Bank Service Price Measurement Bank Service Price Measurement and Output Deflation in Canadaand Output Deflation in Canada

Presented at the 2008 World Congress on National Accounts Presented at the 2008 World Congress on National Accounts and Economic Performance Measures for Nations, May 17, 2008and Economic Performance Measures for Nations, May 17, 2008

S. Dubey and M. Ruddock, S. Dubey and M. Ruddock, Statistics CanadaStatistics Canada

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Steps and Challenges in Building a Canadian Bank Services Producer Price Index (SPPI)

1.1. Measure and Price of Bank “Output”: SNA 1993, Measure and Price of Bank “Output”: SNA 1993, Financial Intermediation Services Indirectly Measured Financial Intermediation Services Indirectly Measured (FISIM), and the User-Cost of Money framework (FISIM), and the User-Cost of Money framework

2.2. Stakeholder Consultations and Fitness-for-Use: A Stakeholder Consultations and Fitness-for-Use: A Quality Assurance approach to index development and Quality Assurance approach to index development and levels of dissaggregationlevels of dissaggregation

3.3. A review of the Canadian Industrial Structure of A review of the Canadian Industrial Structure of Commercial BankingCommercial Banking

4.4. What remains: The measurement challenges of defining What remains: The measurement challenges of defining Bank Service/Output and Price in the User Cost Bank Service/Output and Price in the User Cost Framework; Data Collection; and Index CalculationFramework; Data Collection; and Index Calculation

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We began with the features of an “Ideal” We began with the features of an “Ideal” Price IndexPrice Index

1.1. Price indices must be “Well-Aligned” with OutputPrice indices must be “Well-Aligned” with Output

2.2. Prices should reflect transaction pricesPrices should reflect transaction prices

3.3. Prices must measure Constant Quality TransactionsPrices must measure Constant Quality Transactions

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Which led to the question, “What is “Bank Which led to the question, “What is “Bank Output / Bank Services? ” Output / Bank Services? ”

• Banks provide the following services:

– Monitoring and Information Processing; Liquidity and Payment Monitoring and Information Processing; Liquidity and Payment Services; Safe-keeping; Asset Transformation; Risk Management Services; Safe-keeping; Asset Transformation; Risk Management (C. Wang, S. Basu, X. Freixas, J-C Rochet(C. Wang, S. Basu, X. Freixas, J-C Rochet) )

• These services are bundled into products, such as consumer loans, mortgages, business loans, time deposits, etc.

• Pricing these products is, perhaps, the closest we get to pricing bank services

• Changes in these services may constitute quality change

– Credit scoring models and regulatory requirements such as Basel II Credit scoring models and regulatory requirements such as Basel II also help monitor and manage risk; also help monitor and manage risk;

– Financial Engineering models/growth of derivatives increase asset Financial Engineering models/growth of derivatives increase asset transformation; transformation;

– Telephone Banking and ABMs increase access to liquidity; Telephone Banking and ABMs increase access to liquidity;

– Internet Banking facilitates speed and ease of paymentsInternet Banking facilitates speed and ease of payments

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And the question “How will a Bank Service And the question “How will a Bank Service SPPIs be used?” SPPIs be used?”

1. Banking SPPI component of overall Producer Price Index

2. Output (Price) Deflators for the Canadian System of National Accounts

• Implicit (interest) charges on deposits: banks and other deposit credit intermediaries. Deposits include Demand deposits, Notice deposits, Fixed term deposits, Sub-ordinated debt and Other interest-bearing liability

• Implicit (interest) charges on loans: banks and other deposit credit intermediaries. Loans include Mortgages (residential and non-residential), Personal loans, Other loans for business purposes, Loans to government and financial institutions, Securities and Other interest-earning assets

• Paid (service) charges: banks and other deposit credit intermediaries

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Commodity Commodity Output ShaOutput Share of Banking and Other re of Banking and Other Depository Credit Intermediation, 2004 Current DollarsDepository Credit Intermediation, 2004 Current Dollars

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Currently price indices produced at Statistics Currently price indices produced at Statistics Canada do not meet these needsCanada do not meet these needs

• Price Indices:Price Indices:

– No Bank Service SPPI existsNo Bank Service SPPI exists

– Implicit Services: No current price index for implicit services. Implicit Services: No current price index for implicit services. The SNA uses other methods to derive constant price output.The SNA uses other methods to derive constant price output.

