## Monetary and Financial Statistics Manual and Compilation Guide — key findings, methodology, and compilation guidance ## Source details **Canonical URL:** [Monetary and Financial Statistics Manual and Compilation Guide — key findings, methodology, and compilation guidance](https://www.imf.org/-/media/files/data/guides/mfsmcg-final.pdf) ## Other formats - [Markdown version](/-/media/files/data/guides/mfsmcg-final.pdf.md) - [Structured JSON version](/-/media/files/data/guides/mfsmcg-final.pdf.json) --- ### Purpose, scope, and institutional context - The Manual updates and merges methodological and practical aspects of compiling monetary and financial statistics into a single volume aimed at compilers and users of monetary data (Monetary and Financial Statistics Manual and Compilation Guide — Preface). - Structure: the Manual “consists of eight chapters and three appendices (1.17).” (Chapter structure and annexes summarized throughout the Manual). - Preparation: prepared by the IMF’s Statistics Department (STA) with contributors from national central banks, statistical offices, and international organizations (Preface). ### Harmonization and relationship with other macroeconomic frameworks - Methodological consistency is maintained with: - System of National Accounts 2008 (2008 SNA), - Balance of Payments and International Investment Position Manual, sixth edition (BPM6), - Government Finance Statistics Manual 2014 (GFSM 2014), - ECB/UN handbook on Financial Production, Flows and Stocks in the SNA (Preface). - The Manual reconciles monetary-statistics practices with IFRSs and provides explicit rules for converting IFRS-based accounts into monetary-statistics source data (Sections 2.50, 2.57–2.61). ### Institutional sectoring and recommended subsector aggregation for monetary statistics - For monetary statistics the FCs sector is aggregated into three subsectors: - (1) central bank, - (2) other depository corporations (ODCs): deposit-taking corporations except the central bank [MS] and MMFs, - (3) other financial corporations (OFCs) [MS] (Chapter 3, 1.22). - Resident NFCs are split for monetary statistics into two subsectors: - public nonfinancial corporations (PNFCs) and other NFCs (combining national private and foreign-controlled NFCs) (1.22). - General government subsectoring recommendation: merge social security funds with the level of government at which they operate; state and local government are aggregated into one subsector for monetary statistics (2.29). ### Classification of financial instruments — core conventions and notable changes - Instrument classification follows 2008 SNA codes: Monetary gold and SDRs [F1], Currency and deposits [F2], Debt securities [F3], Loans [F4], Equity and investment fund shares [F5], Insurance, pension, and standardized guarantee schemes [F6], Financial derivatives and ESOs [F7], Other accounts receivable/payable [F8] (4.14). - Notable subcategory and terminology updates: - Investment fund shares/units added to equity subcategories and separately identified as MMF shares and non-MMF investment fund shares (Preface; Chapter 3, 1.25). - Insurance technical reserves replaced by Insurance, pension, and standardized guarantee schemes (IPSGS) with extended asset boundary (Preface). - Employee stock options (ESOs) added to financial derivatives (Preface). - Currency-denomination rule: instruments indexed to a foreign currency are to be treated as if denominated in that foreign currency following BPM6 (1.14). ### Recording, valuation, and flow decomposition rules - Recording basis: accrual recording recommended; transactions recorded at time economic value is created, transformed, exchanged, transferred, or extinguished; financial asset transactions recorded on the trade date (5.24–5.30; 1.29). - Stocks and flows identity: CS ≡ OS + T + VC + OCVA (closing stock equals opening stock plus Transactions plus Valuation Changes plus Other Changes in the Volume of Assets) and compilers should, where possible, report OS, CS, T, VC, and OCVA separately (5.19; Table 5.2). - Valuation principles: - Market prices or market-price equivalents recommended for stocks and flows; where market prices unavailable, estimate market-equivalent values via relative or absolute valuation (present-value methods) (5.37–5.48; Box 5.1). - Specific instrument valuation rules preserved exactly: - Deposits and loans: nominal value (including accrued but unpaid interest) (2.34; 5.41). - Debt securities: market or fair value; if source data use amortized cost, restate to market/fair value with contra-entry in Equity liability [MS] as a valuation adjustment (2.57; 5.103–5.106). - Equity assets and investment fund shares: market/fair value; Equity liability [MS] (liabilities of FCs except investment fund shares) recorded at book value in monetary statistics with market-value memorandum items recommended (2.29; 5.149–5.156). - Insurance, pension, and standardized guarantee schemes: market/fair value where applicable; actuarial present-value methods for life insurance, annuities, and pension entitlements (4.14; 5.178–5.197). - Revaluations and OCVA: - Revaluations arise from price and exchange-rate changes and recorded separately in VC. - OCVA records changes not due to transactions or valuation changes: appearance/disappearance of assets, catastrophic losses, uncompensated seizures, classification changes, write-offs and provisioning actions (5.22; 5.83; Annex 7A examples). ### Equity and provisions — monetary-statistics departures from 2008 SNA and reconciliation - Equity liability [MS] (FCs’ equity excluding MMF/non-MMF investment fund shares) is reported at book value and disaggregated into five components: - (1) funds contributed by owners, - (2) retained earnings, - (3) current year result, - (4) general and special reserves, - (5) valuation adjustment (2.29; 5.157–5.165). - Provisions for losses on assets are treated as liabilities (Other accounts payable [MS]) in monetary statistics and recorded as OCVA when provisions are made or reversed; this differs from 2008 SNA treatment where provisions are generally internal bookkeeping entries (2.29; 4.197–4.199; 5.231). - Reconciliation principle: SNA net worth and market-valued equity plus adjustments reconcile to the sum of book-valued Equity liability [MS] plus provisions recorded in monetary statistics (2.29). ### Monetary definitions: broad money, liquidity aggregates, and monetary base - Broad money definition (Manual): “Broad money is the sum of all liquid financial instruments held by money-holding sectors that are widely accepted in an economy as a medium of exchange, plus those that can be converted into a medium of exchange at short notice at, or close to, their full nominal value.” (6.11) - Inclusion rules and maturity guidance: - Currency and transferable deposits included; other deposits and short-term debt securities may be included based on liquidity/moneyness and maturity. The Manual considers “a range of one to two years acceptable” as an upper original-maturity limit for inclusion in broad money (6.15, 6.34). - Repurchase agreements resembling deposits can be included in broad money if they function like deposits; otherwise treated as loans (6.36). - MMF shares are included in broad money; non-MMF investment fund shares are excluded (3.146; 6.47). - Monetary base (reserve/base money): central bank liabilities that support broad money expansion; defined as currency in circulation plus ODCs’ deposits at the central bank and those deposits of money-holding sectors at the central bank included in broad money (6.89–6.93; Box 6.3 and Box 6.4). - Money-issuing / money-holding / money-neutral sectors classification required to compile DCS and related analytical surveys (6.61–6.75). ### Surveys, sectoral balance sheets, SRFs, and main analytical outputs - Sectoral balance sheets and standardized report forms: - SRFs correspond to sectoral balance sheets for: - SRF 1SR — Central Bank, - SRF 2SR — Other Depository Corporations, - SRF 4SR — Other Financial Corporations, - SRF 5SR — Money Aggregates (7.136–7.139; Appendix II templates). - Analytical surveys and consolidation: - Central Bank Survey (CBS), Other Depository Corporations Survey (ODCS), Depository Corporations Survey (DCS — consolidates CBS and ODCS), Other Financial Corporations Survey (OFCS), Financial Corporations Survey (FCS — consolidates DCS and OFCS) (2.7; 7.49–7.64). - DCS is principal set for monetary policy: presents broad money liabilities and their counterparts; FCS provides the broadest institutional coverage for liquidity and credit analysis (2.7; 7.58–7.60). - Required cross-classifications in SRFs: instrument, currency (domestic/foreign), and counterpart sector (central bank, ODCs, OFCs, central government, state/local government, PNFCs, other NFCs, households and NPISHs, nonresidents) (Appendix II, SRFs guidance). - Memorandum items strongly recommended: accrued interest by instrument, interest and principal arrears, expected loan losses by debtor sector, debt securities/loans with residual maturity ≤ 1 year by currency and counterpart sector, market value of equity liabilities (SRF memoranda; Chapter 5, Chapter 7). ### Compilation practices, source data, validation, and reporting frequency - Primary source data: FC accounting and supervisory records (general and subsidiary ledgers); compilers must adapt accounting records to Manual classifications (2.52–2.59; 7.70–7.83). - Recommended periodicity and timeliness: - DCs: monthly reporting with a time lag of one–two months (2.66; 7.73). - OFCs: monthly or quarterly reporting with time lag of one–three months or three–four months, respectively (2.66). - FCS periodicity aligned with OFC periodicity (2.66). - Validation and plausibility testing: - Automated validation checks (completeness, balance-sheet identity, totals/subtotals) and multi-stage plausibility filtering and diagnostic testing recommended; cost–benefit decision rules for queries emphasize materiality (7.120–7.127). - Coverage and sampling exemptions: - Consider size thresholds or coverage quotas for reporting frequency; periodic census or statutory reporting recommended to maintain institutional lists and update exemptions (7.128–7.135). ### Treatment of special institutional and instrument cases - Currency unions: - Two models: centralized and decentralized (3.119–3.137). - CUCB (currency union central bank) and CUNCBs (currency union national central banks) roles defined; union-wide monetary statistics require consolidation of CUCB-headquarters accounts and CUNCBs (3.119–3.129). - Dollarized and co-circulation economies: - Foreign currencies used as mediums of exchange are classified as foreign-currency-denominated instruments; in fully dollarized economies domestic accounting may be converted to foreign unit of account; techniques for estimating co-circulation and foreign-currency circulation recommended (6.149–6.153; 6.153–6.157). - IMF accounts and SDRs: - Quota subscription, IMF No. 1 and No. 2 Accounts, IMF Securities Account, SDR holdings, SDR allocations, Use of Fund credit (UFC) treatment explained for central bank balance sheets and CBS presentation, with a Reserve Tranche Position (RTP) example (7.34; 4.242–4.246; Table 4A.2). - Islamic financial institutions and instruments: - Classification and recommended statistical treatment for Islamic contracts and instruments (Qard, Murabaha, Bai Salam, Istisna’a, Ijarah, Musharaka, Mudaraba, PSIA, Sukūk) — guidance to treat deposit-like instruments as deposits, Sukūk as debt securities unless claim on residual value exists, and Takaful as insurance if meeting insurance definitions (Annex 4.3, 4.255–4.267). - Securitization, repos, securities lending, gold swaps: - Repos and securities lending backed by cash treated as collateralized loans; on‑selling requires recording short positions and appropriate treatment to avoid double-counting; gold swaps treated like repos (4.71–4.83; 4.85–4.90). ### Practical compilation formulas and estimation techniques (exchange-rate revaluation decomposition) - Estimation of transactions (T) and valuation changes (VC) for foreign-currency-denominated assets using the daily average exchange rate em and opening/closing foreign-currency stocks S0 and S1: - T = em (S1 − S0) when no OCVA (5.4). - VC = e1 S1 − e0 S0 − em (S1 − S0) = (e1 − em) S1 − (e0 − em) S0 (5.5). - Alternative forms using domestic-currency opening and closing stocks OS = e0 S0 and CS = e1 S1: T = (em / e1) CS − (em / e0) OS (5.6); VC = [1 − (em / e1)] CS − [1 − (em / e0)] OS (5.7). - With OCVA denominated in foreign currency, T = em (S1 − S0 − OCVA) and extended VC formulas in equations (5.8)–(5.11) with numeric examples provided (5.8–5.11; illustrative euro examples). - Present-value fair-value approach for nontraded debt securities and derivatives valuation recommended (Box 5.1; chapters 5 and Annexes). ### Policy and compilation recommendations emphasized by the Manual - Adopt Manual guidelines to improve cross-country comparability and methodological soundness for monetary and financial statistics (Foreword; Preface). - Compile DCS monthly with timely reporting to support monetary policy; compile FCS to broaden analysis of liquidity/credit (2.7; 7.71–7.76). - Record stocks and flows on gross basis; consolidate intra-group positions only for analytical surveys (1.30; 7.61). - Report flows disaggregated into Transactions, Valuation Changes, and OCVA where feasible; provide memoranda on accrued interest, arrears, expected loan losses, and market-value equity (5.19; 7.90; SRF guidance). - Use IFRS adjustments where needed: - Restate amortized-cost debt securities to market/fair value with contra-entry to Equity liability [MS] (2.57). - Restate holdings of equity assets to market/fair value while equity liabilities remain book-valued in monetary statistics (2.57; 5.149–5.156). - Strengthen source-data reporting and cooperation: - Encourage standardized reporting forms, common charts of accounts, and read-only access to central bank consolidated ledgers where feasible to streamline validation and compilation (7.113–7.116; 7.113). *Monetary and Financial Statistics Manual and Compilation Guide. International Monetary Fund* ### Foreword ### Foreword ### Need for improved monetary and financial statistics - Modern episodes of financial instability, in particular that of 2008–2009, underscored the need for accurate, comprehensive, and reliable monetary and financial data across countries. - The International Monetary Fund (IMF) has taken the lead in promoting methodologically sound and internationally comparable monetary and financial statistics. ### Purpose and content of the Manual - The Monetary and Financial Statistics Manual and Compilation Guide (Manual) updates and merges into one volume methodological and practical aspects of the compilation process of monetary statistics. - The Manual is aimed at compilers and users of monetary data, offering guidance for the collection and analytical presentation of monetary statistics. - The Manual includes standardized report forms, providing countries with a tool for compiling and reporting harmonized data for the central bank, other depository corporations, and other financial corporations. ### Consistency with other macroeconomic frameworks - The methodology and concepts described in the Manual are consistent with other macroeconomic data sets, including: - the System of National Accounts 2008 (2008 SNA), - the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6), - the Government Finance Statistics Manual 2014 (GFSM 2014), - the handbook on Financial Production, Flows and Stocks in the System of National Accounts published by the United Nations and the European Central Bank. - This consistency underscores the close relationship existing between the different macroeconomic statistical systems. ### Preparation, consultation, and acknowledgements - The Manual has been prepared by the Statistics Department, in consultation with a group of experts of national central banks, statistical offices, and other international organizations. - Earlier versions of the Manual were posted on the IMF’s website for comments by the general public. - The Managing Director thanks all of the experts involved for their invaluable assistance and for their collaborative spirit. ### Recommendations and expectations - The Manual is published with the expectation that it will assist member countries in their efforts to improve the process of compiling and disseminating high-quality monetary and financial statistics. - Member countries are encouraged to adopt the guidelines of the Manual. *Christine Lagarde, Managing Director, International Monetary Fund* ### Preface ### Preface ### Purpose and scope - The Monetary and Financial Statistics Manual and Compilation Guide (Manual) updates and merges into one volume methodological and practical aspects of the compilation process of monetary and financial statistics. - The Manual sets forth the broad framework for the collection and presentation of these statistics and provides specific recommendations for the classification, sectoring, valuation, and recording of various categories of financial assets and liabilities in an economy. - The Manual was produced by the IMF’s Statistics Department (STA) as part of its mandate to provide leadership on the development and application of sound statistical methodologies and practices. - The purpose of the Manual is to support compilers of monetary and financial statistics in the production of methodologically sound and cross-country comparable monetary data by: - providing tools for identifying, classifying, and recording stocks and flows of financial assets and liabilities; - describing standardized, analytically oriented frameworks for presenting monetary statistics; and - identifying a set of analytically useful aggregates within those frameworks. ### Harmonization with other statistical frameworks and accounting standards - The concepts, accounting principles, and other methodological elements of the Manual are harmonized with: - the System of National Accounts 2008 (2008 SNA), - the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6), - the Government Finance Statistics Manual 2014 (GFSM 2014), and - the handbook on Financial Production, Flows and Stocks in the System of National Accounts published by the United Nations and the European Central Bank. - The Manual elaborates on the relationship between monetary and financial statistics and internationally accepted accounting standards, in particular the International Financial Reporting Standards (IFRSs). ### Historical perspective and rationale for revision - The 2000 Monetary and Financial Statistics Manual (MFSM) was the first volume of its kind and was harmonized with the System of National Accounts 1993 (1993 SNA) and BPM5; it focused on concepts and was not intended as a compilation guide. - The 2008 Monetary and Financial Statistics Compilation Guide (MFS Guide) provided practical guidance on implementing the MFSM methodology, focusing on cross-country harmonization of source data and methodology, and accounting standards applicable to source data for monetary and financial statistics (MFS). - In 2004 the IMF introduced standardized report forms (SRFs) for monetary data reporting by member countries; monetary data compiled using the SRFs were first published in International Financial Statistics (IFS) in September 2006. - Key methodological updates and related publications that motivated revision include: - the System of National Accounts 2008 (2008 SNA) released in 2009; - the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6); - the Government Finance Statistics Manual 2014 (GFSM 2014) published in 2014; - the 2014 handbook by the ECB and the United Nations on Financial Production, Flows and Stocks in the SNA. - The decision was made to combine the MFSM and the MFS Guide into a single volume to align monetary and financial statistics methodology with the new frameworks, to address practical compilation issues revealed by SRF implementation, and to reflect recent financial sector and market developments. ### Main methodological changes from the MFSM and the MFS Guide - Institutional sectors: - The 2008 SNA increased to nine the number of subsectors of the financial corporations (FCs) sector, compared with the five of the 1993 SNA. - There is a greater focus on other financial corporations (OFCs), including a split between insurance corporations and pension funds, identification of money market funds (MMFs) and non-MMF investment funds, and inclusion of a category for captive financial institutions and money lenders. - The Manual expands the treatment of special cases of institutional units such as special purpose entities (SPEs), sovereign wealth funds (SWFs), and central clearing counterparties (CCPs). - Financial instruments: - The Manual adopts the revised terminology and classification of the 2008 SNA and adds three subcategory changes: - investment fund shares/units are added to equity; - the term Insurance technical reserves is replaced by Insurance, pension, and standardized guarantee schemes (IPSGS), with the asset boundary extended to include Provisions for calls under standardized guarantee schemes and Claims of pension funds on pension managers; - employee stock options (ESOs) are added to financial derivatives. - The Manual contains additional discussions on borderline cases in classification of financial assets and liabilities. - Special Drawing Rights (SDR) allocations: - The Manual records the reclassification of SDR allocations to member countries from equity to long-term foreign liability. - This change was introduced in August 2009 in monetary data compiled by countries, with historical data revised correspondingly. - The 2008 SNA and BPM6 consider SDR allocations as long-term foreign liabilities because of a requirement to repay the allocation in certain circumstances and because interest accrues on the allocation; if SDR allocations are held on the balance sheet of the central bank, they are treated accordingly. ### Project management, contributors, and consultations - The Manual was prepared by the staff of the Financial Institutions Division of STA under the general direction of Mr. Robert Heath, STA Deputy Director, and Mr. Luca Errico, Division Chief. - Project management and editorial review: - Mr. Artak Harutyunyan (Deputy Division Chief) managed the project and, with José M. Cartas (Senior Economist), reviewed and edited the text. - Primary contributors include Mme. Xiuzhen Zhao and Messrs. José M. Cartas, Thomas Elkjaer, Artak Harutyunyan, Jaroslav Kucera, Marco Martínez, Pierre Papadacci, and Richard Walton. - Other contributors include Messrs. Thomas Alexander, Gary Barinshtein, Agus Firmansyah, Venkateswarlu Josyula, Phousnith Khay, Alexander Massara, André Mialou, Farid Talishli, and Giovanni Ugazio. - Mr. Kenneth Sullivan (accounting expert and former IMF staff) provided support on the IFRSs and other accounting related issues. - Administrative and numerical support was provided by Mme. Gloria Adison, Mr. Redley Pinkney, Messrs. Goran Amidzic, Matias Costa Navajas, and Plapa Koukpamou. - The Manual benefited from review and comments from a wide range of individuals from STA and other IMF departments (list of named staff provided in the Manual) and from numerous officials in member countries and international organizations. - Experts who participated in the February 2012 meeting of experts in Washington, D.C., convened to launch the revision of the MFSM and MFS Guide included representatives from Algeria, Armenia, Australia, Belarus, Brazil, Canada, Chile, China, France, Germany, Iceland, India, Indonesia, Israel, Italy, Japan, Korea (Republic of), Mexico, Morocco, Peru, Poland, Portugal, Russian Federation, South Africa, Saudi Arabia, Spain, Switzerland, Thailand, Turkey, United Kingdom, United States, BCEAO, BEAC, ECB, BIS, Eurostat, IAIS, OECD, UNSD, and The World Bank. ### Acronyms included in the Manual - Selected acronyms documented in the Manual include: - 1993 SNA System of National Accounts 1993 - 2008 SNA System of National Accounts 2008 - AAOIFI Accounting and Auditing Organization for Islamic Financial Institutions - AMC Asset management company - BA Bankers’ acceptances - BCEAO Banque Centrale des États de l’Afrique de l’Ouest - BEAC Banque des États de l’Afrique Central - BIS Bank for International Settlements - BLA Bilateral Loan Agreement - BMA Bond Market Association - BML Broad money liabilities - BOE Bank of England - B O O Ts Build, own, operate, transfer schemes - BOP Balance of payments - BPM5 Balance of Payments Manual, fifth edition - BPM6 Balance of Payments and International Investment Position Manual, sixth edition - BSA Balance sheet approach - CB Central bank - CBA Cost-benefit analysis - CBS Central bank survey - CCP Central clearing counterparty - CDO Collateralized debt obligation - CDS Credit default swap - CLN Credit-linked notes - CMA Common market area - CMO Collateralized mortgage obligation - CPI Consumer price index - CS Closing stock - CSDB Centralized securities database - CUCB Currency union central bank - CUNCB Currency union national central bank - DC Depository corporation - DCS Depository corporations survey - DGI Data gaps initiative - DQAF Data Quality Assessment Framework - DR Depository receipt - DSSB Dissemination Standards Bulletin Board - ECB European Central Bank - ECCU Eastern Caribbean Currency Union - ECCB Eastern Caribbean Central Bank - ECF Extended Credit Facility - EFF Extended Fund Facility - ESAF Enhanced Structural Adjustment Facility - ESO Employee stock option - FCL Flexible Credit Line - FC Financial corporations - FCS Financial corporations survey - FRA Forward rate agreement - GAB General Arrangements to Borrow - GDP Gross domestic product - GDDS General Data Dissemination System - GFS Government finance statistics - GFSM 2014 Government Finance Statistics Manual 2014 - GNDI Gross national disposable income - GNI Gross national income - GRA General Resources Account - IAH Investment account holders - IASB International Accounting Standards Board - IAS International Accounting Standard - ICPF Insurance corporations and pension funds - ICS Integrated Correspondence System - IDB Islamic Development Bank - IFI Islamic financial institution - IFRSs International Financial Reporting Standards - IFS International Financial Statistics - IFSB Islamic Financial Services Board - IG Implementation Guidance - IIP International investment position - IMF International Monetary Fund - IPSGS Insurance, pension, and standardized guarantee schemes - IRA Individual retirement account - ISIN International Securities Identification Number - IT Information technology - LIBOR London interbank offered rate - LICs Low-income countries - MBB Mortgage-backed bond - MCM Market capitalization method - MFI Monetary financial institution - MFS Guide Monetary and Financial Statistics Compilation Guide - MFSM Monetary and Financial Statistics Manual 2000 - MMFs Money market funds - MT Managed trust - NAV Net asset value - NCB National central bank - NFA Net foreign assets - NFC Nonfinancial corporation - NPI Nonprofit institution - NPISH Nonprofit institutions serving household - NPL Nonperforming loan - OCVA Other changes in the volume of assets and liabilities - ODC Other depository corporation - ODCS Other depository corporations survey - OFC Other financial corporation - OFCS Other financial corporations survey - OIN Other items (net) - OS Opening stock - OTC Over-the-counter - PEF Private equity fund - PFIs Private finance initiatives - PLL Precautionary and Liquidity Line - PLS Profit and loss sharing - PNFC Public nonfinancial corporation - PPP Public-private partnership - PRGF Poverty Reduction and Growth Facility - PRGT Poverty Reduction and Growth Trust - PSA Public Securities Association - PSIA Profit sharing investment accounts - PVA Present-value approach - REIT Real estate investment trust - RPF Reserve position in the Fund - RTP Reserve tranche position in the IMF - SBA Stand-By Arrangement - s-b-s security-by-security - SDDS Special Data Dissemination Standard - SDR Special Drawing Rights - SHS Security holding statistics - SIC Standards Interpretations Committee - SIFMA Securities Industry and Financial Markets Association - SNA System of National Accounts - SPE Special purpose entity - SRF Standardized report form - SSF Social security fund - STA Statistics Department - SWF Sovereign wealth fund - UFC Use of Fund credit - VC Valuation changes *Monetary and Financial Statistics Manual and Compilation Guide — Preface. International Monetary Fund* ### Chapter 3, for monetary statistics purposes the insti- ### mfsmcg-final - Chapter 3, for monetary statistics purposes the insti- ### Structure and organization of the Manual - The Manual consists of eight chapters and three appendices (1.17). - Chapters with notable content and ancillary material: - Chapter 2: scope and uses of monetary and financial statistics; schematic presentation of the compilation process integrating FCs sector institutional units with source data; analytical surveys generated from sectoral balance sheets (1.18). - Chapter 3: deals with institutional units and their allocation to institutional sectors; follows concepts and definitions of the 2008 SNA, BPM6, and GFSM 2014; provides examples of borderline cases for classifying resident and nonresident units (1.21). - Chapter 4: detailed description and classification of financial assets and liabilities consistent with the 2008 SNA; guidance on (1) monetary gold and SDRs, (2) currency and deposits, (3) debt securities, (4) loans, (5) equity and investment fund shares, (6) IPSGS, (7) financial derivatives and ESOs, and (8) other accounts receivable/payable (1.23). - Chapter 5: concepts of stocks and flows, accounting rules for FCs institutional units, integrated framework of stocks-and-flows data; compilation of flows, transactions, revaluations, and other changes in the volume of assets (OCVA); accrual basis recommended; valuations based on market prices or market-price