The Financial Corporations Sector, its subsectors and Institutional Units STATE STATISTICAL COMMITTEE OF AZERBAIJAN REPUBLIC Istanbul, May 6-8, 2015

Financial Corporations Sector The financial corporations sector includes all resident corporations whose principal activity is providing financial services including financial intermediation, insurance and pension fund services, and units that provide activities that facilitate financial intermediation. In addition, the sector includes NPIs engaged in market production of a financial nature such as those financed by subscriptions from financial enterprises whose role is to promote and serve the interests of those enterprises.(Item 4.29, SNA 2008). 2

Subsectors of Financial Corporation Sector in SNA 1993 S.121 Central bank S.122 Other deposit organizations S.123 Other financial intermediaries, other than insurance corporations and pension funds S.124 Auxiliary financial units S.125 Insurance corporations and pension funds 3

Subsectors of Financial Corporation Sector in SNA 2008 Subsectors in SNA 1993Subsectors in SNA 2008 Central bank S.121 Central Bank Other deposit organizations S.122 Deposit-taking corporations except the Central Bank S.123 Money market funds (MMF) Other financial intermediaries, other than insurance corporations and pension funds S.123S.124 Non-MMF investment funds S.125 Other financial intermediaries except insurance corporations and pension funds (ICPF) Auxiliary financial units S.124S.126 Financial auxiliaries S.127 Captive financial institutions and money lenders Insurance corporations and pension funds S.125S.128 Insurance corporations S.129 Pension funds Holding companies (from S.11) 4

Subsectors of Financial Corporation Sector in Azerbaijan, in accordance with SNA 2008 S.121Central Bank S.122Deposit-taking corporations except the Central Bank S.125Other financial intermediaries except insurance corporations and pension funds S.126Financial auxiliaries S.127Captive financial institutions and money lenders S.128Insurance corporations 5

CodeSubsectorInstitutional Units Type of Activity Codes under NACE rev.2 S 121Central Bank Central Bank of the Republic of Azerbaijan 6411 S 122 Deposit-taking corporations except the Central Bank Commercial banks, credit unions6419 S 125 Other financial intermediaries except insurance corporations and pension funds Leasing companies6491 S 126Financial auxiliaries Broker's offices, stock exchanges, investment companies, etc. 6499, 661, 662, 663 Distribution of Institutional Units Operating in Azerbaijan by Subsectors of Financial Corporation Sectors 6

CodeSubsectorInstitutional Units Type of Activity Codes under NACE rev.2 S 127 Captive financial institutions and money lenders Non-bank credit organization, microfinance institutions, organizations through which the government credit programs are implemented, pawnshops 6492 S 128Insurance corporations Insurance organizations, deposit insurance fund 651, 652 Distribution of Institutional Units Operating in Azerbaijan by Subsectors of Financial Corporation Sectors 7

The output of Central Bank (CB) is divided into: market output; non-market output. The CB output is calculated in two stages Central Bank output 8

At the first stage, the CB total output on expenses is calculated based on data reflected in the CB profit and loss statement by the following items of operating expenses: paid fee; staff maintenance expenses; operating expenses; depreciation on fixed assets and intangible assets; expenses related to production and delivery of banknotes and banking documents; other expenses. Central Bank output, continuation 9

Commission fees and other incomes are considered as market output of the Central Bank. CB non-market output is calculated as a difference between total output and market output. Market output of the Central Bank is used as intermediate consumption by other financial corporations as well as by units of general government and non-financial corporation sectors. Non-market output of the central bank is shown in secondary distribution of income account as a current transfer from the financial corporation sector to general government sector. Central Bank output, continuation 10

Output of credit organization services consists of two types of services: Financial services to be provided for a fee explicitly; Financial Intermediation Services Indirectly Measured (FISIM). Credit Organization Services output 11

Data sources: Consolidated profit and loss statement of commercial banks (Central Bank); Consolidated balance sheet of commercial banks (Central Bank); Data on credit and deposit rates (Central Bank); Data of statistical form No.2-bank “On main indicators of financial and economic activity of financial and credit organizations”. Credit Organization Services output, continuation 12

Output of services to be provided for a fee explicitly is calculated by summing up following statement profit and loss items: Incomes of account management; Fee income from providing of other services; Other operating income. Credit Organization Services output, continuation 13

Output of Financial Intermediation Services Indirectly Measured (FISIM) is calculated using standard formula below: FISIM = [(rL – rr) x yL] + [(rr – rD) x yD], where yL – average credit balance for accounting period; yD –average deposit balance for accounting period, rL – loan rate, rD – deposit interest rate, rr – base interest rate. Credit Organization Services output, continuation 14

Base rate is calculated using data on balances and interest rates on credits and deposits of legal entities and individuals in national and foreign currencies; There are calculated two reference rates by cash assets in national currency and cash assets in foreign currency Base rates are calculated as weighted average of credits and deposits rates. Credit Organization Services output, continuation 15

FISIM is distributed by institutional sectors and subsectors proportionally to the annual average of credits and deposits balance, based on data provided by the Central Bank; The FISIM export and import indicators are not calculated yet due to insignificant share of credits and deposits external transactions and lack of required information. Credit Organization Services output, continuation 16

Output of insurance services consists of following types of insurance services: direct insurance services; including: life insurance; non-life insurance; reinsurance services. Insurance Services output 17

Data source: Data of statistical form No.1-insurance “On activity of insurers (reinsurers) and insurance brokers having the corporate status” Data of the State Agency for Insurance Supervision (Ministry of Finance) Insurance Services output, continuation 18

Insurance Services output, continuation Output of non-life insurance services is calculated using formula below: Actual earned premiums plus additions to the premiums minus adjusted payable insurance compensation where adjusted payable insurance compensations are assessed based on the analysis of insurance compensations data for the last 5-7 years. 19

Insurance Services output, continuation Output of life insurance services is calculated as follows: Actual earned premiums plus additions to the premiums minus payments with expiring due date minus increase (plus decrease) of life insurance reserve funds Output of reinsurance services is calculated using the same formula as for direct insurance 20

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