The BER started conducting surveys amongst retail and merchant & investment banks in 2002. The scope of the survey was expanded to asset managers and life insurers in 2003. Ernst & Young, the international accounting and business advisory firm, not only supports the financial sector survey financially, but has also contributed valuable input to its scope and design and makes the overall results public.

• ... for the latest results, visit the Ernst & Young website or click here
• ... for details on the survey method, click here
• ...for a presentation on the survey method, click here

To Download the data, click on one of the links below:

1. The Ernst & Young Financial Services Index (E&Y FSI)
2. Retail and Investment Banks
3. Investment Management
4. Life Insurance
   

The need for the financial sector survey
The international standing of the financial sector survey
Ensuring the reliability and accuracy of the financial sector survey
Appendix: The net balance statistic

SA has one of the most advanced financial sectors of all emerging market economies and its development is in many respects on par with those of industrialised countries – and yet its performance is not measured regularly and consistently. There is a general consensus on the need for a regular, consistent and impartial financial sector survey, from financial sector managers to financial analysts.

The contribution of the financial sector to the GDP has increased from 11% in the 1960s to 18% in the 1990s. Despite its importance, current information lags behind:  

• Statistics SA publishes GDP and employment figures for the financial sector with a lag of one quarter and no details about the sector’s financial performance.

• The compulsory monthly DI 900 returns of banks and the Annual Reports of the Research Department of the SA Reserve Bank and Financial Services Board provides detailed information about the performance of banks and other financial institutions, but the information is made public with a lag in time.

• The interim and annual reports of listed financial companies provide information about their performance, but these reports appear at irregular intervals, as their release dates depend on the financial year-ends of the different companies, and the results are difficult to compare.

• The annual PwC Banking Survey and bi-annual Life Office’s Association (LOA) review, although entirely relevant in relation to its intended target market and ultimate aim, differs fundamentally from the Financial sector Survey. This new survey measures the same performance criteria of financial institutions over time, appears quarterly and the results are obtained by means of short questionnaires.

• The investment performance and strategy of asset managers are measured regularly (e.g. by the Association of Collective Investments, Alexander Forbes, Hugo Lambrechts, Plexus, Merrill Lynch and Old Mutual) but no regular, consistent measure of income and expenditure of investment management firms exist.
• The investment performance and strategy of asset managers are measured regularly (e.g. by the Association of Collective Investments, Alexander Forbes, Hugo Lambrechts, Plexus, Merrill Lynch and Old Mutual) but no regular, consistent measure of income and expenditure of investment management firms exist.

At present, financial sector surveys are conducted in the UK and Switzerland. In the UK, the Confederation of British Industries (CBI) in London has been conducting comprehensive quarterly financial sector surveys in partnership with PriceWaterhouseCoopers since December 1989. The Swiss Business Cycle Institute (KOF) in Zurich has conducted a quarterly banking survey since the beginning of 2000.

In the USA, the Federal Reserve Bank has been conducting a “Senior Loan Officer Opinion Survey on Bank Lending Practices” for many years, but unlike the UK and Swiss banking surveys, it focuses on bank lending practices and not banking sector performance.

The South African financial sector survey is modelled on those of the UK and Switzerland. However, the questionnaire has been adapted for South African conditions and needs. Furthermore, it also includes questions out of the US “Senior Loan Officer Opinion Survey” on credit standards for approving applications for loans and credit lines.

The questionnaire has been designed for maximum efficiency and minimum input time, with multiple-answer type ticks only required. No figures are requested. Participants only have to tick, for example, if a particular activity (such as business volumes, number of people employed) is “up”, “the same” or “down” compared to the same period a year ago.

Respondents are carefully selected and approached on the basis of their position in the financial world. The head of retail banking or the head of group life assurance is quizzed and not the chairperson of the board of directors of the group or holding company. Divisional heads tend to be best informed about their business units. The confidentiality of the responses adds to their honesty and candour. Furthermore, respondent quality is monitored.

For reasons of focus, the following financial institutions are not covered, namely short-term insurers, public financial institutions (e.g. the IDC, Land Bank and Post Bank), medical insurance schemes, the informal micro-lending industry, and retailers providing credit and individual insurance brokers/agents. The survey also only focuses on the supply of financial services and not on the demand for such services, which stems from businesses and households.

The same group of participants is surveyed from one quarter to the next. Changes in the results from one quarter to the next can therefore be attributed to an actual change in the performance yardstick in question and not because of the participation – or not – of particular banks, asset managers or life insurers.

South Africa has relatively few banks, asset managers and life insurers. For example, four banks dominate the retail and six the merchant and investment banking sector. Likewise, two companies dominate the life insurance industry. The number of potential participants in a financial sector survey is therefore relatively low in South Africa.

The degree of presentation of the panel of participants has an important impact on the reliability of a quantitative survey, i.e. when respondents have to indicate actual amounts for each activity and the rand value of the level and change are calculated. In contrast, the financial sector survey is a qualitative survey, i.e. the majority view of respondents on a particular activity is taken as an indication of the direction and strength of the trend in that activity. The degree of presentation of the panel of participants is less of a concern in the case of qualitative surveys. Furthermore, the participation – or not – of a particular respondent has less of an impact on the overall results in the case of qualitative surveys compared to quantitative ones, as the view of the majority is established and not the actual size.

The survey results reveal trends and not actual figures. The net balance statistic is used to interpret the survey results. The net balance statistic is the percentage of respondents replying “up” less the percentage replying “down”. The percentage of respondents replying “the same” is ignored. Over the years, the net balance statistic has proved to be the most reliable indicator of the direction and size of change in the trend of the respective activities surveyed. The net balance statistic is a qualitative yardstick of the direction and size of the year-on-year growth rate of a particular activity. A positive net balance implies positive year-on-year growth and vice versa. The higher the value of the net balance (positive / negative), the larger the rate of increase / decrease of the activity in question.

To aggregate the sector performance, individual responses are weighted according to their relative size. It makes sense that the response of a small participant has to count less compared to that of a large participant.

We base our interpretation of the survey results on the net balance statistic. Over the years, the net balance statistic has proved to be the most reliable indicator of the direction and size of change in the trend of the respective activities surveyed.

The net balance statistic is the percentage of respondents replying “up” less the percentage replying “down”. The percentage of respondents replying “the same” is ignored. For example, if the percentage of respondents rating the volume of business higher / the same / lower compared to the same period a year ago is as follows;

                       Higher                    Same                      Lower                  Net balance

                        70%                        10%                        20%                        50%

then we can conclude that the majority of participants experienced higher business volumes. A net majority (i.e. the percentage of respondents rating the volume of business higher less the percentage rating the volume lower) of 50% is registered in the above example.