equivalents (1.27–1.29). - Chapter 6: concepts of money, liquidity, credit, and debt; definition of broad money; distinction between money issuers, money holders, and money neutral sectors; framework for liquidity aggregates (1.32–1.34). - Chapter 7: compilation and presentation framework for monetary statistics; sectoral balance sheets and main outputs (analytical surveys: DCS and FCS); source data, reporting requirements, adjustments and validation tests; dissemination at national level and reporting to the IMF (1.35–1.36). - Chapter 8: framework for financial statistics; two-dimensional and three-dimensional financial statistics on a from-whom-to-whom basis; main data sources and treatment of statistical discrepancies (1.38). - Annexes and appendices: - Chapter 3 contains three annexes: (1) “Examples of Debt Securities Issued through Securitization,” (2) “Accounts with the IMF,” and (3) “Islamic Financial Institutions and Instruments” (1.26). - Chapter 5 has four annexes on (1) estimation of transactions and valuation changes from exchange rate movements; (2) valuation and numerical examples for specific debt securities; (3) valuation and recording of financial derivatives and a numerical example; and (4) settlement date and transaction date accounting (1.31). - Chapter 6 contains six annexes on: (1) currency-union currency; (2) dollarized economies and co-circulation; (3) reserve requirements; (4) seasonal adjustment of economic time series; (5) holding sectors of debt securities issued by FCs; and (6) divisia money (1.34). - Chapter 7 contains three annexes: (1) “Other Changes in the Volume of Assets,” (2) “Consolidation Adjustments,” and (3) “Supplementary Data” (1.37). - Appendix I: relationship between monetary and financial statistics and government finance statistics and external sector statistics; Appendix II: illustrative sectoral balance sheets/SRFs and guidelines for completion; Appendix III: the FCSs and monetary authorities accounts (1.39). ### Institutional sectoring and classification changes - For monetary statistics purposes, the FCs sector subsectors are combined into only three subsectors: (1) central bank; (2) ODCs, comprising deposit-taking corporations except the central bank [MS] and MMFs; and (3) OFCs [MS], comprising all remaining subsectors of the FCs sector (1.22). - Resident nonfinancial corporations (NFCs) are split into only two subsectors: public nonfinancial corporations (PNFCs) and other NFCs, rather than three subsectors used in the 2008 SNA (PNFCs, national private NFCs, and foreign controlled NFCs) (1.22). - State government and local government within general government are combined into one subsector; households and nonprofit institutions serving households (NPISHs) are combined into one sector for monetary and financial statistics (1.22). ### Key methodological revisions and treatment of instruments - Major revisions to sectoral balance sheets/SRFs to implement methodological changes (1.16): - (1) Inclusion of a separate line for SDR allocations on the liability side of the central bank sectoral balance sheet. - (2) Reclassification of the IMF No. 1 Account, IMF No. 2 Account, and IMF Securities Account from deposits denominated in domestic currency to deposits denominated in foreign currency. - (3) Introduction of separate lines for MMF and non-MMF investment fund shares/units on the asset side of sectoral balance sheets and separate subcategories for (1) MMF shares, (2) non-MMF investment fund shares, and (3) equity (1.16, 1.25). - (4) Introduction of separate lines for MMF (in the ODCs sectoral balance sheet) and non-MMF investment fund (in the OFCs sectoral balance sheet) shares/units on the liability side with a breakdown by counterpart sector. - (5) More detailed memorandum items identifying assets and liabilities with nonresident FCs, interbank positions with affiliated nonresident FCs, debt securities and loans with a maturity of one year or less, and loans and deposits of households (introductory material). - Currency denomination treatment updated to follow BPM6: - Financial instruments with principal and interest indexed to a foreign currency are to be treated as if denominated in foreign currency; the Manual defers to this BPM6 approach (1.14). - Classification and disaggregation guidance: - Currency and deposits are disaggregated into (1) currency, (2) transferable deposits, and (3) other deposits (1.23). - Deposits and debt securities on the liability side are divided into included in broad money and excluded from broad money for monetary statistics purposes (1.24). - Equity and investment fund shares are disaggregated into separate subcategories for MMF shares, non-MMF investment fund shares, and equity (1.25). ### Accounting, valuation, and reporting principles - Recording basis and valuation: - The Manual recommends using the accrual basis of recording (flows recorded at the time economic value is created, transformed, exchanged, transferred, or extinguished) (1.29). - Valuations of stocks and flows should be based on market prices or market-price equivalents; where market prices are not available or assets are infrequently traded, market-equivalent values should be estimated (1.29). - Gross vs net reporting: - General principle: data should be reported on a gross basis; reporting on a net basis may be needed only due to lack of availability of gross data. - Underlying data should be reported aggregated across institutional units within a sector or subsector; data should be disseminated on a consolidated basis eliminating intra-group positions; for analytical purposes, positions with nonresidents and central government are presented on a net basis (1.30). - Stocks and flows components: - Flows comprise the sum of one or more of: (1) transactions; (2) revaluations (holding gains and losses); and (3) other changes in the volume of assets (OCVA) (2.5). - References to OCVA also apply to liabilities (footnote in 1.29/2). - Accounting rules covered in Chapter 5 include: (1) time of recording; (2) treatment of transaction costs and financial services fees; (3) valuations of financial stocks and flows; and (4) aggregation, netting, and consolidation (1.28). ### Money, liquidity, credit, and analytical outputs - Definitions and frameworks: - The Manual provides a definition of broad money and introduces the concepts of money issuing, money holding, and money neutral sectors; guidance is intended to help compilers tailor broad money scope to their economy under the Manual’s principles (1.15, 1.32). - Aggregates of money, liquidity, credit, and debt share dimensions: (1) financial instruments included; (2) issuing sectors; and (3) holding sectors (1.33). - Analytical surveys and main outputs: - Depository corporations survey (DCS): consolidated data for all depository corporations (DCs), presenting their claims on other sectors and on nonresidents—the counterpart sources of broad money (1.35). - Financial corporations survey (FCS): consolidated data for all institutional units within the FC sector and provides the broadest coverage of domestic credit supplied by FCs (1.35). *Monetary and Financial Statistics Manual and Compilation Guide (the Manual).* ### 2.7 Monetary statistics cover the stocks and flows of ### 2.7 Monetary statistics cover the stocks and flows of the assets and liabilities of the resident FCs sector ### Scope and core definitions - Monetary statistics record stock and flow data for the assets and liabilities of the resident financial corporations (FCs) sector (the exception is monetary gold, gold bullion held by monetary authorities as a reserve asset, which does not have a counterpart liability and is treated as a financial asset by convention). - Monetary statistics are organized in two hierarchical frameworks: - Sectoral balance sheets (by category of financial instrument, by currency, and by counterpart institutional sector). - Analytical surveys (rearranged sectoral balance sheet data presenting assets as FCs’ claims on resident institutional sectors and nonresidents, and liabilities ordered by liquidity). - The analytical surveys comprise: - Central bank survey (CBS). - Other depository corporations survey (ODCS). - Other financial corporations survey (OFCS). - Depository corporations survey (DCS) consolidates the CBS and the ODCS. - Financial corporations survey (FCS) consolidates the DCS and the OFCS and contains data for the entire FCs sector. ### Compilation, frequency, and primary analytical uses - Most countries compile the DCS on a monthly basis and disseminate it within one or two months after the end of the reference period. - For monetary policy purposes, the primary focus is consolidated data for the depository corporations (DCs) subsector, presented in the CBS, the ODCS, and the DCS: - The CBS contains data on all components of the monetary base (central bank liabilities that support the expansion of broad money and credit). - The DCS contains data on all DCs’ liabilities included in broad money. - The balance sheet identity in the DCS links broad money supply with DCs’ claims on nonresidents and resident sectors; these data are used for monetary policy formulation and broader macroeconomic policy. - For broader macroeconomic policy and analysis, emphasis extends to the OFCs subsector and the FCS (the broadest set of monetary statistics by institutional coverage), useful for analyzing FCs’ claims on other sectors and nonresidents and for presenting liquidity aggregates issued by FCs. ### Relationship to financial statistics and the 2008 SNA - Financial statistics extend coverage to all sectors of the economy and nonresidents, covering stocks and flows of assets and liabilities between sectors and nonresidents; presentation formats include flow-of-funds, balance-sheet approach matrix, and financial sectoral accounts. - Financial statistics provide data for compiling the financial account and balance sheets of the 2008 SNA; compilers of monetary statistics and national accounts are advised to cooperate to gain efficiencies and promote integration. - The overarching framework for monetary and financial statistics is the 2008 SNA; consistency is maintained in residence, sectoring, classification, recording and valuation rules, and aggregation and consolidation, with acknowledged exceptions (provisions, valuation of equity liabilities, and coverage of deposit-taking corporations except the central bank). ### Institutional sectoring, residence, and key sectoral definitions - Residence is defined identically to the 2008 SNA and BPM6, based on economic territory and center of predominant economic interest (residence requires a location within the economic territory and engagement in economic activities and transactions for at least one year). - Institutional sectoring groups units with similar objectives, functions, and behavior. The 2008 SNA groups resident units into: (1) nonfinancial corporations (NFCs), (2) FCs, (3) general government, (4) households, and (5) nonprofit institutions serving households (NPISHs). Monetary statistics aggregate households and NPISHs. - In the 2008 SNA the FCs sector contains nine subsectors. For monetary statistics: - The FCs sector is divided into three subsectors: central bank, other depository corporations (ODCs), and other financial corporations (OFCs) by combining certain 2008 SNA subsectors. - ODCs combine deposit-taking corporations except the central bank and money market funds (MMFs). - OFCs combines the 2008 SNA subsectors other than central bank, deposit-taking corporations except the central bank, and MMFs. - The DCs subsector consists of the central bank and ODCs. - NFCs sector treatment in monetary statistics: - NFCs are divided into two subsectors: public NFCs (PNFCs) and other NFCs (combining national private and foreign-controlled NFCs), whereas the 2008 SNA splits NFCs into three subsectors. ### Key differences with the 2008 SNA (selected) - Offshore banks: Offshore banks that do not issue liabilities included in broad money are classified within OFCs [MS]; in the 2008 SNA all offshore banks are classified as deposit-taking corporations except the central bank. - Interbank positions: Interbank positions are identified fully by instrument categories (except equity liability); when uncertainty exists between a loan and a deposit, record under Other deposits. Memorandum items separately identify claims on and liabilities to MMFs to permit compilation of interbank positions as in the 2008 SNA. - Equity liability (excluding investment fund shares): In monetary statistics equity liability of FCs is disaggregated into five components and is valued at book value; the 2008 SNA values equity liability at market value (or uses own funds at book value for unlisted equity). Monetary statistics record market value of equity liabilities and holding counterpart sectors as memorandum items to allow reconciliation. - Provisions for losses on assets: Monetary statistics treat provisions for losses on assets as liabilities classified under Other accounts payable [MS], with provisions recorded as OCVA reducing equity. The 2008 SNA treats provisions as internal bookkeeping entries not included except for expected losses on NPLs (which appear as memorandum items). - Net worth: The net worth concept does not appear in monetary statistics, where equity liability is valued at book value; the 2008 SNA defines net worth. In both frameworks, assets less liabilities (including equity) equal zero, with reconciliation illustrated in Figure 2.2. *Monetary and Financial Statistics Manual and Compilation Guide (excerpt).* ### 2.29 The 2008 SNA (paragraphs 4.129–4.130) and ### 2.29 The 2008 SNA (paragraphs 4.129–4.130) and ### Subsectoring of General Government - Two subsectoring options are offered by the 2008 SNA (paragraphs 4.129–4.130) and the GFSM 2014 (paragraph 2.78): - Option 1: (1) central government, (2) state government, (3) local government, and (4) social security funds. - Option 2: merge social security funds with their appropriate level of government. - Recommendation for monetary statistics: - Data on social security funds should be merged with the level of government at which they operate. - State and local government are aggregated into a single subsector of the general government sector in monetary and financial statistics. ### Classification of Financial Assets and Liabilities - High-level classification is fully consistent with the 2008 SNA; monetary statistics provide more detailed disaggregation: - Currency and deposits split into subcategories: currency, transferable deposits, and other deposits. - Deposits and debt securities on the liability side are classified by: - included in broad money vs excluded from broad money; and - included in monetary base vs excluded from monetary base (for central bank liabilities). - Equity and investment fund shares disaggregated into equity, MMF shares, and non-MMF investment fund shares. - Table 2.2—Classification and Valuation in Monetary Statistics (selected instrument valuation rules): - Monetary gold (central bank): Market value - Special Drawing Rights (central bank): Market value - Currency: Face value (in currency of denomination) - Deposits: Nominal value (in currency of denomination) - Debt securities: Market or fair value - Loans: Nominal value (in currency of denomination) - Equity and investment fund shares: Market or fair value (assets and investment fund share liabilities); book value (liability) - Insurance, pension, and standardized guarantee schemes: Market or fair value - Financial derivatives and employee stock options: Market or fair value - Other accounts receivable/payable: Nominal value - All foreign-currency-denominated assets and liabilities are converted into domestic currency units at market exchange rates (see paragraph 2.39). ### Equity Liabilities [MS] and Components - Monetary statistics further disaggregate equity liabilities of financial corporations (FCs) (except MMF and non-MMF investment fund shares) into five components: - (1) funds contributed by owners - (2) retained earnings - (3) current year result - (4) general and special reserves - (5) valuation adjustment - Labeling and purpose: - These equity components are labeled Equity liability [MS] to recognize the difference from the 2008 SNA concept. - The five components support the balance sheet identity in sectoral balance sheets and aid analysis of FCs’ equity structure. - Counterpart sectors holding equity liabilities of FCs appear only as memorandum items in monetary statistics. - MMF and non-MMF investment fund shares are disaggregated on the liability side by counterpart sectors. ### Treatment of Provisions for Losses on Assets - In monetary statistics: - Provisions for losses on assets that are internal to the reporting institutional unit are treated as if they are liabilities and classified under Other accounts payable [MS]. - Underlying assets are recorded gross of provisions. - Equity liability [MS] is reduced whenever provisions are made because provisions are charged to losses. - Provisions are a precursor of a possible loan (or other financial asset) write-off and, similar to loan write-offs, are recorded as Other changes in volume of assets and liabilities (OCVA). - Reconciliation with the 2008 SNA: - Provisions for losses on assets are treated as bookkeeping entries internal to the reporting institutional unit and are not included in the 2008 SNA, except expected losses on nonperforming loans (NPLs), which appear as memorandum items in the balance sheets (2008 SNA, paragraphs 3.41 and 13.66–13.68). ### Valuation Principles and Deviations from the 2008 SNA - General principle: - Valuations of stocks and flows should be based on market prices or market-price equivalents; market-equivalent values should be estimated for assets not traded or infrequently traded. - Specific valuation practices in monetary statistics: - Deposits and loans: valued at nominal value (outstanding amount debtor owes creditor, including accrued but not yet paid interest); same applies to trade credit and advances (paragraph 2.34). - Equity and investment fund shares on the asset side, and investment fund shares on the liability side: recommended to be valued at market prices. - Equity on the liability side of FCs’ sectoral balance sheets (Equity liability [MS]): valued at book value (value recorded in an FC’s business accounts). - Consequences of equity-liability valuation at book value: - a. Flows between Equity liability [MS] and assets, and between Equity liability [MS] and other liabilities, are classified as transactions, revaluations, and OCVA depending on their nature to ensure Equity liability [MS] balances assets and non-equity liabilities—such flows do not appear in the 2008 SNA. - b. The 2008 SNA concept of net worth (value of assets less value of all outstanding liabilities including equity) is embedded in Equity liability [MS]. In both frameworks, the value of all assets less value of all outstanding liabilities (including equity) and net worth (in the 2008 SNA only) equals zero. - Rationale and additional guidance: - Valuation of Equity liability [MS] at book value is recommended to maintain the balance sheet identity of reported data and to support analysis of the FC balance sheet. - Equity liability [MS] can be assimilated to the SNA calculation of shareholders’ equity called own funds (see 2008 SNA, paragraph 13.88). - Data on the market value of equity liability are recommended to be compiled as memorandum items in sectoral balance sheets. - MMF shares or units: presented at market value; MMFs invest in short-term, low-risk assets making MMF shares close substitutes for deposits. Non-MMF investment fund shares or units are also recorded at market value in the sectoral balance sheet. ### Reconciliation between Monetary Statistics and the 2008 SNA - Differences due to provisions and Equity liability [MS] can be reconciled: - Provided same valuation for all assets and liabilities except equity liability, the sum of SNA net worth and market-valued equity (own funds) equals the sum of book-valued equity plus all provisions for losses on assets recorded in monetary statistics (illustrated in Figure 2.2). ### Unit of Account and Exchange Rate Conversion - Standard unit of account: domestic currency. - Conversion rules (paragraph 2.39): - Foreign-currency-denominated assets and liabilities must be converted into domestic currency units using the market exchange rate prevailing on the balance sheet date. - For transactions in foreign-currency-denominated assets and liabilities, use the market exchange rate prevailing on the transaction date. - Use the midpoint between the buying and selling exchange rates as the prevailing market exchange rate when converting both flow and stock data. ### Time of Recording - Recording principle (consistent with 2008 SNA, paragraph 3.172): - Record transactions on a change-of-ownership basis (accrual approach). - Flows and changes in corresponding stocks are recorded when economic value is created, transformed, exchanged, transferred, or extinguished, not at time of payment. - Financial asset transactions are recorded on the trade date rather than the settlement date. ### Aggregation, Consolidation, and Netting - Aggregation: summation of stock or flow data across institutional units within a sector or subsector or across assets/liabilities within an instrument category; reporting should be organized and reported on an aggregated basis. - Consolidation: elimination of stocks and flows occurring between institutional units grouped together and presented as a single unit; monetary statistics data are consolidated into analytical surveys of the FCs’ sector and subsectors, while financial statistics are presented on an unconsolidated basis. - Gross recording principle: - Data should be recorded and compiled on a gross basis (see paragraphs 5.61–5.63). - Claims by an institutional unit on other institutional units should not be netted against liabilities to those same units or sectors, except in special circumstances or where data availability necessitates (e.g., derivative contracts settled on a net basis). - Acquisitions and disposals of a specific category of financial instruments are presented on a net basis. ### Relationship with International Financial Reporting Standards (IFRSs) - Sources and adaptation: - Basic source data for monetary statistics are FCs’ accounting and regulatory records (balance sheets, subsidiary ledgers) which reflect national/international accounting, supervisory, and taxation frameworks; compilers must adapt accounting records for monetary statistics using the structures of sectoral balance sheets and analytical surveys. - IFRSs overview (Box 2.1 summary): - IFRSs are issued by the International Accounting Standards Board (IASB) and include the Conceptual Framework for Financial Reporting, individual IFRSs, IASs, IFRICs, and SICs. - The Manual refers to IFRSs to illustrate the relationship between FCs’ accounting data and source data for monetary and financial statistics; the IFRSs referenced are those available for application on January 1, 2015. - Similarities and differences: - Common features: double-entry accounting, accrual principle, market or fair valuation as a basic principle, and treatment of institutional units as going concerns. - Main differences arise from objectives: - IFRSs focus on financial statements of a reporting entity for investors, lenders, and other creditors. - Monetary and financial statistics focus on stocks and flows between all sectors and nonresidents, with emphasis on macroeconomic aggregates (broad money, domestic credit, liquidity) and the relationship between the FCs sector and other sectors. - Practical implication: - Reporters and compilers should be familiar with both IFRSs and monetary statistics methodology to convert IFRS-based accounts into source data suitable for monetary statistics. *Monetary and Financial Statistics Manual and Compilation Guide (International Monetary Fund).* ### 2.50 In the IFRSs, the original entry of an asset or ### mfsmcg-final - 2.50 In the IFRSs, the original entry of an asset or ### Key differences between IFRSs and the Manual (measurement, recognition, terminology) - Initial recognition (IFRSs) = original entry of an asset or liability into balance sheet accounts; revaluation (monetary and financial statistics) = subsequent measurement (IFRSs). - Equity treatment: - IFRSs: equity of an enterprise is classified separately from liabilities. - Monetary and financial statistics: the equity account is designated as Equity liability (consistent with the 2008 SNA). - Provisions/allowances: - Manual: provisions for losses on assets (Chapters 4 and 5). - IFRSs: allowances for losses on impaired assets. - Fair value: - Manual: fair value = market-equivalent value; estimated when market price unavailable. - IFRSs: fair value encompasses market values from price quotations in active markets and estimated fair values in absence of market price quotations. ### Valuation and measurement specifics - Nominal value vs amortized cost: - Monetary statistics: several categories recorded at nominal value (concept not in IFRSs). - IFRSs counterpart: valuation at amortized cost (amount advanced originally plus all accrued but not paid interest, less any repayment of principal, less any allowance for impairment or non-collectability) — not fully consistent with nominal value because amortized cost reduces asset value by allowance for impairment or non-collectability. - IFRSs classifications and measurement depend on enterprise motivation (trading vs hold-to-maturity): - Held-for-trading securities = measured at fair value through profit and loss. - Held-to-maturity securities = measured at amortized cost. ### Required adjustments to IFRS-based source data for monetary and financial statistics (paragraph 2.57) - a. Debt securities valued at amortized cost need to be restated at market or fair value. - The market value replaces amortized cost in recording outstanding amount; contra-entry equal to (fair value − amortized cost) is recorded in Equity liability [MS] as a valuation adjustment (positive for a gain, negative for a loss). - b. Holdings of equity shares valued at amortized cost need to be restated at market or fair value for monetary statistics. - No adjustment needed for liabilities in the form of equity (measured at book value). - For financial statistics, adjustment to market or fair value applies to both assets and liabilities in the form of equity. - c. Loans valued at market or fair value under IFRSs need to be restated at nominal value. - A contra-entry (difference between nominal value and fair value) is recorded in Equity liability [MS] as a valuation adjustment. ### Revaluation recording and contra-entries (paragraph 2.58) - IFRSs: gains/losses from revaluations recorded either in profit-or-loss accounts (Current year result) or directly in equity (Valuation adjustment). - Manual methodology: revaluations for each asset/liability recorded separately in the revaluation account; contra-entry for gain/loss from revaluation recorded in Equity liability [MS], because both Current year result and Valuation adjustment are components of Equity liability [MS]. ### Accruals and classification adjustments (paragraph 2.59) - IFRSs and most national standards follow accrual accounting, but many do not require accrued interest to be included in outstanding amounts of underlying financial assets/liabilities. - For monetary and financial statistics, accrued interest recorded in Other accounts receivable/payable must be reclassified as part of the outstanding amount of the underlying financial asset or liability. ### Sectoring and counterpart disaggregation (paragraphs 2.53–2.54) - Monetary and financial statistics require disaggregation of stocks and flows for FCs by counterpart sector/subsector: central bank, ODCs, OFCs, central government, state and local government, PNFCs, other NFCs, households and NPISHs, and nonresidents. - IFRSs do not specify sectoral disaggregation. - Compilers may need more detailed information from FCs; general and subsidiary ledgers usually contain account hierarchies corresponding to sectoral balance sheet disaggregation. ### Presentation, classification, and valuation of financial instruments (paragraphs 2.55–2.56) - Monetary statistics: standardized presentation of assets and liabilities. - IFRSs: not prescriptive on presentation; possible presentations include order of liquidity, expected date of realization, and current vs non-current liabilities. - Valuation methodologies under IFRSs depend on classification by enterprise motivation (see held-for-trading vs held-to-maturity above). ### Time of recording (paragraphs 2.60–2.61) - Monetary and financial statistics: debtor and creditor records should agree in amount and time of recording; transactions in financial assets are recorded on the trade date (time of change in economic ownership) rather than settlement date. - IFRSs: an entity can record transactions on trade dates or settlement dates (IAS 39.38 and IFRS 9, paragraph 3.1.2). - For compilation, adjust IFRS-recorded settlement-date transactions to a transaction-date basis when settlement occurs after ownership change (creates accounts receivable/payable). ### Loans: gross versus net presentation (paragraphs 2.62–2.63) - IFRSs: loan asset values directly adjusted for impairment or presented as carrying amount = loans (gross) less allowances for loan losses. - Monetary statistics: loans presented on a gross basis at nominal value, with provisions for losses on assets classified as liabilities (see paragraph 2.32); expected loan losses included as memorandum items to sectoral balance sheets so realizable values of loans can be calculated. ### Periodicity and timeliness (paragraphs 2.64–2.69) - IFRSs require financial statements at least annually (IAS 1.36) and encourage interim reports at least as of the end of the first half of the financial year and not later than 60 days after interim period (IAS 34.1). - IFRSs specify timely preparation