– Explicit Services: Explicit Services:

• CPI began production of price indices for households using a CPI began production of price indices for households using a model-price approach: model-price approach:

– profile “typical” consumers (# of transactions, minimum balance, profile “typical” consumers (# of transactions, minimum balance, etc), using bank service charges as posted by Industry Canadaetc), using bank service charges as posted by Industry Canada

• No producer price or non-household explicit fee index exist at No producer price or non-household explicit fee index exist at presentpresent

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So next we looked at the User Cost of Money framework So next we looked at the User Cost of Money framework to price Bank Products (Loans and Deposits)to price Bank Products (Loans and Deposits)

ppAjAj = = unit price of assets (loans) with characteristic unit price of assets (loans) with characteristic jj

jjAjjAjAj πcs)r(rp *

ppDiDi = = unit price of deposits (liabilities) with characteristic unit price of deposits (liabilities) with characteristic ii

DiDiiDi s)rk)(1(rp

rrAjAj* = interest received by bank from borrowers; * = interest received by bank from borrowers; ssAjAj = explicit service fee on loans; = explicit service fee on loans;cj = expected capital gains on loans (assets); cj = expected capital gains on loans (assets); πj = expected provision for loan losses; andπj = expected provision for loan losses; and

rrDi Di = interest paid by banks to depositors; = interest paid by banks to depositors; ssDj Dj = explicit service fee on deposits;= explicit service fee on deposits;

k = reserve requirement on deposits (now = 0 in Canada); k = reserve requirement on deposits (now = 0 in Canada);

rrjj and and rrii = reference rate (may be the opportunity cost to the financial = reference rate (may be the opportunity cost to the financial institution, sometimes seen as a “risk-free” rate); institution, sometimes seen as a “risk-free” rate);

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The User Cost of Money and Bank “Output”The User Cost of Money and Bank “Output”

• qqj j AA = loans (assets) with characteristic = loans (assets) with characteristic j = 1, 2, …, Jj = 1, 2, …, J

• qqi i D D == deposits with characteristic deposits with characteristic ii = 1, 2, … , I = 1, 2, … , I

Total Income or “Output” for Banks from Loans & Deposits:Total Income or “Output” for Banks from Loans & Deposits:

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ss)r(rq)r(r Aj

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• First two terms = income from implicit fees (FISIM); First two terms = income from implicit fees (FISIM); • Third and Fourth terms = income from explicit fees; Third and Fourth terms = income from explicit fees;

• MEASUREMENT ISSUE #1: Bank interest paid on loans likely include MEASUREMENT ISSUE #1: Bank interest paid on loans likely include expected capital gains and expected loan losses: rexpected capital gains and expected loan losses: rAjAj = r = rAjAj* + c* + cjj – – ππjj. . However, the Canadian SNA excludes capital gains/losses.However, the Canadian SNA excludes capital gains/losses.

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Aggregating Canadian Bank Output and Aggregating Canadian Bank Output and Prices, by sector of the economy: Prices, by sector of the economy:

Implicit Net Interest received Implicit Net Interest received from loans (relative to from loans (relative to

reference rate): reference rate):

∑ ∑ qqjjAA * (r * (r

AjAj - r - rjj))

Explicit fees Explicit fees charged on loans: charged on loans:

∑∑qqjjA A * s* s

AjAj

Implicit Net Interest received Implicit Net Interest received on deposits (relative to on deposits (relative to

reference rate): reference rate):

∑∑qqiiDD * (r * (r

ii - r - rDiDi))

Explicit fees Explicit fees charged on charged on deposits: deposits:

