United Nations Statistics Division Household debt: Methods of compilation and data sources Expert Group Meeting on Short-Term Economic Statistics in Western Asia February 2016 Amman, Jordan

Outline of presentation  What are financial assets and liabilities?  Breakdown of financial assets and liabilities in the 2008 SNA  Definition of debt  Components of debt  Valuation of debt  What is household debt?  Components of household debt  Data sources  Other considerations 2

What are financial assets and liabilities?  Consist of all financial claims, shares or other equity in corporations plus gold bullion held by monetary authorities as a reserve asset 3 Financial assets Financial claim  Is the payment or series of payments due to the creditor by the debtor under the terms of a liability Liability  Is established when one unit (the debtor) is obliged, under specific circumstances, to provide a payment or series of payments to another unit (the creditor)  All liabilities are financial in nature

Breakdown of financial assets and liabilities in the 2008 SNA 4 Monetary gold and Special Drawing Rights (SDRs) Monetary gold SDRs Equity and investment fund shares Equity Listed shares Unlisted shares Other equity Investment fund shares/units Money market fund shares/units Other investment fund shares/units Currency and deposits Currency Transferable deposits Inter-bank deposits Other transferable deposits Other deposits Insurance, pension and standardized guarantee schemes Non-life insurance technical provisions Life insurance and annuity entitlements Pension entitlements Claims of pension funds on pension managers Entitlements to non-pension benefits Debt securities Short-term Long-term Financial derivatives and employee stock options (ESOs) Financial derivatives Options Forwards Employee stock options Loans Short-term Long-term Other accounts receivable/payable Trade credits and advances Other accounts receivable/payable

Definition of debt  Debt is defined as a financial claim that requires payment(s) of interest and/or principal by the debtor to the creditor at a date, or dates, in the future  For a financial claim to be considered debt, it must exist and be outstanding  Decisive consideration: does a creditor have a claim on the debtor? 5

Components of debt  SDRs  Currency and deposits (including unallocated gold accounts)  Debt securities  Loans  Insurance, pension and standardized guarantee schemes  Other accounts payable 6 Debt does not include  Equity and investment fund shares  Financial derivatives and ESOs  Gold bullion held as monetary gold By convention, there is no corresponding liability No payment of principal or interest is required

Valuation of debt  Debt is valued at reference date at nominal value Refers to the amount the debtor owes to the creditor, which comprises the outstanding principal amount including any accrued interest  Debt securities should also be valued at market value, which is determined by the prevailing market price Refers to the amount that willing buyers pay to acquire something from willing sellers 7

What is household debt?  Household debt is defined as a financial claim that requires payment(s) of interest and/or principal by the households sector to the creditor at a date, or dates, in the future  Given the 2008 SNA definition of the households sector, household debt also include the debt of unincorporated enterprises within the households sector  Household debt is one component of the total debt in an economy 8

Components of household debt  Household debt typically comprises Loans  Housing mortgage debt  Credit card debt  Student loan debt  Revolving credit debt  Amount overdrawn on overdrafts  Instalment loan debt  Vehicle loan debt  Hire-purchase credit debt Other accounts payable  Thus, not all the components of debt are found in household debt 9

Data sources  Household surveys Advantages  Household sector can be properly defined  Data can be obtained directly from respondents making verification possible Disadvantages  Surveys are typically not conducted annually  Can be costly and time-consuming  Increases respondent burden  Responses may not be accurate 10 Direct methods

Data sources  Returns of financial institutions to monetary and supervisory authorities and tax data Advantages  Returns may be submitted monthly or quarterly  Reduces respondent burden  Data may be more accurate and timely Disadvantages  Definition of households may not be consistent with definition in the SNA  Separate data on households may not be available 11 Indirect methods

Other considerations  Compiling economy-wide data on household debt is important but such data do not provide insight on the distribution of household debt  Distribution of household debt will require the use of micro data  Micro and macro data sources need to be integrated to ensure consistency  Production and dissemination of distributional information on income, consumption, saving and wealth for the households sector will provide more insights in the well- being of households 12

13 Thank you