The Financial Sector in Ireland's National Accounts 2016 - Thematic Research Publication

Source Publication: Assets and Liabilities of the Financial Sector 2016

Get the data: StatBank

The balance sheet of Financial Corporations (S.12) grew markedly since 2013, after a contraction in 2011 and 2012. Much of the increase post-2014 is driven by an expansion of assets of Investment Funds (S.124) and Other Financial Corporations (S.125+S.126+S.127).

In 2016 the balance sheet of the Financial Corporations sector grew by €176bn, this was driven mostly by Investment Funds (S.124) which increased by €133bn.

^{Note: The Financial and Insurances Activities sector is coded NACE K 64, 65, and 66 for more information please see Background Notes.}

Source publication: Institutional Sector Accounts Non-Financial and Financial 2016, National Income and Expenditure Annual Results 2016

Get the data: Eurostat

Figure 1.2 above shows value added of the S.12 sector to the economy over the years. Value added is the value of production minus all costs, except personnel costs, and refers to the contribution of the sector towards the economy.

Value added by the S.12 sector decreased between 2007 and 2009 by €1.36bn. After an increase in 2010, the value added began to contract again until 2014. In 2015 an increase of €1.66bn was seen, much of this increase came from Services auxiliary to Financial Intermediation (66). The Financial sector contributed a value of €17.35bn to the total GDP in 2016 which is in line with 2007 levels however, this accounted for approximately 8.8% of the total GDP in 2007 while only accounts for 6.3% of the GDP in 2016.

Get the data: Modified GNI or GNI*, Eurostat

Figure 1.3 shows the contribution of the Financial sector as a percentage of GNI* as opposed to GDP. Modified GNI (or GNI*) is defined as GNI less the effects of the profits of redomiciled companies and the depreciation of intellectual property products and aircraft leasing companies. In terms of percentage, the total Financial sector comprised 9.17% of the total GNI*. Out of this the main component was Financial Intermediation Services (64) which made up 5.28% of the total economy while the shares of Insurance (65) and the shares of Services auxiliary to Financial Intermediation (66) were similar.

The share of the sector grew to 12.9% in 2010 from 10.3% in 2007 but has been declining since. However, the absolute size of the Financial sector has increased since 2015 so this decline can be attributed to the increase in size of the GNI* as a whole.

Source publication: National Income and Expenditure Annual Results 2016

Get the data: Eurostat

Figure 1.4 above shows the trend of value that the Financial sector adds to the economy classified by its three major components. Profits is the most significant component, followed by wages and salaries paid out. The Financial sector also contributes to the economy by way of paying taxes which is a small component of the total value that the sector adds.

Compensation of employees in this sector have remained mostly constant over the 10 year period, remaining around the €6bn to €6.5bn range. Net taxes paid reduced significantly to €30m in 2010 and then reducing to a small negative value in 2011. Given that the share of taxes is small and share of wages is fairly constant, the trend in value added can then be attributed mainly to profits which reduced between 2007 and 2009. Increasing by €1.17bn in 2010, profits show a net decline until 2013 after which an increase is seen until 2016, thereby following a similar trend as overall value added.

Get the data: Eurostat

Figure 1.5 shows the value of the gross operating surplus created by this sector. It is equal to the gross value added excluding the value of wages and salaries paid out.

The operating surplus for this sector decreased by €1.3bn between 2007 and 2009 before increasing in 2010. The operating surplus then declined sharply by €3.8bn between 2010 and 2013 falling to €6bn. From 2013 to 2016 an increase was observed much like the trend seen in value added. In 2016 the operating surplus stood at €9.85bn back in line with its 2007 levels.

Source publication: Quarterly National Household Survey Q1 2017

Get the data: StatBank

With labour expenses in this sector also contributing to the economy, Figure 1.6 shows the employment in this sector broken down by NACE code. Much of the employment is provided by activities related to Financial Services except Insurance and Pensions (coded 64). This includes the Central Bank, Deposit Taking Corporations and Holding Companies. In 2016 approximately 95,000 people were employed in the Financial sector, with approximately 66,000 people employed under activities coded 64. Employment in the Insurance sector has remained fairly constant over the time period under consideration. 

Acknowledgements

This publication has been developed over the past few years, partly due to the work undertaken by number of interns taking part in an internship programme between the CSO and the Bundesbank, Germany.

We would like to thank the following participants in the Bundesbank internship programme for their contribution to the chapters over the years:
S.121 Robin Hermann
S.122 Alena Tonjes
S.123 Sarah Brockmeyer
S.124 Michelle Vey
S.125/7 Treasuries - Julia Schaefer
S.128 Anna Michaels
Financial Services - Annika Kleinstück and Lena-Sophie Ulrich.

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