∑∑qqiiDD * s * s

Di Di

Total Bank Output/Price =Net Value of

Assets (mortgage & non-mortgage

loans)

Explicit Fees

Implicit FeesII +

+Net Value of

Deposits

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Price Index Quality and Fitness-for-use requires Price Index Quality and Fitness-for-use requires its satisfied needs of users/stakeholdersits satisfied needs of users/stakeholders

• Prices Division at Statistics Canada began a consultation Prices Division at Statistics Canada began a consultation process in October, 2007process in October, 2007

– Participants: System of National Accounts; Bank of Canada; Participants: System of National Accounts; Bank of Canada; Department of Finance Canada; Industry CanadaDepartment of Finance Canada; Industry Canada

– Process included inter-agency meetings; presentations; and Process included inter-agency meetings; presentations; and a consultation questionnairea consultation questionnaire

– Questionnaire helped clarify what was meant by “bank Questionnaire helped clarify what was meant by “bank output”, along with the most needed disaggregations of a output”, along with the most needed disaggregations of a Bank SPPI (frequency, geography, sector, product line, and Bank SPPI (frequency, geography, sector, product line, and income source)income source)

– Consensus: Most important use of the Bank SPPI comes Consensus: Most important use of the Bank SPPI comes from its use as a deflator in the System of National Accountsfrom its use as a deflator in the System of National Accounts

– Deflation Section, in turn, requires a separate deflator for Deflation Section, in turn, requires a separate deflator for implicit (interest) fees and explicit (service) feesimplicit (interest) fees and explicit (service) fees

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Consultation QuestionsConsultation Questions

1.1. What is your division/department/agency’s principal anticipated What is your division/department/agency’s principal anticipated uses of a bank services SPPI? (Please check all that apply)uses of a bank services SPPI? (Please check all that apply)

– Direct use as a Deflator of bank outputDirect use as a Deflator of bank output– Direct use in Productivity Research Direct use in Productivity Research – Direct use in International comparisons of Bank Service SPPIsDirect use in International comparisons of Bank Service SPPIs– Direct use as a Business indicator/Price Trend of bank servicesDirect use as a Business indicator/Price Trend of bank services– Indirect use in Productivity Research of Trends in Real Indirect use in Productivity Research of Trends in Real

(Deflated) Bank Output (Deflated) Bank Output – Indirect use in International comparisons of Trends in Real Indirect use in International comparisons of Trends in Real

(Deflated) Bank Output(Deflated) Bank Output– Other (please specify) Other (please specify)

__________________________________________________________________________________________

2.2. Please rank the items in Q1 by priority.Please rank the items in Q1 by priority.

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Consultation Questions (in progress)Consultation Questions (in progress)3.3. In your view, how do you define “Bank Services” or “Bank Output”? In your view, how do you define “Bank Services” or “Bank Output”?

Please check all that apply. Bank output consists primarily of:Please check all that apply. Bank output consists primarily of:– Traditional products offered by banks, such as loans (mortgage and non-Traditional products offered by banks, such as loans (mortgage and non-

mortgage) and depositsmortgage) and deposits– All products offered by banks, including loans, deposits, brokerage All products offered by banks, including loans, deposits, brokerage

services, mutual funds services, investment advice, insurance, trust services, mutual funds services, investment advice, insurance, trust services, etc. services, etc.

– The income components of bank income, such as explicit (service) fees, The income components of bank income, such as explicit (service) fees, implicit (interest) fees, returns on use of own funds, etc.implicit (interest) fees, returns on use of own funds, etc.

