Circular BCL 2002/174 of 17 July 2002 — Modification of the statistical collection regarding interest rates

Luxembourg, 17 July 2002
To all credit institutions

CIRCULAR BCL 2002/174
Modification of the statistical collection regarding interest rates.
Abolition of table S 2.7 "Information on debtor and creditor interest rates in EUR" and implementation of table S 1.5 "Information on interest rates in EUR"

Dear Sirs,

On 23 November 1998, the Council (EC) adopted Regulation No 2533/98 concerning the collection of statistical information by the European Central Bank (ECB). This regulation complements the framework of the ECB's statistical activities necessary to enable the European System of Central Banks (ESCB) to fulfill its functions by defining the natural and legal persons subject to reporting obligations, the confidentiality regime, and adequate implementation and sanction provisions, in accordance with Article 5.4 of the Statutes of the European System of Central Banks and of the European Central Bank.

Following this Council Regulation, the Governing Council of the ECB adopted Regulation ECB/2001/18 concerning statistics on interest rates applied by monetary financial institutions to deposits and loans vis-à-vis households and non-financial companies.1

The new regulation aims to ensure the provision of harmonized and comprehensive statistics. These statistics will contain essential information for the analysis of monetary developments and the monetary policy transmission mechanism, as well as for the surveillance of financial stability. Furthermore, a single set of comparable interest rate statistics across the euro area will be made available to the banking sector and the general public.

1 Regulation (EC) No 63/2002 of the European Central Bank of 20 December 2001 concerning statistics on interest rates applied by monetary financial institutions to deposits and loans vis-à-vis households and non-financial companies (ECB/2001/18) published in the Official Journal of the European Communities L 10, 12/01/2002

The new interest rate statistics applied by MFIs will enable the Eurosystem to eventually abandon the ten interest rate data points applied by deposit banks in the euro area, which have been published in the ECB Monthly Bulletin since January 1999. These ten interest rate series are based on existing national statistics. Although their publication provided certain bank interest rate statistics from the start of the monetary union, these series themselves present significant limitations.

The underlying data are not harmonized, and their coverage and level of detail do not fully meet the imperatives of defining and conducting monetary policy.

Furthermore, these new statistics will enable the Banque Centrale du Luxembourg (BCL) to considerably improve the interest rate information disseminated through its various publications and to refine its analysis tools for the Luxembourg banking system.

This new regulation regarding statistics on interest rates applied by MFIs is the second part of a set of statistical measures aimed at significantly improving the statistical information available for the fulfillment of the Eurosystem's missions, particularly the definition and implementation of unique monetary policy. The first part consists of Regulation ECB/2001/13 concerning the consolidated balance sheet of the MFI sector.

It should be emphasized that every effort was made during the preparation of these statistical measures to minimize the additional burden on reporting institutions; the intention is to stabilize reporting obligations related to the statistics covered by these two regulations for at least five years.

1. Objectives
   To comply with the aforementioned regulatory provisions, the BCL modifies the existing collection system by this circular to meet various objectives, primarily the complete coverage of the European Central Bank's requirements regarding interest rate statistics.

The statistical table S 2.7 "Information on debtor and creditor interest rates in LUF/BEF" no longer allows for the enumeration of all information requested by the ECB and must therefore be replaced by a new report S 1.5 "Information on interest rates in EUR".

It is recalled that the information requested relates to deposits and loans denominated in euros towards households and non-financial companies resident in the euro area.

2. Main Modifications
   The current interest rate collection, defined in 1993, proves insufficient given the growing need for interest rate information expressed by the ECB.

The BCL waited for the ECB to precisely define its needs in this area before proceeding with a overhaul of the interest rate collection, to avoid the risk of having to modify this collection multiple times within a short period.

As of January 2003, the current table S 2.7 will be replaced by a new table S 1.5, which is much more detailed and comprehensive.

The main differences between the two tables are listed below.

2.1. Reporting Population
While table S 2.7 was to be submitted by all credit institutions on the market, the new table S 1.5 is to be completed only by a representative sample of these institutions; the banks selected for this sample will be informed by individual letter of their participation in this collection.

