The new industrial analysis of bank deposits and lending By Karen Westley Tel: 0171 601 5481 During the recent review of banking statistics significant changes were made to data collected by the Bank on the industrial composition of banks business with UK residents. The review adopted revised classifications for the industrial analysis of lending and also introduced a new and complementary analysis of deposits. A historical time series of seasonally adjusted sterling lending data has now been published 1. The data have uses both within the Bank of England and externally. They are also published in a quarterly press release. Introduction The new industrial analysis of deposits, first collected in December 1997, and the updated industrial analysis of lending, are based on the latest Standard Industrial Classification for 1992 (SIC92). The industrial analysis of deposits and lending uses eighteen summary headings (see Chart A) from the detailed SIC92 codes. Several of these headings are further divided, in particular manufacturing and financial intermediation, which break down into eight and ten sub-categories respectively. The data are currently collected quarterly from around 300 banks operating in the UK all those with balance sheets of over 600 million or eligible liabilities over 60 million. These banks are responsible for over 97% of sterling and foreign currency deposits from and lending to non-bank, non-building society UK residents (other UK residents). Less detailed deposits and lending data collected from all of the banks at each end-calendar quarter are used to gross-up the industrial analysis data to reflect the business of the entire UK banking population. The analysis of lending provides loans and advances (including under reverse repo and sterling commercial paper) separately from acceptances. Lending facilities (including undrawn) are also collected and published but without an instrument breakdown. The analysis of deposits (including under repo) has no deposit instrument breakdown. Total deposits, lending and facilities figures for each category are provided in a sterling/other currency split (the latter will include Euro data later this year). Banks are asked to classify companies according to their main activity, and for multi-functional companies a classification according to the precise purpose of the loan or deposit should be applied whenever possible. Where the lending is to, or deposit is from a group of companies, and in the absence of information about the specific purpose of the loan or deposit, they are classified according to the main activity of the parent. The analysis also covers deposits from and lending to individuals and individual trusts. The latter is broken down into lending secured on dwellings and other loans and advances. In the economic sector analysis of M4 and M4 lending 2, a distinction is made between the public and the private sectors, with the latter broken down into other financial corporations, non-financial corporations, individuals, unincorporated business and non-profit making institutions. By contrast, the industrial analysis requires classification of business according to the activity of the depositor or borrower regardless of whether they are public or private sector. The industrial categories cut across the sectoral boundaries underlying M4 and M4 lending. Current data: key features Chart A shows the scale of business associated with each of the eighteen principal industrial classifications and their position as net depositors or borrowers at the end of September 1998. Financial intermediation and individuals and individual trusts, along with wholesale and retail trade and manufacturing were the most prominent net borrowers (borrowing from UK banks exceeds deposits placed with UK banks). Few categories are net depositors. Insurance companies and pension funds, activities auxiliary to financial intermediation and public administration and defence were the most notable exceptions. Activities auxiliary to financial intermediation, a category with net deposits exceeding 31 billion at end-september 1998, is affected by the presence of fund managers. When fund managers borrow money it is assumed that the money is for the maintenance and development of the fund management business. However, when they deposit money or enter into a reverse sale and repurchase agreement (reverse repo) with banks it is invariably on behalf of the clients for whom they manage funds. Where possible, banks are asked to provide more detail on the deposits placed by fund managers, indicating a broad classification of the ultimate depositor 3. The financial intermediation category is dominated by securities dealers which account for about half of the 1 See Tables 13.1, 13.2 and 13.3 of this publication. 2 See Table 5.1 of this publication 3 Quarterly changes data for fund managers analysed by ultimate depositor are available for the current quarter in a footnote to Table 13.1. 1