– Other (please specify) Other (please specify) __________________________________________________________________________________________

4.4. What Bank Service price indices are What Bank Service price indices are importantimportant to your group? Please to your group? Please check all that apply:check all that apply:

– An overall Bank Service SPPIAn overall Bank Service SPPI– Bank Service SPPIs broken down into products, such as loans, deposits, Bank Service SPPIs broken down into products, such as loans, deposits,

insurance, etc insurance, etc – Bank Service SPPIs broken down into income sources, such as explicit Bank Service SPPIs broken down into income sources, such as explicit

(service) fees, implicit (interest) fees, returns on use of own funds, etc.(service) fees, implicit (interest) fees, returns on use of own funds, etc.– Bank Service SPPIs broken down by both products and income sourcesBank Service SPPIs broken down by both products and income sources– Other (please specify) Other (please specify)

__________________________________________________________________________________________

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Consultation Questions (in progress)Consultation Questions (in progress)5.5. What sector categories of Bank Service price indices are What sector categories of Bank Service price indices are

importantimportant to your group? Please check all that apply: to your group? Please check all that apply:– Bank Service SPPIs for the household sector Bank Service SPPIs for the household sector – Bank Service SPPIs for the business sectorBank Service SPPIs for the business sector– Bank Service SPPIs for non-residents/foreign sectorBank Service SPPIs for non-residents/foreign sector– Bank Service SPPIs for the public sectorBank Service SPPIs for the public sector– An overall Bank Service SPPI that aggregates all four sectors aboveAn overall Bank Service SPPI that aggregates all four sectors above– Other (please specify) ______________________________________Other (please specify) ______________________________________

6.6. What levels of geography and time frequency of Bank What levels of geography and time frequency of Bank Service price indices are Service price indices are importantimportant to your group? Please to your group? Please check all that apply:check all that apply:

AnnualAnnual QuarterlyQuarterly MonthlyMonthly

Canada TotalCanada Total

Provincial/TerritorialProvincial/Territorial

Other (specify)Other (specify)

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Consultation: Questions for DiscussionConsultation: Questions for Discussion7.7. In calculating a Bank Services price index, we use a “risk-free” reference rate of In calculating a Bank Services price index, we use a “risk-free” reference rate of

interest to compute the implicit (interest) fees portion of the index. What do you interest to compute the implicit (interest) fees portion of the index. What do you believe is the appropriate “risk-free” rate? Do you believe this is a single rate, or believe is the appropriate “risk-free” rate? Do you believe this is a single rate, or multiple rates? multiple rates?

8.8. In calculating a price index, it is important that a statistical organization collect In calculating a price index, it is important that a statistical organization collect information on price determining characteristics. For example, since auto information on price determining characteristics. For example, since auto insurance is provincially regulated, a good price index for auto insurance would insurance is provincially regulated, a good price index for auto insurance would take into account provincial differences. In your view, what are some of the take into account provincial differences. In your view, what are some of the important price determining characteristics that affect the price of bank services? important price determining characteristics that affect the price of bank services?

9.9. Quality change affects the nature of a product, and hence the way in which price Quality change affects the nature of a product, and hence the way in which price index theory prices products. For example, a savings account held in a Canadian index theory prices products. For example, a savings account held in a Canadian bank in 1980 allowed individuals to access their savings during bank hours; today, bank in 1980 allowed individuals to access their savings during bank hours; today, these savings can be access virtually any time through Automatic Bank Tellers and these savings can be access virtually any time through Automatic Bank Tellers and Internet Banking. Changes in features, such as accessibility, alter the quality of the Internet Banking. Changes in features, such as accessibility, alter the quality of the bank service, and should be taken into account in determining price changes. bank service, and should be taken into account in determining price changes. Please list and discuss some of the quality change features you feel are important, Please list and discuss some of the quality change features you feel are important, and how they might be taken into account in pricing bank services.and how they might be taken into account in pricing bank services.

10.10. Are you aware of existing methodologies used to measure bank service price Are you aware of existing methodologies used to measure bank service price indexes, or bank productivity? If so, are there lessons we should take from them?indexes, or bank productivity? If so, are there lessons we should take from them?

11.11. Are there issues, other than the items above, you feel are relevant for the Are there issues, other than the items above, you feel are relevant for the development of Bank Service price indexes? Please explain and discuss.development of Bank Service price indexes? Please explain and discuss.

