Page 77 - Contributed Paper Session (CPS) - Volume 5

CPS1053 DU zhixiu
financial liabilities other than loans. rAFA is the yield column vector of other
financial instruments other than loans; rAFL is the yield column vector for the
payment of financial liabilities other than loans.

Table 1 Financial institutions capital flow and stock table

The reference rate is introduced. According to the principle that FIs loans
come from liability instruments, the reference rate is equal to the cost of
capital, which is equal to its real interest rate. As shown in table 1,

Where,  is the column vector whose component is 1. Equation (7) refers
to the reference rate when deposits and loans face the same risks. For the
convenience of analysis in the following text, this reference rate is named as
"account reference rate". According to equation (7), the reference rate includes
risk premium.

3. Result
At present, most countries adopt interbank lending rate as reference rate
in practice. In China, the interbank lending rate is the main interest rate variety
in the money market, so the weighted average interest rate of inter-bank
lending can be selected as the representative of China's reference rate for
FISIM calculation. Besides, some countries use the average deposit and loan
rate as the reference rate. For China, we use the weighted average deposit and
loan interest rate with the balance of deposit and loan as the weight as the
reference rate.

66 | I S I W S C 2 0 1 9