Latest Developments in the Canadian Economic Accounts
Understanding household credit measures, a joint study by the Bank of Canada and Statistics Canada
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The Bank of Canada (the Bank) and Statistics Canada both produce aggregate measures of borrowing, or credit, for sectors of the Canadian economy. The Statistics Canada measures are part of the National Balance Sheet Accounts (NBSA), which cover the entire economy and directly align with the internationally recognized national accounting principles detailed in the United Nations System of National Accounts. They are available by sector as currently defined in the Canadian System of Macroeconomic Accounts. The NBSA are created using a balance sheet approach, which involves presenting the assets and liabilities for all instruments and sectors of the economy. In other words, for each instrument all holders of financial assets must have corresponding counterparties who hold the financial liabilities, and as such, the sum of these are equal in the aggregate. The Bank’s data are presented based on the issuer of credit, i.e., the holder of the financial assets, and do not display liabilities.
Both measures are constructed primarily from records of Canadian financial institutions and provide thorough coverage of lending by those institutions. They show a similar picture of the indebtedness of Canadian households, currently and in the past. However, the use of differing classification systems, methodologies, and definitions results in some reconcilable differences in the aggregate measures. Therefore, the Bank and Statistics Canada conducted a joint study to identify and understand these key differences between their respective measures of household credit.
Household credit was the focus of this current exercise, while business credit will be investigated later. The magnitude of the variance between the Bank's and Statistics Canada's main household credit aggregates is shown below. While the differences are small at the aggregate level, they are larger when examined by component. The differences at the level of residential mortgages and consumer credit are examined in subsequent sections.
Main household credit aggregates | |||||||||
---|---|---|---|---|---|---|---|---|---|
Bank of Canada | National Balance Sheet Accounts | Differences | |||||||
Residential mortgagesTable 1 Note 1 | Consumer creditTable 1 Note 2 | Total household credit | Household mortgage liabilitiesTable 1 Note 3 | Consumer creditTable 1 Note 4 | Non-mortgage loansTable 1 Note 5 | Total household credit | Total difference in household credit | Total difference in household credit | |
millions of dollars | % | ||||||||
First quarter 2012 | 1,099,569 | 495,207 | 1,594,776 | 1,024,021 | 508,234 | 78,551 | 1,610,806 | -16,030 | -1.01 |
Second quarter 2012 | 1,116,727 | 501,415 | 1,618,142 | 1,041,041 | 515,653 | 79,893 | 1,636,587 | -18,445 | -1.14 |
Third quarter 2012 | 1,137,382 | 508,476 | 1,645,858 | 1,058,772 | 524,036 | 79,132 | 1,661,940 | -16,082 | -0.98 |
Fourth quarter 2012 | 1,151,385 | 511,691 | 1,663,076 | 1,069,928 | 527,886 | 78,330 | 1,676,144 | -13,068 | -0.79 |
First quarter 2013 | 1,158,938 | 507,589 | 1,666,527 | 1,077,924 | 526,844 | 80,949 | 1,685,717 | -19,190 | -1.15 |