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Preliminary Findings:Preliminary Findings:

1.1. Use of Bank Services SPPI: Use of Bank Services SPPI: Range of uses requested covers all choicesRange of uses requested covers all choices

2.2. Ranking Uses: Ranking Uses: Need for accurate output deflator the most importantNeed for accurate output deflator the most important

3.3. Bank Output definition:Bank Output definition:

• SNA requires commodity level detail: aggregate product lines (mortgage SNA requires commodity level detail: aggregate product lines (mortgage loans, non-mortgage loans, deposits) by type of fee (explicit/implicit)loans, non-mortgage loans, deposits) by type of fee (explicit/implicit)

• External productivity researchers interested in detailed product line, but External productivity researchers interested in detailed product line, but recognize data collection limitations.recognize data collection limitations.

4.4. Price index detail:Price index detail:

• SNA requires SPPIs by sector (household, business, etc) and by SNA requires SPPIs by sector (household, business, etc) and by explicit/implicit fees breakdown for loans and deposits.explicit/implicit fees breakdown for loans and deposits.

• If limited in choice, BoC prefers aggregate financial services SPPI to sub-If limited in choice, BoC prefers aggregate financial services SPPI to sub-component SPPIscomponent SPPIs

• Department of Finance, which sets the five-year regulatory regime for financial Department of Finance, which sets the five-year regulatory regime for financial institutions, also interested in global output of Canadian banks, not just institutions, also interested in global output of Canadian banks, not just “booked in Canada”“booked in Canada”

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Preliminary Findings:Preliminary Findings:4.4. Sector Breakdown: Sector Breakdown: All sectors (household, business, non-resident, public, All sectors (household, business, non-resident, public,

NPISH) NPISH)

5.5. Geography: Geography: Annual national the most important, but need exists for quarterly Annual national the most important, but need exists for quarterly national indices and annual provincial indices.national indices and annual provincial indices.

6.6. Reference rate selection:Reference rate selection:

• Should rate reflect government securities or banker’s acceptances?Should rate reflect government securities or banker’s acceptances?

• Should rate be a single rate or multiple rate (e.g. yield curve or term structure)Should rate be a single rate or multiple rate (e.g. yield curve or term structure)

• Note:Note: Wrong choice can result in negative prices, as pointed out by Canadian Wrong choice can result in negative prices, as pointed out by Canadian SNA; Bank of Japan; and India’s Ministry of IndustrySNA; Bank of Japan; and India’s Ministry of Industry

Note: “Booked in Canada” concept essential, yet creates data problemsNote: “Booked in Canada” concept essential, yet creates data problems::

• System of National Account measures Gross System of National Account measures Gross DomesticDomestic Product, which Product, which requires “Booked in Canada” data.requires “Booked in Canada” data.

• Under Basel II, banks operating internationally disclose data on global Under Basel II, banks operating internationally disclose data on global operations.operations.

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Primary use of Bank SPPIs as deflators in our Primary use of Bank SPPIs as deflators in our SNA requires the following disaggregationsSNA requires the following disaggregations

For Explicit (Service) Charges:For Explicit (Service) Charges:• Banking and other depository credit intermediation Banking and other depository credit intermediation

services - explicit chargesservices - explicit charges

For Implicit (Interest) Charges:For Implicit (Interest) Charges:• Banking and other depository credit intermediation Banking and other depository credit intermediation

services - implicit changes on depositsservices - implicit changes on deposits• Banking and other depository credit intermediation Banking and other depository credit intermediation

services - implicit changes on mortgagesservices - implicit changes on mortgages• Banking and other depository credit intermediation Banking and other depository credit intermediation

services - implicit changes on other loans  services - implicit changes on other loans  

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Concentration of Commercial Banking in Canada will impact SPPI development for Bank Services

• In 2007, there were 71 chartered banks: 22 domestic + 49 foreign bank In 2007, there were 71 chartered banks: 22 domestic + 49 foreign bank subsidiaries/branchessubsidiaries/branches

• SixSix largest domestic banks control about 85 of industry assets; and largest domestic banks control about 85 of industry assets; and rank between 40 and 119 of the world’s top 150 banksrank between 40 and 119 of the world’s top 150 banks