of annual financial statements as within six months after the reference date/period. - Typical source-data reporting for monetary statistics: - DCs: monthly reporting, within four to six weeks after reference month. - OFCs: monthly or quarterly reporting; time-lag between one and four months. - Manual recommendations for periodicity and timeliness (paragraph 2.66): - a. Reporting of source data and compilation of the CBS, ODCS, and DCS on a monthly basis with a time lag of one–two months. - b. Reporting of source data and compilation of the OFCS on a monthly or quarterly basis with a time lag of one–three months or three–four months, respectively. - c. Compilation of the FCS on a monthly or quarterly basis, depending on OFCS periodicity, with a time lag of one–three months or three–four months, respectively. - Many countries compile central bank and ODC balance sheets monthly; OFC compilation frequency varies by country. - Compilation of financial statistics quarterly/annually depends on national accounts periodicity; quarterly compilation applicable where quarterly current and capital account data exist or migration is underway. ### Institutional units and sectoring (Chapter 3 introduction and unit definition) - Chapter 3 purpose: identify institutional units and group into institutional sectors based on economic objectives, functions, and behavior; focus on holders and issuers of financial assets for monetary and financial statistics. - Framework follows 2008 SNA, BPM6, and GFSM 2014. - Institutional unit definition: - An economic entity capable of owning assets, incurring liabilities, and engaging in economic activities and transactions with other entities. - Four main attributes of institutional units: - (1) entitlement to own goods or assets in own right; - (2) ability to take economic decisions and engage in activities; - (3) ability to incur liabilities on own behalf; - (4) they either have a complete set of accounts including a balance sheet or it is possible and meaningful to compile such accounts. - Two main types of units that may qualify: households (persons or groups sharing accommodation and pooling income/wealth) and legal/social entities (corporations and quasi-corporations). - Corporations in macroeconomic statistics: emphasis on being market producers (producing goods/services for the market at economically significant prices) and potential to be a source of profit or financial gain to owners. - Quasi-corporations: unincorporated enterprises functioning like corporations; treated as separate institutional units when a full set of accounts can be compiled and business-related assets/liabilities are separable from owners. *Monetary and Financial Statistics Manual and Compilation Guide* ### 3.10 Production activities undertaken by house- ### Institutional Units and Sectors ### Household production activities - Production activities undertaken by households—such as production and selling of goods and services—are treated as an integral part of the households unless legal or social entities are created separately from the households, such as those that satisfy the criteria to be considered quasi-corporations. ### Legal or social entities: definition and categories - A legal or social entity is an institutional unit whose existence is recognized by law or society independently of the persons or other entities that may own or control it; such units engage in economic activities and transactions in their own right and are responsible and accountable for the economic decisions or actions they take. - Three categories of legal or social entities constituting institutional units are identified: (1) corporations, (2) nonprofit institutions (NPIs), and (3) government units. - The status of an institutional unit cannot always be inferred from its name; classification requires examination of economic objectives, functions, and behavior. ### Corporations: definition and types - Corporations are entities capable of generating a profit or other financial gain for their owners, recognized by law as separate legal entities from their owners, and set up for purposes of engaging in market production. - In macroeconomic statistics, "corporation" covers legally constituted corporations and also includes cooperatives, limited liability partnerships, notional resident units, and quasi-corporations; classification hinges on economic nature rather than strictly legal status. - Types and special forms: - Legally constituted corporations: legal entities created for producing goods and services. - Quasi-corporations: three main kinds are: (1) unincorporated enterprises owned by government units engaged in market production and operated similar to publicly owned corporations; (2) unincorporated enterprises, including unincorporated partnerships or trusts, owned by households and operated as if privately owned corporations; and (3) unincorporated enterprises that belong to institutional units resident abroad, referred to as “branches.” - Head offices: units exercising managerial control over subsidiaries; allocated to the nonfinancial corporations (NFCs) sector unless most subsidiaries are financial corporations (FCs), in which case treated as financial auxiliaries. - Holding companies: hold assets of subsidiary corporations but do not undertake management activities; classified as captive financial institutions and always allocated to the FCs sector. - Special purpose entities (SPEs): typically created to carry out a single, well-defined specific activity (raise funds in open markets for parent, hold/manage wealth for individuals or families, issue debt securities on behalf of related companies or government units); often have no employees or very little nonfinancial assets; residence is determined by territory of incorporation or registration. - Artificial subsidiaries: legal entities that cannot act independently and are passive holders of assets and liabilities; generally do not satisfy institutional unit criteria and are treated as integral parts of parents unless resident in a different economy. ### Ownership and control of corporations - Control is the ability to determine the general corporate policy of the corporation. - An institutional unit owning more than a half of the voting shares, or equity, of a corporation is able to control its policy and operations; effective control may also be exercised with less than 50 percent ownership in exceptional cases. - A corporation is a subsidiary when another corporation can exercise control by more than half of shareholders’ voting power or the right to appoint or remove a majority of directors. - A corporation is an associate when another corporation can exercise a significant degree of influence but not control. - Groups of corporations (conglomerates) may form with a parent corporation controlling several subsidiaries; each individual corporation should generally be treated as a separate institutional unit even when information on the group as a whole may be desirable. ### Government control and nonresident control - A corporation is a public corporation if a government unit, another public corporation, or some combination controls the entity. - Important indicators for determining government control include: (1) ownership of the majority of the voting interest; (2) control of the board or other governing body; (3) control of appointment and removal of key personnel; (4) control of key committees; (5) golden shares and options; (6) regulation and control; (7) control by a dominant public sector customer or group of public sector customers; and (8) control attached to borrowing from the government. - In general, a nonresident unit controls a resident corporation if the nonresident unit owns more than 50 percent of the equity of the corporation. Branches of nonresident corporations are always under foreign control. Control may also be possible with a holding of less than half the equity if the nonresident unit can exercise powers indicating possible control. ### SPEs, captive financial institutions, and ancillary units - SPEs that raise funds in open markets to be used by their parent corporation are examples of captive financial institutions. - Other units treated as captive financial institutions include holding companies whose principal activity is to own the group and units used for holding and managing wealth for individuals or families and issuing debt securities on behalf of related companies. - Artificial subsidiaries and units undertaking only ancillary activities generally do not satisfy the condition of being an institutional unit and are not treated as separate institutional units. - General government may set up units with characteristics of artificial subsidiaries; if resident, such units are treated as part of the general government subsector that established them rather than as separate units; if nonresident, they are treated as separate institutional units resident where they are established, with fiscal activities reflected in the accounts of the government that controls them. ### Nonprofit institutions (NPIs): purposes and sector classification - NPIs are legal or social entities created to produce or distribute goods and services but that cannot be a source of income, profit, or other financial gain for the institutional units that establish, control, or finance them. - Motives for establishing NPIs include: (1) to provide services for benefit of households or corporations that control or finance them; (2) to provide goods or services to persons in need for charitable, philanthropic, or welfare reasons; (3) to provide health or education services for a fee, but not for profit; and (4) to promote interests of pressure groups in business or politics. - Distinction used to determine sector classification: NPIs engaged in market production versus NPIs engaged in nonmarket production. - NPIs engaged in market production: - Market producers if they provide services for which they charge economically significant prices (prices that have a significant effect on supply and demand). - Market NPIs are classified as corporations; examples include schools, colleges, universities, clinics, or hospitals constituted as NPIs that charge fees based on production costs and economically significant prices. - NPIs that restrict activities to serving a subset of market producers (e.g., chambers of commerce, agricultural/manufacturing/trade associations, employers’ organizations, research and testing laboratories) and are financed by contributions/subscriptions from the enterprises they serve are treated as market producers (corporations). - NPIs engaged in nonmarket production: - The majority of NPIs in most countries are nonmarket producers that provide most output free or at prices not economically significant. - Nonmarket NPIs fall into two main groups: (1) NPIs controlled by government; and (2) NPIs that are not (NPISHs: NPIs serving households), which constitute a separate sector. - Nonmarket NPIs controlled by government are included in the general government sector. - NPIs are considered controlled by government when: (1) government has the right to appoint officers managing the NPI; (2) other provisions enable government to determine significant aspects of policy or program; (3) a contractual agreement allows government to determine key aspects of general policy; (4) an NPI is financed mainly by government; or (5) government is exposed to all or a large proportion of financial risks associated with the NPI’s activities. - Certain entities legally constituted as corporations by government units but with characteristics of nonmarket NPIs controlled and mainly financed by government should be treated as general government units regardless of names. ### Residence and economic territory - Residence of an institutional unit is the economic territory with which it has the strongest connection, expressed as its center of predominant economic interest; residence is not based on nationality of the account holder nor on currency of denomination of accounts. - An economic territory is any geographic area or jurisdiction for which statistics are required; the most commonly used concept is the area under the effective economic control of a single government and includes special zones. - Economic territory includes: (1) the land area; (2) airspace; (3) territorial waters, including areas over which jurisdiction is exercised over fishing rights and rights to fuel or minerals; (4) islands that belong to the territory in maritime territory; and (5) territorial enclaves in the rest of the world, such as embassies, consulates, military bases, scientific stations, information and immigration offices, aid agencies, and central bank representative offices with diplomatic status. - Economic territory combines physical location and legal jurisdiction so that corporations created under the law are part of that economy; the concepts of economic territory and residence ensure each institutional unit is a resident in one economic territory determined by its center of predominant economic interest, with exceptions for multi-territory enterprises. *Monetary and Financial Statistics Manual and Compilation Guide* ### 3.48 NPISHs consist of nonmarket NPIs that are not ### Institutional Units and Sectors ### NPISHs and Government units - NPISHs consist of nonmarket NPIs that are not controlled by government. They provide goods and services to households free or at prices that are not economically significant. - Government units are unique kinds of legal entities established by political processes that have legislative, judicial, or executive authority over other institutional units within a given area. - The principal economic functions of government units are to: - (1) assume responsibility for the provision of goods and services to the community or individual households primarily on a nonmarket basis; - (2) redistribute income and wealth by means of transfer payments; - (3) engage primarily in nonmarket production; and - (4) finance their activities primarily out of taxation or other compulsory transfers. - Government units may control unincorporated enterprises engaged in the production of market goods and services. If these enterprises are managed in a way similar to a corporation, with their own set of accounts, they are treated as quasi-corporations. - Unincorporated enterprises owned by a government unit that are not quasi-corporations remain an integral part of these units and so are included in the general government sector. ### Residence: concept and operational definition - The concept and coverage of residence for monetary and financial statistics are identical to those in the 2008 SNA and BPM6. - The delineation between resident and nonresident units facilitates the estimation of the external position of the FCs sector. - Residence requires that an institutional unit have a location, dwelling, place of production, or other premises in the economic territory on which or from which the unit engages and intends to continue engaging, either indefinitely or over a finite but long period of time, in economic activities and transactions on a significant scale. - Actual or intended location for one year or more is used as an operational definition. Although the choice of a specific period of time is somewhat arbitrary, it is adopted in BPM6 (see paragraph 4.114) to avoid uncertainty and facilitate international consistency. ### Resident units: households, corporations, and special cases - An institutional unit is considered a resident of an economy if it has already engaged in economic activities and transactions on a significant scale in the territory for one year or more, or if it intends to do so. - Households: - A household is a resident in the economic territory in which the household members maintain or intend to maintain a dwelling or succession of dwellings treated and used by members of the household as their principal dwelling. - The residence of individual persons is determined by that of the household of which they form part and not by their place of work. - All members of the same household have the same residence as the household itself, even though they may cross borders to work or otherwise spend periods of time abroad (see paragraphs 3.62–3.63). - Corporations and NPIs: - Corporations and NPIs usually may be expected to have a center of predominant economic interest in the economy in which they are legally constituted and registered. - An enterprise is resident in an economic territory when it is engaged in a significant amount of production of goods or services from a location in the territory, maintains at least one production establishment in the territory, and plans to operate it indefinitely or over a long period of time (usually one year or more). - Additional factors include maintenance of a set of accounts covering local productive activities and being subject to the income tax system in the economy in which it is located. - Unincorporated enterprises that are not quasi-corporations are not separate institutional units from their owners and, therefore, have the same residence as their owners. - When a nonresident unit has substantial operations over a significant period in an economic territory, but no separate legal entity for those operations, a branch may be identified as an institutional unit. - Ownership of immovable assets by nonresidents: - When a nonresident has ownership of immovable assets such as land, structures, or natural resources other than land, the assets are deemed to be owned by a notional resident institutional unit in the economy of location. - All land, structures, and natural resources other than land are, therefore, owned by residents. The legal owner is deemed to hold equivalent equity in the notional resident unit. - Special cases may require considering individuals or institutional units as residents of the territory and their accounts with FCs incorporated in the domestic assets and liabilities of those FCs. ### Cross-border and highly mobile workers; staff and locally recruited diplomatic staff - Cross-border workers: - Individuals who cross international borders to work remain residents of their home territories. - Seasonal workers who cross the border for particular periods (such as harvest or tourist season) are included as residents in home countries. - Residence is based on the principal dwelling, rather than the territory of employment. - If such workers engage in substantial and sustained economic activity abroad; earn income, consume, and maintain regular residence abroad; and return only briefly or infrequently to their original household, they cease to be considered a member of the household in their home territory and are no longer resident in the economy where the household is located. - Highly mobile individuals: - Individuals with close connections to two or more territories who do not have continuous actual or intended presence in any one territory for one year should be considered resident in the territory of the principal dwelling they maintain. - Staff of international organizations and technical assistance personnel: - International organizations are, by definition, resident in an economic territory of their own; employees of these organizations are residents of the local economies where they have their principal dwelling. - Technical assistance personnel on long-term (more than one year) assignment should be treated as residents of the countries where they work. - Employees of international organizations on long-term assignment in a country different from the location of the headquarters of the organization are residents of the country where they perform their duties. - If the assignment is shorter than one year, they are considered residents of the economy in which they reside on a longer-term basis. - Locally recruited staff of diplomatic representations continue to have their center of predominant economic interest in the country where they live and in which the embassy (or representation) is located. - Crew members of ships, aircrafts, oil rigs, space stations, or other similar equipment that operate outside a territory or across several territories continue to be residents of the economies where they have their principal dwelling and not of the economies in which they stop or layover but are not living. - Refugees: - The residence of refugees will change from their home territory to the territory of refuge if they have stayed or intend to stay in their place of refuge for one year or more, even if that residence is involuntary or transient, and its future status is unclear. ### General government, subsidiaries, construction, mobile operations, and offshore - General government includes territorial enclaves, such as embassies, consulates, military bases, scientific stations, information or immigration offices, aid agencies, and other enclaves of governments in host territories with diplomatic status. - These operations are usually not separate institutional units, and even if they were, they are residents of their home territory rather than the host territory where they are physically located. - An entity created by a government under the laws and jurisdiction of the host territory is a corporation resident in the host economy and not part of the general government sector in either economy. - Subsidiaries or branches of multinational conglomerates: - Subsidiaries of a multinational corporation should be treated as units separate from the parent company and are residents of the economy where they operate. - Branches of a multinational corporation should be treated as units separate from the parent company when resident in another economy. - Construction projects: - Construction companies operating in a foreign territory may be managed through a branch or local office in the economy where the project is undertaken. - A branch or local office may be treated as a quasi-corporation and resident of the territory where the project is located, particularly for large-scale projects with completion times of several years. - If the construction project will be finished in less than a year, the construction operations may not satisfy the conditions for recognition as a branch; consequently, the accounts of the local office should be recorded as accounts of nonresidents for the territory where the project is located. - Units operating mobile equipment: - The same principles of the residence of an enterprise must be applied to enterprises operating mobile equipment outside the economic territory where the enterprise is a resident. - If operations take place in international waters or airspace, the unit has a predominant center of economic interest where the operator maintains the base of its operations. - If operations take place in another economy outside of the home base and are substantial enough to meet the criteria to be classified as a branch, then the branch is considered a resident in the host economy. Otherwise, production is attributed to the home base of the operator. - Offshore enterprises, offshore banks, and offshore financial centers: - Special zones under government control with separate laws, such as free trade zones or offshore financial centers, are part of the economic territory under the control of the government and consequently the enterprises located there are treated as resident units of that economic territory. - Offshore units engaged in manufacturing processes (including assembly of components manufactured elsewhere) are residents of the economies in which the offshore enterprises are located, even if located in special zones exempted from customs duties or regulations (free trade zones). - Offshore banks that engage exclusively (or almost exclusively) in transactions with non-residents are still considered residents of the country where they are incorporated or registered. - Offshore financial centers are jurisdictions in which the majority of the financial transactions are entered into by FCs located therein and are on behalf of clients who reside outside the offshore financial center. Offshore financial centers should compile data for all corporations incorporated or registered in their jurisdictions. ### Pension funds, ancillaries, holding corporations, SPEs, NPIs, and CUCBs - Pension funds of international organizations: - Separately constituted pension funds of international organizations are not treated as international organizations, but regarded as FCs. - They are residents of the economic territory in which they are located or, lacking a physical presence, residents of the economy where they are incorporated or registered. - Ancillary corporations, holding corporations, and special purpose entities: - Domestic ancillaries are treated as an integral part of the parent corporation rather than as separate institutional units. - Ancillary corporations located in a country different from their parent corporations are treated as separate units and considered residents of the country in which they are legally established. - Holding corporations and SPEs constituted outside the country where their parent unit resides are treated as separate institutional units and considered residents of the economic territory where they are incorporated or registered even if they are bare trustees not bearing market or credit risk. - Nonprofit institutions (NPIs): - An NPI is a resident of the country under whose laws and regulations it was created and in which its existence as a legal or social entity is officially recognized and recorded. - When an NPI engages in charity or relief work on an international scale, the residence of any branches it may maintain in dispensing relief in individual territories should be specified. If an NPI maintains a branch or unit for one year or more in a particular country, that branch or unit should be considered a resident of that economy. - Currency union central banks (CUCBs): - A CUCB is a regional financial institution that acts as a central bank for the member countries of a currency union. The CUCB is an institutional unit in its own right, owning assets and liabilities on its own account. - The CUCB is nonresident of any currency union economy, but when compiling monetary statistics for the entire currency union, the CUCB is a resident institutional unit of the union. ### Multiterritory enterprises, nonresident units, and migrant workers - Multiterritory enterprises: - Some enterprises operate as a seamless operation over more than one economic territory with substantial activity in more than one territory but with no separate accounts and no separate branches identifiable. - Particular cases include binational (or multinational) public entities established to construct and operate hydroelectric projects on river borders, bridges, tunnels, or undersea cables that cross borders, as well as shipping lines, airlines, or pipelines. - If separate institutional units cannot be identified for each economy, it is necessary to prorate the total operations of the enterprise into the individual economic territories. The factor used for prorating should be based on available information that reflects the contributions to actual operations, such as equity shares, equal splits, wages, or tonnage. - Nonresident units: - Institutional units that have their center of predominant economic interest outside the economic territory are nonresidents. Their accounts are recorded as part of foreign assets or foreign liabilities of the resident FCs, irrespective of the nationality of the account holder and of the currency of denomination of the accounts. - Migrant workers: - Migrant workers that earn income, consume, and maintain their principal dwelling abroad for one year or more and who return only briefly or infrequently to their original households are residents of the economy where they work. - Even if individuals continue to be employed and paid by an enterprise that is resident in their home economy, those persons should be treated as residents of the host economy where they maintain their principal dwelling continuously for one year or more. - Accounts of migrant workers maintained in their country of origin should be reported as nonresident accounts and, therefore, as foreign liabilities of the depository corporations (DCs) subsector in their home country. Any loan granted to a migrant worker in his or her country of origin should be reported as a loan to a nonresident. - For DCs, it is often difficult to identify accounts of migrant workers as nonresident accounts because they are opened by providing a national identification and a national address. In countries with a substantial proportion of their population who live and work abroad, special instructions should be issued to DCs with a view to identifying the accounts of migrant workers. *Monetary and Financial Statistics Manual and Compilation Guide* ### 3.91 If the account opened by a migrant worker in ### Institutional Units and Sectors ### Residency rules for specific populations and entities - Migrant workers: If an account opened by a migrant worker in the home economy is a joint account with a resident of that economy, or if the account holder authorizes a resident of the home economy to withdraw funds from such an account, the account should be considered as belonging to a resident and should be reported under domestic liabilities. - Students abroad: - People who go abroad for full-time study generally continue to be resident in the economy in which they were resident prior to studying abroad, even though their course of study may exceed one year. - Accounts they open with FCs in the economy where they study should be reported as accounts of nonresidents. - If they develop an intention to continue their presence in the territory of study after completion of the studies, they should then be considered as residents in the host territory. - Medical patients: - People who go abroad for medical treatment maintain their predominant center of interest in the territory in which they were resident before treatment, even if they stay longer than one