Calculation of the interest rate



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CENTRAL BANK OF CYPRUS

EUROSYSTEM

STATISTICS DEPARTMENT

MONEY AND BANKING STATISTICS AND

FINANCIAL ACCOUNTS SECTION

REPORTING INSTRUCTIONS

ON THE MONTHLY INTEREST RATES STATISTICS RETURNS

BY MONETARY FINANCIAL INSTITUTIONS

JANUARY 2010

TABLE OF CONTENTS

Part I: Guidance Notes on the reporting of Monthly Interest Rates

Statistics Returns

Page

List of abbreviations .................................................................................... 1

1. Introduction

1.1 Scope .................................................................................................... 2

1.2 Main changes in relation to the Directive on the Reporting of

Monthly Interest Rates Statistics by Monetary Financial Institutions…. 2

1.3 Submission of returns ........................................................................... 3

1.4 Minimum standards for the fulfilment of the reporting obligations ........ 3

1.5 Verification and compulsory collection ................................................. 5

1.6 Mergers, divisions and reorganizations…………………………………. 5

1.7 Repeal………………………………………………………………………. 5

2. Definitions ........................................................................................... 6

3. Types of interest rates

3.1 Main features ........................................................................................ 9

3.2 Description of the three types of interest rates...................................... 9

3.3 Treatment of taxes and subsidies ......................................................... 13

3.4 Convention ............................................................................................ 14

4. Business coverage

4.1 Interest rates on outstanding amounts .................................................. 15

4.2 Interest rates on new business .............................................................. 16

5. Time reference point

5.1 Time reference point for interest rates on outstanding amounts ............ 19

5.2 Time reference point for interest rates on new business ........................ 19

6. Instrument categories

6.1 General provisions .................................................................................. 20

6.2 Breakdown by currency .......................................................................... 20

6.3 Breakdown by sector .............................................................................. 20

6.4 Breakdown by type of instrument ........................................................... 21

6.5 Breakdown by amount category ............................................................. 23

6.6 Breakdown by original maturity, notice period or initial rate of fixation ... 23

6.7 Breakdown by secured loans with collateral and/or guarantees ……….. 25

7. Aggregation of data by Monetary Financial Institutions and

reporting obligations

7.1 General ................................................................................................... 27

7.2 Weighting procedure ............................................................................... 27

7.3 Group reporting ....................................................................................... 28

Part II : MFI Interest Rates Statistics Returns

Part III : Technical requirements

1. Submission details…………………………………………………………… 2

2. VPN client software………………………………………………………….. 4

3. File specifications for MIR 1 type of data………………………………….. 5

4. Variables used for each record of MIR data item…………………………. 8

5. Allowed values……………………………………………………………….. 9

6. Per schedule specifications of data to be reported……………………….. 12

Appendix I: Calculation of the Annual Percentage Rate of Charge

Appendix II: Examples of the treatment of specific products/cases

PART I

Guidance Notes

on the reporting of

Monthly Interest Rates Statistics Returns

JANUARY 2010

LIST OF ABBREVIATIONS

AAR : Annualised Agreed Rate

APRC : Annual Percentage Rate of Charge

CBC : Central Bank of Cyprus

ECB : European Central Bank

ESCB : European System of Central Banks

EU : European Union

EUR : Euro

MBSR : Monthly Balance Sheet Return

MFIs : Monetary Financial Institutions

MIR Returns : MFI Interest Rates Statistics Returns

NDER : Narrowly Defined Effective Rate

NFCs : Non - Financial Corporations

NPISHs : Non - Profit Institutions Serving Households

REPOs : Repurchase Agreements

RIs : Reporting Instructions

p.a. : Per Annum

1. INTRODUCTION

1.1 Scope

The Central Bank of Cyprus (“CBC”), hereby, prescribes the format and content of the monthly MFI Interest Rates Statistics Returns (“MIR Returns”) which Monetary Financial Institutions (“MFIs”) are required to submit to the CBC. The required statistics refer to interest rates applied by MFIs to deposits and loans denominated in euro (“EUR”) vis-à-vis households, non-profit institutions serving households (“NPISHs”) and non-financial corporations (“NFCs”) resident in the euro area member states.

The MIR Returns have been revised in accordance with the provisions of Regulation 2009/7, issued by the European Central Bank (“ECB”), on 31 March, 2009, concerning statistics on interest rates applied by MFIs to deposits and loans vis-à-vis households and non-financial corporations[1], which replaced Regulation ECB/2001/18. It takes into account the interest rate requirements of Guideline ECB/2009/23 amending Guideline ECB/2007/9 on monetary, financial institutions and markets statistics (recast) issued on 4 December, 2009 as well as other data requirements of the CBC.

These Reporting Instructions (“RIs”) apply to MFIs resident of Cyprus, other than the CBC and Money Market Funds. A list of these institutions, which is updated, on an ad hoc basis, can be found on the ECB’s website ecb.int.

1.2 Main changes in relation to the Directive on the Reporting of Monthly Interest Rates Statistics by Monetary Financial Institutions.

The main changes in relation to the Directive on the Reporting of Monthly Interest Rates Statistics by Monetary Financial Institutions are the following:

(a) a new instrument category (“Extended Credit Card Debt”) affecting Table 3.