Chart A: Bank deposits from and lending to UK residents: end-september 1998 (nsa) Fishing Education Mining & quarrying Health & social work Deposits Lending Agriculture, hunting & forestry Electricity, gas & water supply Construction Public administration & defence Hotels & restaurants Recreational, personal & comm ty service activities Transport, storage & communication Activities auxiliary to financial intermediation Wholesale & retail trade Manufacturing Real estate, renting, computer & other business Insurance companies & pension funds 0 10 20 30 40 50 60 billions Financial intermediation Individuals & individual trusts 0 50 100 150 200 250 300 350 400 billions deposits and lending (see Chart B) and, alongside financial leasing corporations, have been heavy net borrowers over the past year. Approximately 85% of bank deposits from and lending to other UK residents are in sterling. The split varies across the categories, with financial intermediation having one of the lowest proportions of sterling deposits and borrowing (approximately 55%), and individuals and individual trusts having over 99%. Facilities (all firm commitments to lend) data are used both within the Bank of England and externally for analysis of credit conditions. Percentage utilisation of facilities can be calculated for the various categories and compared over time. Over the year to end-september 1998, the percentage utilisation by the manufacturing industry was broadly stable at around 47%. Manufacturing holds a large amount of unused facilities compared with the percentage for total UK residents (77% 2
250 Chart B: Financial intermediation: further breakdown for end-september 1998 (nsa) 200 billions 150 100 50 0 Deposits Lending Others (5 categories) Financial leasing corporations Non-bank credit grantors Investment & unit trusts Securities dealers Other financial intermediaries utilisation, unchanged from September 1997). The highest user of facilities is the individuals and individual trusts category, which currently utilises 94% (similar to September 1997). Foreign currency facilities are taken up to a lesser extent than sterling facilities, remaining below 60% throughout the past year for total UK residents. Banking Statistics Review (BSR) The analysis of lending was significantly altered by the BSR in September 1997. The classifications were updated from the SIC 1980 codes to SIC92. The effects on the industrial analysis were substantial, with few categories remaining intact. Some were affected by the reclassification of business activities to which there was only a small amount of lending. Other pre-bsr categories were broken down and redistributed across several new categories, making them unsuitable for long run data series in their existing form. Further changes made as part of the BSR included the reclassification of the offshore islands (Channel Islands and Isle of Man) as non-resident. This had a two-fold effect, with both lending to offshore island residents and lending by those offshore island banks that previously reported to the Bank of England being removed from the data. The reporting banks were also asked to include lending via sale and repurchase agreements (reverse repo), and exclude lending to building societies in their figures from the first submission of the new analysis for September 1997. Long-run analysis of sterling lending In order to prepare for the changes outlined above, along with several other changes relating to other data 4, the banks were not required to complete the industrial analysis return for June 1997. This resulted in a gap in the series. Because of the missing data, and the other changes associated with the BSR, the new data are published in a separate table. However, there was considerable demand for a continuous series, both within the Bank of England and from external users. The British Bankers Association (BBA) continued to collect the industrial analysis of lending, monthly from the Major British Banking Groups 5 (MBBG) throughout the changeover period, and published a series that merged the old and new analyses. In order to do this, several of the industrial categories were condensed to place them on a comparable basis (see box on the following page). 4 See the articles in the September 1997 and February 1998 issues of Monetary & Financial Statistics for further details of the changes introduced at BSR. 5 Abbey National, Alliance & Leicester, Bank of Scotland, Barclays, Halifax, Lloyds TSB, Midland, National Westminster, Royal Bank of Scotland, Woolwich and all of their subsidiary banks. 3
Pre-BSR category (SIC80) 6 Long-run category Post-BSR category (SIC92) Agriculture, forestry & fishing Agriculture & fishing Agriculture, hunting & forestry Fishing Manufacturing industry (excluding Extraction of minerals and ores) Manufacturing Manufacturing o/w Food, drink and tobacco o/w Food, beverages & tobacco o/w Food, beverages & tobacco o/w Textiles, leather, clothing and footwear o/w Textiles & leather o/w Textiles & leather o/w Chemical industry o/w Chemicals, rubber & plastics o/w Chemicals, man-made fibres, rubber & plastics o/w Metal o/w Non-metallic mineral products o/w Mechanical engineering o/w Electrical & electronic engineering o/w Motor vehicles o/w Other transport equipment o/w Other engineering and metal goods o/w Other manufacturing o/w Other manufacturing o/w Pulp, paper, publishing & printing o/w Non-metallic mineral products and metals o/w Machinery, equipment & transport equipment o/w Electrical, medical & optical equipment o/w Other manufacturing Water supply Cold water supply Cold water purification & supply Construction Construction Construction Garages & retail distribution of motor vehicles Other retail distribution Wholesale distribution Garages & retail distribution of motor vehicles Wholesale distribution