year. - These patients remain members of households in their home territories. - Foreign diplomatic representations: - Embassies and other diplomatic representations are enclaves of their governments in the host economy and part of the economic territory of the government they represent. - Their accounts in the financial system of the host economy are reported as accounts of nonresidents. - Employees (including household members) sent by a government to work in its diplomatic representations continue to have a center of predominant economic interest in their home country, irrespective of assignment length, and are residents of their home economy; their accounts in the host economy are classified as accounts of nonresidents. - Government entities resident abroad: - If a government uses an entity resident in another economic territory to carry out general government (fiscal) activities, that entity is not included as part of the general government in either its economy of residence or the economy of the government that uses the entity. - Such entities are not treated like embassies and other territorial enclaves if they are created and operate under the laws of the host economy. - Special imputations of transactions and positions between the government and the entity are adopted to ensure fiscal operations undertaken through nonresident entities are reflected in the transactions and positions of the government concerned. - Military personnel: - Military personnel stationed abroad in an enclave of their home country (a military base) or in peace-keeping missions, as well as the military base itself, continue to have their center of predominant economic interest in their home economy, irrespective of assignment length. - They and members of their household are considered nonresidents of the territory where they are serving. ### International organizations - Characteristics of international organizations: - Members are either national states or other international organizations whose members are national states. - They are established by formal political agreements that have the status of international treaties; their existence is recognized by law in their member countries. - Purposes include: - International financial institutions—conduct financial intermediation at an international level (channeling funds between lenders and borrowers in different economies). Examples include the IMF, World Bank Group, Bank for International Settlements (BIS), and regional development banks. - Other international organizations—provide nonmarket services of a collective nature for member states (peacekeeping, education, science, policy issues, research). - Residency and treatment: - The economic territory of an international organization consists of the territorial enclave(s) over which the organization has jurisdiction. - International organizations are not considered residents of any national economy and are treated as extra-territorial (nonresident) by the economies in which they are located or conduct affairs. - All accounts that these organizations have with the FCs are treated as nonresidents’ accounts. - Regional organizations are a type of international organization whose members are governments or monetary authorities of economies located in a specific region. ### Overview of institutional sectoring - Resident institutional units are grouped into five mutually exclusive sectors: - (1) FCs - (2) NFCs - (3) general government - (4) households - (5) NPISHs - Key points on sectoring: - Sectoring of resident institutional units is a key element in the compilation and presentation of monetary and financial statistics. - Sectoring should be aligned with the 2008 SNA and other macroeconomic datasets. - All resident institutional units are allocated to only one institutional sector. A unit engaged in activities belonging to more than one sector and not having separate accounts for each activity must be classified entirely in a single sector, based on the most prominent economic activity. - Dividing the total economy into sectors and subsectors enhances usefulness for economic analysis by grouping units with similar objectives, functions, and behavior. - Boxed classification (as presented): - Financial corporations [S12] - Depository corporations - Central bank [S121] - Other depository corporations (ODCs) / Deposit-taking corporations except the central bank [S122] - Money market funds (MMFs) [S123] - Other financial corporations - Non-MMF investment funds [S124] - Other financial intermediaries except insurance corporations and pension funds (ICPF) [S125] - Financial auxiliaries [S126] - Captive financial institutions and money lenders [S127] - Insurance corporations [S128] - Pension funds [S129] - Nonfinancial corporations [S11] - Public nonfinancial corporations - National private nonfinancial corporations - Foreign-controlled nonfinancial corporations - General government [S13] - Central government [S1321] - State government [S1322] - Local government [S1323] - Households [S14] - Nonprofit institutions serving households [S15] - Notes: - Square brackets indicate the 2008 SNA sector codes. - Deposit-takers whose deposit liabilities are not included in broad money are excluded from ODCs and classified as other financial intermediaries except ICPF. - Social security funds are allocated to the general government subsectors on the basis of the level at which they operate (this Manual adopts that approach; the 2008 SNA also allows social security funds to be combined into a separate subsector). ### Financial corporations [S12] and monetary-statistics subsectors - Definition and distinguishing features: - The FCs sector consists of all resident corporations, including quasi-corporations, principally engaged in providing financial services, including insurance and pension fund services, to other institutional units. - FCs are distinguished from NFCs because FCs are engaged principally in providing financial services and financial intermediation. - Characteristics of financial intermediation include: - (1) incurrence of liabilities to raise funds for lending; - (2) transformation of financial instruments with respect to maturity, interest rate, currency of denomination, etc.; - (3) acquisition of credit and financial risks. - Key factors for classification as FCs include incurrence of credit and financial risks, existence of a separate set of accounts for financial intermediation activities, and predominance of financial services in total production. - Exclusions from FCs: - (1) Corporations/quasi-corporations that mainly sell goods or nonfinancial services and provide credit directly to customers (e.g., manufacturers or retailers extending consumer credit under their own credit plans). - (2) Individuals or households that make loans or buy and sell foreign currency if they do not have separate and complete sets of accounts for their financial activities. - Monetary statistics subsectors: - Distinction for monetary statistics between FCs that issue liabilities included in broad money (DCs) and OFCs that intermediate financial assets or engage in activities closely related to financial intermediation but do not issue liabilities included in broad money. - The DCs subsector comprises the central bank, deposit-taking corporations except the central bank, and MMFs. - The OFCs subsector of monetary statistics includes FCs other than DCs. - In BPM6, MMFs are included in the OFCs subsector. - For compiling data for DCs groups, separate sectoral balance sheets need to be compiled for each of the three groups for ODCs and OFCs. ### Depository corporations and central bank [S121] - Broad money and DCs: - For monetary statistics, DCs are FCs that issue liabilities included in broad money (definition of broad money is presented in paragraph 6.11). - Due to its special characteristics, the central bank constitutes a separate subsector within DCs. - When compiling monetary statistics, accounts of deposit-taking corporations except the central bank and MMFs are aggregated and presented in a consolidated form in the ODCs survey (ODCS). - Central bank functions (typical): - (1) issuing currency; - (2) conducting monetary policy, including by regulating money supply and credit; - (3) managing international reserves; - (4) transacting with the IMF; - (5) providing credit to ODCs; - (6) usually acting as banker to government in holding central government deposits and providing credit in the form of overdrafts, advances, and purchases of debt securities. - Central banks in some countries also accept deposits from or provide credit to NFCs, NPISHs, and households. - Central bank subsector includes: - (1) central banks (variously named: central bank, reserve bank, monetary authority, national bank, state bank); - (2) currency boards or independent currency authorities that issue domestic currency fully backed by foreign exchange reserves; - (3) government-affiliated agencies that are separate institutional units and primarily perform central banking functions, except those exclusively engaged in supervision and regulation. - Agent vs principal: - Transactions and financial positions should be attributed to the central bank when it acts on its own behalf and is the actual debtor/creditor. - When it acts only as an agent, transactions or positions should be attributed to the unit that is the actual debtor/creditor. A key factor is the bearing of financial risks and appropriation of benefits from the transactions. - Supervision and representative offices: - If supervisory activities are performed within the structure of the central bank, they are included in the central bank subsector; if the supervisory authority is a separate institutional unit, it is classified as a financial auxiliary outside the central bank subsector. - Branches of the central bank are consolidated with headquarters for central bank balance sheets. - Central bank representative offices located in other economies are classified as resident financial auxiliaries in the economy in which they are located and are not consolidated with headquarters. If such overseas representative offices have diplomatic immunity, they are considered part of the economic territory in which the central bank itself is located. - Monetary authorities accounts: - In countries where certain central banking functions are performed wholly or partly by the central government (currency issuance, holding of international reserves, transacting with the IMF), compilers could consider compiling monetary authorities accounts in addition to the central bank survey. - The functional approach of monetary authorities accounts groups stock positions and flows according to functions or objectives performed (e.g., all data relating to central banking functions performed by the central government should be included along with the central bank’s data). Specifically, if the central government holds part of the international reserves, they are included in the monetary authorities accounts together with the reserves held by the central bank. - Currency boards and government-affiliated agencies: - Currency boards are independent monetary authorities that issue domestic currency usually fully backed by foreign exchange reserves at a fixed exchange rate; they are included in the central bank subsector. - Government-affiliated units that perform certain central banking functions and are separate institutional units (except those exclusively engaged in supervision/regulation) should be included in the central bank subsector. - If such units remain financially integrated with and under direct control and supervision of the government, they cannot be treated as separate institutional units; monetary authority functions carried out by the government should be recorded in the central government subsector. *Monetary and Financial Statistics Manual and Compilation Guide* ### 3.119 A common currency area, or currency union, ### A common currency area, or currency union ### Definition and membership - A common currency area, or currency union, consists of more than one economy and has a regional central decision-making body, usually a CUCB, with the authority to conduct a single monetary policy and issue the legal tender of the area. - To belong to the currency union, an economy must be a member of the central decision-making body. - Member countries of the currency union share a common currency and may have a single monetary and foreign exchange policy. - Two kinds of currency unions are identified. ### Centralized model - Characteristics: - The currency union has a CUCB owned by the governments of the member economies. - The common currency is issued by the CUCB. - Central bank operations in each economy are carried out by national directorates or agencies of the CUCB. - Institutional treatment for statistical purposes: - In each member economy the central bank functions are deemed to be carried out by a national (resident) directorate or agency of the central bank. - This institutional unit acts as the central bank for that economy and must be treated as an institutional unit separate from the headquarters of the CUCB. - Allocation of transactions and positions: - Not all transactions carried out and positions held by the CUCB can be allocated to individual member countries. - Transactions and positions conducted on the own account of the CUCB that cannot be allocated to member countries (in particular, international reserves) remain at the CUCB-headquarter level. - These unallocated items are taken into account, together with allocated transactions and positions, only when monetary statistics are compiled at the currency union level. - Observed examples: Banque Centrale des États de l’Afrique de l’Ouest (BCEAO), Banque des États de l’Afrique Centrale (BEAC), Eastern Caribbean Central Bank (ECCB). ### Decentralized model - Developed by the euro area through creation of the European Central Bank (ECB). - Structure and responsibilities: - The currency union comprises a CUCB and currency union national central banks (CUNCBs) of the member economies, with the CUCB owned by the CUNCBs. - Monetary policy decisions are made by the decision-making body of the CUCB, which also coordinates implementation of the decisions. - Implementation is a primary responsibility of the CUNCBs. - Statistical recording: - In each economy, monetary activities with residents of the currency union are carried out by CUNCBs having their own assets and liabilities, and these activities are recorded in the national data. ### Economic territory and compilation of union-wide monetary statistics - The economic territory of a currency union consists of the economic territory of the currency union economies, plus the CUCB. - Any other regional organizations that comprise the same or a subset of the currency union economies are included in the currency union. - The currency union needs to compile monetary statistics for the union-wide area by consolidating: - The accounts of the CUCB headquarters, and - The accounts of the CUNCBs. - Foreign assets and liabilities of the CUCB reflect its claims on and liabilities to nonresidents of the currency union. - To support compilation of union-wide data, sectoral balance sheets and surveys for economies in a currency union should have a two-way classification of claims on and liabilities to nonresidents: - Those vis-à-vis residents in other economies of the currency union, and - Those vis-à-vis nonresidents of the currency union. ### Box 3.2 — Currency Unions and Regional Central Banks (examples) - Centralized Model - Banque Centrale des États de l’Afrique de l’Ouest (BCEAO): Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, Togo - Banque des États de l’Afrique Centrale (BEAC): Cameroon, Central African Republic, Chad, Republic of Congo, Equatorial Guinea, Gabon - Eastern Caribbean Central Bank (ECCB): Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines - Decentralized Model - European Central Bank (ECB): Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, The Netherlands, Portugal, Slovakia, Slovenia, Spain - Footnote: As of December 31, 2016. ### Other depository corporations (ODCs) — overview for monetary statistics - For monetary statistics purposes, all FCs (other than the central bank) that incur liabilities included in broad money are classified as ODCs. - Deposit-taking corporations except the central bank have financial intermediation as their principal activity and obtain funds through acceptance of deposits or other financial instruments that are close substitutes for deposits. - They may also issue bills, bonds, other debt securities, or other financial instruments. ### Commercial banks and other deposit-taking corporations - Commercial bank: - The most common designation of a deposit-taking corporation. - Common services: accepting deposits and granting business and personal loans. - In many countries they are required to place reserve requirements at the central bank in a certain proportion to their deposit liabilities. - Other deposit-taking corporations: - Include varied institutions depending on national naming conventions and principal activities. - Examples (not exhaustive): merchant banks; savings and loan associations, building societies, and mortgage banks; credit unions and credit cooperatives; municipal credit institutions; rural banks and agricultural banks; discount houses; traveler’s check companies engaged mainly in financial activities; post office giro institutions; electronic money institutions. - Compilers should investigate the characteristics of an FC’s liabilities to determine whether liabilities should be included in broad money, which determines coverage in the ODCs subsector. ### Specific types of deposit-taking corporations — characteristics and statistical guidance - Merchant banks: - Specialize in financial activities facilitating trade and commerce, international financing, long-term lending, and underwriting of securities. - Usually do not offer banking services to the general public. - Savings and loan associations, building societies, mortgage banks: - Specialize in long-term lending for real estate purchases. - Traditionally mutual associations; legal and regulatory changes have relaxed some rules. - Credit unions and credit cooperatives: - Owned and controlled by their members; deposit accounts may be designated as shares and confer membership and voting rights. - Regulation and reporting requirements vary by country. - Municipal credit institutions: - Independent, locally managed savings banks concentrating on regional customers; generally not profit-oriented but are market producers. - Rural banks and agricultural banks: - Small community banks specializing in micro-financing for rural and agricultural activities. - Data collection challenges: lack of central bank supervision and reporting obligations; inadequate communication infrastructure; limited staff resources. - Discount houses: - Raise funds to finance investments in money-market instruments and purchase debt securities for rediscounting with the central bank. - Classified in ODCs if they issue liabilities included in broad money; otherwise classified as OFCs. - Traveler’s checks companies: - Issue negotiable instruments usable for third-party payments. - Classified as ODCs if the issuer is an FC and traveler’s checks are included in broad money. - Traveler’s checks are included in broad money if most are expected to be used for domestic market transactions; excluded if most are expected to be used for foreign travel. - Post office giro institutions: - If postal financial activity has a separate set of accounts, it should be included in the ODCs subsector; otherwise the postal system is classified as an NFC. - Data on transferable and other deposits accepted by the postal system should be collected for inclusion in broad money. - Electronic money institutions: - Authorized to issue electronic money defined as monetary value electronically stored on a physical device or remotely at a server (see paragraphs 4.38–4.41). - Electronic money typically can be used for third-party payments and is a close substitute for transferable deposits. - Classified as ODCs if an FC and the electronic money issued is included in broad money (see paragraph 6.30). - Monetary value stored on specific prepaid instruments is not electronic money if instruments are designed for specific limited use only. ### Offshore banks - Definition and features: - Deposit-taking corporations (except the central bank) established in jurisdictions with legal and fiscal advantages such as low or no taxation and less stringent regulations. - Engage in deposit-taking and lending denominated in foreign currencies and may be restricted from accepting deposits from residents of the local economy. - Statistical recommendations: - Offshore banks engaged in trade and finance are residents of the economies in which they are located. - Recommended to include offshore banks in the ODCs subsector if they transact with residents of the economy where they are located and issue liabilities included in broad money; otherwise classify as OFCs. - Because of special characteristics, data on offshore banks should be identified separately within the subsector. - Data collection challenges: - Offshore banks often face less-stringent regulation, making data collection difficult. - If the central bank does not regulate offshore banks, it must negotiate reporting or seek special legal powers for reporting compliance. ### Banks in liquidation - Status and implications: - Some deposit-taking corporations may operate under receivers or regulators or be closed due to financial difficulties; they continue to exist until formal bankruptcy or reorganization. - Deposits may be frozen and it is unclear whether depositors will recover funds or when. - Such corporations continue to hold claims on various sectors; claims may be transferred to restructuring agencies or acquired by other deposit-taking corporations. - Statistical treatment: - To avoid distortion in monetary statistics during restructuring, deposit-taking corporations in liquidation or reorganization should continue to be included in the ODCs subsector as long as they own financial assets and liabilities. - Their liabilities should be excluded from broad money as depositors’ withdrawal demands cannot be met (see paragraph 6.42). - Separate data on their accounts should be presented as memorandum items accompanying the ODCs sectoral balance sheet. ### Money market funds (MMFs) [S123] - Definition and classification: - MMFs are collective investment schemes that raise funds by issuing shares or units to the public and invest primarily in money market instruments, MMF shares or units, transferable debt instruments with residual maturity not more than one year, bank deposits, and instruments pursuing a rate of return that approaches interest rates of money market instruments. - To be an MMF there needs to be: (1) a certain degree of capital certainty (store of nominal value); and (2) the possibility to withdraw funds immediately or on short notice. - If these conditions are not met, the institution is classified as a non-MMF investment fund. - Payment features and liquidity: - Some MMFs allow withdrawals via checks payable to third parties or other direct payment means, possibly subject to minimum/maximum limitations. - MMF shares and units—with or without third-party payment features—are highly liquid and very close substitutes for transferable and other deposits. - Statistical treatment: - MMF shares and units are included in broad money. - All MMFs as defined are classified as ODCs. ### Other financial corporations (OFCs) [MS] and non-MMF investment funds [S124] - OFCs composition: - OFCs comprise the 2008 SNA subsectors: non-MMF investment funds, other financial intermediaries except insurance corporations and pension funds (ICPFs), financial auxiliaries, captive financial institutions and money lenders, insurance corporations, and pension funds. - Supervisory and data collection implications: - FCs in the OFCs subsector may be supervised by agencies other than the central bank or not at all. - Close collaboration between monetary statistics compilers and supervisory agencies is required to collect and compile monetary and financial statistics. - Non-MMF investment funds: - Raise funds by issuing shares or units and invest predominantly in long-term financial assets (equity shares, bonds, mortgage loans) and nonfinancial assets (real estate). - May hold a small percentage of assets in highly liquid short-term instruments to meet redemptions. - Denominations include mutual funds, investment pools, investment trusts, unit trusts, or institutions for collective investment. - Shares or units are not close substitutes for deposits because: (1) they are not transferable by checks or other third-party payment means; and (2) their price can fluctuate according to market conditions and so they are not a reliable store of nominal value. - Consequently, shares or units issued by non-MMF investment funds do not meet the definition of broad money and are not included therein. *Monetary and Financial Statistics Manual and Compilation Guide* ### 3.150 It is possible to distinguish between open-ended ### mfsmcg-final - 3.150 It is possible to distinguish between open-ended ### Open-ended versus closed-ended investment funds (paragraph 3.150) - Open-ended investment funds: - Issue and redeem shares on a continuous basis. - Each new investment creates new shares or units. - Redemption requires selling an investment to match the redemption. - Closed-ended investment funds: - Open for subscription only during a specified period at launch. - Thereafter investors acquire shares only by buying them on a secondary market from other investors. ### Types of non-MMF investment funds (paragraph 3.151) - Equity-based investment funds. - Security-based investment funds. - Real estate investment funds: invest in debt and equity securities of companies that purchase real estate. - Mortgage real estate investment trusts (mortgage REITs): provide dividends to shareholders by investing in real estate mortgages or mortgage-backed securities. - Note: Equity REITs are not considered financial intermediaries as they specialize in owning and managing real estate and thus are not part of the FCs sector. - Index funds: index-tracking funds that mirror the performance of a specific group of shares. - Exchange-traded funds (ETFs): a subset of index funds that are priced continuously throughout the trading day and therefore trade like a stock. - Funds of funds: hold a portfolio of other investment funds' shares rather than investing directly. - Hedge funds: involve high minimum investments and light regulation; invest in financial derivatives, take long and short positions in securities, and may sell over-the-counter derivative contracts. ### Private equity funds and related vehicles (paragraph 3.152) - Private equity funds (PEFs): - Collective investment schemes that invest in unlisted equity. - Usually constituted as closed-ended investment funds or as limited partnerships. - Investments mainly by institutional investors such as ICPFs or large financial groups. - Venture capital funds: a subcategory of PEFs investing in start-up companies. - PEFs are included within non-MMF investment funds. ### Other financial intermediaries except insurance corporations and pension funds (paragraphs 3.153–3.164) - Definition and features: - FCs that provide financial services by incurring liabilities other than currency, deposits, or close substitutes for deposits on their own account to acquire financial assets via market transactions. - Transactions on both sides of the balance sheet carried out in open markets. - Funding and activities (paragraph 3.154): - Generally raise funds on wholesale financial markets, usually not as deposits, and use funds to extend loans and acquire other financial assets. - Often specialize in lending to particular sectors or for specialized financial arrangements. - Examples and roles: - Finance companies (paragraph 3.155): extend credit mainly to NFCs and households; offer consumer loans, credit cards, small business loans, mortgage loans, economic development loans, purchases of bankers’ acceptances and trade receivables. If they accept deposits included in broad money, classify in the ODCs subsector. - Financial leasing companies (paragraph 3.156): finance purchase of tangible assets; legal owner is the leasing company while economic ownership is conveyed to the lessee. - Central clearing counterparties (CCPs) (paragraph 3.157): - Provide clearing and settlement of market transactions in securities and derivatives, including tri-party repos. - Offset obligations and entitlements to enable net settlement. - Take financial risk of the transaction onto their own account, mitigating counterparty risk. - CCPs are FCs but not money issuers: margin deposits collected are restricted and held as collateral and are not included in broad money; classify as other financial intermediaries except ICPFs. - Investment banks (paragraph 3.158): assist corporations in raising equity and debt and provide strategic advisory services; invest their own funds; usually do not have deposit liabilities that meet the definition of broad money. - Underwriters and dealers (paragraph 3.159): specialize in securities market activities; only those acting as financial intermediaries are classified in this category; securities brokers and units that arrange trades but do not hold securities on their own account are classified as financial auxiliaries. - Financial derivative intermediaries (paragraph 3.160): units that engage primarily in issuing and/or taking positions in financial derivatives. - Securitization vehicles (paragraph 3.161): - Raise funds by selling securities backed by specific assets or future income streams; convert assets or pools of cash–flow producing assets into marketable securities. - Included in other financial intermediaries except ICPFs if the entity is the legal owner of the