The Financial Sector in Ireland's National Accounts 2018

Source Publication: Institutional Sector Accounts Non-Financial and Financial 2018

The size of the balance sheet of deposit taking corporations (S.122) contracted consistently from 2009 to 2017. In 2017 it had decreased to approximately 41% of the 2009 level. In 2018, both assets and liabilities increased for the first time in the 10 year period examined.

The most significant asset positions were deposits (AF.2), debt securities (AF.3) and loans (AF.4). While most instruments exhibited a smooth and gradual downward trend, equity (AF.5) and other accounts receivable (AF.8) showed more year-on-year volatility.

Source Publication: Institutional Sector Accounts Non-Financial and Financial 2018

Much of the contraction of deposit taking corporation liabilities can be attributed to the steady decline in currency and deposits (AF.2). Equity (AF.5) was the only instrument to increase in the observed period. Financial derivatives (AF.7) declined by almost 50% between 2009 and 2018.

Source Publication: Macroeconomic Scoreboard 2018

Overall the relative share of equity as a percentage of total liabilities grew from 4% in 2009 to 14% in 2018 due to the intensified capital requirements. It fell to 13% in 2017. This was due primarily to the reduction of €36bn in equity (AF.5). Figure 3.3 shows that, in aggregate, Irish banks met the regulations stipulated in the 2013 Basel norms in 2018. See 2013 Basel 3 norms (PDF) for further information.

Source Publication: Business in Ireland 2017

The value of interest linked to securities was consistently less than the interest arising from loans and deposits for all years in the observed period. Interest payable and interest receivable both decreased at similar rates over the period, while net interest income remained positive and relatively stable.

Source Publication: Business in Ireland 2017

In the observed period domestic banks received more than 66% of their interest from loans and deposits. The share from securities in domestic banks increased to a peak of 34% in 2012 and gradually decreased thereafter reaching its lowest point of 10% in 2018.

Source Publication: Business in Ireland 2017

In contrast, the international banks operating in Ireland had almost half of their interest generated by securities in 2009, 2010 and 2014-2016. This contribution decreased to 21% in 2018.

Source Publication: Business in Ireland 2017

The personnel costs of international banks have remained relatively stable at approximately €500m over the period under consideration. Personnel costs in domestic banks, on the other hand, varied considerably over the same period. There was a steep decline from €2.2bn in 2012 to €1.5bn in 2013. From 2013 to 2018 total personnel costs increased to the level observed in 2009.

Source Publication: Business in Ireland 2017

Interest margin is the gap between interest receivable and interest payable. The interest margin for all banks declined from 2009 to 2013, rose slightly in 2014 and has remained around that level since. For domestic banks, the margin is consistently higher than that of international banks. The margin of both domestic and international banks followed the same overall trend with a slight divergence in 2011.

Source Publication: Business in Ireland 2017

The value of production of deposit taking corporations consists of profit linked to securities and loans and deposits as well as other income. Over the whole period the value of production decreased by approximately 35% and increased between 2013 and 2018 by €2.6bn with a slight decrease in 2016. Except for the profit linked to securities, the other components increased in more recent years. 

Source Publication: Business in Ireland 2017

Gross operating surplus is the value of production minus the total costs, including personnel costs. While interest receivable has declined markedly from 2008 to 2018, the gross operating surplus was comparably stable due to interest payable declining in a similar fashion to interest receivable.

Interest receivable and interest payable comprise the majority of income and expenditure, while other costs and income are relatively small in comparison. In 2018, the gross operating surplus of deposit taking corporations amounted to €3.4bn.

Source Publication: Business in Ireland 2017

Domestic banks generated proportionately more operating surplus between 2009 and 2011 than their international counterparts. Since then, they experienced a sharp decrease in their gross operating surplus from 2011 to 2012. In 2012 international banks increased their surplus to €1.6bn and have maintained that level. Overall, the gross operating surplus of deposit taking corporations declined by €1.5bn in the period 2009 to 2018.

Source Publication: Business in Ireland 2017 

Value added by domestic banks was consistently higher than value added by international banks for all years from 2009 to 2018. However, from 2012 the gap between the contribution of domestic and international banks has decreased. Between 2009 and 2011 the share of total gross value added attributed to domestic banks was more than 75%and decreased to 65% in 2018.

The difference in value added by the S.122 sector from National Accounts can be attributed to FISIM. More information on FISIM can be obtained from the information note: The Impact of Financial Intermediation Services Indirectly Measured (FISIM) on the National Accounts (PDF 537KB)