for their own
account, to grant loans and/or to make investments in securities
 Subsector S.122 does not include head offices which oversee and manage
other units of a group consisting predominantly of deposit-taking
corporations, but which are not deposit-taking corporations. Such head
offices are classified in subsector S.126
MFIs: deposit-taking corporations
Deposit-taking corporations (DTCs) comprises two types of institutions:

 Credit institutions (CIs) – an enterprise whose business is to receive deposits or
other repayable funds from the public and to grant credits for its own account
(broadly speaking, banks)
Examples: commercial banks, savings banks, post banks, rural credit banks, cooperative
credit banks, credit unions, …
 Other deposit-taking corporations

Examples: electronic money institutions principally engaged in financial intermediation

E-money
 Electronic money (e-money) is the digital alternative to cash, which

enables users to store funds on a device or through the internet and to
make payment transactions
 E-money is released into circulation by e-money issuers, who received
funds from natural or legal persons, for the purpose of making payments
which are accepted by subjects other than the money issuer (this
distinguishes e-money from e.g. a pre-paid card for use in a particular chain of shops
or on public transport)

MFIs: e-money institutions
 E-money issuers can be either institutions primarily dedicated to this kind

of issuances or others institutions (e.g. credit institutions)
 Electronic money institutions (ELMIs) are corporations principally
engaged in financial intermediation in the form of issuing e-money
 The issuance of e-money does not constitute deposit taking (although
ELMIs are classified in subsector S.122 Deposit-taking corporations)

E-money issued in the euro area
Source: ECB
The amount of e-money issued in the EA is modest. In 2020 it represented 1.4% of euro banknotes in circulation
E-money vs. cryptocurrencies
Electronic money ≠ cryptocurrencies

E-money is an electronically stored monetary value of legal tender (fiat)
currencies controlled by central banking systems
Cryptocurrencies represent non-fiat currencies which use decentralized
control and are neither issued nor regulated by central banking systems
In statistical terms, cryptocurrencies are considered a non-financial asset

Central bank digital currencies
 The increasing popularity of non-cash payments and the expansion of

crypto-assets reveal a growing demand for immediacy and digitalization
 For this reason, countries around the world are currently exploring the
issuance of a central bank digital currency (CBDC). Nine* countries have
now fully launched a digital currency and some large economies are quite
advanced in their exploration, like China
 A CBDC is the legal tender issued by a central bank in a digital form. It is
the same as a fiat currency and is exchangeable one-to-one with the fiat
currency. It offers the possibility for everyone to use public money for
digital payments
* as of May 2022
MFIs: money market funds
 The money market funds subsector (S.123) consists of collective

investment schemes that raise funds by issuing to the public shares or
units regarded as close substitutes for deposits and, for their own
account, to make investments in money market instruments, MMF shares,
short-term debt securities and/or deposits
 Investment funds are split into 2 subsectors: MMF (S.123) and non-MMF
investment funds (S.124) (the latter will be discussed in lesson #12)

What distinguishes a MMF from other IFs
 A MMF is a special category of investment fund (IF). In order to an IF be

classified as a MMF it:
 must confine their investments to high-quality liquid assets with short maturity
 may not assume direct or indirect exposure to equities and commodities
 must avoid currency exposure to currencies other than the fund’s currency
 may not invest in other investment funds unless they are themselves MMFs
 Due to the high liquidity of the market instruments where MMF can
invest, the stability of value of the principal invested and the rate of
return obtained, MMF units/shares may be regarded as close substitutes
for deposits
Summarizing in a visual way
MFIs
Deposit-taking
Central banks
corporations
Money market funds Other MFIs
Credit institutions Other DTCs
Other MFIs (OMFIs) are those financial intermediaries through

which the effects of the monetary policy of the central bank ELMIs
are transmitted to the other entities of the economy
The MFI sector in Portugal
Number and total assets of MFIs in Portugal as of end-2021

No. EUR millions %
S.121 Central bank 1 219 642 31,7%

Banks 61 436 234 62,9%
S.122 Cooperative banks 81 36 412 5,3%
Saving banks 2 486 0,1%
S.123 Money market funds 3 341 0,0%
TOTAL 148 693 115 100,0%

≈ 3.3 x GDP in 2021
Source: BdP

The MFI sector in the euro area
Overview of the MFI population in the euro area (end-July 2021)