portfolio, sells a new financial asset representing an interest in the portfolio, and has—or it would be possible and meaningful to compile—a full set of accounts. - If the portfolio is not transformed, or the vehicle does not bear market or credit risks, combine with parent (if resident in same economy) or treat as a captive intermediary (if resident in different economy than parent). - Specialized financial intermediaries (paragraph 3.162): export/import finance firms; factoring companies; venture capital funds pooling third-party investor funds in start-ups; mezzanine companies providing short-term financing for mergers and acquisitions. - Asset management companies (AMCs) and bank restructuring agencies (paragraph 3.163): created to address workout of nonperforming loans (NPLs) or other impaired financial assets through acquisition, management, and disposal; may be public institutions or subsidiaries of FCs; AMCs that are subsidiaries of ODCs and resident in same economy are consolidated with parent unless meeting institutional unit criteria (see paragraph 3.4). - Classification of government-controlled entities (paragraphs 3.164–3.165): - Considerations for classification as general government versus FC: - More likely general government if the entity (1) serves only or primarily government; (2) sells or buys financial assets at values other than market values; and/or (3) takes low risks due to strong public financial support and acts on behalf of government. - Classify in the FCs sector if the entity (1) is a genuine holding company controlling and managing subsidiaries; and/or (2) borrows on the market at its own risk to acquire financial or nonfinancial assets that it actively manages. - If operating as an FC, sector according to nature of operations (usually other financial intermediaries except ICPFs); otherwise classify as general government with consolidation of transactions and balance sheets with the government. ### Financial auxiliaries (paragraphs 3.166–3.179) - Definition (paragraph 3.166): - FCs principally engaged in activities associated with transactions in financial assets and liabilities or providing regulatory context without taking ownership of the financial assets and liabilities being transacted; do not act as intermediaries. - Examples and specific functions: - Public exchanges, securities markets, and clearing houses (paragraph 3.167): - Provide facilities for transaction and settlement of commodities, debt and equity securities, and financial derivatives. - Identified as exchanges if legally determined to be exchanges, maintain insurance or capital reserves, exercise control over member trading, or operate a margining system or collect collateral. - Include securities depository companies, accounting and clearing offices, other specialized providers of securities trading services, and entities that regulate or supervise exchanges and securities markets—provided they do not act as principals to the transactions. - Brokers and agents (paragraph 3.168): arrange, execute, or facilitate client transactions; included only if they specialize in brokerage and do not take their own positions in financial assets. - Foreign exchange companies / bureaux de change (paragraph 3.169): buy and sell foreign exchange in retail or wholesale markets; classified as financial auxiliaries because income is from buy-sell spreads rather than taking positions in foreign exchange. - Insurance and pension funds auxiliaries (paragraph 3.170): include agents, adjusters, and salvage administrators; may warrant separate identification in some countries. - Financial derivative corporations (paragraph 3.171): facilitate issuance of financial derivative contracts without issuing derivatives or taking positions; distinguished from financial derivative intermediaries. - Representative offices of foreign banks (paragraph 3.172): if they do not accept deposits or extend credits, classified as resident financial auxiliaries. - Corporations operating electronic payment mechanisms (paragraph 3.173): classified as financial auxiliaries if separately identifiable institutional units, primarily engaged in the activity, and do not incur liabilities against electronic payment instruments; if they incur liabilities against issuance of electronic money, included in ODCs subsector (if electronic money is included in broad money). - Third-party payment processors (paragraph 3.174): provide banks with a payment platform; classified as financial auxiliaries (examples: online payment corporations, prepaid card corporations, financial payment corporations). - Supervisory agencies and regulatory bodies (paragraph 3.175): sectored as financial auxiliaries if separate institutional units even if affiliated with government; regulatory activities exercised by the central bank are subsumed within the central bank. If these bodies extend emergency credits or acquire assets/liabilities of FCs and holdings become substantial and the unit engages in financial intermediation, reclassify as other financial intermediary except ICPFs. - Managers of pension funds and mutual funds (paragraph 3.176): implement fund investment strategy and manage trading; paid a fee usually a percentage of the fund’s average assets under management; managers allocated to financial auxiliaries subsectors; the funds they manage are sectored as MMFs, non-MMF investment funds, or pension funds. - Head offices of FCs (paragraph 3.177): engaged principally in controlling FCs or groups of FCs but not conducting financial intermediation; sectored as financial auxiliaries only if all or most subsidiaries are FCs; otherwise allocated to the NFCs sector. - Solicitor nominee companies (paragraph 3.178): bare trusts that receive funds for lending secured by property; nominee holds asset in its own name on behalf of beneficial owners. - Peer-to-peer lending companies (paragraph 3.179): - Facilitate lending from individuals and other lenders to unrelated individuals or small businesses online by matching lenders and borrowers. - Loans are relatively small, mostly to individuals for consumption or credit refinancing; loans generally unsecured with lenders bearing default risk. - Main income source is fees collected from borrowers and lenders. - Use credit checking tools to assign differentiated risk ratings and set customized interest rates; interest rates are lower than similar bank loans due to lower overhead, while lenders receive yields significantly higher than for a deposit. - Typically assume no liability or risk for loans being made; if they use own funds for lending they act as financial intermediaries and should be classified as other financial intermediaries except ICPFs. *Monetary and Financial Statistics Manual and Compilation Guide* ### 3.180 Credit rating agencies assess the creditworthi- ### 3.180 Credit rating agencies assess the creditworthiness of an issuer of debt securities with regard to its financial obligations ### Credit rating agencies - Assess the creditworthiness of an issuer of debt securities with regard to its financial obligations. - Evaluate the issuer’s overall financial capacity and willingness to make scheduled payments on a specific issue. ### Captive financial institutions and money lenders [S127] - Definition: institutional units providing financial services other than insurance where most of either their assets or liabilities are not transacted on open financial markets. - Typical forms: - Entities transacting within only a limited group of units or subsidiaries of the same holding corporation. - Entities that extend loans from own funds provided by only one sponsor. - Captive financial institutions: - Corporate subsidiaries acting as financial agents for parent corporations, raising funds for lending to parents or purchasing parents’ accounts receivables. - Sometimes operated by deposit-taking corporations for specialized activities or regulatory reasons. - If not qualifying as separate units, subsumed within the parent corporation’s balance sheets unless resident in a different economy from the parent. - Classified in the OFCs subsector if treated as separate institutional units. - Captive insurance companies and pension funds that serve only their owners are classified as insurance corporations or pension funds, respectively. - Holding companies: - Units that hold assets of a group of subsidiary corporations as their principal activity and do not administer or manage other units. - Always allocated to the FCs sector and treated as captive financial institutions, even if all subsidiaries are NFCs. - Units providing financial services exclusively with own funds or sponsor funds (if qualifying as quasi-corporations) included here: - Money lenders offering small personal loans at a high rate of interest. - Corporations lending (e.g., student loans, import and export loans) from funds received from a sponsor such as a government unit or an NPI. - Pawnshops or pawnbrokers extending loans secured by personal property collateral. ### Trusts - Arrangements providing legal control of financial assets and liabilities and specifying use of portfolio holdings and income. - Personal trusts: - Control portfolios of assets owned by individuals; assets within personal trusts are treated as part of the direct holdings of the households that control the trust. - General treatment: - Trusts are generally not recognized as separate institutional units and are consolidated within the units that control or benefit from them. - Trusts are treated as separate institutional units (quasi-corporations) only in two circumstances: 1. Constituted in a different economy to that of any of the beneficiaries; or 2. Otherwise satisfy the definition of a quasi-corporation. - Trusts established for financial intermediation (e.g., securitization, collateralized security issuance, investment pooling) may be separate units if: - They act like financial intermediaries, and - No other unit can reasonably be considered as controlling the portfolio. - Data on trusts administered by DCs located in the same economy as their parent should be reported together with the accounts of the parent corporations. ### Special purpose entities (SPEs) - SPEs that qualify as separate institutional units and raise funds in open markets to be used by their parent corporation are classified as captive financial institutions. - Essential considerations: - Whether the SPE has a full set of accounts and is acting as a financial intermediary such that it bears financial risk; otherwise consolidated with parent if resident in same economy. - Accounts that SPEs hold at financial institutions should be classified in the same sector as their parent units if the SPE is not treated as a separate corporation. - An SPE established in a different economy to its parent is always treated as a separate unit and sectored as other financial intermediaries (except ICPFs) in the economy in which it is incorporated. ### Sovereign wealth funds (SWFs) - Created and owned by the general government to hold, manage, or administer assets to achieve financial objectives; employ investment strategies including investing in foreign financial assets. - Common funding sources: balance of payments surpluses, official foreign currency operations, privatization proceeds, fiscal surpluses, receipts from natural resources or commodity exports. - Sectoring decision depends on activity: - If the SWF actively manages its portfolio and provides financial services on a market basis to government, it may be a separate institutional unit of the OFCs subsector. - If it simply acts as a passive holder of government assets, it may be part of general government. - Interaction with the central bank: - If the central bank acts as agent for SWF transactions but the SWF retains investment decisions and risks/rewards, SWF accounts should be kept by the central bank off balance sheet. - If the SWF constitutes deposits with the central bank and the central bank bears all risks/rewards, the deposits are recorded by the central bank on its balance sheet as a liability to the SWF and the corresponding assets recorded as part of total central bank assets. - An SWF incorporated abroad or a quasi-corporation located abroad is treated as a separate institutional unit in the OFCs sector of the economy in which it is legally incorporated or domiciled. ### Insurance corporations [S128] - Consist of incorporated, mutual, and other entities whose principal function is to provide life, accident, sickness, fire, or other forms of coverage to individual units or groups, or reinsurance services to other insurance corporations. - Captive insurances (serving only their owners) and reinsurance corporations are included in this subsector. - Life insurance corporations invest premiums to build portfolios of financial assets to meet future claims, spreading risks over time. - Non-life insurance corporations provide benefits in events such as accidents, fire, property loss, health expenses, spreading current risk among clients. - Composite insurance companies sell both life and non-life insurance. - Captive insurance subsidiaries: - Separate units included in this subsector; collect premiums from parent corporations, reinsure themselves, or invest assets to build reserves against future claims. - Reinsurance corporations insure policies written by other insurers in exchange for premiums, capping net loss for primary insurers. - Financial guarantee corporations (including national deposit guarantee schemes and similar deposit protection arrangements): - Insure customers against financial loss on specific securities or other contracts or against losses from collapse of financial institutions. - Deposit insurers, issuers of deposit guarantees, and other issuers of standardized guarantees that are separate institutional units and function like insurers by constituting reserves and charging premiums proportional to cost are sectored as insurance corporations. - Guarantees provided by banks, securities brokers, and other intermediaries as secondary activities are treated as integral parts of those units. - Classification of a financial protection scheme: - May be part of general government, a public FC, or a private FC outside the public sector according to sectoring principles. - A resident financial protection scheme may or may not satisfy criteria to be an institutional unit; if not, treated as integral part of the unit that controls it. - Classified as a public financial (insurance) corporation if fees are set by government or the government/public corporation controls the scheme and it is a separate institutional unit. - A protection scheme will be part of general government if all of the following hold: 1. Fees payable to the government are compulsory (beneficiaries cannot opt out). 2. Fees are clearly out of proportion to the service provided (fees are not determined based on associated risks covered). 3. Fees payable to the government are not set aside in a fund, or can be used for other purposes. ### Pension funds [S129] - Subsector consists of autonomous pension funds established to provide retirement benefits for specific groups of individuals, with separate sets of pension-fund assets and liabilities and specific obligations to contributors. - Pension schemes: - Can be voluntary or compulsory with mandated contributions from employee, employer, or both. - May be administered by a separately constituted pension fund or a fund operated by the employer. - Governments may organize pension schemes for employees independent of the social security system. - Autonomous pension funds: - Separate institutional units organized and directed by private or public employers or jointly by employers and employees. - Nonautonomous pension funds: - Not separate institutional units; assets and liabilities are reflected in the accounts of the organizing entity. - Funded vs. unfunded schemes: - Funded schemes have separate pools of financial assets (reserves) assigned for payment of benefits. - Unfunded schemes are administered without specific pension-fund reserves; they are not separate institutional units from the administrator. - Three types of funded pension schemes: 1. Operated by insurance corporations. 2. Operated as autonomous pension funds. 3. Operated as nonautonomous pension funds. - Pension plan benefit determination: - Defined benefit plans: future benefits determined by actuarial formula related to length of service, salaries, expected retirement ages, mortality rates, etc. - Defined contribution plans: benefits based on participant’s contributions and investment performance. - Exclusions from the pension fund subsector: - Nonautonomous pension funds managed by the employer. - Government-sponsored pension schemes funded through social security schemes (pay-as-you-go). - Arrangements organized by non-government employers where reserves are included among employer’s own resources or invested in employer-issued securities. - All assets, liabilities, transactions, and flows of nonautonomous pension funds are consolidated in the accounts of the employer who operates the scheme. ### Nonfinancial Corporations [S11] - NFCs sector encompasses corporations and quasi-corporations whose principal activity is production of market goods or nonfinancial services. - Components of the NFCs sector: 1. All resident NFCs, regardless of shareholders’ residence. 2. Branches of nonresident enterprises engaged in nonfinancial production in the economic territory on a long-term basis. 3. All resident NPIs that are market producers of goods or nonfinancial services. - NFCs with secondary financial activities (e.g., producers/retailers providing consumer credit) are classified entirely as NFCs if main activities are nonfinancial. - 2008 SNA subsectoring criteria for NFCs: - Separate NPIs from other units in the sector. - Show control: (1) PNFCs, (2) national private NFCs, (3) foreign-controlled NFCs. - For monetary statistics, resident NFCs are split into two subsectors—PNFCs and other NFCs. ### Public nonfinancial corporations (PNFCs) - PNFCs: resident NFCs and quasi-corporations subject to control by government units, another public corporation, or combination thereof. - To be classified as a PNFC rather than a government unit, a corporation must be a market producer (charge economically significant prices as defined in paragraph 3.42). - Practical guidance on economically significant prices: - No prescriptive numerical relationship, but sales (excluding taxes and subsidies) would be expected to average at least half of production costs over a sustained multiyear period. - Example: public railway and urban transportation may be regarded as charging economically significant fares if fares cover at least half of production costs and influence public use decisions. - Nominal fees so low that they do not ration use and do not produce enough revenue to contribute significantly to financing imply classification as part of general government. - Specific examples: - A government-controlled publishing office selling publications at prices covering at least half of production costs should be classified as a PNFC. - A national statistical office is part of central government even if publications are sold, because that activity produces only modest revenue. - Reclassification should occur only if a change in pricing holds for several years or is expected to hold for several years. - Government-controlled entities undertaking only ancillary activities (transportation, cleaning, maintenance) do not satisfy criteria for being separate institutional units and will be classified as part of general government. *Monetary and Financial Statistics Manual and Compilation Guide* ### 3.213 For a market producer corporation (or quasi- ### Institutional Units and Sectors (Extract: paragraphs 3.213–3.244) ### Public corporations and market producers - A market producer corporation (or quasi-corporation) controlled by government is classified as a public corporation only if the government allows considerable discretion over management of production and use of funds (paragraph 3.213). - The corporation must be able to: - maintain its own working capital, and - finance some or all of its capital formation either from own resources or by borrowing (paragraph 3.213). - Distinguishability of flows of income and capital between the corporation and the government owner implies that operating and financing activities are not fully integrated with the parent unit’s activities, even if the corporation is not a separate legal entity (paragraph 3.213). ### Subsectoring and identification of nonfinancial corporations - A clear distinction is necessary between public NFCs and private NFCs, and between government units and PNFCs (paragraph 3.214). - The recommended starting point for subsectoring is an official and comprehensive list of institutional units belonging to the PNFCs subsector, distributed to the central bank, ODCs, and OFCs, and periodically reviewed and updated (paragraph 3.214). - Some countries use an identification code (linked to the tax system) for each institutional unit to ensure appropriate sector/subsector inclusion (paragraph 3.214). ### Other nonfinancial corporations (NFCs) - Other NFCs comprise all resident NFCs not controlled by government (paragraph 3.215). - For monetary statistics, national private and foreign-controlled NFCs are combined into the category of Other NFCs, despite the 2008 SNA distinction (paragraph 3.215). ### National private and foreign-controlled NFCs - National private NFCs include resident NFCs not controlled by government or by nonresident institutional units (paragraph 3.216). - Private NFCs that produce goods or services for government or that receive government subsidies, but charge economically significant prices, should be classified as private NFCs (paragraph 3.217). - The subsector also includes NPIs that produce goods or nonfinancial services for the market (e.g., fee-based education or health providers, trade associations) (paragraph 3.218). - Foreign-controlled NFCs comprise resident NFCs controlled by nonresidents, with classification based on majority control ("more than 50 percent of the shares") and therefore differ from the balance of payments concept of direct investment enterprises that includes associated firms with "10–50 percent" ownership by nonresidents (paragraph 3.219). - This subsector includes: - subsidiaries (but not associates) of nonresident corporations; - corporations controlled by a foreign government, or by a group of nonresident units acting in concert; and - branches or other unincorporated entities controlled by nonresidents that engage in significant amounts of production in the economic territory on a long-term basis and therefore are treated as resident quasi-corporations (paragraph 3.219, list). ### Unincorporated enterprises within households - Household unincorporated market enterprises are created to produce goods or services for sale or barter on the market and can range from street vendors to manufacturing or service enterprises with several employees; they include unincorporated partnerships whose partners belong to different households (paragraph 3.220). - Unincorporated household enterprises that are not quasi-corporations are not separate institutional units and are classified as part of the household sector (paragraph 3.221). - If an unincorporated enterprise has its own accounts independent of the household, assets separable from owners, and owners who do not bear unlimited liability, it is treated as a quasi-corporation and classified in the nonfinancial corporations sector (paragraph 3.221; see 2008 SNA, paragraphs 4.155–4.157). ### General government sector: scope and delineation - Government units are legal entities established by political process with legislative, judicial, or executive authority and whose principal functions include provision of goods and services primarily on a nonmarket basis, redistribution of income and wealth via transfers, nonmarket production, and financing via taxation or other compulsory transfers (paragraph 3.222). - The general government sector comprises resident institutional units whose primary activity is government, including central, state, provincial, regional and local government units, social security funds, and resident nonmarket NPIs controlled by government units (paragraph 3.223). - Two principal methods for delineating general government subsectors are provided by the 2008 SNA and GFSM 2014: - Method 1: divide general government into central government, state governments, local governments, and social security funds. - Method 2 (recommended in this Manual): subsume social security funds within the general government subsectors (central, state, or local government) in which the social security funds operate, classifying deposits of social security funds by level of government (paragraph 3.223). ### Central government subsector and entities - Central government authority extends over the territory of the country and can impose taxes on all resident and nonresident units engaged in economic activities within the country (paragraph 3.225). - The central government subsector includes a central group of departments or ministries plus autonomous units under central authority; dispersed departments, branch offices, agencies, and military installations remain part of central government (paragraph 3.226). - Entities established by central government (e.g., hospitals, schools, universities) that are not separate institutional units have accounts consolidated with the central government; where separate institutional units are nonmarket producers, their accounts should still be consolidated with central government as extrabudgetary units (paragraph 3.227). - If such entities are separate institutional units and charge economically significant prices, they are market producers and included in the public nonfinancial corporations subsector (paragraph 3.228). - Compilers should receive a comprehensive, periodically updated list of agencies and entities that belong to the central government (and state/local governments), with responsibility for providing the list residing with a single government agency such as the ministry of finance or the general accounting office (paragraph 3.229). - Central government may include units undertaking monetary-authority-like activities (issuance of currency, holding international reserves, operation of exchange stabilization funds, financial relationship with the IMF); when financially integrated with central government and under direct control, their activities are recorded in the central government subsector, but compiling a single set of accounts covering monetary authority functions of the central bank and central government is analytically important (paragraph 3.230; see paragraph 3.115). ### Nonmarket NPIs, autonomous agencies, and other central government arrangements - Nonmarket NPIs controlled by central government are classified as part of central government; those primarily financed through the national budget remain central government agencies even if they charge fees or sell products (paragraphs 3.231–3.232). - Autonomous or extrabudgetary agencies with individual budgets not fully covered by the general budget are nevertheless classified as central government when funded mainly through the national budget (paragraph 3.233). - Special agencies may have separate legal identity, administrative discretion, and direct revenue sources (earmarked taxes) to carry out specific functions such as road construction or nonmarket production of health or education services (paragraph 3.234). - Market regulatory agencies should be investigated for sector classification: - agencies that merely distribute subsidies or have administrative, advisory, or price-setting functions belong to general government; - agencies whose principal activity is to buy, hold, and sell goods or services at economically significant prices are classified in the nonfinancial public corporations sector; - market regulatory agencies that meet the definition of an international or regional organization are classified as residents of the rest of the world (paragraph 3.235). ### Sinking funds, internationally financed project agencies, and national universities - Sinking funds may or may not be institutional units and are classified according to whether they are separate institutional units and whether they provide services at economically significant prices: - sinking funds that are separate institutional units and provide services as market producers are classified as public financial corporations; - sinking funds that are separate institutional units and provide services as nonmarket producers are classified as general government units; - sinking funds that are not separate institutional units are classified with the unit that controls them (paragraph 3.236). - Resident agencies managing internationally financed development projects usually open special accounts and, despite autonomy, are usually classified as part of central government; the central government negotiates loans or grants with international organizations and assumes financial liability for the project (paragraph 3.237). - For analytical purposes, separate identification of government accounts related to projects financed by international agencies is recommended (paragraph 3.237). - National universities controlled by central government whose main funding is the central government should be part of central government accounts even if they enjoy greater autonomy and can freely spend funds; if controlled at the state level, they are part of the state government subsector (paragraph 3.238). ### Political parties, public-private partnerships (PPPs), and special purpose entities (SPEs) - Political parties are usually part of the NPISHs sector; in single-party states the relationship between central government and the government party may lead to classifying the party within the central government subsector (paragraph 3.239). - PPPs are long-term contracts whereby one unit acquires or builds an asset, operates it, and hands it over to a second unit; arrangements include PFIs, BOOTs, and similar schemes (paragraph 3.240). - A PPP may or may not create a separate institutional unit; if a separate unit is established its sector classification depends on the economic nature of its activities and control: - a market-producing PPP is classified as an NFC (PNFC or other NFC depending on control); - a nonmarket producer controlled by a government unit is classified as part of general government (paragraph 3.241). - Compilers of monetary statistics should sector-classify financial corporations’ claims on and liabilities to PPP units (paragraph 3.241). - Governments may set up SPEs involved in fiscal or quasi-fiscal activities (e.g., securitization or borrowing): - resident SPEs that function only passively relative to general government and carry out fiscal/quasi-fiscal activities do not satisfy criteria to be institutional units and are treated as part of government (paragraph 3.242); - resident SPEs acting independently, acquiring assets and incurring liabilities on their own behalf and accepting associated risk, are treated as separate institutional units and classified according to principal activity (paragraph 3.243); - SPEs resident in a different country than their controlling government are always classified as separate institutional units in the economy where established; nonresident SPEs created by a government for borrowing or outlays abroad require imputation of flows and stock positions in government and rest of the world accounts to reflect fiscal activities undertaken by the SPE (paragraph 3.244; see BPM6, paragraphs 8.24–8.26). *Monetary and Financial Statistics Manual and Compilation Guide, paragraphs 3.213–3.244.