(b) a new breakdown by original maturity affecting loans to non-financial corporations in Table 4.

(c) a new breakdown by secured loans with collateral and/or guarantees affecting Table 4.

(d) new size categories for the breakdown by amount category affecting loans to non-financial corporations in Table 4.

(e) new periods for the initial rate fixation affecting loans to non-financial corporations in Table 4.

1.3 Submission of returns

MFIs are required to submit to the CBC the MIR Returns prescribed in Part II, within twelve working days from the end of the reference month, in accordance with the minimum standards for transmission, accuracy, conceptual compliance and revisions as set out in paragraph 1.3 below.

In accordance with the contents of these RIs, the first MIR Return shall be submitted to the CBC for the reporting date 30 June, 2010. MFIs which will be granted a banking business licence allowing them to commence operations in Cyprus after the above date or credit institutions incorporated in other European Union (EU) Member States, which will exercise their right of establishment, under EU Directive 2006/48/EC, to carry on banking business in Cyprus after the above date, should submit their first MIR Returns as at the end of the month in which their first transaction has taken place.

The transmission of the MIR Returns, which shall be certified by using electronic signatures, shall be effected electronically as described in the “Technical Requirements” set out in Part III. The names of the officers authorised to certify the MIR Returns shall be provided to the Money and Banking Statistics and Financial Accounts Section of the Statistics Department, prior to the submission of the MIR Returns as described above.

1.4 Minimum standards for the fulfilment of the reporting obligations

The minimum standards to be applied by MFIs to meet the reporting requirements of the MIR Returns are given below:

1.4.1 Minimum standards for transmission

a) MFIs shall ensure that they transmit the MIR Returns within the specified time limit, i.e. within twelve working days from the end of the reference month.

b) MFIs shall ensure that the transmission of the MIR Returns is effected in accordance with the provisions of Part III “Technical Requirements”, which may change from time to time; the prescribed technical format of the transmission of data shall not in any way be changed.

c) MFIs shall always have at the disposal of the CBC the names of at least two contact persons who shall be responsible for the submission of the MIR Returns to the CBC and also for providing explanations on significant fluctuations on the items included in the MIR Returns.

1.4.2 Minimum standards for accuracy

a) The data included in the MIR Returns shall be correct i.e. all constraints shall be fulfilled. Also data shall be consistent across the whole MIR Returns. They shall also be consistent with the Monthly Balance Sheet Return (“MBSR”) which is transmitted to the CBC in accordance with the “Reporting Instructions on the Monthly Balance Sheet Return by MFIs” issued by the CBC in January 2010.

b) The data shall be complete. However, in very rare cases where a reporting MFI shall not be able to provide data for certain instrument categories, an estimate shall be reported. It is emphasized that such reporting shall be accepted only for one transmission and that the situation shall be rectified by the next transmission at the latest.

c) MFIs shall provide the interest rates on outstanding amounts and on new business to the CBC with a detail of two decimal places, e.g. 5,41%. Amount data shall be expressed to the last cent. The reporting currency shall be the euro.

d) The allowed values for the reported data are specified in Part III - Chapter 5 “Technical Requirements”.

1.4.3 Minimum standards for conceptual compliance

a) MFIs are required to prepare and submit electronically to the CBC the MIR Returns in accordance with the definitions and classifications set out in these RIs.

b) In the event of deviations from the requirements set out in (a) above, reporting MFIs shall monitor on a regular basis and quantify the difference between the measure used and the measure contained in these RIs.

c) MFIs shall be able to explain breaks in the monthly data transmitted to the CBC.

1.4.4 Minimum standards for revisions

MFIs may have to revise the data referring to the previous reference month shall such need arise. In addition, revisions arising, for example, from mistakes, reclassifications, improved reporting procedure and referring to data prior to the previous reference month may also occur. However, MFIs shall not systematically revise the data for the period prior to the previous reference month. Should such revisions take place, they should be submitted to the CBC accompanied by an explanatory note.

1.5 Verification and compulsory collection

The CBC shall exercise the right to verify or collect the information which MFIs are required to provide pursuant to these RIs, without prejudice to the ECB’s right to exercise this right itself. In particular, the CBC shall exercise this right when an MFI does not fulfil the minimum standards for transmission, accuracy, conceptual compliance and revisions specified in paragraph 1.3 above.

1.6 Mergers, divisions and reorganisations

In the event of a merger, division or any other reorganisation that may affect the submission of the MIR Returns by an MFI, the MFI concerned shall immediately inform the Money and Banking Statistics and Financial Accounts Section of the Statistics Department, once the intention to implement such an operation has become public, of the date of implementation and the actions planned to be taken in order to fulfil the RIs concerning the MIR Returns.

1.7 Repeal

The “Directive on the Reporting of the Monthly Interest Rates Statistics by Monetary Financial Institutions” and all its subsequent amendments/circular letters shall be repealed with effect 1 July, 2010.

2. DEFINITIONS

The main terms used in these RIs are defined below:

Monetary Financial Institutions (MFIs) are defined as the euro area credit institutions and all other financial institutions residents of the euro area whose business is:

a) to receive deposits and/or close substitutes for deposits from entities (institutional units) other than MFIs, and

b) to grant credits and/or to make investments in securities for their own account (at least in economic terms).

