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10060
Reduction in households' investments in unlisted companies
statistikk
2007-07-06T10:00:00.000Z
National accounts and business cycles
en
finsek, Financial accounts, financial investments, households and non-profit organisations, general government, abroad, balance sheets, FINSEFinancial accounts , National accounts and business cycles
false

Financial accounts, Q1 2007

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Reduction in households' investments in unlisted companies

The financial accounts for households and non-profit institutions serving households in the first quarter of 2007 show considerable negative net lending over the last four quarters. The development is characterized by a fall in investments in unlisted companies and a high level of borrowing.

The decline in net lending is mainly explained by a significant fall in household’s investments in shares and loans to unlisted companies. Until the end of 2005, these investments were high and financed by extraordinarily high share dividends. Dividend tax for shareholders was introduced in 2006, and the payment of extraordinarily high dividends has now come to an end. During 2006, shareholders started to take out share capital which they earlier had invested in the companies. Share capital and share premium accounts have been redeemed and paid out to owners instead of share dividends. The development in the financial accounts is supported by preliminary statistics for dividends, which show a large fall in dividends to shareholders in the household sector in 2006.

Household net lending and change in net financial assets over last four quarters. NOK billion. Net assets as ratio of disposable income.

Households net lending over the last four quarters until the end of the first quarter of 2007 was 2007 NOK -83.6 billion. Other changes in assets (holding gains and upward adjustment of the security portfolio caused by revised statistics for securities) amounted to NOK 92 billion. Changes in net financial assets totalled NOK 9 billion, and household net financial assets were estimated to NOK 490 billion at the end of the first quarter of 2007.

Local government increased their borrowing

The financial accounts for local government show a fall in net lending from over the last four quarters from NOK 2.3 billion in 2006 to NOK -1.1 billion in the first quarter of 2007. Net lending has shown a growing trend from the second quarter of 2003, but the development has declined from the second quarter of 2006.

Local government’s increased borrowing in mortgage companies is the main explanation for the fall in net lending, but the growth in local government bank deposits has also declined. Net borrowings in mortgage companies amounted NOK 14.9 billion over the last four quarters compared to NOK 13 billon in 2006. Local government’s debt totalled to NOK 310 billion at the end of the first quarter of 2007.

High level of net lending abroad and holding gains on shares owned by foreigners

Norway's net foreign assets were calculated to NOK 1 514 billion at the end of the first quarter of 2007, which is an increase of NOK 38 billion during the last quarter. The increase can be explained by net lending in the rest of the world of almost NOK 87 billion and net holding losses of NOK 49 billion. This is due to increasing share prices on shares owned by foreigners at Oslo stock exchange.

Financial accounts for households and non-profit institutions serving households. NOK billion
  1. quarter 2005 2. quarter 2005 3. quarter 2005 4. quarter 2005 1. quarter 2006 2. quarter 2006 3. quarter 2006 4. quarter 2006 1. quarter 2007
  Stocks, end of quarter
Financial assets 1 825 1 899 1 953 2 015 2 086 2 103 2 127 2 220 2 273
Liabillities 1 424 1 484 1 520 1 574 1 605 1 661 1 699 1 757 1 783
Net financial assets / net financial wealth  401  415  434  441  481  442  428  462  490
                   
  Sum over the last four quarters
Change in net financial assets / net financial wealth 32 47 67 78 80 27 -5 21 9
Other changes 12 25 47 42 67 60 52  103 92
Net lending 19 22 20 36 13 -33 -57 -81 -84

Concepts in capital and financial accounts

The link between non-financial and financial accounts is established by the balancing item “net lending/net borrowing”. In theory, net lending derived from capital account should be identical to net lending derived from financial accounts. However, experience shows that significant discrepancies occur between the two parts of the accounting system.

A. Capital account / National accounts, institutional sectors

Saving + net capital transfers = net acquisition of non - financial assets + net lending

Disposable income may be used either for finale consumption or savings. Savings can be invested in financial or non-financial assets.

B. Financial accounts

Net lending = net acquisition of financial assets - net incurrence of liabilities

If savings exceed non-financial investments, a sector has a surplus of funds and becomes a net lender to other sectors. In the financial transactions account, this means that the sector acquires more financial assets than liabilities. On the other hand, if savings are less than non-financial investments, investments have to be financed either by selling financial assets or incurring debts. Household investments in non-financial assets mainly reflect the purchase of new housing and fixed investments by unincorporated enterprises. They typically finance substantial parts of these investments by incurring debt in the form of loans.

Net financial assets ( net financial wealth ) = total financial assets - total liabilities

The financial balance sheet shows the financial position of a sector at the end of the reference period and is broken down into categories of financial assets and liabilities. Insurance technical reserves, currency and deposits are the predominant assets held by households, while loans provided by financial corporations (banks etc) constitute the main proportion of liabilities.

Changes in net financial asset = net lending + other change in assets , net

The change in the financial balance sheet during the reference period is a result of accumulated financial transactions and other changes in assets. The latter category mainly reflects revaluations due to changes in market prices of financial instruments.