Household financial assets and liabilities
From Statistics Explained
- Data from January 2013. Most recent data: Further Eurostat information, Database.
This article analyses the financial behaviour of the household sector of national accounts, including non-profit institutions serving households, in the European Union (EU). It considers households' financial assets - such as currency deposits and shares - and their liabilities.
Data on household financial assets are used by governments in setting social protection policies, especially pension provisions, as they give an indication as to how well-prepared households are for the future.
Household saving rates also serve as a bellwether for an economy. Considered with other factors, such as economic growth, they give an indication of how households would be able to cope with an economic downturn.
Main statistical findings
Households’ stocks of assets
Figure 1 shows the total stock of financial assets held by the household sector and non-profit institutions serving households as a percentage of gross domestic product (GDP) for all EU countries, plus Norway and Switzerland. It is worth noting that all data presented in this article are non-consolidated.
As Figure 1 shows, the stocks of financial assets held by the household sector as a percentage of GDP in 2011 ranged from 58 % in Latvia to 337 % in Switzerland. Within the EU, the Netherlands, the UK, Denmark and Cyprus rank high while, in general, it can be said that in most of the Member States which joined the EU in 2004 or 2007 (in this Figure Bulgaria, the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Romania, Slovenia and Slovakia), the stocks of financial assets as a percentage of GDP are smaller than in the other countries. That is, the size of the stocks seems to be correlated to per-capita GDP, although other variables, such as development of financial markets can be important.
Table 1 shows the development of the stocks of financial assets for 2007–2011. The ratio of total financial assets held by the household sector to GDP does not show a common trend in EU countries between 2007 and 2011. In some countries, there was a decrease on total financial assets to GDP in 2008, but this downturn was overcome and the ratio was very similar (or even higher) in 2011 than in 2007. This has been the case for countries as Denmark, Germany, Ireland, France, Luxembourg or the Netherlands among others. However, there are also countries (Spain, Cyprus or Greece for example) where the level of financial assets held by households in 2007 has not been recovered after the financial crisis.
Looking at the most preferred instruments by households to hold their financial wealth, Table 2 shows the percentage of total financial assets by instrument for 2007 and 2011. The instruments households prefer for their financial assets are currency and deposits (AF.2), shares and other equity (AF.5) and insurance technical reserves (AF.6). Securities other than shares (AF.3) and other accounts receivable/payable (AF.7) have some importance, while the stock of loans (AF.4) has only a symbolic presence in households’ portfolios. The table also shows the changes in the portfolio composition in the last five years. It is interesting to note that in all countries, except Malta, there has been an increase in the currency and deposits held by households. In contrast, in almost all Member States the amount of shares and other equity owned by this sector has decreased.
One of the most interesting features of the crisis is the change in the portfolio of households. While in 2007 there was no common pattern regarding the preferred instrument by households in the different countries, as shown in Figure 2 in 2011 currency and deposits is clearly the preferred one in most of them, with only few exceptions: Denmark and Sweden (shares and other equity and insurance technical reserves preferred), Estonia and Romania (shares and other equity) and Ireland, France, the Netherlands and the United Kingdom (insurance technical reserves). So, it is clear that the financial turmoil has increased household´s risk aversion, turning their investment into more secure assets.
So far, we have focused on households’ holdings of assets. Now, we turn our attention to the liabilities side.
Figure 3 shows the total liabilities of households and non-profit institutions serving households as a percentage of their disposable income. This is a very important ratio, since it shows how many years it would take for households to pay off their debt if they used all of their income. As can be seen, this ratio has increased in some countries between 2007 and 2011 and, in the final year of this period, exceeds 100 % for Estonia, Spain, France, Portugal, Finland, Sweden and the United Kingdom. It is over 200 % for Denmark, Ireland, Cyprus the Netherlands and Norway. To analyse the preferred instruments by which households become indebted, Table 3 shows the total liabilities by instrument.
Table 3 shows that loans and other accounts payable (AF.4 and AF.7) are the instruments most used by households in all countries to get into debt. Loans represent over 90 % of liabilities in most countries, which is to be expected. There are no significant changes compared to the situation in 2007. Figure 4 shows the proportion of these two instruments in 2011 with a view to analysing the differences by countries. Only in Bulgaria, France, Italy, Cyprus, Lithuania and Malta are other accounts payable of any significance (around 20 % of total liabilities), which shows the importance of trade credit as a way for households to acquire products in those countries.
It should also be noted that some countries show significant household liabilities in other financial instruments, for example shares and other equity. This is usually due to inclusion of unincorporated enterprises within the household sector or perhaps the inclusion of some non-profit institutions in the analysis. There are small changes in the liabilities structure of the households but the general pattern of these changes is an increase of loans as preferred instrument by households to obtain finance.
Finally, Figure 5 shows net financial assets (BF.90), what we could call the net financial wealth of households, by country for 2007 and 2011.
Some countries — Belgium, Italy, Malta, the Netherlands, the United Kingdom and Switzerland — stand out due to the high level of the net financial wealth of their households as a percentage of GDP (over 150 %). There are also other two features in Figure 5 that deserve mentioning. On the one hand, net financial wealth decreased between 2007 and 2011 for almost all countries, as the deepening of the economic difficulties led to falls in asset prices. On the other hand, the Member States which joined the EU in 2004 or 2007 show lower levels of household net financial wealth as a percentage of GDP in general (except for Bulgaria, Estonia and Slovenia). Finally, it is worth noting the decrease in net financial assets has been especially huge in countries most affected by the crisis, such as Greece, Spain, Italy or Cyprus.
Data sources and availability
The data presented only go up to 2011 — the latest annual data available — and so do not reflect the most recent changes in financial markets.
Europe faces major structural challenges, including its ageing population and potential future shortfalls in pensions funding.
In 2000, EU leaders adopted the Lisbon Strategy, which was revised in 2005, to address these challenges up to 2010, aiming to stimulate sustainable growth and create more and better jobs, while respecting the environment and Europe's social model.
Further Eurostat information
- Non-financial flows and stocks (nasa_nf)
- Non-financial transactions (nasa_nf_tr)
- Financial flows and stocks (nasa_f)
- Financial balance sheets (nasa_f_bs)
Methodology / Metadata
- Balance sheets (ESMS metadata file - fina_st_esms)
- Manual on sources and methods for the compilation of ESA95 financial accounts
- Manual on sources and methods for quarterly financial accounts for general government