These RIs shall apply to MFIs resident in Cyprus other than the CBC and Money Market Funds.

Annualised Agreed Rate (“AAR”) is defined as the interest rate that is individually agreed between the MFI and a household or a NPISH or a NFC (the “customer”) for a deposit or loan, converted to an annual basis and quoted in percentages per annum. The AAR shall cover all interest payments on deposits and loans, but no other charges which may apply.

Narrowly Defined Effective Rate (“NDER”) is defined as the interest rate that equalises the present value of all commitments other than charges (deposits or loans, payments or repayments, interest payments) future or existing, agreed by the MFIs and the customer.

Annual Percentage Rate of Charge (“APRC”) is defined as the total cost of credit to the consumer/customer, expressed as an annual percentage of the amount of credit granted, which equalises, on an annual basis, the present value of the total of the current or future obligations (loans, repayments and charges), agreed between the MFI and the consumer/customer.

Deposits, as provided in the “Reporting Instructions on the Monthly Balance Sheet Return by MFIs”, shall include the amounts owed to creditors by MFIs which were received on terms and which will be repaid, with or without interest or a premium, either on demand or at a future date or under other circumstances agreed upon by or on behalf of the person making the payment and the MFI. Deposits are broken down by type of deposit as follows: (i) overnight deposits, (ii) deposits with agreed maturity including “Non-negotiable debt securities issued by MFIs”, (iii) deposits redeemable at notice and (iν) repos. For the purposes of these RIs, the term “creditors” shall include only households, NPISHs and NFCs.

Loans, as provided in the “Reporting Instructions on the Monthly Balance Sheet Return by MFIs”, shall include all funds lent by the reporting MFI to customers, which are not evidenced by documents or which are represented by a single document, even if it has become negotiable (including traded loans) as well as assets in the form of deposits. These include credit facilities extended in the form of loans and overdrafts on current accounts, bills, including promissory notes, discounted by the reporting MFI, hire-purchase facilities excluding unearned hire purchase (HP) charges, credit card debt, financial leasing facilities, traded loans and holdings of non-negotiable securities. Loans to the “Private Individuals” sub-sector (S14.2) shall be further broken down into: (i) consumer credit, (ii) loans for house purchase/housing loans and (iii) other loans.

Outstanding amounts are defined as the stock of all deposits placed and not yet withdrawn by customers with the MFIs and the stock of all loans granted by the MFIs to customers and not yet repaid, in all the periods up to and including the reporting date.

New business in loans and deposits is defined as any new agreement arranged between the customer and the MFI within the reporting month. New agreements are:

• all financial contracts, terms and conditions that specify for the first time the interest rate of the deposit or loan, and

• all new negotiations of existing deposits and loans.

Initial period of fixation of the interest rate is defined as the predetermined period of time at the start of a loan contract during which the value of the interest rate cannot change. The initial period of fixation may be smaller or equal to the original maturity of the loan. The value of the interest rate shall only be considered to be unchangeable if it is defined as an exact level, for example as 10 % or as a differential to a reference rate at a certain point in time, for example as six-month Euribor plus 2 percentage points at a certain date and time.

Sector breakdown[2]

Households sector (S.14) comprises individuals or groups of individuals in their capacity as consumers and possibly also as entrepreneurs producing market goods and non-financial and financial services. It also includes individuals or groups of individuals as producers of goods and non-financial services for exclusively own final use.

Employers (including own-account workers) sub-sector (S.14.1) consists of the group of households who are owners of unincorporated enterprises, including own account workers, with or without paid employees.

Private individuals sub-sector (S.14.2) consists of all units classified in the “Households sector” (S.14), except those classified as “Employers” (S.14.1), but includes those households who are employers of housemaids only.

Non-Profit Institutions Serving Households (“NPISHs”) sector (S.15) consists of non-profit institutions which are separate legal entities providing non-market goods and services to households.

Non-Financial Corporations (“NFCs”) sector (S.11) consists of independent legal entities which are market producers and whose principal activity is the production of goods and non-financial services.

3. TYPEs OF INTEREST rateS

A description of the MFI interest rates required by these RIs and their main features is given below.

3.1 Main features

The main features of MFI interest rates are:

(a) agreed rates: The data collected refers to the interest rate that is individually agreed between an MFI and its customer. MFI interest rates are hence distinct from advertised nominal rates because the customer might be able to negotiate with the MFI better terms and conditions than those advertised.

(b) annualised: MFI interest rates are converted to an annual basis and quoted in percentages per annum. This means that they take into account the frequency of interest payments (capitalization periods). Ceteris paribus, the more frequent the capitalization periods, the higher the MFI interest rate. Two possibilities exist for annualising interest rates: either an algebraic formula leading to the AAR, discussed in paragraph 3.2.1 below, or successive approximation resulting in the NDER discussed in paragraph 3.2.2.

3.2 Description of the three types of interest rates

The three types of interest rates, required by these RIs, are the AAR, the NDER and the APRC. MFIs have the option of providing for all deposit and loan instrument categories referring to new business and outstanding amounts either the AAR or the NDER.

