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Outline. Financial Soundness Indicators (FSIs) on households 1.1 Total debt service compared to principal payments and interests paid Focus on technical measurement 1.2 Total households’ indebtedness: long term versus short term indebtedness Focus on real estate analysis

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Outline

  • Financial Soundness Indicators (FSIs) on households

    • 1.1 Total debt service compared to principal payments and interests paid

      • Focus on technical measurement

    • 1.2 Total households’ indebtedness: long term versus short term indebtedness

      • Focus on real estate analysis

  • Households’ wealth analysis

    • 2.1 A measure of households’ maturity mistmaches & households’ solvency issue

    • 2.2 Households’ wealth effects and the last crisis

      • Focus on the Household Finance and Consumption Survey (HFCS)


FSIs: Household debt service and principal payment to income

The indicator on total debt service could be divided into two parts :

The principal payments and the interests paid on the debt


FSIs: Household debt service and principal payment to income

  • Principal payments calculation

  • Two data collecting used:

    • One from Balance Sheet Item (BSI) statistics used to compile monetary statistics and providing net transactions on loansgranted to households equal, inside a quarter, to:

  • New granted loans – principal payments on existing loans

    • One from Monetary Interest Rate (MIR) statistics used to compile the interest rates and new business to households

  • A simple way of calculation would lead to:

  • Principal payments = new business- net transactions

  • A need for retreatment as the two data collecting

  • are not consistent


FSIs: Household debt service and principal payment to income

  • Principal payments calculation

  • Retreatment on MIR statistics to comply with the BSI statistics perimeter

  • Main issue:

    • MIR statistics on new business include new negociations of existing loans meaning for instance debt renegotiation for which households benefited from lower interest rate - especially observed in 2010

    • series on renegotiations come from a loan by loan collection of data implemented in the context of the calculation of usurary rates

    • Conclusion: series on new loans from MIR statistics are “ bleeded ” from debt renegotiation

  • After corrections, the simple calculation may be applied:

  • Principal payments = new business- net transactions

  • Interests paid on loans compiled through FISIM


FSIs: Household debt service and principal payment to income

  • Interests paid calculation

  • Interests paid on loans compiled (including FISIM) as:

  • Apparent interest rate from MIR statistics ×

  • outstanding amounts on loans from financial accounts

  • total interests paid by households > interests paid in non financial accounts (D.41)

  • Interests paid in non financial accounts (D.41) are calculated as:

  • Reference rate ×

  • outstanding amounts on loans from financial accounts


FSIs: Household debt to Gross Domestic Product

The indicator on total debt to GDP could be divided into two parts:

The short term debt and the long term debt


Households’ indebtedness and real estate transactions

Households’ risk analysis cannot be disconnected from real estate analysis

Graph (1) – Left: Long term banking loans to households compared to existing-home transactions and households' investment rate(data cumulated over 4 rolling quarters for loans and transactions)

Graph (2) – Right:Real estate prices compared to households' disposable income

Sources: Banque de France, INSEE (NSI), CGEDD after Tax Department and notaries' databases


Households : maturity mismatches and solvency issue

  • Maturity mismatches indicator = short term liabilities / liquid assets

  • Solvency indicators : total debt / total financial assets & total debt / total assets (including housing and built land).


Households’ revaluation

The plunge in market prices would entail to a negative change in the households’ gross financial wealth (assessed at about 130 € billions)…


Households Finance and Consumption Survey (HFCS) and Financial Accounts

  • …But not hitting most of households

  • Confirmed by a satisfactory consistency between HFCS and financial accounts


Measurement of Households’ risks for France

Thank you for your attention


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