2.2. Table Frequency
While table S 2.7 had a quarterly frequency, the new report S 1.5 must be submitted monthly by the reporting credit institutions.

2.3. Table Structure
Table S 1.5 records interest rates related to new contracts concluded during the month to which the table relates, as well as interest rates related to existing balances at the date of preparation of the table.

The new table S 1.5 is more detailed than table S 2.7 regarding the instruments concerned: these correspond in principle to those used at the level of table S 1.1 "Monthly Statistical Balance Sheet".

2.3.1. Interest rates related to balances
The first part of report S 1.5 allows for the enumeration of information on interest rates applied to existing balances at the date of preparation of the report.

By "balances" is meant all deposits placed by households and non-financial companies with the credit institution and all loans granted by the credit institution to households and non-financial companies.

For interest rates on balances, credit institutions must report on interest rates as well as the amount of balances for the following categories of instruments:

• loans granted to non-financial companies
• consumer loans granted to households and non-profit institutions serving households (NPISH)
• mortgage loans granted to households and NPISH
• other loans granted to households and NPISH
• bank overdrafts granted to non-financial companies as well as to households and NPISH
• demand deposits of non-financial companies as well as of households and NPISH
• time deposits of non-financial companies as well as of households and NPISH
• notice deposits of households and NPISH
• firm sale and repurchase operations of non-financial companies as well as of households and NPISH

It should also be noted that a breakdown by initial maturity of operations is to be applied for certain instruments. Thus, regarding rates on balances, the following breakdowns are requested:

• loans
  • ≤ 1 year

  • 1 year and ≤ 5 years

  • 5 years

• time deposits
  • ≤ 2 years

  • 2 years

• notice deposits
  • ≤ 3 months

  • 3 months

2.3.2. Interest rates related to new contracts
The second part of report S 1.5 allows for the enumeration of information on interest rates applied to new contracts.

By "new contracts" is meant all new agreements concluded between the non-financial company and/or the household and NPISH and the credit institution during the reference month.

For interest rates related to new contracts, credit institutions must report on interest rates as well as the amount of balances for the following categories of instruments:

• loans of an amount less than or equal to 1 million euros granted to non-financial companies
• loans of an amount greater than 1 million euros granted to non-financial companies
• consumer loans granted to households and NPISH
• mortgage loans granted to households and NPISH
• other loans granted to households and NPISH
• bank overdrafts granted to non-financial companies as well as to households and NPISH
• demand deposits of non-financial companies as well as of households and NPISH
• time deposits of non-financial companies as well as of households and NPISH
• notice deposits of households and NPISH
• firm sale and repurchase operations of non-financial companies as well as of households and NPISH

Operations related to new contracts are also subject to a breakdown by initial maturity. While for liability instruments the underlying concept is identical to that retained for operations on balances, at the asset level a new concept is used. Indeed, debtor interest rates are broken down by the initial period of interest rate fixation, appearing in the contract. For the preparation of statistics on credit institution interest rates, the initial fixation period is defined as a predetermined period at the beginning of a contract, during which the level of the interest rate cannot vary. The initial fixation period may be less than or equal to the initial maturity of the loan.

The various asset and liability items are to be broken down as follows.

• Consumer loans and other loans granted to households as well as loans granted to non-financial companies are to be broken down into three classes:

  • variable rate and initial interest rate fixation period less than or equal to 1 year
  • initial interest rate fixation period greater than 1 year and less than or equal to 5 years
  • initial interest rate fixation period greater than 5 years

• Mortgage loans granted to households are to be broken down into four classes:

  • variable rate and initial interest rate fixation period less than or equal to 1 year
  • initial interest rate fixation period greater than 1 year and less than or equal to 5 years
  • initial interest rate fixation period greater than 5 years and less than or equal to 10 years
  • initial interest rate fixation period greater than 10 years

• Time deposits are to be broken down into three classes:

  • initial maturity ≤ 1 year
  • initial maturity > 1 year and ≤ 2 years
  • initial maturity > 2 years

• Notice deposits are to be broken down into two classes:

  • initial maturity ≤ 3 months
  • initial maturity > 3 months

2.4. Types of interest rates to be reported
Table S 1.5 is based on two rate concepts, namely the Annualized Contractual Rate (ACR) and the Annual Effective Global Rate (AEG).

