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 depository corporations 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) Financial auxiliaries 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.121 Central bank S.122 Deposit-taking corporations except the Central Bank S.125 Other financial intermediaries except insurance corporations and pension funds S.126 Financial auxiliaries S.127 Captive financial institutions and money-lenders S.128 Insurance 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

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

At the first stage, the CB total output is calculated as sum of costs based on data from the CB profit and loss statement using the following items of operating expenses: paid fees; administrative expenses; operating expenses; depreciation deductions on permanent assets and intangible assets; expenses related to production and delivery of bank notes and banking documents; other expenses. Issue of the Central Bank, 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 the government sector 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 corporations sector to general government sector. Issue of the Central Bank, continuation 10

Output of deposit taking corporations consists of two types of services: Financial services provided in return for explicit charges; Financial Intermediation Services Indirectly Measured (FISIM). Issue of Credit Organization Services 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 institutions”. Issue of Credit Organization Services, continuation 12

Financial services provided in return for explicit charges – the output is calculated by summing up the following items from the profit and loss statement: Incomes (charges) from account management; Income (charges) from other services rendered; Other operating income. Issue of Credit Organization Services, continuation 13

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

Basic rate is calculated using data on balances and interest rates on credits and deposits of legal entities and individuals in national and foreign currencies; Two prime rates are calculated: by assets denominated in national currency and assets denominates in foreign currency Basic rates are calculated as weighted average of credits and deposits rates. Issue of Credit Organization Services, continuation 15

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

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

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

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

Issue of Insurance Services, continuation Output of life insurance services is calculated as follows: Actual premiums earned plus premiums supplements minus benefits due minus increase (plus decrease) of life insurance technical reserves Output of reinsurance services is calculated using the same formula as for non-life insurance 20

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