Second quarter 2013 | 1,176,275 | 512,199 | 1,688,474 | 1,096,521 | 534,018 | 81,229 | 1,711,768 | -23,294 | -1.38 |
Third quarter 2013 | 1,197,326 | 516,411 | 1,713,737 | 1,113,910 | 540,354 | 82,693 | 1,736,957 | -23,220 | -1.35 |
Fourth quarter 2013 | 1,211,490 | 519,316 | 1,730,806 | 1,123,435 | 544,864 | 82,517 | 1,750,816 | -20,010 | -1.16 |
First quarter 2014 | 1,218,078 | 517,659 | 1,735,737 | 1,129,674 | 543,233 | 84,326 | 1,757,233 | -21,496 | -1.24 |
Second quarter 2014 | 1,234,194 | 523,983 | 1,758,177 | 1,147,757 | 552,592 | 83,735 | 1,784,084 | -25,907 | -1.47 |
Third quarter 2014 | 1,257,385 | 529,692 | 1,787,077 | 1,167,939 | 558,650 | 85,200 | 1,811,789 | -24,712 | -1.38 |
Fourth quarter 2014 | 1,273,562 | 535,087 | 1,808,649 | 1,180,341 | 562,029 | 85,870 | 1,828,240 | -19,591 | -1.08 |
First quarter 2015 | 1,281,606 | 533,358 | 1,814,964 | 1,188,478 | 560,408 | 87,488 | 1,836,374 | -21,410 | -1.18 |
Second quarter 2015 | 1,302,124 | 540,849 | 1,842,973 | 1,211,403 | 568,361 | 93,252 | 1,873,016 | -30,043 | -1.63 |
Third quarter 2015 | 1,331,297 | 546,086 | 1,877,383 | 1,237,241 | 574,192 | 94,126 | 1,905,559 | -28,176 | -1.50 |
Fourth quarter 2015 | 1,354,228 | 549,176 | 1,903,404 | 1,256,015 | 576,753 | 94,960 | 1,927,728 | -24,324 | -1.28 |
First quarter 2016 | 1,363,288 | 549,020 | 1,912,308 | 1,264,914 | 576,046 | 98,010 | 1,938,970 | -26,662 | -1.39 |
Second quarter 2016 | 1,385,652 | 560,357 | 1,946,009 | 1,291,464 | 588,557 | 99,181 | 1,979,202 | -33,193 | -1.71 |
Third quarter 2016 | 1,415,780 | 567,239 | 1,983,019 | 1,315,313 | 592,321 | 98,823 | 2,006,457 | -23,438 | -1.18 |
Fourth quarter 2016 | 1,438,837 | 572,950 | 2,011,787 | 1,331,264 | 598,978 | 100,541 | 2,030,783 | -18,996 | -0.94 |
First quarter 2017 | 1,448,589 | 573,100 | 2,021,689 | 1,341,433 | 599,572 | 102,188 | 2,043,193 | -21,504 | -1.06 |
Second quarter 2017 | 1,471,434 | 586,860 | 2,058,294 | 1,363,076 | 614,562 | 103,480 | 2,081,118 | -22,824 | -1.11 |
Third quarter 2017 | 1,497,950 | 596,965 | 2,094,915 | 1,383,182 | 622,235 | 103,633 | 2,109,050 | -14,135 | -0.67 |
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While a comparison of the two measures of household credit results in a consistent picture of the extent of Canadians’ indebtedness, differences exist between the measures. Both organizations make certain assumptions based on limited information regarding certain debt components, particularly those related to non-bank financial institutions. Moreover, it is important to note that some assumptions made by each organization are specific to the particular component being measured.
Mortgage liabilities of the household sector
The table below reconciles differences in measures of residential mortgage liabilities; however, Statistics Canada does not publish data separately on residential mortgages. Consequently, the table starts with Statistics Canada’s value for the total mortgage liabilities of households. From there, explainable differences between the Bank’s and Statistics Canada’s values are calculated, including differences due to classification, coverage, and timing, which are explained following the table. This leads to a Statistics Canada approximated value according to how the Bank of Canada defines residential mortgage credit. The residual column is the remaining difference between the approximated value and the Bank’s actual value.