3.2.1 Annualised Agreed Rate

The AAR is defined as the interest rate that is individually agreed between the MFI and the customer for a deposit or loan, converted to an annual basis and quoted in percentages per annum. The AAR shall cover all interest payments on deposits and loans, but no other charges that may apply.

When interest payments agreed between the MFI and the customer are capitalised at regular intervals within a year, the agreed rate shall be annualised using the following formula:

[pic] [Equation 1]

where:

[pic] is the AAR,

[pic] is the interest rate per annum that is agreed between the MFI and the customer for a deposit or loan where the dates of the interest capitalisation of the deposit and all the payments and repayments of the loan are at regular intervals within the year, and

[pic] is the number of interest capitalisation periods for the deposit or the loan per year.

Example 1

A customer and an MFI agree on a five-year loan at 8% per annum (p.a.) for its entire duration, where the interest is capitalised semi-annually (n=2). The AAR for this loan is then 8.16% p.a., calculated as follows:

[pic]

If, in the same example, the capitalisation of interest was effected on a monthly basis (n=12), then the AAR would be slightly higher at 8.30% p.a., calculated as follows:

[pic]

The examples 1, 2 and 3 of Appendix II are also relevant.

Example 2: Special case of step up (or step down) deposits or loans

A step-up (step-down) deposit or loan is a deposit or loan with a fixed maturity to which an interest rate is applied that increases (decreases) from year to year by a pre-fixed number of percentage points. The example below describes how to calculate the interest rate on new business and on outstanding amounts.

In the case of a four-year loan for which the MFI charges rag1 in the first year, rag2 in the second, rag3 in the third and rag4 in the fourth, with biannual capitalization, the procedure below shall be followed to compute the:

(i) Interest rate on new business:

Step 1: Equation 1 is applied in order to derive the AAR for each year.

[pic] [pic] [pic] [pic]

Step 2: The equation of the geometric average of the factors “1+AAR” is then applied:

[pic] [Equation 2]

where MIR (NB) is the MFI interest rate on new business.

In the above example, equation 2 becomes:

[pic]

(ii) Interest rate on outstanding amounts:

In the above example, the MFI interest rate on outstanding amounts for years 1 to 4 shall be the AAR calculated by the MFIs for each year. That is [pic] at year 1, [pic] at year 2, [pic] at year 3 and [pic] at year 4.

The example 25 of Appendix II is relevant.

3.2.2 Narrowly Defined Effective Rate

The NDER is defined as the interest rate that equalises the present value of all future or existing commitments (deposits or loans, payments or repayments, interest payments) other than charges, agreed by an MFI and the customer. The NDER is equivalent to the interest rate component of the APRC, which is further explained in Paragraph 3.2.3, i.e. it does not take into account the component of other charges. Hence, given a standard year of 365 days and assuming the amount of the deposit or loan is placed or paid out in one amount, the following applies:

[pic] [Equation 3]

where:

i is the interest rate

CFn is the cash flow n, from the perspective of the investor in the case of deposits and from the point of view of the MFI in the case of loans

N is the number of cash flows associated with the financial instrument

A is the amount of the deposit (loan) initially placed (paid out)

Dn is the timing of the cash flow n, expressed in days after the first cash flow (in general, the date of investment of the deposit or valuation of the loan)

Comparison of AAR and NDER: The difference between the NDER and the AAR is the underlying method for annualising interest payments. The NDER uses successive approximation and can be applied to any type of deposit or loan, whereas the AAR uses the algebraic formula in Equation 1 (paragraph 3.1.1) and is therefore only applicable to deposits and loans where interest capitalisation occurs at regular intervals.

Either type of rate, the NDER or the AAR, may be reported for the purposes of MFI interest rates statistics. For products with complex cash flow, however, only the NDER gives the mathematically correct result. The AAR provides a close approximation and is also acceptable.

3.2.3 Annual Percentage Rate of Charge

In addition to the AAR/NDER, MFIs are required to report for new business loans to private individuals in respect of consumer credit and for house purchases/housing loans, the APRC. The APRC, as defined in article 2(1) of Part I of the Consumer Credit Law No. 39(I) of 2001[3] is the total cost of credit to the consumer/customer, expressed as an annual percentage of the amount of credit granted, which equalises, on annual basis, the present value of the total of the current or future obligations (loans, repayments and charges), agreed between the MFI and the consumer/customer. Calculations shall be made in accordance with the formula specified in Appendix I of these RIs.

3.3 Treatment of taxes and subsidies

The AAR/NDER and the APRC reflect what the reporting MFI pays on deposits and receives for loans. When the amount paid by one party and received by the other differs, the point of view of the reporting MFI determines the interest payment covered by MFI interest rates statistics.

Following this principle, MFI interest rates shall be recorded on a gross basis before tax, since the pre-tax interest rates reflect what the reporting MFIs pay on deposits and receive on loans. For example, if a customer places a deposit at 2% p.a. and a tax of 10% is charged on the interest received, resulting to a clean interest rate of 1,8% p.a., then the 2% p.a. shall be covered by MFI interest rates statistics.

