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Revision of balance sheet statistics

Background

The SNB conducted surveys based on FINMA’s revised accounting rules for banks (ARB, FINMA-Circ. 15/01, previously FINMA-Circ. 08/02) for the first time in the reporting month of November 2015. The new accounting rules altered the breakdown and the contents of both the balance sheets and the income statements of banks. These changes are reflected in the tables published with the balance sheet statistics (data.snb.ch), which the SNB also converted to the ARB as of the reporting month of November 2015. It was the SNB’s intention to link the data under the new ARB to the previously published data wherever possible, and to make long time series available to data users. Several of these time series have breaks between October and November 2015 due to the ARB revision. Other time series, however, do not have breaks since the previously collected data can be clearly allocated within the new balance sheet structure.

Key changes in the accounting rules

Amounts due in respect of customer deposits

The ARB combine the current liability items, ‘other amounts due to customers’ and ‘amounts due to customers in the form of savings and investments’, in a new item entitled ‘amounts due in respect of customer deposits’.

Value adjustments and provisions

Banks will in future be obliged to offset value adjustments against the associated item on the assets side of the balance sheet and are no longer allowed to report them on the liabilities side. Until now, banks could either offset value adjustments directly against the affected item on the assets side of the balance sheet or carry them as a liability in the item, ‘value adjustments and provisions’. Accordingly, the old item ‘value adjustments and provisions’ on the liabilities side of the balance sheet is renamed ‘provisions’.

However, in the first two financial years following the entry into force of the new ARB (i.e. until the end of 2016), banks may also report the total or partial amount of value adjustments as a global negative item under balance sheet assets (under the transitional balance sheet item, ‘non-eligible value adjustments according to transitional provisions’), instead of offsetting them against the associated items on the assets side of the balance sheet.

Securities financing transactions

The ARB introduces the new balance sheet items, ‘amounts due from securities financing transactions’ and ‘liabilities from securities financing transactions’. These items capture the claims or liabilities arising from cash collateral in connection with securities lending business (repos and reverse repos) or securities lending and borrowing (SLB transactions). Banks previously recorded these transactions under amounts due to or from banks or customers.

Trading portfolio liabilities

The new liability item, ‘trading portfolio liabilities’, captures the short positions in the trading portfolio and liabilities resulting from short positions due to short spot sales, which are reported according to the principle of trade date accounting. Banks previously reported these positions under ‘amounts due to banks’ or ‘other amounts due to customers’.

Other financial instruments at fair value

The fair value option (FVO), which was introduced recently, enables banks – under certain conditions – to record financial instruments at fair value instead of amortised cost or nominal value. If banks choose the FVO for a given instrument, they record it at fair value under the new balance sheet item, ‘other financial instruments at fair value’ on the assets side of the balance sheet, or under ‘liabilities from other financial instruments at fair value’ on the liabilities side. The reason for introducing the FVO and the associated balance sheet items is mainly to ensure that banks can book structured products, which they have issued themselves, on the liabilities side of their balance sheets.

Derivative financial instruments

Until now, the positive or negative replacement values of all derivative instruments arising from banks trading on their own account and for customers, which are outstanding on the balance sheet date, were recorded under the balance sheet items, ‘other assets’ and ‘other liabilities’. With the introduction of the ARB, they will be reported under the new balance sheet items, ‘positive replacement values of derivative financial instruments’ or ‘negative replacement values of derivative financial instruments’.

Money market instruments

The old balance sheet items, ‘amounts due arising from money market instruments’ and ‘liabilities arising from money market instruments’, are discontinued under the new ARB. With the exception of bills of exchange and cheques, money market instruments formerly recorded under ‘amounts due arising from money market instruments’ are now recorded under the balance sheet item, ‘financial investments’. Depending on the counterparty, banks now report bills of exchange and cheques as amounts due from banks or customers. On the liabilities side – depending on the counterparty – money market instruments are now recorded under ‘amounts due to banks’, ‘amounts due in respect of customer deposits’ or, if the counterparty is unknown, under the balance sheet item, ‘bond issues and central mortgage institution loans’.

Breaks in series

As a result of the revision of the accounting rules for banks, there are breaks in series in various items of the banking statistics tables between October and November 2015. The breaks are due to the amended provisions on the breakdown and contents of banks’ balance sheets. In addition, some banks took advantage of the changeover to the new accounting rules to carry out some internal changes, leading to further adjustments in the reported data.

The following observations on the main breaks in series relate mostly to total positions; the breaks continued, occasionally irregularly, through the breakdowns by bank category, currency, maturity and sector:

Amounts due from banks and amounts due from customers

Amounts due from banks declined by CHF 141.7 billion (–28%) between October and November 2015. With a drop of CHF 122.7 billion (–33%), amounts due from banks abroad were much more affected than amounts due from domestic banks (CHF –19.0 billion; –15%). The main reason for this decrease is that claims from securities lending (repos) are booked under the new balance sheet item ‘amounts due from securities financing transactions’ from November 2015.

Amounts due from customers in the aggregate figure for all banks decreased considerably less strongly than amounts due from banks (CHF –22.0 billion; –3%). This decline concentrated on cantonal banks (CHF –9.3 billion; –17%) and big banks (CHF –16.8 billion; –4%) and, in the case of amounts due from banks, is attributable in particular to the introduction of the new balance sheet item ‘amounts due from securities financing transactions’.

Amounts due to banks

The amounts due to banks also declined as a result of the introduction of the new balance sheet item ‘liabilities from securities financing transactions’, although a little less strongly than the amounts due from banks on the assets side (CHF –90.6 billion; –19%). The decrease for amounts due to banks abroad was CHF 62.1 billion (–18%); amounts due to domestic banks fell by CHF 28.5 billion (–20%).

Maturity allocation of call money

Previously, call money data were collected and published in the SNB’s balance sheet statistics under the maturity category ‘with a residual maturity of up to 1 month’. However, under both the old and the new accounting rules, they are allocated to the category ‘callable’. This discrepancy was corrected with the switch to the new ARB. This was reflected, for instance, in the first-time reporting in November 2015 of callable amounts due from banks and to banks of CHF 8.1 billion and CHF 10.8 billion respectively. Furthermore, the callable ‘amounts due in respect of customer deposits excluding pension provision’ increased by approximately CHF 40 billion (+7%), while the ‘amounts due in respect of customer deposits excluding pension provision’ with a residual maturity of 1 month decreased by CHF 35 billion (–29%). The big banks were particularly affected by this reclassification.

Cash bonds

Cash bonds decreased from October to November by CHF 8.9 billion (–39%). The decline affected the Raiffeisen banks category, which also carried out internal changes when switching over to the new accounting rules: Certain items which were previously included in the amounts due from cash bonds have now been reallocated to time deposits.

Bond issues and central mortgage institution loans

Liabilities from bond issues and central mortgage institution loans fell by CHF 112.8 billion (–22%) between October and November 2015. The main drivers of this decline are liabilities such as self-issued structured products which, with the application of the fair value option (FVO), can be booked under the new balance sheet item ‘liabilities from other financial instruments at fair value’. The FVO was applied to big banks in particular and used for their liabilities abroad.

Provisions

Total domestic and foreign provisions in November 2015 stood at CHF 4.4 billion (–18%), below the previous month’s value. Certain value adjustments were still included in this balance sheet item up to and including October 2015. The introduction of the ARB means that banks are no longer allowed to report value adjustments on the liabilities side: The banks offset value adjustments directly against the affected item on the assets side or report them as a global negative item on the assets side under the transitional balance sheet item ‘non-eligible value adjustments according to transitional provisions’.