• The Annualized Contractual Rate (ACR) is defined as the interest rate individually agreed between the credit institution and the household or non-financial company for a deposit or loan, converted to an annual rate and indicated in annual percentages. The Annualized Contractual Rate covers all interest payments on deposits and loans, with the exception of any other commissions that may apply. The discount, defined as the difference between the nominal amount of the loan and the amount received by the client, is considered an interest payment occurring at the beginning of the contractual period and is therefore integrated into the Annualized Contractual Rate.

Reporting agents must report an Annualized Contractual Rate related to balances and new contracts for all categories of deposit and loan instruments indicated in point 2.2 above.

• The Annual Effective Global Rate as defined by Council Directive 87/102/EEC (modified by Directives 90/88/EEC and 98/7/EC). The AEG includes the "total cost of consumer credit," as defined in Article 1, paragraph 2, point d), of Council Directive 87/102/EEC which was modified by Directives 90/88/EEC and 98/7/EC. These total costs consist of an interest rate component and a component comprising other related fees, such as investigation fees, administration fees, document preparation fees, guarantees, credit insurance, etc.

Reporting agents must report an Annual Effective Global Rate related to new contracts for consumer loans and mortgage loans granted to households and non-profit institutions serving households.

3. Integration of new requirements into the BCL statistical collection
   The details of the breakdowns as well as the description of the items of the various tables are presented in the update of the "Collection of Instructions to Banks". As for its part, the ECB has established a "Compilation Guide on Money and Banking Statistics" (www.ecb.int) which is regularly updated when questions and/or problems arise; the BCL will adjust the collection as necessary in light of the ECB's guide.

Regarding figures related to amounts (balances and new contracts), the tables will continue to be filled in the capital currency, with conversions made at the exchange rate on the day of preparation of the table, in accordance with the rules detailed in the "Definitions and Preliminary Comments" (XVI.12.c. of the Collection of Instructions to Banks).

4. Quality of transmitted data
   We consider it necessary to re-emphasize the importance of the quality of data transmitted to the BCL and the necessity to submit data prior to transmission to the verification rules detailed in the technical documentation. Only rigorous control performed at the time of data production will allow meeting both quality requirements and imposed deadlines. This point is all the more important as the data thus collected will be controlled by the ECB services before being aggregated with data from other Member States. Any significant error or negligence will have damaging repercussions on the reputation of the entire national banking community.

5. Implementation of the new collection
   The communication of this information is mandatory as of the deadline of end of January 2003; the new table S 1.5 will therefore be submitted for the first time in February 2003.

6. Compliance with reporting deadlines
   6.1. Deadline for submission of monthly statistical reports.
   The monthly statistical report S 1.5 "Information on interest rates in EUR" must reach the Banque Centrale du Luxembourg within 15 working days following the end of the month to which it relates.

The BCL will establish and communicate, each year, to credit institutions a delivery schedule of data which includes the exact dates on which the aforementioned table is to be submitted to the Banque Centrale du Luxembourg during the year.

6.2. Compliance with delivery deadlines
It is indicated to the concerned credit institutions that the Banque Centrale du Luxembourg must transmit to the European Central Bank the aggregated national statistical information regarding interest rates within a deadline of 19 working days following the period to which they relate. It is therefore essential that institutions strictly respect the delivery deadlines defined in this circular so that the Banque Centrale du Luxembourg can fulfill its commitments within the framework of the ESCB.

Please accept, Ladies and Gentlemen, the assurance of our very distinguished sentiments.

BANQUE CENTRALE DU LUXEMBOURG
The Management
Serge KOLB Andrée BILLON Yves MERSCH

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