Wholesale & retail trade o/w Wholesale trade & garages Wholesale & retail trade o/w Sale & repair of motor vehicles and fuel o/w Other wholesale trade Other retail distribution o/w Retail trade o/w Other retail trade & repair Hotels & catering Hotels & restaurants Hotels & restaurants Transport Postal services and telecommunications Transport, storage & communication Transport, storage & communication Property companies Real estate Development, buying, selling & renting of real estate Financial (excluding Building societies and Insurance companies & pension funds) Financial intermediation Financial intermediation (does not include lending to building societies) o/w Leasing enterprises o/w Financial leasing o/w Financial leasing corporations o/w Securities dealers, stockbrokers, jobbers etc. o/w Securities dealers, etc o/w Securities dealers o/w Investment & unit trusts etc. o/w Investment & unit trusts etc. o/w Investment & unit trusts (excluding money market mutual funds) o/w Money market mutual funds o/w Bank holding companies o/w Other financial o/w Other financial o/w Non-bank credit grantors (excluding credit unions) o/w Credit unions o/w Factoring corporations o/w Mortgage & housing credit corporations o/w Other financial intermediaries o/w Insurance companies & pension funds Insurance companies & pension funds Insurance companies and pension funds Oil & extraction of natural gas Other energy industries Extraction of minerals and ores Central and local government Hiring of movables Other services Unclassified industrial categories Mining & quarrying Electricity, gas & heated water Renting of machinery & equipment Computer & related activities Legal, accountancy, consultancy & other business activities Public administration & defence Education Health & social work Recreational, personal & community service activities Activities auxiliary to financial intermediation Individuals & individual trusts Individuals & individual trusts Individuals & individual trusts o/w Bridging finance o/w Loans secured on residential property o/w Lending secured on dwellings o/w Lending secured on dwellings (including bridging finance) o/w Other loans and advances to individuals o/w Other lending to individuals o/w Other loans & advances Sub-categories indented 6 Last published in Table 12.2 in the April 1998 edition of Monetary & Financial Statistics 4
Using the BBA s method, the Bank of England constructed a table of sterling lending by all banks to other UK residents. As with the BBA s table, lending via reverse repo was added into the back data using data supplied on other statistical returns, and lending to building societies was removed from the series. Information from other returns (i.e. the total amount of sterling lending to UK residents and lending to individuals) was used to estimate the missing levels for June 1997. The BBA provided MBBG data for the missing quarter, and the remainder of the known total lending was allocated across the industrial categories using a four-quarter weighted average. Converted building societies lending was considered separately, owing to the lending being heavily weighted towards the personal sector. Their lending to individuals and individual trusts was set according to personal lending data collected on other statistical reports, and the residual of their known total lending was then distributed across the other categories using the same method as for the non- MBBG banks data. Published statistics The pre-bsr tables of lending were published monthly in Monetary & Financial Statistics (Bankstats) up to and including the April 1998 edition. The long-run analysis of lending described above was first published in the March 1998 Bankstats. Banks first reported an industrial analysis of deposits from UK residents for December 1997 and the first quarterly changes data for deposits were published in the May 1998 Bankstats. In the September 1998 edition the long-run analysis included twelve-month growth rates of lending for the first time, and in this issue a seasonally adjusted long-run analysis of lending to UK residents (including three and twelve-month growth rates) is included. Bank group data based firstly on type of bank (Retail, Investment) with the remaining banks based on geographical ownership ( other British, American, Japanese and other overseas) were published as part of the pre-bsr analysis. Bank group data are not published with the new analysis, but are available upon request solely on geographical ownership 7 basis (UK, other EU, American, Japanese, other developed and other). The analysis of lending is published in the Bank of England annual Statistical Abstract in three formats: the pre-bsr data that run from 1975 to 1996; the post-bsr data; and the condensed long-run of data (nsa) as previously published in Bankstats 8. The analysis of deposits is available in the same publication. New observations for each quarter are first published in a Monetary & Financial Statistics Division press release approximately six weeks after the end of the quarter. 7 See the October 1998 edition of Monetary & Financial Statistics (Bankstats) for a full list of banks within each group; amendments to the list are published in this edition. 8 Non-seasonally adjusted data are still available on the Monetary & Financial Statistics Internet site. 5
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