Furthermore, subsidies granted to customers by third parties, such as the government, shall not be taken into account when determining the interest payment, because these subsidies are not paid or received by the reporting MFIs. For example, an MFI grants a loan at 8% p.a. where the customer pays 5% p.a. and the government transfers the remaining 3% p.a. as a subsidy directly to the MFI. In this case, MFI interest rates statistics shall reflect the 8% p.a. which is charged by the MFI. The example 5 of Appendix II is also relevant.

MFI interest rates statistics shall reflect favourable rates that the reporting MFIs apply to their employees. Favourable rates do not include a subsidy granted by a third party but are those actually applied by the reporting MFI.

3.4 Convention

MFIs are required to apply a standard year of 365 days for the compilation of the AAR/NDER, i.e. the effect of an additional day in leap years shall be ignored. For the compilation of the APRC, the convention as set out in Schedule II of the Consumer Credit Law of 2001 shall be applied.

4. Business coverage

MFIs shall provide MFI interest rates statistics referring to outstanding amounts and to new business.

4.1 Interest rates on outstanding amounts

Outstanding amounts are defined as the stock of all deposits placed and not yet withdrawn by customers with the MFIs and the stock of all loans granted by the MFIs to customers and not yet repaid, in all the periods up to and including the reporting date.

An interest rate on outstanding amounts reflects the weighted average interest rate level applied to the stock of deposits or loans in the relevant instrument category on the last day of the reference month and, therefore, shall have the same time reference point as the MBSR data. Hence, the outstanding amounts of loans and deposits which are necessary for the weighting procedure shall be extracted from the MBSR data. The weighting procedure is described in paragraph 7.2 below.

However, interest rates on bad loans and loans for debt restructuring below market conditions shall be excluded from MFI interest rates statistics and, therefore, from the weighting procedure.

4.1.1 Treatment of combined deposit and loan facilities

In order to calculate MFI interest rates on accounts that, depending on their balance, can either be a deposit or a loan, for example for overnight deposits and bank overdrafts, MFIs shall distinguish between the periods with credit balance and the periods with debit balance. The MFIs shall report weighted average interest rates referring to the credit balances as overnight deposits and weighted average interest rates referring to the debit balances as bank overdrafts. Only the balance on the last day of the reference month is relevant and shall be assessed in order to decide whether the account is an overnight deposit or a bank overdraft.

The example 6 of Appendix II is relevant.

4.2 Interest rates on new business

New business in loans and deposits is defined as any new agreement arranged between the reporting MFI and the customer during the reference month. New agreements are:

• all financial contracts, terms and conditions that specify, for the first time, the interest rate of the deposit or loan, and

• all new negotiations of existing deposits and loans.

The key issue in distinguishing between new business and an automatic prolongation (continuation) of an existing contract is the active involvement of the customer. Therefore, prolongations of existing deposit and loan contracts that occur automatically, i.e. without any active involvement of the customer and do not involve any renegotiation of the terms and conditions of the contract, including the interest rate, are not considered as new business, whereas prolongations with the active involvement of the customer are considered as new business. Whether the new contract has terms and conditions identical to the old contract or has new terms and conditions is irrelevant for determining whether new business occurs.

An interest rate on new business shall reflect the weighted average interest rate level that has been agreed for all new deposits or loans in the relevant instrument category during the reference month. Interest rates on new business cover all new agreements concluded during the whole month prior to the reporting date. Loans for debt restructuring at rates below market conditions are not considered as new business and are, therefore, not covered by MFI interest rates statistics. The weighting procedure is described in paragraph 7.2 below.

The examples 4, 10, 11, 12, 13, 16, 17, 18 and 19 of Appendix II are relevant.

4.2.1 Deposits with agreed maturity

For most deposits with agreed maturity, i.e. deposits where a fixed sum is placed for a predefined period of time, new business only arises when a new account is opened for the first time, at which point the deposit amount and the interest rate are agreed.

When the terms and conditions of a maturing deposit with agreed maturity are renegotiated and, as a consequence, the deposit is classified as new business, then the maturity of that (new) deposit is counted as commencing at the point of the new business classification.

The examples 7, 8 and 9 of Appendix II are relevant.

4.2.2 Floating interest rates

Changes in floating interest rates in the sense of automatic adjustments of the interest rate performed by the reporting MFI are not new agreements and shall, therefore, not be considered as new business. Such adjustments in floating rates shall, therefore, not be captured in new business rates but only in the rates on outstanding amounts.

4.2.3 Changes from fixed to variable interest rates or vice versa

A change from fixed to variable interest rates or vice versa during the course of a contract is not a new agreement, if the possibility of such a change is an agreed part of the terms and conditions of the deposit or loan. Such change shall, therefore, not be considered as new business. However, a change from a fixed to a variable interest rate or vice versa is considered as new business, if this possibility was not laid down in the initial contract. In this case, the change is the result of negotiations between the customer and the reporting MFI and constitutes new business.

4.2.4 Loan withdrawal in tranches

A customer may withdraw a loan, other than a revolving loan or overdraft, in full at the start of the contract (time t0) or in tranches at different time periods. The fact that the loan, other than a revolving loan or overdraft, is taken out in tranches shall be irrelevant for MFI interest rates statistics on new business. These statistics shall capture the interest rate and the whole amount of the loan laid down in the relevant agreement signed by the customer and the reporting MFI at time t0. The examples 14, 15 and 20 of Appendix II are relevant.

