Balance sheets of the Monetary Financial Institutions sector for the Czech Republic
The CNB compiles both an aggregated and a consolidated balance sheet of the Monetary Financial Institutions (MFI) sector for the Czech Republic. The former is the sum of the harmonised balance sheets of all the MFIs resident in the Czech Republic and includes inter-MFI positions. The consolidated balance sheet of the MFI sector is obtained by netting out inter-MFI positions on the aggregated balance sheet. It shows the assets and liabilities of the MFI sector vis-a-vis:
- Czech residents non-MFI (the general government and other Czech residents),
- euro area residents
- non-euro area residents (including banks and nonbanks)
The balance sheets of the MFI sector have the following main functions:
- The liabilities side of the consolidated balance sheet of the Czech MFIs provides the basis for the calculation of monetary aggregates (M1, M2 and M3). The liability breakdowns on the consolidated balance sheet of the MFI sector allow different degrees of moneyness to be distinguished.
- The consolidated balance sheet of the MFI sector also provides the basis for the regular analysis of the counterparts of M3. The counterparts of M3 correspond to all the items other than M3 on the consolidated balance sheet (both on the assets side and on the liabilities side).
- The aggregated balance sheet of the MFI sector provides information on inter-MFI positions and on cross-border activities of MFIs with regard to the euro area and to the rest of the world. This information can be used to assess the integration of financial systems and the importance of the interbank market.
- Both the aggregated balance sheet and the consolidated balance sheet of the Czech MFIs provide a breakdown of several positions by original maturity, currency denomination and sector. For example, these data provide information on the share of long-term lending compared with short-term lending, the importance of the CZK in the assets and liabilities of the MFI sector, and the relative weight of inter-MFI positions compared with positions vis-a-vis other Czech and euro area residents (including households, corporations and the government).
The compilation of the consolidated balance sheet of the Czech Republic MFIs:
The balance sheets of the "other MFIs" sectors of the Czech Republic (banks, money market funds, credit unions) and the balance sheets of the central bank are combined to form the aggregated balance sheet of the Czech Republic "MFIs" sector. These balance sheets are both compiled on a gross basis. The aggregated balance sheet thus includes assets and liabilities vis-a-vis other MFIs. For example, it includes deposits exchanged on the interbank markets or the liquidity periodically supplied to the banking system by the Czech National Bank.
Consolidation implies the following: i) deposits with MFIs and loans to MFIs are netted out; and ii) currency in circulation and negotiable liabilities issued by the MFI sector (debt securities and money market fund shares and units) are netted out with the amounts of such instruments held on the assets side by MFIs. As it is very difficult to identify the current holder of a negotiable financial instrument (to do so would imply monitoring all subsequent on-sales of the security), the amounts held outside the MFI sector can only be derived as a residual of the total issued, minus the corresponding holdings reported by MFIs as assets.