* ### 3.245 State, provincial, or regional governments exer- ### State, provincial, or regional governments exercise some of the functions of government at a level below that of central government and above that of the local government level ### Scope and definition of the state/provincial/regional government subsector - The subsector consists of state, provincial, or regional governments that are separate institutional units plus those nonmarket NPIs that are controlled by state, provincial, or regional governments. - A state, province, or region is the largest geographical area into which a country may be divided for political or administrative purposes; its legislative, judicial, and executive authority extends over the entire area of an individual state, which usually includes numerous localities. - Autonomy, powers, and responsibilities of states vary widely; in some countries, individual states do not exist. ### Fiscal authority, autonomy, and statistical treatment - A state government usually has the fiscal authority to levy taxes on institutional units that are resident in, or engage in economic activities or transactions within, its area of jurisdiction. - A state government must be entitled to spend or allocate some, or possibly all, of the taxes or other revenue that it receives according to its own policies, although some of the transfers it receives from central government may be tied to certain specific purposes. - A state government should be able to appoint its own officers independently of external administrative control. - If a regional unit is entirely dependent on funds from central government, and if the central government also determines the ways in which these funds are to be spent, for statistical purposes the unit should be treated as an agency of the central government rather than as a separate level of government. ### Institutional composition and related entities - The principal departments and ministries of a state government will constitute a single institutional unit similar to the core unit of the central government. - Agencies that operate under the authority of a state government and have separate legal identity and enough autonomy may form additional institutional units. - The same considerations that apply to the central government regarding nonmarket NPIs, autonomous agencies, and SPEs are applicable to determination of whether these units are part of the state government subsector or some other sector. - State governments may own or control corporations or have other units that engage in market production and are classified as quasi-corporations. - The authority over some institutional units may be shared by two or more states; such units are included in the state government subsector. ### Local governments [S1323] — definition and characteristics - The local government subsector consists of local governments that are separate institutional units plus those nonmarket NPIs that are controlled by local governments. - Local government authority is restricted to the smallest geographic areas distinguished for administrative and political purposes; their scope of authority is less than that of central or state governments. - Local governments may or may not be entitled to levy taxes on institutional units or economic activities in their areas. - Typical sources of revenue: taxes on real estate and automobiles; fees for collective services (e.g., trash collection). - Local governments are typically dependent on grants and transfers from higher levels of government; in some countries they are able to raise funds by issuing bonds. - Local governments are entitled to own assets, raise funds, and incur liabilities on their own account and must have some discretion over their expenditures and be able to appoint their own officers independent of external administrative controls. - Units that satisfy the criteria to be a quasi-corporation should be classified in the NFCs sector if the services are supplied on a market basis; units supplying services on a nonmarket basis remain an integral part of the local government unit to which they belong. - Statistics for local government may cover counties, municipalities, cities, towns, townships, boroughs, school districts, and water sanitation districts; local government units with different functional responsibilities often have authority in the same geographic area. - Two or more contiguous local governments may jointly organize a government unit with regional authority accountable to the local governments; such units should be included in the local government subsector. - Government units serving both a state and one or more local governments are included at the level of government that accounts for the largest share of their operations and financing. - Intermediate levels of government between central and lower levels are grouped together with the level of government, either state or local, with which they are most closely associated. ### Social security funds - A social security fund is a particular kind of government unit devoted to the operation of one or more social security schemes; they can be found at all government levels (central, regional, local). - To be treated as independent institutional units, social security funds must be organized and managed separately from other government activities, hold their assets and liabilities separately, and engage in financial transactions on their own account. - Social protection schemes are systematic government interventions intended to relieve households and individuals of the burden of a defined set of social risks. - Typical social risks covered by these schemes are: (1) old age, (2) invalidity, (3) death, (4) sickness and maternity, (5) work injury, and (6) unemployment. - Benefits are provided through social security schemes that cover the community as a whole, or large sections of the community, and generally require formal participation evidenced by compulsory contributions by employees and/or employers; the terms under which benefits are paid are determined by the government. - Because the government can vary social security benefits as part of its overall economic policy, no liabilities are associated with social security schemes. - In some countries, social security funds may become so closely integrated with the other finances of the government as to bring into question whether they should be treated as a separate subsector of the general government. - Even if separately constituted, the Manual recommends combining the accounts of social security funds with the level of government at which they operate. - Social security funds are distinguished from autonomous pension schemes provided by employers (which offer benefits linked to employment); such employer schemes, operated privately or by the government, are included in the OFCs sector. ### Households [S14] — definition and production activities - A household is defined in paragraph 3.7; in general, each member of a household should have some claim upon the collective resources of the household; unattached individuals are also considered households. - Households often coincide with families but may be of any size and form; among members there is sharing of resources and consumption. - Domestic staff living on the same premises as their employer do not form part of their employer’s household; they have no claims upon the collective resources of their employer’s household and should be treated as belonging to a separate household. - Institutional households comprise groups expected to reside in institutions for long or indefinite periods and are treated as a single household if they have little or no autonomy in economic decision making. Examples of persons belonging to institutional households include: (1) members of religious orders living in monasteries, convents, or similar institutions; (2) long-term patients in hospitals, including mental hospitals; (3) prisoners serving long sentences; and (4) persons living permanently in nursing or retirement homes. - Households may engage in production through unincorporated enterprises (sole proprietors) or by supplying labor as employees. - Household unincorporated enterprises may produce for the market or for own final use (examples include subsistence farmers and households engaged in construction of their own dwellings). - Unincorporated partnerships are included among household enterprises; when partners have unlimited liability, partnerships remain within the household sector because all household assets, including the dwelling, are at risk. - Unincorporated enterprises owned by households and engaged in market production are classified in the household sector; however, if it is possible to separate all assets of the enterprise—including financial assets down to the level of cash—from those belonging to the household as consumer, these enterprises qualify as quasi-corporations and are included in the NFCs sector. - Unincorporated partnerships with many partners that behave like corporations should be treated as quasi-corporations assuming a complete set of accounts is available. ### Nonprofit Institutions Serving Households (NPIs) and NPISHs [S15] - NPIs are allocated to the financial or NFCs sector when they engage in market production, or to the general government sector if they are controlled by government, resident in the same economy, and engaged in nonmarket production. - NPIs are nonmarket producers if they provide goods or services to members, other households, or the community as a whole either free or at prices (or fees) that are not economically significant. - Nonmarket NPIs that are not financed and are not controlled by government units are called NPISHs and constitute a separate institutional sector. - NPISHs are mainly financed from contributions, subscriptions from members, donations, transfers, and earnings on holdings of financial and nonfinancial assets. - The NPISHs sector includes: (1) trade unions, professional or learned societies, consumers’ associations, political parties (except in single-party states), churches or religious societies (including those financed by the government), and social, cultural, recreational, and sports clubs; and (2) charities and relief or aid organizations financed by voluntary transfers (in cash or in kind) from other institutional units. - Compilers may need to consider borderline cases or misleading designations when deciding whether a unit should be classified as a NPISHs or an NFC (examples: recreational and sports clubs; sports clubs organized as private enterprises are NFCs; professional associations require determining whether they serve households or corporations). - For monetary statistics, households and NPISHs are combined in the category of Households and NPISHs. - It is recommended that compilers identify a memorandum item "of which: households" for loans to and deposits of households. *Monetary and Financial Statistics Manual and Compilation Guide* ### 4.14 Table 4.1 shows the main categories of financial ### Classification of Financial Assets and Liabilities ### A. Monetary Gold and Special Drawing Rights (SDRs) - Monetary gold and SDRs are financial assets usually held only by monetary authorities. - Monetary gold [F11]: - Defined as gold to which the monetary authorities (or others subject to the effective control of the monetary authorities) have title and is held as a reserve asset. - Comprises gold bullion (including gold held in allocated gold accounts) and unallocated gold accounts with nonresidents that give title to claim the delivery of gold. - All monetary gold is included in reserve assets or is held by international financial institutions. - Gold bullion has no corresponding liability and can be a financial asset only for the central bank or central government except in limited institutional circumstances. - Gold bullion takes the form of coins, ingots, or bars with a purity of at least 995 parts per thousand. - Gold bullion holdings that are not part of reserve assets are classified as nonfinancial assets. - Allocated gold accounts provide ownership of a specific piece of gold; unallocated gold accounts provide a claim against the account operator to deliver gold. - Allocated gold accounts are monetary gold when held by monetary authorities as reserve assets, or nonfinancial assets when not held as reserve assets. - Unallocated gold accounts that give title to claim delivery of gold are monetary gold when held as reserve assets; unallocated gold account assets not held as reserve assets, and all unallocated gold account liabilities, are classified as deposits in foreign currency. - The same principles apply to unallocated accounts for other precious metals. - Nonmonetary gold (bullion, gold powder, unwrought or semi-manufactured forms, or gold coins) may be held as a store of value or for industrial purposes; central bank gold not held as reserve assets should be classified as nonmonetary gold. - Special Drawing Rights (SDRs) [F12]: - SDRs are international reserve assets created by the IMF and allocated to its members that are SDR Department participants to supplement existing official reserves. - SDRs are held by member countries (central banks or central governments) that participate in the SDR Department, by the IMF through the General Resources Account (GRA), and by international organizations and monetary institutions prescribed by the IMF. - SDRs are transferable among SDR Department participants, prescribed holders, and the IMF GRA. - SDR holdings represent assured and unconditional rights to obtain freely usable currency. - SDRs are assets representing claims on the SDR Department participants collectively and not on the IMF. - SDR holdings and SDR allocations should be recorded as gross assets and liabilities in the balance sheet of the entity that under domestic law is responsible for a member’s SDR Department positions, usually the central bank and in some cases the central government. - Allocations of SDRs increase claims on nonresidents (reserve assets) and liabilities to nonresidents (foreign liabilities), initially by the same amount. - SDR allocations are classified as debt liabilities to nonresidents because (1) interest is payable to the SDR Department on the cumulative allocation, and arrears arise if payments are not made on time; and (2) a country would be required to repay its allocation of SDRs in certain circumstances such as upon termination of participation in the SDR Department, cancellation of SDRs, or upon liquidation of the SDR Department. ### B. Legal and Economic Ownership - Two types of ownership in macroeconomic statistics: - Legal owner: institutional unit entitled by law and sustainable under the law to claim associated benefits. - Economic owner: institutional unit entitled to claim benefits associated with use by virtue of accepting the associated risks. - Every asset and liability has both legal and economic owners; usually they coincide. - When legal and economic owners differ: - The legal owner has passed the risk and associated benefits to the economic owner. - In monetary and financial statistics, references to “holder(s)”, “holding(s)”, “ownership,” or “owner” generally refer to the economic owner when legal and economic owners differ. - Examples: - Financial leases: change of economic ownership while legal ownership remains unchanged. - Repurchase agreements: change in legal ownership without change in economic ownership. ### Classification scheme (2008 SNA) and main financial-asset categories - The 2008 SNA classification scheme is used to classify financial assets and liabilities. - Table 4.1 — Classification of main financial assets (2008 SNA codes shown in square brackets): - Monetary gold and Special Drawing Rights [F1] — (1993 SNA: Monetary gold and Special Drawing Rights) - Currency and deposits [F2] — (1993 SNA: Currency and deposits) - Debt securities [F3] — (1993 SNA: Securities other than shares) - Loans [F4] — (1993 SNA: Loans) - Equity and investment fund shares [F5] — (1993 SNA: Shares and other equities) - Insurance, pension, and standardized guarantee schemes [F6] — (1993 SNA: Insurance technical reserves) - Financial derivatives and employee stock options (ESOs) [F7] — (1993 SNA: Financial derivatives) - Other accounts receivable/payable [F8] — (1993 SNA: Other accounts receivable/payable) ### B. Currency and Deposits - Currency [F21]: - Consists of notes and coins of fixed nominal values issued or authorized by central banks or governments. - Divided into domestic currency and foreign currency. - Domestic currency: legal tender in the economy issued by the central bank or government of that economy or of the common currency area to which the economy belongs. - Currencies not meeting that definition are foreign currencies to that economy, representing claims on nonresident central banks or governments. - Gold or precious metal coins held for intrinsic value, and commemorative coins held for numismatic value, if not in active circulation should be classified as nonfinancial assets. - Commemorative coins that differ only slightly from standard coins, are issued at or near face value, are fungible with standard coins, and for which the issuing authority has a liability to redeem them, are classified as currency. - Central bank or central government holdings of unissued currency are nonfinancial assets and are valued at cost. - Deposits [F2]: - Defined as nonnegotiable contracts representing placement of funds available for later withdrawal; usually standard contracts open to the public. - Deposits include all claims that (1) are on the central bank, other depository corporations (ODCs), other financial corporations (OFCs), and, in some cases, other institutional units; and (2) are represented by evidence of deposit. - Deposit category comprises transferable deposits and other (nontransferable) deposits. - Transferable deposits [F22]: - Comprise all deposits that (1) are exchangeable for banknotes and coins on demand at par and without penalty or restriction; and (2) are directly usable for making payments to third parties by check, draft, giro order, direct debit/credit or other direct payment facility. - Judgment is required in national contexts to decide classification for deposits with limited transferability features; usually such deposits are treated as other deposits. - Special cases: - Cashier’s checks: included within transferable deposit liabilities of the depository corporation (DC) on which they are written; attributed to the economic sector of the purchaser of the check. - Bank drafts (teller’s checks): reduce deposit liabilities of purchaser and the DC’s deposit holdings at the other DC; included within transferable deposit liabilities of the DC on which the draft is written when presented for payment; while held by purchaser or in transit, not included in broad money. - Deposit overdrafts: outstanding claims from overdrawn deposit accounts should be classified as loans rather than as negative deposit balances. - Traveler’s checks: included within transferable deposit liabilities of the issuing DC. - IMF No. 1 Account and IMF No. 2 Account and IMF Securities Account: deposit liabilities of central banks that are transferable deposits the IMF holds in central banks of member countries; securities substituted for IMF No. 1 Account liabilities should be classified as transferable deposits. - Reserve deposits: deposits at the central bank used by ODCs to satisfy reserve requirements—those that satisfy reserve requirements including any excess reserves based on averaging are classified as transferable deposits unless illiquid; pre-specified fixed required reserves (without averaging), including excess reserves, are classified as other deposits. - Electronic money: payment instrument where monetary value is electronically stored on a device or remotely and represents a claim on the issuer; to qualify as electronic money it must represent general purchasing power and, if usable for direct payments to third parties, qualifies as a transferable deposit. - Other (nontransferable) deposits [F29]: - Comprise all claims represented by evidence of deposit other than transferable deposits. - Include: a. Sight deposits permitting immediate cash withdrawals but not usable for direct payments to third parties. b. Savings deposits that pay interest but cannot be used for direct payments to third parties. c. Fixed-term deposits (term or time deposits) with maturities ranging from a month to a few years; funds withdrawable only after term ends or on predetermined notice. d. Nonnegotiable certificates of deposit. e. Deposits of limited transferability excluded from transferable deposits. f. Transferable deposits posted to depositors’ accounts but not drawable until deposited items are collected. g. FCs’ liabilities in the form of shares arising from members’ deposits that are redeemable immediately or at short notice (but not usable for direct third-party payments). - Note: Deposits called savings deposits but equipped with automatic transfer service features should be classified as transferable deposits. *Monetary and Financial Statistics Manual and Compilation Guide (classification text based on the 2008 SNA).* ### 4.39 In comparison with currency, which has only ### Classification of Financial Assets and Liabilities — Selected Excerpts ### Electronic money and comparison with currency (paragraphs 4.39–4.42) - The Manual contrasts currency, which has only physical security features, with electronic money that uses cryptography to authenticate transactions and to protect confidentiality and integrity of data processing (4.39). - Examples of electronic money include: - The “electronic purse,” where monetary value of small amounts is stored on payment cards for small payments (4.39). - Prepaid cards (except those designed to address specific needs and usable only in a limited way — see paragraph 3.137) (4.39). - Web-based electronic money (such as PayPal, if monetary value is electronically stored) (4.39). - Mobile money, electronic money accessible via a mobile phone or mobile device to make direct payments to third parties (4.39). - Not all electronic payments constitute electronic money: - Credit cards and debit cards are not electronic money because no monetary value is stored on them (4.40). - Store cards are not electronic money (4.40). - Internet-based currency, such as Bitcoins, is not electronic money because it is not issued or authorized by a central bank or government and is not widely accepted as a medium of exchange; Bitcoins are classified as nonfinancial assets (4.40; footnote 15). - Issuers and classification: - Both FCs and NFCs can issue electronic money (4.41). - Regardless of issuing sector, electronic money is classified as deposits rather than currency (4.41). - Circulation types: - Closed circulation: recipients must forward evidence of ownership to the issuer for redemption (4.41). - Open circulation: funds can be transferred through buyer-to-buyer transactions without issuer involvement (less common) (4.41). - Data collection: - For electronic money under closed circulation issued by ODCs, data collection is straightforward because accounting for transactions and balances of electronic money and regular transferable deposits are similar (4.42). - In loading funds to an electronic money device, the ODC depositor acquires electronically stored money on a device (4.42). ### Special asset cases: unallocated precious metal accounts (paragraph 4.44) - Unallocated gold accounts assets, other than monetary gold, are classified as other deposits in foreign currency; all unallocated gold accounts liabilities (including counterpart accounts for monetary gold) are classified as other deposits in foreign currency (4.44). - The same principle applies to unallocated deposit accounts for other precious metals (e.g., silver or platinum) — they are included in foreign currency deposits (4.44). - Allocated deposit accounts for all metals, other than for gold held by monetary authorities as reserve assets, are included in nonfinancial assets (4.44). - Unallocated deposit accounts could conceivably arise for commodities other than precious metals (4.44). ### Interbank positions and sectoral classification (paragraph 4.45) - The 2008 SNA recommends interbank positions in loans and deposits be shown as a separate category of transferable deposits (4.45). - Borrowing and lending within the deposit-taking subsector are of different economic nature from intermediation involving other sectors (4.45). - Monetary statistics classify assets and liabilities (except equity liabilities) by sectors/subsectors of counterparts, identifying inter-DC positions across instrument categories (4.45). - Memorandum items in sectoral balance sheets for the central bank and ODCs separately identify claims on and liabilities to MMFs, allowing compilation of interbank positions as defined in the 2008 SNA (4.45). - When parties are uncertain whether an interbank position is a loan or a deposit, the Manual recommends recording it under other deposits (4.45). ### Restricted deposits (paragraph 4.46) - Definition: Restricted deposits are those for which withdrawals are restricted on the basis of legal, regulatory, policy, or commercial requirements; restrictions do not include agreed maturities of fixed-term deposits (4.46). - Examples of restricted deposits (4.46): - Import deposits required in advance of imports as evidence of available funds (a). - Compulsory savings deposits accessible only after a specified period or only for specified purposes (e.g., home purchase or retirement) (b). - Escrow deposit accounts inaccessible until conditions/obligations fulfilled (c). - Judicial deposits paid to a court in the name and to the credit of such a court (d). - Fiduciary deposits placed with an ODC by a trustee on behalf of a beneficiary (e). - Foreign currency deposits that are blocked (withdrawal allowed only under certain circumstances) because of national policies (f). - Impaired deposits expected to be partially or totally uncollectible (not yet written off), including frozen deposits in FCs under liquidation or reorganization (g). ### Margin deposits and classification (paragraphs 4.47–4.51) - Margins are payments of cash or deposits of collateral covering actual or potential obligations, reflecting counterparty risk; classification depends on whether margins are repayable or nonrepayable (4.47). - Repayable margin (4.48–4.49): - Consists of cash or other collateral deposited to protect a counterparty against default risk; ownership remains with the depositor (4.48). - Classified as repayable if the depositor retains risks and rewards of ownership (e.g., receipt of income, exposure to holding gains/losses) (4.48). - At settlement, repayable margin (or excess over liability owed) is returned to the depositor (4.48). - Repayable margin payments are transactions in deposits, not in the associated financial assets (4.49). - Repayable margin deposits made in cash are classified as other deposits (particularly if issued by ODCs and included in broad money) or as other accounts receivable/payable if placed with financial auxiliaries (4.49). - If repayable margin is made in a non-cash asset (i.e., debt securities), no transaction or new position in stocks is recorded because no change in economic ownership has occurred (4.49). - Nonrepayable margin (4.50): - Are transactions in financial derivatives, not in deposits (4.50). - In organized exchanges, nonrepayable margin is paid daily to meet liabilities from daily marking of derivatives to market value; payments reduce the derivative liability with contra-entry reducing another financial asset (likely currency or deposits) (4.50). - Receipt of nonrepayable margin is recorded as a reduction in the financial derivative asset with contra-entry an increase in another financial asset (probably currency or deposit) (4.50). - Practical issues: - In some countries repayable and nonrepayable margins are recorded in a single account, making distinction difficult; review institutional arrangements and apply the key test of whether the margin is repayable or reflects an effective transfer of ownership (4.51). ### Debt securities: definition, types, and classification (paragraphs 4.52–4.65) - Definition and negotiability (4.52–4.53): - Securities are negotiable financial claims; an asset is negotiable if legal ownership is readily capable of transfer by delivery or endorsement (4.52). - Securities are negotiable instruments designed to be traded on organized exchanges or OTC markets; negotiability is legal form–based and does not require evidence of actual trading (4.52). - Securities comprise debt securities and equity securities; debt securities are discussed in this subsection (4.53). - Debt securities defined (4.54): - Debt securities are negotiable financial instruments serving as evidence of a debt, including bills, bonds, notes, negotiable certificates of deposit, commercial paper, debentures, asset-backed securities, and similar instruments usually traded in financial markets (4.54). - Common issuance bases (4.55): - Coupon basis: periodic interest (coupon) payments during life and principal at maturity (a). - Amortized basis: interest and principal paid in installments during life (b). - Discount or zero coupon basis: issued at a price less than face value; interest and principal payable at maturity (c). - Deep discount basis: issued at less than face value; principal and substantial part of interest payable at maturity (d). - Indexed basis: interest and/or principal tied to a reference index (e). - Bills, bonds, debentures (4.57–4.58): - Bills: give holders unconditional right to stated fixed sums on a specified date; generally issued short-term at discount to face value; examples include treasury bills, negotiable certificates of deposit, promissory notes, bankers’ acceptances, commercial paper (4.57). - Bonds and debentures: long-term debt securities giving holders unconditional right to fixed or contractually determined variable payments on specified date(s); earning of interest not dependent on debtors’ earnings (4.58). - Negotiable loans and preferred shares (4.59–4.60): - Loans that have become negotiable de facto should be reclassified from loans to debt securities; reclassification requires evidence of secondary market trading, market makers, and frequent quotations such as bid-offer spreads (4.59). - Nonparticipating preferred stocks that pay a fixed income and do not provide participation in residual value on dissolution are included in debt securities (4.60). - Convertible bonds and bankers’ acceptances (4.61–4.62): - Convertible bonds are fixed interest rate bonds convertible into equity and are classified as debt securities prior to conversion (4.61). - Bankers’ acceptances (BA) are treated as debt securities from time of acceptance and must be tradable; BA represents an unconditional claim on holder and unconditional liability of accepting FC (4.62). - Private placements and structured securities (4.63–4.64): - Private placements: issuer sells directly to a small number of investors without public offering; if traded among investors, negotiability criterion may be met (4.63). - Structured debt securities combine a debt security or basket with an embedded financial derivative; if inseparable, the instrument is valued/classified according to primary characteristics as debt security or financial derivative (4.64). - Depository receipts (4.65): - Depository receipts (e.g., ADRs, GDRs) allow a nonresident institutional unit to introduce its equity or debt into another market via a resident deposit-taking corporation acquiring underlying securities and issuing receipts; DRs are classified according to the underlying financial instrument (debt securities or equity) because the deposit-taking corporation does not take the underlying securities onto its balance sheet (4.65). *Monetary and Financial Statistics Manual and Compilation Guide — selected excerpts.