4.2.5 Cooling off period

The same principles apply in case a period of time elapses (“cooling off” period) between the conclusion of the agreement and the withdrawal of a loan. The “cooling off” period has no influence on MFI interest rates statistics on new business. MFI interest rates on new business reflect the conditions, i.e. the interest rate and the amount of the loan, as laid down in the contract at the time of the agreement. The actual day of the withdrawal of the funds is irrelevant for interest rates on new business but affects only the statistics on outstanding amounts. In the same context, when the customer steps back from the contract after the conclusion of the agreement, MFI interest rates statistics on new business will not be influenced.

5. Time reference point

5.1 Time reference point for interest rates on outstanding amounts

The time reference point for interest rates on outstanding amounts is the last day of the month. At that point in time, the reporting MFI shall collect the interest rates and the amounts involved for all outstanding deposits and loans vis-à-vis households, NPISHs and NFCs and compile a weighted average interest rate for each instrument category.

5.2 Time reference point for interest rates on new business

The time reference point for new business rates is the average of the month. MFI interest rates on new business reflect the average interest rate level applied to deposits and loans in new agreements that have been arranged between customers and MFIs during the reference month.

6. Instrument categories

6.1 General provisions

MFIs are required to provide interest rates statistics on outstanding amounts for the instrument categories specified in Tables 1 and 3 of Part II of these RIs and on new business for the instrument categories specified in Tables 2 and 4 of Part II of these RIs. Each instrument category shall refer to the banking business of the reporting MFI with resident households, NPISHs and NFCs. The MFI interest rates statistics shall be compiled based on interest rates applied to all the products offered by the reporting MFI comprising an instrument category, with the exception of interest rates on bad loans and loans for debt restructuring at rates below market conditions.

In case an MFI does not offer any products that belong to a certain instrument category, then this category shall be inapplicable and can be omitted. Data shall be provided if some business exists, however limited this business is.

6.2 Breakdown by currency

MFI interest rates statistics shall cover the interest rates applied by MFIs to deposits and loans, vis-à-vis households, NPISHs and NFCs resident in the euro area which are denominated in EUR. Data on deposits and loans in currencies other than the EUR are not required.

6.3 Breakdown by sector[4]

MFIs are required to report interest rates for all deposits and loans applied in the three following sectors:

(i) Households (S. 14), distinguishing between employers (including own – account workers) (S. 14.1), and private individuals (S. 14.2)

i) Non-profit Institutions Serving Households (S. 15)

ii) Non – financial corporations (S. 11).

This sector breakdown shall be applied to all deposits and loans required for MFI interest rates statistics.

6.4 Breakdown by type of instrument

6.4.1 General

The instrument breakdown by type of deposit or loan for MFI interest rates statistics and the definitions used, follow to a large extent the “Reporting Instructions on the Monthly Balance Sheet Return by MFIs” issued by the CBC in January 2010. Therefore, unless as otherwise stated in paragraph 6.4.2 below, the instrument breakdown for MFI interest rates and the definitions of the types of instruments shall follow the assets and liabilities categories as set out in the above mentioned RIs.

6.4.2 Type of instruments of deposits and loans

The instrument breakdown requirements for deposits and loans as set out in each of the four tables of MFI interest rates statistics included in Part II of these RIs, are given below:

i) Table 1: MFI interest rates on the outstanding amounts of deposits at the end of the month.

Deposits on outstanding amounts, shall be distinguished between overnight deposits, deposits with agreed maturity, deposits redeemable at notice and repos.

It is, hereby, clarified that MFI interest rates on overnight deposits shall cover all overnight deposits, whether or not interest bearing.

ii) Table 2: MFI interest rates on the new business amounts of deposits during the month.

MFIs are required to report MFI interest rates statistics for new business amounts deposited during the month, only for deposits with agreed maturity and repos.

iii) Table 3: MFI interest rates on the outstanding amounts of loans at the end of the month.

MFI interest rates on outstanding amounts of loans at the end of the month, cover all types of lending including revolving loans and overdrafts, for which separate reporting is required under each sector, i.e. they are treated as a separate type of instrument. In addition, MFI interest rates in respect of extended credit card debt for each sector shall also be reported. However, the extended credit card debt and any new credit card limit approved shall not be reported under any new business instrument category.

For the purposes of MFI interest rates statistics, revolving loans and overdrafts are loans that have all the following features: 1) the borrower may use or withdraw funds to a pre-approved credit limit without giving prior notice to the lender; 2) the amount of available credit can increase and decrease as funds are borrowed and repaid; 3) the credit may be used repeatedly; 4) there is no obligation of regular repayment of funds. Revolving loans include the amounts obtained through a line of credit and not yet repaid (outstanding amounts). A line of credit is an agreement between a lender and borrower that allows a borrower to take advances, during a defined period and up to a certain limit, and repay the advances at his discretion before a defined date.