AT BE CY DE EE ES EU FI FR GR IE IT LT LU LV MT NL PT SI SK TOTAL
Central banks 1 1 1 1 1 1 1 1 2 1 1 1 1 1 1 1 1 1 1 1 21
Credit institutions 468 81 27 1427 36 193 1 200 401 36 272 444 81 123 46 22 86 144 16 25 4 129
Money market funds 0 7 0 7 0 2 0 1 113 7 115 2 0 130 0 0 5 3 2 0 394
Other deposit taking corporations 2 7 15 3 1 47 0 0 108 3 19 12 9 11 3 0 2 1 0 0 243
TOTAL 471 96 43 1438 38 243 2 202 624 47 407 459 91 265 50 23 94 149 19 26 4 787
European Central Bank -159 compared to 2021

European Investment Bank -5069 compared to 1999
86% of MFIs are Credit Institutions
Source: ECB
The ECB releases daily updates to the list of MFIs
Number of MFIs in the euro area over time
Source: ECB

Balance sheet of euro area MFIs
Aggregated balance sheet of euro area MFIs (excluding the Eurosystem): June 2022
(EUR billions; outstanding amounts at end of period)
56%
Source: ECB
Balance sheet of euro area MFIs over time
Source: ECB
The BS of MFIs evolved differently across the euro area
Growth rate of the balance sheet of euro area MFIs (excluding the Eurosystem): 2016-2022
Source: ECB
Recalling the changes in euro area composition
1999 2001 2007 2008 2009
Austria Belgium Finland Greece Slovenia Cyprus Slovakia
12 13 16
France Germany Ireland Malta
15
2011 2014 2015 2023

Italy Luxembourg Netherlands
Estonia Latvia Lithuania Croatia
Portugal Spain 11 17 18 19 20
Questions?
Luís Teles Dias

ldias@novaims.unl.pt


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Monetary and Financial Statistics

Monetary and Financial Statistics

Monetary and Financial Statistics

Monetary and Financial Statistics

Monetary and Financial Statistics

 S.11 - Non-financial corporations (NFC) Units from these sectors

 S.13 - General government (GG)

 S.14 - Households (HH) In MFS these 2 sectors are

 Each institutional unit belongs to only one institutional sector

Sector Type of producer Principal activity and function

Source: European System of Accounts – ESA 2010

Monetary and Financial Statistics

 An institutional unit is resident in a country when it has its centre of predominant

Source: European System of Accounts – ESA 2010

Monetary and Financial Statistics

Monetary and Financial Statistics

 The financial corporations sector consists of institutional units whose

 Financial corporations are principally engaged in financial intermediation or in

Monetary and Financial Statistics

Financial corporations S.12

Total assets – end-2021 (EUR billions)

Number of financial corporations in PT – August 2022

Monetary and Financial Statistics

 Monetary statistics, as the name suggests, focus on the institutions

 S.121 + S.122 + S.123

Monetary and Financial Statistics

Monetary and Financial Statistics

Monetary and Financial Statistics

 The central bank subsector (S.121) consists of all financial corporations

 The deposit-taking corporations (except the central bank) subsector

Deposit-taking corporations (DTCs) comprises two types of institutions:

 Other deposit-taking corporations

Monetary and Financial Statistics

 Electronic money (e-money) is the digital alternative to cash, which

Monetary and Financial Statistics

 E-money issuers can be either institutions primarily dedicated to this kind

Monetary and Financial Statistics

Electronic money ≠ cryptocurrencies

In statistical terms, cryptocurrencies are considered a non-financial asset

Monetary and Financial Statistics

 The increasing popularity of non-cash payments and the expansion of

 The money market funds subsector (S.123) consists of collective

Monetary and Financial Statistics

 A MMF is a special category of investment fund (IF). In order to an IF be

Credit institutions Other DTCs

Other MFIs (OMFIs) are those financial intermediaries through

Number and total assets of MFIs in Portugal as of end-2021

S.121 Central bank 1 219 642 31,7%

Monetary and Financial Statistics

Overview of the MFI population in the euro area (end-July 2021)

Money market funds 0 7 0 7 0 2 0 1 113 7 115 2 0 130 0 0 5 3 2 0 394

Other deposit taking corporations 2 7 15 3 1 47 0 0 108 3 19 12 9 11 3 0 2 1 0 0 243

European Central Bank -159 compared to 2021

86% of MFIs are Credit Institutions

Monetary and Financial Statistics

1999 2001 2007 2008 2009

Austria Belgium Finland Greece Slovenia Cyprus Slovakia

France Germany Ireland Malta

2011 2014 2015 2023

Estonia Latvia Lithuania Croatia

Luís Teles Dias

Monetary and Financial Statistics