* ### 4.66 A promissory note is an unconditional promise ### mfsmcg-final - 4.66 A promissory note is an unconditional promise ### Promissory notes and bills (paragraph 4.66) - A promissory note is an unconditional promise to pay a certain sum on demand or on a specified date. - Promissory notes are a type of debt securities within the category "bills", which give holders the unconditional rights to receive the stated sums on a specified date. - Bills are issued and usually traded in organized markets at a discount to face value depending on the rate of interest and the time to maturity. ### Securitization and asset‑backed debt securities (paragraph 4.67) - Securitization involves issuance of debt securities backed by financial assets (e.g., mortgage loans, claims on credit card holders, car loans, commercial and industrial loans), nonfinancial assets, or future income streams (e.g., music record or ticket sales). - Future income streams used in securitization transactions are not recognized as an asset in macroeconomic statistics. - Securitization provides liquidity for otherwise less liquid assets; for example, an originating mortgage lender can sell a loan portfolio to a special purpose vehicle that issues securities to investors backed by the loans. - Securitization can also occur without creation of a separate entity if the originator issues asset‑backed securities on its own books. ### Indexed securities (paragraph 4.68) - Indexed debt securities link coupon payments, principal, or both to an index such as a price index, an interest rate, an exchange rate index, or the price of a commodity. - These securities are classified as variable‑rate instruments. - Recording of revaluations and interest for indexed financial instruments is discussed in Chapter 5 (paragraphs 5.53–5.59 and Annex 5.2, paragraph 5.271). ### Loans: definition and scope (paragraphs 4.69–4.70) - Loans are financial assets that are (1) created when a creditor lends funds directly to a debtor, and (2) evidenced by non‑negotiable documents. - The loans category includes overdrafts, mortgage loans, installment loans, hire‑purchase credit, loans to finance trade credit, and payday loans. - Claims on, or liabilities to, the IMF that are in the form of loans are included in the loans category. - An overdraft arising from the overdraft facility of a transferable deposit account is classified as a loan. - Repurchase agreements, gold swaps, and financing by means of a financial lease are classified as loans, with few exceptions. - Undrawn lines of credit are not recognized as an asset; accounts receivable/payable and loans that have become debt securities are excluded from loans. ### Repurchase agreements (repos), buy‑sell‑backs, and statistical treatment (paragraphs 4.71–4.78) - A securities repurchase agreement (repo) is the sale of securities for cash at a specified price with a commitment to repurchase the same or similar securities at a fixed price on a specified future date or with an “open” maturity. - A repo is viewed as a repo by the securities provider (cash taker) and as a reverse repo by the cash provider (securities taker). - Legal ownership of securities is conveyed to the cash provider, permitting on‑selling, but economic ownership is retained by the cash taker (securities provider), who retains market risk and ownership benefits other than the right of sale. - Repos are economically similar to loans collateralized by the underlying securities. - Repos can be used for financing acquisition of the underlying instrument, cash borrowing, or covering a short position; substitution of securities may be permitted; haircuts and margin deposits protect against adverse price movements and counterparty risk. - A buy‑sell‑back has the same economic effect as a repo but consists of two legally independent contracts (spot sale and forward purchase), whereas repo transactions are under a single contract. - In macroeconomic statistics, repos are treated as collateralized loans or deposits rather than as outright sales of securities; generally classified as loans. - Repos that resemble deposits (where the DC is the cash taker) should be classified as other deposits and may be included in broad money; securities remain on the balance sheet of the cash taker and a loan or deposit is recorded as an asset of the cash provider and a liability of the cash taker. - Securities acquired under reverse repos may be repoed again; securities may support two loan transactions without double‑counting the security on the balance sheet of the original cash taker. - If a cash provider acquires a security under a reverse repo and on‑sells it outright, the cash provider should record the transaction in the security and the outright purchaser should also record it; this on‑selling is treated as "short selling" and results in a recorded short position in the security for the on‑seller. - Recording a negative position for short sales ensures aggregate consistency and overcomes double‑counting that would otherwise arise. - Recommended statistics collection: when a repo (reverse repo) is undertaken, data on the counterparty (resident sector or nonresident), and the instrument and sector of issuer (e.g., government debt security) should be made available to compilers for appropriate sectoral balance‑sheet recording. ### Tri‑party repos (paragraph 4.79) - A tri‑party repo is mediated by a third party (typically a custodian bank or central counterparty) to reduce counterparty risk for the lender. - Structure: (1) borrower enters into a repurchase agreement with the third party pledging collateral; (2) lender enters into a reverse repurchase agreement with the third party; (3) third party administers the transaction and collateral, acting as direct counterparty to seller and buyer and assuming the borrower's default risk. ### Securities lending and treatment (paragraphs 4.80–4.83) - Securities lending transfers securities from a holder to a borrower with the stipulation that the same (or similar) securities be returned on a specified date or on demand; full legal ownership is transferred but economic ownership remains with the original owner. - Securities lending is used to raise return on securities and/or reduce custody costs. - Two major categories of securities lending are delineated by collateral type: cash collateral and securities (or no collateral). - The borrower usually provides collateral equal to or greater than the value of the lent securities. - Securities lending backed by cash collateral is economically similar to a repo and is treated as a collateralized loan. - Securities lending backed by non‑cash collateral (or not collateralized) should not be treated as a transaction and should be recorded off balance sheet by both lender and borrower. - If securities are on‑sold outright by the borrower, the borrower should record a security transaction and a reduction in security assets, resulting in a "short" position; this approach overcomes aggregate double‑counting similar to repos. - Additional information may be required when a security acquired under a securities lending transaction has been on‑sold to determine who is holding the instrument. ### Gold swaps and gold loans (paragraphs 4.85–4.87) - A gold swap involves exchange of gold for foreign exchange with agreement to reverse the transaction at an agreed future date at an agreed gold price so that the original owner remains exposed to the gold market; gold swaps are forms of repurchase agreements typically undertaken between central banks or between a central bank and other types of FCs and should be treated similarly to repos. - Gold swaps that exchange gold for foreign exchange should be recorded as collateralized loans; gold remains on the balance sheet of the original owner and is not taken onto the balance sheet of the cash provider. - If gold received under a gold swap is swapped again, it is treated again as a collateralized loan by both parties. - If gold received under a gold swap is sold outright by a nonmonetary authority, the seller should record a "short" holding of nonmonetary gold and the purchaser should record a holding of nonmonetary gold. - If gold received under a gold swap is sold outright by a monetary authority, it should record on its balance sheet a negative position in monetary gold; the transaction will involve demonetization if the counterparty is not a monetary authority. - Gold loans (or gold deposits) are undertaken to obtain an income return on gold; gold placed on loan may be monetary gold or nonmonetary gold. - Under gold loans the gold remains on the books of the gold lender, who retains exposure to market price movements; gold loans are not backed by cash collateral in some cases and may have no collateral, but the gold may be on‑sold by the borrower. - The Manual (and the 2008 SNA and other statistical manuals) recommends that gold loans be treated as off‑balance‑sheet items (i.e., not recorded as assets or liabilities, and not recorded as transactions). - If gold is on‑sold by the borrower, the on‑selling party should record a gold transaction in the same manner as for gold swaps. ### Reconciliation with economic ownership and the 2008 SNA (paragraph 4.88) - Recording repos, securities lending, gold swaps and gold loans under the collateralized loan approach aligns with economic ownership principles in the 2008 SNA. ### Financial leases: economic substance and statistical treatment (paragraphs 4.89–4.90) - A financial lease is a contract where the lessor (legal owner) conveys substantially all risks and rewards of ownership to the lessee; the lessee becomes the economic owner of the asset. - Financial leases involve imputing a loan: the lessor is shown as making a loan to the lessee, who uses it to acquire the asset. - The leased asset is shown on the balance sheet of the lessee, not the lessor; the corresponding imputed loan is an asset of the lessor and a liability of the lessee. - Payments under a financial lease are treated as payments of interest (possibly a service charge for FISIM) and repayments of principal on the imputed loan, not as rentals. - The statistical treatment moves away from legal form to capture economic substance by treating assets under a financial lease as if acquired and owned by the user financed with a loan (example: bank leases cargo vessel to transportation company; company is deemed economic owner, records vessel as asset and a loan as liability). *Monetary and Financial Statistics Manual and Compilation Guide (paragraphs 4.66–4.90).* ### 4.91 Examples of situations that would usually lead to ### 4.91 Examples of situations that would usually lead to a recording of a financial lease include: ### Financial lease (criteria and interpretation) - A recording of a financial lease occurs when any of the following apply: - The lease transfers legal ownership to the lessee at the end of the lease term. - The lease has the option for the lessee to acquire legal ownership at the end of the lease term at a price that is sufficiently low that the exercise of the option is reasonably certain. - The lease term is for the major part of the economic life of the asset. - At inception, the present value of the lease payments amount to substantially all of the value of the asset. - If the lessee can cancel the lease, the lessor’s losses are borne by the lessee. - Gains or losses in the residual value of the residual asset accrue to the lessee. - The lessee has the ability to continue the lease for a secondary period for a payment substantially lower than market value. - These contractual conditions may not conclusively demonstrate that substantially all risks have been conveyed; if the asset is conveyed at the end of the lease at its fair value at that time, the lessor retains substantial ownership risks and the lease is classified as an operating lease. - Financial leases are also called finance leases, capital leases, or full-payout leases; accounting practices recognize financial leases in the same way as in macroeconomic statistics. ### Credit card debt - Credit cards serve both as a means of payment and financing purchases. - Cardholders typically do not incur financing charges if the entire balance due is paid within each billing cycle, typically monthly. - Cardholders who carry balances month-to-month are charged interest on all outstanding balances, including balances from new purchases during the month leading up to the billing cycle. - All credit card balances should be classified as loans, and interest accrued and not yet paid are recorded as for loans. ### Loan participations (structure and accounting entries) - A loan participation occurs when two or more investors jointly fund a loan to a single borrower via syndication or by purchasing portions of an outstanding loan. - Each syndicate member records the amount of the loan participation that the member has funded. - A loan participation should be disaggregated by economic sector of the debtor and each creditor. - Debtor-creditor relationships are determined by contractual arrangements: - Assignment basis: - Each participant classifies the amount funded as a direct claim on the original debtor. - The debtor records the loan participations as individual loans, disaggregated by economic sector of the creditor. - The originator shows a loan claim on the debtor only to the extent the originator retained a participation. - Nonassignment basis: - The original creditor/debtor relationship remains intact. - The original creditor continues to record a loan claim on the debtor for the full outstanding amount. - The debtor continues to record a loan to the original creditor in the full outstanding amount. - The original creditor records a loan liability to each participant for the outstanding amount of participation, classified by sector of the participant. - Each participant shows the outstanding participation as a loan claim on the original creditor, classified by sector of the original creditor. - An FC may specialize in originating loans to be sold shortly after origination to another FC that intends to hold the loans to maturity. - Loan participations held to maturity after initial purchase should continue to be classified as loans. - If structured as a negotiable instrument, all syndicate participants should classify the loan participations as debt securities, resulting in a single classification as debt securities for the entire syndicated loan. - Collection and disbursement of interest and principal are usually on a pass-through basis; the FC that sold participations (or its agent) records receivables from the debtor and passes amounts payable to participants for a fee. ### Bills of exchange and acceptances (definitions and classifications) - A bill of exchange is an unconditional order requiring payment on demand or at a fixed/determinable future time to order or bearer; called sight drafts or time drafts depending on timing. - When a bill of exchange is accepted (stamped and signed by the drawee), it becomes a promissory note and is designated an acceptance. - An acceptance is classified within loans, debt securities, or trade credit depending on instrument characteristics. - Acceptances eligible for rediscounting in a secondary market or by a central bank (bankers’ acceptances) are usually classified as debt securities. - Acceptances ineligible for rediscounting are designated other acceptances and classified as loans or trade credit depending on nature. - Loans and debt securities created through acceptances include: - Exporter credit: drawer (exporter) holds acceptance and classifies it as a trade credit claim on the drawee. - Export bill: drawer may rediscount acceptance at a DC; if ineligible for further rediscounting, classify as a loan extended by the DC to the drawee; if eligible for rediscounting in BA market or central bank, classify as debt securities attributed to sector of the drawee (original issuer). - Import bill: importer arranges acceptance funded by an ODC; credit advanced to importer is classified as a loan by the ODC and remains in the DC’s loan portfolio until repaid. - Banker’s acceptances: export/import bills meeting BA eligibility are sold to BA investors and classified by debtor sector (e.g., debt securities issued by NFCs if importer is an NFC). - Own acceptances: a DC repurchasing its own acceptances should deduct holdings of own acceptances from the liability account for bankers’ acceptance outstanding; repurchased own acceptances can be reintroduced as debt securities if rediscounted during the remaining term to maturity. ### Nonperforming loans - A loan is nonperforming when: - payments of interest and/or principal are past due by 90 days or more; or - interest payments equal to 90 days or more have been capitalized or delayed by agreement; or - evidence exists to reclassify a loan as nonperforming even without a 90-day past due payment (e.g., debtor files for bankruptcy). - Once classified as nonperforming, the loan (or any replacement loans) should remain classified as such until payments are received or the principal is written off on this or subsequent replacement loans. - Impaired loan trading: - Loans sold in secondary markets range from high-quality to nonperforming or otherwise impaired loans. - Impaired loans often sell at deep-discounted prices (well below nominal value or carrying amount). - These instruments should be classified as loans even if sold at a fraction of nominal value unless there is evidence of secondary-market trading with market makers and frequent quotations; in that latter case they are classified as debt securities and recorded at market value. ### Distinction between deposits and loans (principles and indicators) - Principle: all financial instruments usable for direct payments to third parties should be classified as transferable deposits regardless of designation (checking, current, giro, nostro/vostro, etc.). - Transferable deposits cannot be classified as loans because loans are not usable for payments to third parties. - Differentiation between other deposits and loans can be difficult, especially interbank; classification is based on documented instrument characteristics, focusing on whether creditor has option of early withdrawal. - If the creditor does not have an option of early withdrawal, classify as a loan unless the creditor is a household or a nonfinancial corporation. - The instrument should have the same classification in the accounts of creditor (asset) and debtor (liability). ### Other deposits (specific cases and treatments) - Deposits included in broad money: any instrument included in broad money is classified as an other deposit; broad money does not include a separate component for loans. - Zero-interest deposits: non-interest bearing instruments do not raise the loan vs deposit issue; loans are generally interest-bearing. The most common zero-interest category is transferable deposits. - Deposits with non-formula-based variable interest rates: relates to savings accounts where interest-rate changes are at DC discretion and apply to all accounts in the category; this mechanism typically does not exist for loans. - Insured deposits: deposit insurance typically provided by an institutional unit (insuring agency) that covers broad categories of DC liabilities; credit guarantees apply to individual loans or portfolios and differ in institutional arrangements and asset coverage. - Repurchase agreements: classified as other deposits if contracted with money holders and the DC is the cash taker; all other repurchase agreements (and all collateral-based security lending arrangements) are classified as loans. - Margin deposits: margin deposits held at DCs are classified as deposits. Margin deposits held at a financial auxiliary are classified as deposits if the auxiliary’s general ledger includes deposit accounts; otherwise margin deposits may be included in Other accounts payable [MS]—other. Margin accounts are not classified as loans. - Deposits incorporated in residential mortgage loan contracts (offset mortgages): combine a mortgage loan and deposit accounts held at the lending institution; deposit balances are deducted from outstanding mortgage amounts for payment calculation. The deposit and loan components are recorded separately in Deposits and Loans, respectively. ### Loans (features distinguishing them from deposits) - Collateralized loans: many business, commercial and residential mortgage loans, and consumer loans are backed by collateral; deposit contracts do not include collateral requirements. - Loans with protective covenants: may require borrower actions or restrict borrower actions without lender approval; similar stipulations do not exist for deposits. - Loans with supporting balance requirements: loan contracts can require borrowers to maintain required deposit amounts in the lending DC; similar requirements do not exist for deposits. - Loans backed by letters of credit and other trade-related documentation: trade bills, letters of credit, and other trade documentation facilitate lending for imports and are classified as loans. Bankers’ acceptances that are tradable should be classified as debt securities. *Monetary and Financial Statistics Manual and Compilation Guide* ### 4.115 Loans made under commitment. Loan commit- ### 4.115 Loans made under commitment. Loan commitments ### Loans made under commitment - Loan commitments originated as informal credit lines for corporate customers with adequate deposit balances and are now firm agreements that specify lending institutions’ obligations to provide credit in the future, including the amount of credit available and the interest rate to be charged, in return for customers’ payments of fees to guarantee credit availability. - All credit extended under informal credit lines or formal loan commitments (including revolving credit arrangements) are classified as loans. ### Distinction between loans and debt securities - The defining feature distinguishing loans and debt securities is negotiability: - Loans are non-negotiable financial contracts evidenced by nonnegotiable documents. - Debt securities are negotiable instruments. - Loans that become negotiable or tradable should be reclassified from loans to debt securities (see paragraph 4.59). - Debt securities include loans that have become negotiable de facto; such conversions are recorded as two OCVA flows: liquidation of the loan and creation of the new debt security (see paragraph 5.21e). - Footnote/side note: Similar to the loans/debt securities distinction, the defining feature that distinguishes deposits and debt securities is that deposits are nonnegotiable financial contracts (evidenced by nonnegotiable documents), whereas debt securities are negotiable instruments. ### Equity and investment fund shares — definitions and subcategories - Equity [F51] - Equity comprises all instruments and records acknowledging claims on the residual value of a corporation or quasi-corporation after creditors’ claims are met; equity is treated as a liability of the issuing institutional unit. - Ownership of equity is usually evidenced by shares, stocks, participations, DRs, or similar documents; shares and stocks have the same meaning. - Participating preferred shares provide participation in residual value on dissolution and are equity securities whether or not income is fixed or formula-determined. - Shares (common stock) may be widely held, closely held, held within a family, or held by a single corporation or individual; they may be traded on exchanges, OTC markets, or not traded. - Share holdings of FCs include shares of their own subsidiaries and shares of unrelated corporations; FCs may hold shares in DCs, OFCs, NFCs, and foreign corporations, subject to national law and regulation. - Reacquired shares (treasury shares) are deducted from funds contributed by owners within the liability account for Equity and investment fund shares (not classified as asset holdings). - 2008 SNA subdivision (not adopted for monetary statistics in this Manual) - Equities are subdivided into: a. Listed shares b. Unlisted shares c. Other equity. - Both listed and unlisted shares are negotiable and therefore equity securities. - Listed shares are equity securities listed on an exchange (quoted shares) with readily available current market prices. - Unlisted shares (private equity, venture capital) are equity securities not listed on an exchange; they tend to be issued by subsidiaries and smaller enterprises. - Other equity is equity not in the form of securities and can include equity in quasi-corporations (branches, trusts, partnerships), unincorporated funds, notional units for ownership of real estate and natural resources, and ownership of some international organizations and currency union central banks. - Other equity principally reflects accumulation of proprietor’s net additions to equity of quasi-corporate enterprises: (1) funds or resources owners provide for capital investment; (2) accumulated retained earnings; less (3) withdrawals from quasi-corporate enterprises. - For quasi-corporations, all equity (including retained earnings and reserves) is assumed to be held by the owners; owner financing via loans, deposits, or purchase of debt securities should be recorded according to the contractual instrument (loan, deposit, etc.), not as additions to equity. - Shares include DRs if the underlying instruments are shares (see paragraph 4.65). ### Equity liability [MS] (monetary statistics context) - In monetary statistics (but not financial statistics), FCs’ total liabilities in the form of equity (except MMF and non-MMF investment fund shares) are recorded at book value, defined as the difference between the value of balance sheet assets and liabilities other than equity liabilities; labeled “Equity liability [MS]” in the Manual. - For monetary statistics, Equity liability [MS] can be divided into components: a. Funds contributed by owners: total amounts from initial and subsequent issuance of shares, stocks, or other ownership forms. b. Retained earnings: all previous years’ after-tax profits not distributed or appropriated as general or special reserves. c. Current year result: accumulation of profit or loss since the beginning of the fiscal year. d. General and special reserves: appropriations of retained earnings. e. Valuation adjustment: net counterpart to changes