Overdrafts are debit balances on current accounts. Both revolving loans and overdrafts exclude loans provided through credit cards. The total amount owed by the borrower is to be reported, irrespective of whether it is within or beyond any limit agreed beforehand between the lender and the borrower with regard to size and/or maximum period of the loan.

Where the overdraft exceeds the agreed limit, usually penalties are charged. These may be charged as an interest rate component, a component of other charges, or a combination of both. Penalties on overdrafts applied as a component of other charges, i.e. in the form of special fees, are not covered by the AAR/NDER, because this type of rate only covers the interest rate component of loans. If penalties on overdrafts are applied as an interest rate component, i.e. a higher interest rate, this higher interest rate is reflected in MFI interest rates statistics.

iv) Table 4: MFI interest rates on the new business amounts of loans during the month.

The instrument categories for MFI interest rates on new business loans exclude revolving loans and overdrafts and, therefore, do not follow exactly the definition of loans as set out in the “Reporting Instructions on the Monthly Balance Sheet Return by MFIs”. Furthermore, the extended credit card debt shall not be reported under any new business instrument category. All other definitions and breakdowns of loans for new business are in line with the aforementioned RIs.

6.5 Breakdown by amount category

The breakdown by size of the loan is required only for new loans granted to NFCs as set out in Table 4. Three size categories for the amount of the loan granted shall be distinguished as follows: (a) “up to and including EUR 0,25 million, (b) “over EUR 0,25 million up to and including EUR 1 million” and (c) “over EUR 1 million”. The amount refers to the single loan transaction considered as new business. It does not cover all business between the NFCs and the reporting MFI.

6.6 Breakdown by original maturity, notice period or initial period of fixation

Depending on the type of instrument and whether the MFI interest rate refers to outstanding amounts or to new business, the statistics shall provide a breakdown by original maturity, period of notice, or initial period of fixation of the interest rate. These breakdowns refer to time bands or ranges. For example, an interest rate on a deposit with an agreed maturity of up to one year shall refer to an average rate across all deposits with an agreed original maturity between two days and a maximum of one year. The breakdown by original maturity and period of notice shall follow the definitions set out in the “Reporting Instructions on the Monthly Balance Sheet Return by MFIs”.

Original maturity: This breakdown shall apply to deposits with agreed maturity and repos referring to both outstanding amounts (Table 1) and new business (Table 2), as well as to all lending categories on outstanding amounts other than overdrafts (Table 3). The example 20 of Appendix II is relevant. This breakdown shall also apply for data on new business loans granted to NFCs for the following periods of the initial rate fixation:

• floating rate and up to (and including) three months initial rate fixation, and

• over three months and up to (and including) one year initial rate fixation.

Period of notice: This breakdown shall apply to deposits redeemable at notice referring only to outstanding amounts (Table 1).

Initial period of fixation of the interest rate: This breakdown is required for the lending interest rates on new business (Table 4). For the purposes of MFI interest rates statistics, the initial period of fixation is defined as a predetermined period of time at the start of a contract during which the value of the interest rate cannot change. The initial period of fixation may be shorter or equal to the original maturity of the loan. The value of the interest rate shall only be considered to be unchangeable if it is defined as (i) an exact level, for example as 10 % p.a., or (ii) as a differential to a reference rate at a certain point in time, for example as six-month Euribor plus 2 percentage points at a certain date and time, which is equivalent to an exact interest rate level. If at the start of a contract for a certain period of time a procedure of calculating the lending rate is agreed between the customer and the MFI, for example six-month Euribor plus 2 percentage points for three years, this shall not be considered to be an initial rate fixation, as during this period the value of the interest rate may change in line with Euribor. The MFI interest rates statistics on new lending business shall only reflect the interest rate that is agreed for the initial period of fixation at the start of a contract or after renegotiation of the loan. If after this initial period of fixation the interest rate automatically changes to a floating rate, this shall not be reflected in the MFI interest rates on new business but only in those on outstanding amounts. The examples 21 and 22 of Appendix II are relevant.

The following three periods of initial rate fixation shall be distinguished for all loans to “Households” other than loans to “Households/Private individuals - Loans for house purchases” and for loans to NPISHs:

• floating rate and up to (and including) one year initial rate fixation,

• over one and up to (and including) five years initial rate fixation, and

• over five years initial rate fixation.

The following four periods of initial rate fixation shall be distinguished for loans to “Households/private individuals - Loans for house purchases”:

• floating rate and up to (and including) one year initial rate fixation,

• over one and up to (and including) five years initial rate fixation,

• over five and up to (and including) ten years initial rate fixation, and

• over ten years initial rate fixation.

The following six periods of initial rate fixation shall be distinguished for loans to NFCs:

• floating rate and up to (and including) three months initial rate fixation,

• over three months and up to (and including) one year initial rate fixation,

• over one and up to (and including) three years initial rate fixation,

• over three and up to (and including) five years initial rate fixation,

• over five and up to (and including) ten years initial rate fixation, and

• over ten years initial rate fixation.

Loans to households and NPISHs without any interest rate fixation shall be considered as loans with "floating rate" and shall be included in the category of up to one year initial rate fixation. Loans to NFCs without any interest rate fixation shall be considered as loans with "floating rate" and shall be included in the category of up to three months initial rate fixation.