• Income from service charges is growing relative to interest income; as Income from service charges is growing relative to interest income; as is off-balance sheet activitiesis off-balance sheet activities

• Concentration results in a sector already heavily burdened by Concentration results in a sector already heavily burdened by Statistics Canada surveysStatistics Canada surveys

IMPLICATIONS & CHALLENGES: IMPLICATIONS & CHALLENGES:

• Cut-off sampling of a very small first-stage sample of banks may be Cut-off sampling of a very small first-stage sample of banks may be sufficient to build a good index; but loss of a single respondent has sufficient to build a good index; but loss of a single respondent has important data quality consequencesimportant data quality consequences

• All 6 fall under the regulatory reporting requirements of Basel II, but All 6 fall under the regulatory reporting requirements of Basel II, but reported data do not match the “Booked-in-Canada” requirements of reported data do not match the “Booked-in-Canada” requirements of an SPPI or output deflatoran SPPI or output deflator

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Canadian Chartered Banks own over 70% of financial Canadian Chartered Banks own over 70% of financial service industry assets, amounting to $2.5 trillion in 2007service industry assets, amounting to $2.5 trillion in 2007

Some Income Components of the Six Major Canadian Banks

0

5

10

15

20

25

30

35

40

45

50

55

2001 2002 2003 2004 2005 2006

$b

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ns

s

Net InterestProvision for loan lossesOther Income

Source: Canadian Bankers Association, August 2007

Total Assets, Deposits and Loans of the Six Major Canadian Banks

700

900

1,100

1,300

1,500

1,700

1,900

2,100

2001 2002 2003 2004 2005 2006

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s

Assets

Deposits

Loans

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Implicit charges as a Percent (%) of Bank & Credit Implicit charges as a Percent (%) of Bank & Credit Union Output fell from 70% in 1971 to 50% in 2003Union Output fell from 70% in 1971 to 50% in 2003

40%

50%

60%

70%

80%

90%

100%

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

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Unresolved Measurement IssuesUnresolved Measurement Issues

1.1. Bank interest paid on loans likely include expected Bank interest paid on loans likely include expected capital gains and expected loan losses.capital gains and expected loan losses. However, the However, the Canadian SNA excludes capital gains/lossesCanadian SNA excludes capital gains/losses

2.2. Most countries with Banking SPPIs use “Unit price” to Most countries with Banking SPPIs use “Unit price” to calculate price (interest) on deposits and loans. If a calculate price (interest) on deposits and loans. If a class of loans (deposits) is not homogenous, is a unit class of loans (deposits) is not homogenous, is a unit price correct? price correct?

3.3. Calculating separate indexes for explicit fees and Calculating separate indexes for explicit fees and implicit fees may increase the risk of negative prices in implicit fees may increase the risk of negative prices in one category:one category:

• Consider low-interest periods on credit card balance Consider low-interest periods on credit card balance transfers, where low or zero interest income is offset transfers, where low or zero interest income is offset by fees on the balance of transferred funds. by fees on the balance of transferred funds. Separating implicit and explicit fees could certainly Separating implicit and explicit fees could certainly make implicit fees face a negative price.make implicit fees face a negative price.

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Unresolved Measurement IssuesUnresolved Measurement Issues

4.4. What is the correct choice of Reference Rate?What is the correct choice of Reference Rate?

• Multiple reference rates have let to problems of negative pricing, and Multiple reference rates have let to problems of negative pricing, and hence, negative output.hence, negative output.

• Reference rate based on “cost of funds” (such as inter-bank lending Reference rate based on “cost of funds” (such as inter-bank lending rate) can also lead to negative prices. rate) can also lead to negative prices.

• Single “risk-free” reference rate using government securities is Single “risk-free” reference rate using government securities is problematic:problematic:

• Wang, Basu and others argue that reference rate should not be risk free. Wang, Basu and others argue that reference rate should not be risk free.