Residental mortages | ||||||||
---|---|---|---|---|---|---|---|---|
NBSA household mortgage liabilities - publishedTable 2 Note 1 | Classification (plus) | Coverage (minus) | Timing (minus) | NBSA approximated to the Bank's definitions | The Bank's residential mortgage credit - publishedTable 2 Note 2 | Difference between NBSA approximated and the Bank's published (Level) | Difference between NBSA approximated and the Bank's published | |
millions of dollars | % | |||||||
First quarter 2012 | 1,024,021 | 75,734 | 5,351 | 2,874 | 1,091,530 | 1,099,569 | 8,039 | 0.73 |
Second quarter 2012 | 1,041,041 | 77,032 | 5,349 | 3,815 | 1,108,910 | 1,116,727 | 7,818 | 0.70 |
Third quarter 2012 | 1,058,772 | 78,449 | 5,297 | 2,824 | 1,129,100 | 1,137,382 | 8,282 | 0.73 |
Fourth quarter 2012 | 1,069,928 | 79,198 | 5,212 | 2,025 | 1,141,890 | 1,151,385 | 9,496 | 0.82 |
First quarter 2013 | 1,077,924 | 79,890 | 5,078 | 2,096 | 1,150,640 | 1,158,938 | 8,298 | 0.72 |
Second quarter 2013 | 1,096,521 | 81,253 | 5,134 | 4,452 | 1,168,189 | 1,176,275 | 8,087 | 0.69 |
Third quarter 2013 | 1,113,910 | 82,512 | 5,422 | 2,492 | 1,188,508 | 1,197,326 | 8,818 | 0.74 |
Fourth quarter 2013 | 1,123,435 | 83,102 | 5,415 | 392 | 1,200,731 | 1,211,490 | 10,760 | 0.89 |
First quarter 2014 | 1,129,674 | 83,647 | 5,380 | 1,099 | 1,206,843 | 1,218,078 | 11,236 | 0.92 |
Second quarter 2014 | 1,147,757 | 85,067 | 5,250 | 4,178 | 1,223,397 | 1,234,194 | 10,798 | 0.87 |
Third quarter 2014 | 1,167,939 | 86,617 | 5,244 | 2,940 | 1,246,372 | 1,257,385 | 11,013 | 0.88 |
Fourth quarter 2014 | 1,180,341 | 87,528 | 5,064 | 1,528 | 1,261,278 | 1,273,562 | 12,285 | 0.96 |
First quarter 2015 | 1,188,478 | 88,115 | 5,011 | 1,104 | 1,270,479 | 1,281,606 | 11,128 | 0.87 |
Second quarter 2015 | 1,211,403 | 89,940 | 4,953 | 5,688 | 1,290,702 | 1,302,124 | 11,422 | 0.88 |
Third quarter 2015 | 1,237,241 | 91,402 | 4,957 | 3,589 | 1,320,098 | 1,331,297 | 11,200 | 0.84 |
Fourth quarter 2015 | 1,256,015 | 92,862 | 4,956 | 3,076 | 1,340,845 | 1,354,228 | 13,383 | 0.99 |
First quarter 2016 | 1,264,914 | 93,527 | 4,957 | 1,489 | 1,351,995 | 1,363,288 | 11,293 | 0.83 |
Second quarter 2016 | 1,291,464 | 95,634 | 4,956 | 5,745 | 1,376,397 | 1,385,652 | 9,255 | 0.67 |
Third quarter 2016 | 1,315,313 | 97,415 | 4,957 | 4,082 | 1,403,690 | 1,415,780 | 12,091 | 0.85 |
Fourth quarter 2016 | 1,331,264 | 98,550 | 4,957 | 2,004 | 1,422,853 | 1,438,837 | 15,984 | 1.11 |
First quarter 2017 | 1,341,433 | 99,314 | 4,958 | 3,266 | 1,432,524 | 1,448,589 | 16,066 | 1.11 |
Second quarter 2017 | 1,363,076 | 100,836 | 4,961 | 5,455 | 1,453,497 | 1,471,434 | 17,938 | 1.22 |
Third quarter 2017 | 1,383,182 | 102,319 | 5,215 | 2,930 | 1,477,356 | 1,497,950 | 20,594 | 1.37 |
Source: Statistics Canada and Bank of Canada, 2018. |
Classification differences
In the NBSA, residential mortgage liabilities are allocated to various sectors of the economy to reflect the fact that residential mortgage liabilities are found in sectors other than the household sector. For example, if the government required a mortgage to finance a social housing program then the NBSA would show a residential mortgage liability and the corresponding non-financial asset (i.e., residential real estate) in the government sector. Similarly, non-residential mortgage liabilities are allocated to the various borrowing sectors with some non-residential mortgage borrowers classified to the household sector (i.e., unincorporated businesses).
Generally, financial institutions will make a distinction between their mortgage assets based on the intended use of the mortgaged property, i.e., for residential or non-residential purposes. For example, if a residential care facility requires a mortgage, a financial lender will record this as a residential mortgage. The NBSA emphasizes the debtor-creditor relationship; that is, if the debtor is a corporation, then the liability will be classified as a residential mortgage in the corporate sector. The Bank’s credit statistics classify mortgages to sectors based on the intended use of property; therefore, the Bank includes all residential mortgages in household credit and all non-residential mortgages in business credit.