6.7 Breakdown by secured loans with collateral and/or guarantees

The breakdown by secured loans with collateral and/or guarantees is required for the lending interest rates on new business (Table 4) except for the loans to: (a) “Households/Employers”, (b) “Households/Private Individuals – Other loans” and (c) “NPISHs”.

The breakdown of loans according to collateral/guarantees includes the total amount of new business loans which are collateralised using the ‘funded’ credit protection technique as defined in Article 4(31) and Annex VIII, Part 1, Sections 6-25 of Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast) and/or guaranteed using the ‘unfunded credit protection’ technique as defined in Article 4(32) and Annex VIII, Part 1 Sections 26-29 of Directive 2006/48/EC, in such a way that the value of the collateral and/or guarantee is higher than or equal to the total amount of the loan. If an MFI applies a system different from the ‘standardised approach’ as defined in Directive 2006/48/EC for supervisory purposes, it may also apply the same treatment in the reporting of loans included under this breakdown.

7. AGGREGATION OF DATA BY MFIs and Reporting obligations

7.1 General

Each reporting MFI is required to submit to the CBC the following data on MFI interest rates statistics, applying the definitions and rules as laid down in these RIs.

For Tables 1 and 3 of Part II of these RIs, MFIs shall provide for each instrument category as specified in the Technical Requirements in Part III of these RIs, a weighted average interest rate referring to the last day of the month. The weighted average interest rate shall cover all outstanding deposits that have been placed and not yet withdrawn by customers or all outstanding loans (except bad loans and loans for debt restructuring) that have been withdrawn and not yet repaid by customers in all the periods up to and including the reporting date.

For Tables 2 and 4, MFIs shall provide for each instrument category as specified in the Technical Requirements in Part III of these RIs, a weighted average interest rate, covering all new business operations during the whole reference month. The weighted average interest rate shall refer to all new deposits or all new loans (except loans for debt restructuring). In addition, MFIs shall provide the amount of new business conducted in each instrument category of Tables 2 and 4 during the month (excluding loans for debt restructuring).

7.2 Weighting procedure

Each instrument category covers various products that were acquired by different customers. An average interest rate shall be calculated for each instrument category on the basis of the rates applied to deposits placed by, or loans granted to each customer, weighted by the respective outstanding amount as at the last day of the month (for Tables 1 and 3), or by the respective amount of new business during the month (for Tables 2 and 4).

Therefore, the weighted average interest rate for each instrument category, ([pic]), shall be calculated as:

[Equation 4]

where:

[pic] is the interest rate for each customer [pic] that acquired a product that is included in each instrument category [pic],

[pic] is the outstanding amount as at the end of the month, (or the new business amount during the month), which the customer [pic] has acquired from

a product that is included in each instrument category [pic].

Note: A customer [pic] may appear more than once in the weighting procedure, if more than one products falling under a specific instrument category were acquired by that customer.

7.3 Group reporting

Under certain circumstances, the CBC may permit to a specific number of reporting MFIs, with a supplementary circular, to report MFI interest rates statistics together as a group. These MFIs shall be considered as one notional MFI and shall provide the data defined in paragraph 6 referring to the group as a whole. The group shall be subject to the same reporting requirements with the other reporting MFIs, as laid down in these RIs.

In order to report their data as a group, the MFIs concerned have to apply one further aggregation in the weighting procedure. Hence, the weighted average interest rate for every instrument category [pic] of the whole group, shall be calculated using equation 5:

[Equation 5]

where:

[pic] is one single weighted average interest rate, for the whole group consisting of [pic]MFIs, for each instrument category [pic],

[pic] is the weighted average interest rate that each MFI [pic], which is a member of the group, has reported for this specific instrument category [pic], as per paragraph 7.2,

[pic] is the outstanding amount of each MFI[pic], which is a member of the group, for this specific instrument category [pic] as at the end of the month, or the new business amount during the month.

Regarding instrument categories that, apart from the interest rate, require also the amount of new business conducted during the month, the new business amounts for each MFI shall be summed up and reported as a group.

In addition, the notional MFI (consisting of all MFIs in the group) shall provide every year for each instrument category, the number of the MFIs within the group, [pic], and the variance of interest rates across these MFIs, which shall refer to the month of October and be transmitted with the October data. The equation for the variance of interest rates across the MFIs is:

[pic] [Equation 6]

where:

[pic] is the weighted average interest rate for the group of MFIs, for each instrument category [pic],

[pic] is the weighted average interest rate that each MFI in the group, has reported for each instrument category [pic].

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[1]

[2] Further guidance for the classification of customers in the above sectors is provided in the CBC “Guidelines on the classification of institutional units into institutional sectors and sub-sectors in accordance with the European System of Accounts (ESA 1995)” issued in January, 2010.

[3] As amended by Laws No. 166(I) of 2001, No. 34(I) of 2002, No. 77(I) of 2002 and No. 33(I) of 2004.

[4] Further guidance for the classification of customers in the above sectors is provided in the CBC “Guidelines on the classification of institutional units into institutional sectors and sub-sectors in accordance with the European System of Accounts (ESA 1995)” issued in January, 2010.

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