• How does a risk-free rate result in relative productivity comparisons How does a risk-free rate result in relative productivity comparisons between countries where banks have different appetites for risk?between countries where banks have different appetites for risk?

• T-Bill rates, for example, may lead to negative prices depending on the T-Bill rates, for example, may lead to negative prices depending on the term structure of assets (Japan)term structure of assets (Japan)

• ““Flight to safety” feature of government securities during credit crisis Flight to safety” feature of government securities during credit crisis begs the question of whether they are truly “risk free”begs the question of whether they are truly “risk free”

• Single reference rate as midpoint between loan rate and deposit rate Single reference rate as midpoint between loan rate and deposit rate reduces problem of negative pricing, but is this theoretically valid? reduces problem of negative pricing, but is this theoretically valid? Is the risk-free rate the same for deposits (usually insured by Is the risk-free rate the same for deposits (usually insured by deposit insurance) and loans?deposit insurance) and loans?

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Unresolved Measurement IssuesUnresolved Measurement Issues

5.5. How do you adjust for quality change?How do you adjust for quality change?

• After 1993 ABMs per capita grew dramatically – as more After 1993 ABMs per capita grew dramatically – as more households use this and other technology, has liquidity households use this and other technology, has liquidity increased? Basel II and Financial Engineering impact on risk increased? Basel II and Financial Engineering impact on risk management. How do we adjust for these? management. How do we adjust for these?

• Currently, no other country does quality adjustment of Bank Currently, no other country does quality adjustment of Bank Service SPPIs.Service SPPIs.

6.6. Where do we place off-balance sheet items? If asset Where do we place off-balance sheet items? If asset transformation is a bank service, should these be ignored?transformation is a bank service, should these be ignored?

7.7. If Payments systems generate a positive externality, then If Payments systems generate a positive externality, then banks are not capturing the benefits from this external benefit, banks are not capturing the benefits from this external benefit, which might imply that bank output is underestimated. Do we which might imply that bank output is underestimated. Do we need to look further at the non-market output of banks?need to look further at the non-market output of banks?

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Unresolved data collection issues: The International Unresolved data collection issues: The International Experience of data collection for Bank Service SPPIsExperience of data collection for Bank Service SPPIs

  Index Index Start Start DateDate

Start Index PublicationStart Index Publication Data NeedsData Needs Points of NotePoints of Note

United States United States (BLS)(BLS)

20012001 2003 as part of SPPI2003 as part of SPPI Sample data for account information

Imposes respondent Imposes respondent burden on chartered burden on chartered banks for sample data; banks for sample data; still need to separate still need to separate single index into single index into explicit/implicit fees for explicit/implicit fees for deflation of outputdeflation of output

United Kingdom United Kingdom (ONS)(ONS)

19991999 2004 (February). Currently on hold.

Part of Corporate Services Price Index (CSPI)

UK facing difficulty with interest rate measure; currently revising SPPI

Japan (Central Japan (Central Bank)Bank)

19851985 1991 as part of Corporate Service Price Index (CSPI); not published separately

Sample data and bank transactions data for multiple reference rates

Requires transactions Requires transactions data not readily available data not readily available to most statistical to most statistical organizationsorganizations

Australia (ABS)Australia (ABS) 1998 1998-2003, loans, deposits and other bank services part of experimental Financial Services Index (FSI); FSI incorporated in CPI since 2005

Explicit Fees: Explicit Fees: Samples 7,000 Samples 7,000 acounts, 3 million acounts, 3 million transactions from transactions from banks; then uses banks; then uses model pricingmodel pricing

Large respondent burden Large respondent burden on chartered banks and on chartered banks and calculation burden on the calculation burden on the ABS; only produces price ABS; only produces price index for CPIindex for CPI

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Next StepsNext Steps

Develop and evaluate alternative strategies for Develop and evaluate alternative strategies for data collection and index calculation.data collection and index calculation.

Your thoughts, advice, comments, and Your thoughts, advice, comments, and suggestions are all welcome!suggestions are all welcome!