Currently this adjustment is positive because the dollar value of residential mortgage liabilities outside the household sector is greater than the dollar value of non-residential mortgage liabilities within the household sector.
Coverage
Given the NBSA’s integrated coverage of all sectors of the economy, residential mortgage assets for some sectors are recorded in the NBSA, but are not included in the Bank’s mortgage statistics. These sectors are households (i.e., intra-sectoral lending), non-financial private corporations, governments and non-residents. The Bank excludes the corresponding household mortgage liabilities involving these particular counterparty sectors because they are outside the scope of the Bank’s credit aggregates.
Mortgages | ||
---|---|---|
Bank of Canada | National Balance Sheet Accounts | |
Lending sector | ||
Chartered banks | included | included |
Issuers of asset-backed securities | included | included |
Property and casualty insurance companies | included | included |
Sales finance and consumer loan companies | included | included |
Other private financial institutions | partial | included |
Investment funds | included | included |
Federal and provincial government business enterprises | included | included |
Trusteed pension plans | included | included |
Trust and mortgage loan companies | included | included |
Credit unions | included | included |
Life insurance companies | included | included |
Segregated funds of life insurance companies | included | included |
Households | excluded | included |
Non-financial private corporations | excluded | included |
Governments | excluded | included |
Non-residents (entities outside Canada) | excluded | partial |
Legend: Included: the lending sector is included in the credit statistics. Partial: the lending sector is included in the credit statistics, but the reconciliation exercise has revealed that some lenders are omitted. Excluded: the lending sector is not included in the credit statistics. Source: Statistics Canada and Bank of Canada, 2018. |
Timing differences
The Bank uses data reported on an average-over-the-period basis (the average value of the stock of an asset over the period), whereas Statistics Canada uses data reported on an end-of-period basis (the value of the stock of an asset on the final day of the period). This results in differences between estimates derived from each source, especially when large movements in the value occur throughout the period or near the end. Although this is labelled a timing difference, any data issues between reconciling at the end of the period compared with the average will inherently be included in this calculation.
Consumer credit
The table below reconciles differences in measures of consumer credit, due to differences in how it is defined. This table starts with Statistics Canada’s value for the consumer credit liabilities of households. From there, explainable differences between the Bank’s and Statistics Canada’s values are calculated, including differences due to classification of loans, methodology, concepts, coverage, and timing, which are explained following the table. This leads to a Statistics Canada approximated value according to how the Bank of Canada defines consumer credit. The residual column is the remaining difference between the approximated value and the Bank’s actual value.
Consumer credit | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|
NBSA consumer credit - publishedTable 4 Note 1 | Classification of loans (plus) | Methodological (minus) | Conceptual (minus) | Coverage (minus) | Timing (minus) | NBSA approximated to the Bank's definitions | The Bank's consumer credit - publishedTable 4 Note 2 | Difference in NBSA approxiamted and the Bank's published (Level) | Difference between NBSA approximated and the Bank's published | |
