1. Agenda item 6c Financial institutions Statistical Office of the Republic of Serbia Prepared by Dusan Gavrilovic, dusan.gavrilovic@stat.gov.rs Workshop on the Implementation of the 2008 SNA, Kiev, 29 November – 2 December 2011

2. Organizational structure The financial corporations sector can be divided into five following subsectors: • S.121 Central Bank This includes National Bank of Serbia (NBS) as central and governingmonetaryand creditinstitution in the financial system of Republic of Serbia. • S.122 Other monetary financial institutions (NACE 64.19) This is the most important subsection among the financial institutions with respect to the creation ofGVA, and contains banks, i.e. depository financial intermediaries, as the major FISIM producers. • S.123 Other financial intermediaries (NACE 64.9) This subsection comprises financial leasing companies, investment funds (excluding fund managingcompanies) and other credit granting (non-depository) companies.

3. Organizational structure, continued • S.124 Auxiliary financial services (NACE 66) This includes the following enterprises: • Agency for deposit insurance • Central Securities Depository and Clearing House • Securities Commission • Belgrade Stock Exchange • Companies engaged in securities brokerage and dealing • Pension and Investment Fund managing companies, • Diners club and North American Sureties (NAS) • Other incorporated enterprises engaged in auxiliary financial services (bureaux de change,investment advisory services, activities of insurance agents and brokers etc.) • S.125 Insurance and pension funds (NACE 65)

4. Data sources • The major data source for all the calculations and derivation of macroeconomic aggregates is thedatabase of the Serbian Business Registry Agency which comprises the register of all institutional units engaged in financialintermediation together with the full set of the annual financial statements of each enterprise. • Apart from annual financial statements, for the calculations related to the banks and the NBS, thedetailed NBS report on all the bookkeeping accounts is available together with a special audit report onoperations of the NBS. • Almost all the variables needed for the calculation of NA aggregates are derived directly from the financial statements

5. Data sources, continued • In the 2007 a survey on banks and insurance companies was launched in order to collectregionalized data on employment, local units and wages and salaries. • This survey containsalso the questions about trade margins on foreign exchange, current and capital transfers • It also covers regionalized data on deposits and loans, fees and commissions (for banking industry) and gross premiums written (for insurance business). Data are collected on municipal level and are used for the compilation of regional accounts.

6. Output, intermediate consumption, GVA National Bank of Serbia (NACE 64.11) • The output, IC and GVA of the NBS as the only unit of the subsector S.124 is calculated using thecost method according to the paragraph 3.63 of ESA95 and the 448/98 Council Regulation. • Outputcomprises all the operating expenditures and costs of the NBS including fees and commissionspayable, compensation of employees and consumption of fixed capital. • Output and IC do notinclude any kind of income or costs from financial operations, non-operating and extraordinaryincomes or expenditures. • All the output of the NBS is consumed and added to intermediateconsumption of the subsector S.122 - Other monetary financial institutions.

7. Output, intermediate consumption, GVA Other monetary financial institutions (NACE 64.19) • This subsector represents the major GVA generator among the financial institutions (about 67% ofthe total of GVA). • The biggest part of the output of these units comes from the income fromnet interest margin or in the terminology of the NA - Financial Intermediation ServicesIndirectly Measured (FISIM). • In Serbian National Account the FISIM is calculated using theformula given in Council Regulation 295/2008 concerning structural business statistics (Annex 6 onCredit Institutions). • The production value is calculated as the sum of FISIM, income from fees andcommissions receivable, trade margins on foreign exchange and securities and other operatingincome (mainly rentals and sales of goods and services). • Unfortunately, due to the lack of data the FISIM is still not allocated to the user sectors and is included into the system via notional sector and subtracted from the GDP of the whole economy.

8. Output, intermediate consumption, GVA Other financial financial services except insurance and pension funding (NACE 64.2, 64.3 and 64.9) • Apart from financial leasing this group covers all other money lending activities outside the banking system including factoring servicesand pawn brokers. • Except for the investment funds and financial leasing companies the financial reporting format is exactly thesame as for the non-financial corporations. The value of the output and IC is measured using thesame items and formula for the non-financial corporations. • Thus, the output ismeasured as net income from sales of goods and services with cost of goods for resale subtracted.Output includes also other operating income such as rentals but excludes any kind of non-operatingor extraordinary income. • For financial leasing companies and other credit granting institutions the main source of theoutput is the FISIM which is added to the above mentioned elements of output. The FISIM is calculated as difference between interest payable and interest receivable.

9. Output, intermediate consumption, GVA 64.30 Trusts, funds and similar financial entities and 64.20 Holding companies • The output of the investment funds is calculated in a specific way due to the specific nature of theseinstitutions which are in fact notional institutional units. • investment funds inSerbia are open-ended non-incorporated (common) funds constituted under the law of contract andmanaged by management companies and with no paid employees. • They are not recognized as legalpersons and are treated as pools of assets with no legal capacity but they are legally separated fromthe shareholders and companies that manage them. • However, according to the Law on investmentfunds and bookkeeping regulation, the fund can incur costs (which diminish net worth of the fund)and operating income such as rentals and this requires treatment in line with NA principles ofrecording of the financial transactions. • So, the value of operating costs (cost of services of themanaging company, costs related to the purchases and sales of securities, costs of custodial servicesand other operating costs) are imputed to the funds as the output and the same figure is treated asthe IC so the GVA (and operating surplus as well) equals zero. • At this moment no trusts, estates or agency accounts are operating. Only mutual and closed-end investment funds. • Only few “pure” holding companies are operating in Serbia and this group of financial institutions are under closer examination for proper sectorization.

10. Output, intermediate consumption, GVA Insurance and pension funding (NACE 65) • The output of insurers is calculated using formula defined in the ESA95 Annex on Insurance and Commission Regulation 295/2008 (Annex 5) as the sum of earned premiums plus premium supplements (portfolio investment income) plus other operating income minus gross claims payments minus gross change in the provision for outstanding claims and minus changes in other insurance provisions. • Claims management expenses are not included in claims incurred and represent the part of IC together with the acquisition, management costs, costs related to the investments of the technical reserves and other operating costs excluding consumption of fixed capital (CFC), personnel costs and taxes on production. • The intermediate consumption apart from other regular, operating expenditure (excluding personnel costs) also includes a reinsurance balance. • Reinsurers are treated the same way as direct insurers regarding calculation of the output and IC.

11. Output, intermediate consumption, GVA • The output of the pension funds is calculated on the basis of the Annex 7 of the Council Regulation295/2008. • Pension funds in Serbia are organized as open-ended non-incorporated (common) fundsconstituted under the law of contract and managed by management companies and with no paidemployees. • In theproduction account the production value is defined as follows: pension contributions less insurancepremiums payable plus investment income plus other income plus insurance claims receivable lesstotal expenditure on pensions less net change in technical provisions. • Intermediate consumption ofthe pension funds comprises payments for managing services of the fund managing companies,costs of services provided to the members of the fund, other operating costs and fees charged with pension contributions. • Gross technical provisions represent the balancing item with no income appropriated to generalreserve and zero value of GVA.

12. Output, intermediate consumption, GVA • Auxilliary financial service providers are also covered with the whole set of financial statements (including small businesses) which are the main data source for derivation of NA aggregates. • In the case of securitybrokerage and dealing the output of companies engaged in these activities includes next tocommissions and fees also thenet margin on sales of securities. • Output of thepension fund managing companies comprises commissions for management of funds and feescharged on pension contributions and services provided to the members of the fund. • Output of investmentfund managing companies comprises commissions and fees for management of the funds, for transactions withsecurities and other operating income.