National Balance Sheet Accounts in Israel Methods and Uses OECD Working Party on Financial Statistics 2008 Paris Paper prepared by Noemi Frisch Zachman, presented by Soli Peleg 1
Contents • Introduction • Sources and Methods • Co-operation with the financial stability unit at the Bank of Israel • Uses of the balance sheets • Main findings of latest balance sheet 2
Introduction • The national balance sheet accounts for Israel were first published in 2002 for the year 1995. • Since then the balance sheets have been prepared for the years 2001 to 2004 (presently completing 2005 -2006). • Over the years changes in number of sub sectors and types of instruments have been introduced. 3
Sources and Methods • The value of asset/liability derived from : - method related to an institutional sector - distribution of the total value of an asset/liability among various sectors. 4
Sources and Methods • First phase: assets and liabilities are recorded in accordance with the data in each sector’s financial statements. • Second phase: comparison between the sums of assets and the corresponding liabilities. Choosing the most reliable estimate. • Third phase: if no information is available we use the “counterpart” method or the “residual derivation” method. 5
Sources and Methods • Non Financial Corporations, Other Financial Intermediaries and Financial Auxiliaries – based on the analysis of the balance sheets of the corporations. • Households – balance sheets of other sectors and information about specific assets known for the households (deposits and loans). 6
Sources and Methods • Deposit Money Corporations – the main source is the Central Bank, Supervisor of banks, and some details are collected directly from the large banks. • Pension and Provident Funds and Insurance Corporations – the source is the report of Capital Market of the Insurance and Saving division of the Ministry of Finance. 7
Sources and Methods • Central Government – the source is the Ministry of Finance, Office of the Accountant General. • NPISH and GNPI – survey of balance sheets for public and private NPI conducted by the CBS. 8
Sources and Methods • The Tel Aviv Stock Exchange is the source for the market values of the quoted governmental bonds, quoted private bonds and shares. • The source for the non financial assets is the net capital stock calculated in the NA using the PIM method (doesn’t include land). 9
Co-operation with the financial stability unit at the Bank of Israel Has led to changes in balance sheets: ü Separation of the Holding Companies from the Other Financial Intermediaries. ü Division between foreign currency indexed assets and CPI indexed assets – used to sum up all assets linked or denominated in foreign currency (to analyze the economy’s resilience to exchange rate risk). 10
Co-operation with the financial stability unit at the Bank of Israel ü Breakdown of assets and liabilities by maturity (to analyze liquidity risks). ü Compilation of up-to-date quarterly national balance sheets (still under development). 11
Uses of the balance sheets • Paper which presents a framework for analyzing an economy’s resilience to exchange rate risk using the balance sheet approach. This analysis shows that Israel’s economy was highly vulnerable to a depreciation of the shekel in 1997, but from then until 2005 it became more resilient. (written by Yair Haim and Roee Levy of the Bank of Israel). 12
Uses of the balance sheets • Distribution of credit by all the lender and borrower sectors and by type of financial instrument – last data available is for 2004. Based on the latest complete balance sheet a similar but partial matrix is prepared by the Central Bank to have an up-to-date preliminary set of data – last matrix available at present is for the first quarter of 2008. 13
Uses of the balance sheets • The financial stability unit also uses the balance sheets and other data as basic input for calculating financial soundness indicators. 14
Main findings - 2004 • Israel’s total national wealth – NIS 1, 166 billion, which is 2. 06 times GDP. • The total assets – NIS 5, 139 billion, which is 9. 1 times GDP. • The government debt (mainly bonds) – NIS 564 billion. 15
Main findings - 2004 • The total credit – NIS 1, 388 billion. The loans from the banks – 44% of the total credit. Were mainly given to Non. Financial Corporations (50%) and the households (38%). Total credit to Non-Financial Corporations - NIS 428 billion Total credit to the Households – NIS 241 billion. 16
Distribution of assets - 2004 17
Distribution of liabilities - 2004 18
Ratio of financial assets to nonfinancial assets 19
Conclusion • The balance sheets were first developed within the NA. • The collaboration with the Central Bank has proved fruitful and has lead to wider use of the balance sheets, mainly for analysis of financial soundness. • The ongoing development of the balance sheets will make further uses possible in the future. 20
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