millions of dollars | % | |||||||||
First quarter 2012 | 508,234 | 78,551 | 3,176 | 30,547 | 66,219 | -342 | 487,184 | 495,207 | 8,023 | 1.62 |
Second quarter 2012 | 515,653 | 79,893 | 3,091 | 30,921 | 67,900 | 941 | 492,694 | 501,415 | 8,721 | 1.74 |
Third quarter 2012 | 524,036 | 79,132 | 3,233 | 31,903 | 67,094 | 939 | 500,000 | 508,476 | 8,476 | 1.67 |
Fourth quarter 2012 | 527,886 | 78,330 | 3,403 | 31,899 | 67,367 | 501 | 503,046 | 511,691 | 8,645 | 1.69 |
First quarter 2013 | 526,844 | 80,949 | 3,328 | 32,487 | 68,596 | -284 | 503,665 | 507,589 | 3,924 | 0.77 |
Second quarter 2013 | 534,018 | 81,229 | 3,699 | 32,452 | 69,699 | 942 | 508,455 | 512,199 | 3,744 | 0.73 |
Third quarter 2013 | 540,354 | 82,693 | 3,258 | 33,365 | 71,444 | 857 | 514,122 | 516,411 | 2,289 | 0.44 |
Fourth quarter 2013 | 544,864 | 82,517 | 3,571 | 34,219 | 72,622 | 628 | 516,342 | 519,316 | 2,974 | 0.57 |
First quarter 2014 | 543,233 | 84,326 | 3,513 | 33,609 | 74,314 | 400 | 515,723 | 517,659 | 1,936 | 0.37 |
Second quarter 2014 | 552,592 | 83,735 | 3,614 | 32,241 | 75,613 | 1,551 | 523,309 | 523,983 | 674 | 0.13 |
Third quarter 2014 | 558,650 | 85,200 | 3,780 | 32,785 | 76,790 | 1,125 | 529,371 | 529,692 | 321 | 0.06 |
Fourth quarter 2014 | 562,029 | 85,870 | 3,695 | 32,684 | 78,421 | 576 | 532,523 | 535,087 | 2,564 | 0.48 |
First quarter 2015 | 560,408 | 87,488 | 3,799 | 33,356 | 78,736 | 328 | 531,678 | 533,358 | 1,680 | 0.32 |
Second quarter 2015 | 568,361 | 93,252 | 4,057 | 38,244 | 79,761 | 1,384 | 538,168 | 540,849 | 2,681 | 0.50 |
Third quarter 2015 | 574,192 | 94,126 | 4,186 | 39,090 | 80,787 | 513 | 543,742 | 546,086 | 2,344 | 0.43 |
Fourth quarter 2015 | 576,753 | 94,960 | 4,708 | 39,683 | 81,469 | -253 | 546,106 | 549,176 | 3,070 | 0.56 |
First quarter 2016 | 576,046 | 98,010 | 4,755 | 41,437 | 83,730 | 78 | 544,057 | 549,020 | 4,963 | 0.90 |
Second quarter 2016 | 588,557 | 99,181 | 5,158 | 41,632 | 84,905 | 1,634 | 554,409 | 560,357 | 5,948 | 1.06 |
Third quarter 2016 | 592,321 | 98,823 | 5,059 | 42,256 | 84,032 | 351 | 559,447 | 567,239 | 7,792 | 1.37 |
Fourth quarter 2016 | 598,978 | 100,541 | 5,058 | 44,089 | 83,771 | 173 | 566,427 | 572,950 | 6,523 | 1.14 |
First quarter 2017 | 599,572 | 102,188 | 5,744 | 43,704 | 85,424 | 185 | 566,703 | 573,100 | 6,397 | 1.12 |
Second quarter 2017 | 614,562 | 103,480 | 4,407 | 42,921 | 86,871 | 2,323 | 581,520 | 586,860 | 5,340 | 0.91 |
Third quarter 2017 | 622,235 | 103,633 | 4,339 | 43,424 | 87,368 | 684 | 590,053 | 596,965 | 6,912 | 1.16 |
Source: Statistics Canada and Bank of Canada, 2018. |
Classification differences
In the NBSA framework, the measure of household consumer credit includes only the financing related to current consumption, whereas financing for financial and capital investment expenditures is included in a separate category for non-mortgage loans other than consumer credit. Both categories combined cover the total non-mortgage debt of the household sector as defined in the NBSA. In contrast, the Bank includes borrowing related to all three categories of expenditures in its measure of consumer credit.
Methodological differences
Because Statistics Canada’s data are presented on a debtor-creditor basis, impaired loans are still assets and liabilities on the books of the debtor and creditor at their full outstanding value (gross of impairments). Conversely, the Bank’s loan data are net of impairments because they measure the value of the loan the creditor anticipates will be collected. As a result, all else being equal, the NBSA estimate will tend to be higher.
Conceptual differences
In the NBSA, unincorporated businesses are included in the household sector. As such, the category of non-mortgage loans includes loans made to unincorporated business, while these are excluded from the measure of consumer credit produced by the Bank.
Coverage differences
The Bank’s credit aggregates do not cover certain loans from some sectors that are included in the NBSA. Examples include student loans and farm loans from governments, automobile leases from non-financial private corporations, and some loans from credit unions and other private financial institutions.
Consumer credit coverage detail | ||||
---|---|---|---|---|
Coverage - total (minus) | Coverage - leases (minus) | Coverage - student loans (minus) | Coverage - other (minus) | |
millions of dollars | ||||
First quarter 2012 | 66,219 | 7,313 | 20,038 | 38,868 |
Second quarter 2012 | 67,900 | 7,546 | 20,366 | 39,988 |
Third quarter 2012 | 67,094 | 7,779 | 20,692 | 38,623 |
Fourth quarter 2012 | 67,367 | 8,013 | 21,020 | 38,334 |
First quarter 2013 | 68,596 | 8,274 | 21,347 | 38,975 |
Second quarter 2013 | 69,699 | 8,689 | 21,696 | 39,314 |
Third quarter 2013 | 71,444 | 9,104 | 22,044 | 40,296 |
Fourth quarter 2013 | 72,622 | 9,520 | 22,394 | 40,708 |
First quarter 2014 | 74,314 | 9,984 | 22,742 | 41,588 |
Second quarter 2014 | 75,613 | 10,531 | 22,793 | 42,289 |
Third quarter 2014 | 76,790 | 11,078 | 22,842 | 42,870 |
Fourth quarter 2014 | 78,421 | 11,626 | 22,891 | 43,904 |
First quarter 2015 | 78,736 | 12,207 | 22,940 | 43,589 |
Second quarter 2015 | 79,761 | 12,632 | 23,168 | 43,961 |
Third quarter 2015 | 80,787 | 13,058 | 23,397 | 44,332 |
Fourth quarter 2015 | 81,469 | 13,483 | 23,626 | 44,360 |
First quarter 2016 | 83,730 | 13,949 | 23,853 | 45,928 |
Second quarter 2016 | 84,905 | 14,226 | 24,287 | 46,392 |
Third quarter 2016 | 84,032 | 14,504 | 24,523 | 45,005 |
Fourth quarter 2016 | 83,771 | 14,781 | 24,762 | 44,228 |
First quarter 2017 | 85,424 | 15,274 | 25,003 | 45,147 |
Second quarter 2017 | 86,871 | 15,561 | 25,289 | 46,021 |
Third quarter 2017 | 87,368 | 15,849 | 25,539 | 45,981 |
Source: Statistics Canada and Bank of Canada, 2018. |
Consumer credit and non-mortgage loans | ||
---|---|---|
Bank of Canada | National Balance Sheet Accounts | |
Lending sector | ||
Chartered banks | included | included |
Issuers of asset-backed securities | included | included |
Property and casualty insurance companies | zero | zero |
Sales finance and consumer loan companies | included | included |
Other private financial institutions | partial | included |
Investment funds | zero | zero |
Federal and provincial government business enterprises | partial | included |
Trusteed pension plansTable 6 Note 1 | zero | zero |
Trust and mortgage loan companies | included | included |
Credit unionsTable 6 Note 2 | partial | included |
Life insurance companies | included | included |
Segregated funds of life insurance companies | included | zero |
Households | excluded | netted |
Non-financial private corporations | excluded | included |
Governments | excluded | included |
Non-residents (entities outside Canada) | excluded | zero |
Included: the lending sector is included in the credit statistics. Zero: there are no known loans in this category from this lending sector. If there were, the loans would be included. Partial: the lending sector is included in the credit statistics, but the reconciliation exercise has revealed that some lenders are omitted. Excluded: the lending sector is not included in the credit statistics. Netted: intra-sectoral loans from households to households are shown on a net basis. Source: Statistics Canada and Bank of Canada, 2018. |
Timing differences
The Bank uses data reported on an average-over-the-period basis (the average value of the stock of an asset over the period), whereas Statistics Canada uses data reported on an end-of-period basis (the value of the stock of an asset on the final day of the period). This results in differences between estimates derived from each source, especially when large movements in the value occur throughout the period or near the end. Although this is labelled a timing difference, any data issues between reconciling at the end of the period compared with the average will inherently be included in this calculation.
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