in the value of assets and liabilities on FCs’ balance sheets, excluding gains or losses recorded in net profit or loss under IFRSs or national financial reporting standards (see paragraph 2.58). - Equity liability [MS] is reconciled with 2008 SNA concepts (presented in Figure 2.2) and is consistent with the 2008 SNA valuation approach for unlisted equity called own funds at book value (paragraphs 13.71e and 13.88), applicable for quasi-corporations such as foreign-owned branches. - Recording market value of equity liability by counterparty sector on a frequent basis presents difficulties for monetary statistics compilers because primary accounting records of FCs do not provide such information, although estimation may be made less frequently. - The accounting rules for Equity liability [MS] are described in Chapter 5 of the Manual. ### Investment fund shares or units [F52] - This category includes shares or units issued by all kinds of investment funds, including MMFs and non-MMF investment funds (see paragraphs 3.144–3.146 and 3.149–3.151). - Holders of units acquire participation across all instruments in the fund, spreading risk. - MMF shares or units (paragraph 3.146) - MMF shares—with or without third-party payment features—are close substitutes for deposits and are included in broad money. - For monetary statistics, MMF shares or units should be separately identified on asset and liability sides of sectoral balance sheets, with further disaggregation on the liability side between MMF shares included in or excluded from broad money based on the creditor sector, and sectored by counterpart holding sector. - Non-MMF investment fund shares or units (paragraph 3.149) - Allow investors to acquire participation in a pool of financial assets and possibly real estate. - Shares or units are not transferable and typically are not regarded as substitutes for deposits. - For monetary statistics, non-MMF investment fund shares or units should be separately identified on asset and liability sides of sectoral balance sheets, with further disaggregation on the liability side by counterpart holding sector. ### Insurance, pension, and standardized guarantee schemes [F6] (IPSGS) - IPSGS function as redistribution of income or wealth mediated by financial institutions; redistribution may be between units in the same period or across periods. - The section focuses on classification of asset and liability accounts of insurance corporations, pension funds, and standardized guarantee schemes included in the OFCs subsector, as reflected in sectoral balance sheets in monetary statistics; these accounts receive separate treatment due to specialized national reporting and macroeconomic statistics treatment. - IPSGS are usually intermediated by FCs. Five categories of reserves applicable to IPSGS: a. Nonlife insurance technical reserves b. Life insurance and annuities entitlements c. Pension entitlements and nonpension entitlements d. Claims of pension funds on pension managers e. Provisions for calls under standardized guarantees. - These reserves, entitlements, and provisions (except claims of pension funds on the pension manager) represent liabilities of the insurer, pension fund, or issuer and corresponding assets of policyholders or beneficiaries. Only certain items may appear as assets in FCs’ balance sheets: nonlife insurance technical reserves, claims of pension funds on the pension manager, and provisions for calls under standardized guarantees. Only life insurance, annuity, and pension entitlements may appear as liabilities in FCs’ balance sheets where beneficiaries and policyholders are households. - Insurers, pension funds, and guarantors typically hold assets to meet obligations, but these are not necessarily equal to provision and entitlement liabilities; aggregate value of liabilities can be estimated actuarially. - In macroeconomic statistics, "insurance" is treated as nonlife insurance; term insurance providing benefit only on death within a given period is regarded as nonlife insurance. ### Nonlife insurance technical reserves [F61] - Nonlife insurance covers loss or damage from accident, fire, property loss, health-related expenses, etc. - Nonlife insurance technical reserves consist of: a. Prepayments of net nonlife insurance premiums. - Buyers prepay premiums at the beginning of coverage; insurance providers earn income on an accrual (pro-rated) basis. - Category includes prepayments for a wide variety of events and less-common premium payments, including reinsurance and deposit insurance. - Includes prepayments insurance corporations have made to other insurance corporations (e.g., a life insurer’s prepayments for fire insurance from a nonlife insurer). - Includes reserves for unexpired risks created at the insurer’s discretion. - Prepayment of nonlife insurance premiums is one of the IPSGS categories for which there are both asset and liability positions in FCs’ sectoral balance sheets: - Assets cover FCs’ prepayments to resident and nonresident insurers. - Liabilities cover prepayments received from resident and nonresident policyholders by resident insurance corporations. - Prepayments in the IPSGS asset account need disaggregation by prepayments made to resident (with breakdowns into ODCs and OFCs) and nonresident insurers to facilitate compilation of total claims on and liabilities to resident institutional sectors and nonresidents for consolidated surveys from sectoral balance sheets (Chapter 7). b. Reserves to meet outstanding nonlife insurance claims. - Funds set aside to cover amounts expected to be paid on valid but unsettled or disputed claims; these reserves are assets of beneficiaries and liabilities of insurance corporations until paid. - Other reserves (e.g., equalization reserves) are recognized as liabilities and corresponding assets only when an event gives rise to a liability; otherwise equalization reserves are internal accounting entries recorded under general and special reserves component of equity and do not represent existing corresponding claims for policyholders. - Footnote/side note: ODCs may also engage in insurance business. *Monetary and Financial Statistics Manual and Compilation Guide, paragraphs 4.115–4.143.* ### 4.144 For nonlife insurance, investment income ### For nonlife insurance, investment income ### Treatment of investment income for nonlife insurance - Investment income attributable to policyholders generated from the assets corresponding to nonlife insurance technical reserves is treated as if it were (1) payable by the insurance corporations to policyholders, and (2) payable back to the insurance corporations in the form of premium supplements. ### Reinsurance - Reinsurance is insurance where both parties to the policy are providers of insurance services; it allows insurance risk to be transferred from one insurer to another. - Many insurers act as both direct insurers and reinsurers; there may be chains of transferring risk from insurer to reinsurer to secondary reinsurer and so on. - Transactions and positions between the direct insurer and the reinsurer should be recorded as a separate set of transactions and positions rather than on a net basis—no consolidation takes place between the transactions of the direct insurer as issuer of policies to clients and the holder of a policy with the reinsurer. - The claim of the original issuer of policies on the reinsurance corporation is not netted out from its liabilities to beneficiaries. - Reinsurance activities are classified and recorded in the same way as direct nonlife insurance. ### Life insurance and annuity entitlements [F62] - Life insurance and annuities entitlements are financial claims policyholders have against an institutional unit offering life insurance or providing annuities. - This category consists of reserves of life insurance corporations and annuity providers for prepaid premiums and accrued liabilities to life insurance policyholders and beneficiaries of annuities. - Life insurance and annuity entitlements provide benefits to policyholders upon expiration of the policy or compensate beneficiaries upon the death of policyholders and are kept separate from shareholders’ funds. - Annuity entitlements are the actuarial calculation of the present value of the obligations to pay future income until the death of the beneficiaries. - These entitlements are regarded as liabilities of the life insurance corporations and annuity providers, and assets of the policyholders and beneficiaries. - For life insurance, the income earned by insurance corporations from their holdings of assets to meet their liabilities (which equal the present value of expected claims from existing policyholders) is attributed to the policyholders as investment income on their claims on life insurance corporations, and then treated as being paid back to the insurance company as premium supplements. ### Pension entitlements [F63] and nonpension entitlements [F65] - Pension entitlements are used to provide retirement benefits for specific groups of employees and show the extent of financial claims that both existing and future pensioners hold against either their employer or a fund designated by the employer. - The category includes funded liabilities of pension funds and liabilities of unfunded employment-related pension schemes. - Some schemes may have related liabilities, such as for health benefits, included under entitlements to nonpension benefits; for practical reasons, liabilities for nonpension entitlements may be included with those for pension entitlements. - Net implicit obligations for future social security benefits (other than employment-related retirement benefits) are not recognized as financial assets or liabilities because there is no direct link between contributions made and benefits eventually payable, and benefits may be varied to achieve policy objectives unrelated to social protection schemes. - If a social security fund also acts as an employment-related pension scheme, those pension obligations (but not implicit social security obligations) are included under this category. ### Claims of pension funds on the pension manager [F64] - An employer may contract with a third party to administer pension funds; if the employer continues to determine terms and retain responsibility for funding any deficit and the right to retain any excess funding, the employer is the pension manager and the third party is the pension administrator. - If the employer passes risks and responsibilities for any funding deficit to the third party in return for the right of the third party to retain any excess, the third party becomes the pension manager as well as the administrator. - When the pension manager is a unit different from the administrator and responsibility for any deficit or claims on any excess rests with the pension manager, the claim of the defined benefit pension fund on the pension manager is shown under this category. ### Provisions for calls under standardized guarantees [F66] - Provisions for calls under standardized guarantees consist of prepayments of net fees and provisions to meet outstanding calls under standardized guarantees. - Standardized guarantees are issued in large numbers, usually for fairly small amounts, along identical lines; they are not provided by means of a financial derivative nor in the form of a one-off guarantee, but the probability of default can be well established. - These guarantees cover similar types of credit risk for a large number of cases (examples include guarantees issued by governments on export credit or student loans). - It is possible to make a reliable estimate of how many out of a large number of such loans will default, enabling the guarantor to determine suitable fees on the same principle as an insurance corporation. - Transactions and stocks for provisions for calls under standardized guarantee schemes are similar to reserves for nonlife insurance; they include unearned fees and calls not yet settled. - Standardized guarantees contrast with: - (a) guarantees that meet the definition of financial derivatives (as defined in paragraph 4.156) that protect the lender on a guarantee-by-guarantee basis and include CDSs as options (see paragraphs 4.180 and 4.182); and - (b) one-off guarantees, which are not recognized as liabilities on the balance sheet of the guarantor until their activation and are off-balance-sheet contingent assets until activated. - Footnote: One-off guarantees granted by governments to corporations in financial distress and that have a very high likelihood of being called are, however, treated as if they were activated at inception.50 ### Financial derivatives and employee stock options [F7] - Financial derivatives and employee stock options (ESOs) are financial assets and liabilities that have similar features, such as a strike price and some of the same risk elements; ESOs are designed to be a form of remuneration. - A financial derivatives contract is a financial instrument linked to another specific financial instrument, indicator, or commodity, and through which specific financial risks (e.g., interest rate risk, foreign exchange risk, equity and commodity price risk, credit risk) can be traded in their own right in financial markets. - The value of a financial derivative derives from the price of an underlying item: the reference price, which may relate to a commodity, a financial asset, an interest rate, an exchange rate, another derivative, or a spread between two prices; the contract may also refer to an index or a basket of prices. - No principal amount is advanced that has to be repaid, and no investment income accrues. - Financial derivatives are used for risk management, hedging, arbitrage between markets, and speculation. - Valuation of financial derivatives is covered in Chapter 5. ### Characteristics and settlement of financial derivatives - The risk embodied in a financial derivative contract can be traded either by trading the contract itself (as with options) or by creating a new contract that countervails the risk (offsetability). - Offsetability—creating a new reverse contract—is considered the equivalent of tradability in demonstrating value; the outlay required to replace an existing derivative contract represents its value. - Financial derivative contracts are usually settled by net payments of cash rather than by delivery of the underlying items; some, particularly those involving foreign currency, are settled by delivery. - Once a financial derivative reaches its settlement date, any unpaid overdue amount is reclassified as accounts receivable/payable as its value is fixed and the nature of the claim becomes debt. ### Types of financial derivatives - Two broad types of financial derivatives are options and forward-type contracts; a major difference is that either party to a forward contract is a potential debtor, whereas the buyer of an option acquires an asset and the option writer incurs a liability. - Option contracts can expire without worth and are exercised only if advantageous for the option holder. - Forward-type contract (forward) is an unconditional contract by which two counterparties agree to exchange a specified quantity of an underlying item at an agreed-upon contract price (the strike price) on a specified date; forward-type contracts include forwards, futures, and swaps.51 - At inception of a forward-type contract, risk exposures of equal market value are exchanged so a contract typically has zero value at inception; as the price of the underlying item changes, market value changes and the contract may be restored to zero by periodic settlement. - Futures are forward-type contracts traded on organized exchanges; forward contracts are bought and sold in OTC trading and are not standardized, whereas futures contracts are standardized by exchanges that act as counterparty and require margins. - Significant differences between forward and futures contracts include: (1) buyer and seller negotiating directly in a forward contract versus clearing house in futures; (2) forward contracts usually contain an exact delivery date, whereas futures often specify a month or several days; (3) forward contracts are usually settled by delivery or cash at maturity, whereas futures are usually closed out prior to maturity; and (4) both have zero value at inception, but forwards allow gains or losses to accrue while futures require daily marking to market and daily settlement of gains or losses. - Forward rate agreements (FRAs) are arrangements to agree on an interest rate to be paid at a specified settlement date on a notional amount of principal that is never exchanged; FRAs are settled by net cash payments based on the difference between agreed forward rate and prevailing market rate and are equivalent to swap agreements. - A foreign currency forward contract involves two counterparties agreeing to transact in foreign currencies at an agreed exchange rate at a specified future date. - Swap contracts involve counterparties exchanging cash flows based on reference prices of underlying items and include currency swaps, interest-rate swaps, cross-currency interest-rate swaps, and equity swaps; obligations of each party may arise at different times and interim amounts are recorded as transactions in the financial derivative contract. *Monetary and Financial Statistics Manual and Compilation Guide* ### 4.170 An interest rate swap contract involves an ### 4.170 An interest rate swap contract involves an ### Swaps: definitions and treatment - 4.170: An interest rate swap contract involves an exchange of cash flows related to interest payments, or receipts, on a notional amount of principal, which is never exchanged, in one currency over a period of time. - One party pays an interest rate based on variable rates and the other based on fixed rates. - Settlements are often made through net cash payments by one counterparty to the other. - 4.171: A foreign currency swap is a spot sale/purchase of currencies and a simultaneous forward purchase/sale of the same currencies. - For foreign currency swaps, it is necessary to distinguish between the transactions in the underlying currencies and the transaction in a financial derivative contract. - 4.172: A cross-currency interest rate swap (sometimes known as a currency swap) involves an exchange of cash flows related to interest payments and an exchange of principal amounts at an agreed exchange rate at the end of the contract. - 4.173: An equity swap involves an exchange of cash flows based on the performance of a stock price or stock index for one party, and based on a fixed or floating rate, another stock price, or a stock index for the other party. - 4.174: An off-market swap has a non-zero value at inception as a result of having reference rates priced differently from current market values (i.e., “off-the-market”). - The economic nature of an off-market swap is equivalent to a combination of a loan and an on-market financial derivative. - Therefore, off-market swaps should be recorded as two stock positions in the sectoral balance sheets—a loan and an on-market financial derivative. - 4.175: Arrangements that do not have the characteristics of a financial derivative, such as a central bank swap arrangement or other similar arrangement, should be treated as an exchange of deposits. ### Options: characteristics and distinctions - 4.176: In an option contract, the purchaser acquires from the seller a right to buy (call) or sell (put) a specified underlying item at a strike price on or before a specified date. - The purchaser of an option pays a premium to the writer of the option. - 4.177: Contrasts between options and forward-type contracts: - (a) At inception, a premium is paid for an option representing a nonzero value for the contract, unlike a forward-type contract where there is usually no up-front payment and the derivative contract begins with a zero value. - (b) During the life of the contract, for an option the buyer is always the creditor and the writer is always the debtor; for a forward-type contract, either party can be creditor or debtor, and it may change during the life of the contract. - (c) At maturity, redemption is determined by the buyer of the option, whereas it is unconditional for a forward-type contract. - 4.178: Warrants give the owner the right but not the obligation to purchase from the issuer a fixed amount of an underlying asset at an agreed contract price for a specified period or on a specified date. - A distinguishing factor: exercise of warrants can create new securities, diluting capital of existing bondholders or shareholders, whereas traded options typically grant rights over assets already available. - 4.179: Covered warrants: - Can have a wider variety of underlying financial instruments. - Are issued by FCs and allow a holder to buy financial instruments issued by other institutional units, not only those issued by the issuer of the warrant. ### Credit derivatives and total return swaps - 4.180: Credit derivatives are financial derivatives whose primary purpose is to trade credit risk; designed mainly for trading loan and security credit default risk. - Credit derivatives take the form of both forward-type (total return swaps) and option-type contracts (CDSs). - 4.181: Total return swap: - Transfers both the credit and market risk of an underlying asset, such as a loan or a bond. - Under the agreement, one party makes payments based on a set rate (fee), either fixed or variable, while the other party makes payments based on the return of an underlying asset, which includes income and any capital gains. - Total return swaps allow the party receiving the total return to gain exposure to an underlying asset without owning it, and allow the other party (which retains the underlying asset on its balance sheet) to buy protection against loss in its value. - 4.182: Credit default swap (CDS): - The buyer pays a periodic fee to the seller in return for a cash payment by the seller in the event of a default by the debtor of the underlying instrument. - A CDS is considered insurance against non-payment; a buyer of a CDS might be speculating on the possibility that the third party will default. - 4.183: Credit derivatives frequently use standard master legal agreements and involve collateral and margining procedures that enable market valuation. ### Employee stock options (ESOs) - 4.184: ESOs are options to buy the equity of a company offered to employees as remuneration. - Grant date: date of agreement; vesting date: when exercise rights begin; exercise period: period during which options may be exercised. - The exercise date cannot be earlier than the vesting date or later than the end of the exercise period. - 4.185: ESOs are recorded in the financial account as the counterpart to the element of compensation of employees represented by the value of the stock option. - ESOs are often called executive stock options when provided to senior managers. - Stock options may also be provided to suppliers of goods and services; for convenience, these are also recorded under ESOs, but the counterpart entry differs: compensation of employees for employees, goods and services supplied for suppliers. - 4.186: Exercise of stock options may increase the number of corporate shares outstanding depending on whether exercise is honored by a corporation through: - (1) issuing new shares; - (2) drawing on own shareholdings (i.e., treasury stock); or - (3) purchasing its own shares in the stock market for delivery to the option holder. - 4.187: Consistent with the 2008 SNA subcategories of financial derivatives, the Manual recommends compilation of separate data on ESOs in sectoral balance sheets. - The data on ESOs should be available to compilers of monetary and financial statistics, either on request or as a memorandum item in the source data. ### Exotic option examples (Box 4.3) - Nonstandard American options: - Early exercise restricted to specific dates or only part of the life of the option. - Strike price may vary over the life of the option. - Examples of exotic options: - Forward start option: an option that starts at some future date. - Compound option: an option on an option. - Chooser option: after a specified time, the holder designates the option as a call or a put. - Barrier option: option knocks out or knocks in if underlying reaches a specified level. - Binary option: discontinuous payoff (fixed amount if in-the-money). - Lookback option: payoff depends on maximum or minimum asset price during life. - Asian option: payoff depends on average price during a predetermined averaging period. ### Financial instruments not classified as financial derivatives - 4.188: For monetary and financial statistics purposes, the following are not financial derivatives: - (a) A fixed-price contract for goods and services, unless standardized so market risk can be traded in financial markets in its own right. - (b) Insurance and standardized guarantees: insurance provides financial protection against specified events and is a form of financial intermediation; technical reserves are held to meet future claims. - (c) Contingencies (one-off guarantees and letters of credit): conditions must be fulfilled before a financial transaction occurs; contingencies do not facilitate trading of specific financial risks. - (d) Embedded derivatives: a derivative feature inseparable from a primary instrument is not considered a financial derivative; the primary instrument is valued and classified according to its primary characteristics (see paragraph 4.64). - Examples: convertible bonds, securities with options for repayment in different currencies, loans prepayable without penalty. - (e) Gold swaps, central bank swap arrangements, and other similar arrangements that do not meet the definition of financial derivatives (see BPM6, paragraphs 5.91 and 6.102–6.104). - 4.189: Classification of margins required for financial derivatives depends on whether they are repayable or nonrepayable; principles are discussed in paragraphs 4.47–4.51. ### Other accounts receivable/payable [F8] and trade credit - 4.190: Other accounts receivable/payable include: - (1) trade credit and advances, and - (2) other. - 4.191: Trade credit and advances consist of: - (1) credit extended directly by suppliers of goods and services to their customers; and - (2) advances for work in progress and prepayment by customers for goods and services not yet provided. - For FCs, trade-credit receivables are usually associated with their sale of financial services; trade-credit payables of FCs arise from acquisition of goods and services from other institutional units and purchases of financial services from other FCs. - 4.192: Exclusions from trade credit and advances: - (a) Claims or obligations arising from transactions in financial assets (recorded at change of economic ownership); for recipient of future payment the claim is recorded in Other accounts receivable–other; the provider records obligation in Other accounts payable [MS]–other. - (b) Prepayment of insurance premiums: advances category excludes prepayment of policy premiums for insurance services. - 4.193: Trade credits do not include loans to finance trade credit. - Trade credits are a direct extension of credit by suppliers; financing by third parties is classified as loans. - In general, trade credits are not interest-bearing; cash discounts for prompt payment are viewed as implicit interest avoided by early payment (see paragraph 5.227). ### Other accounts receivable/payable–other [F89]: composition and special items - 4.194: Category includes accounts receivable and payable other than those previously described; includes amounts related to taxes, dividends, purchases or sales of financial assets, rent, wages, and salaries; also includes deferred income and provisions for financial asset losses. - 4.195: Other accounts receivable–other should be disaggregated into resident and nonresident categories and cover items including: - (a) Dividends receivable on corporations’ shares, recorded when shares go ex-dividend rather than when dividends are paid. For shares not traded publicly, recorded when dividends are payable. - (b) Settlement accounts for timing differences between trade dates (changes of ownership) and settlement dates (payments). - (c) Items in the process of collection: created when a DC receives a check or other transferable item from a customer and records it in the customer’s deposit account with a contra-entry in Other accounts receivable–other; reversed after collection through the clearing system unless settled same day or recorded off-balance-sheet. - A special category: central bank float arises if a central bank provides advance availability of funds to ODCs that have sent checks or other items for collection. - Central bank float, if not adjusted, would overstate broad money because funds would appear in accounts of customers of both banks. - Central bank float need not be shown as a separate category within Other accounts receivable–other in the central bank sectoral balance sheet; it is reported as a memorandum item to accompany the sectoral balance sheet of the central bank. - Adjustment for central bank float can be made as part of the compilation of the Depository Corporations Survey (see Chapter 7). *Monetary and Financial Statistics Manual and Compilation Guide* ### 7.34 and 7.57d.) ### Classification of Financial Assets and Liabilities (7.34 and 7.57d.) ### Recording of IMF quota subscription and related items - IMF quota subscription is recorded as an asset on the balance sheet of the central bank of the member country if the central bank has been designated as a depository or as both depository and fiscal agency for the country’s financial relationship with the IMF and records: - the IMF quota subscription, - IMF No. 1 Account, and - IMF Debt Securities Account on a gross basis. (See Annex 4.2; reference number 56 appears in the source.) - Quota is determined upon admission to IMF membership and can be adjusted under the IMF’s General Quota Reviews or on an ad hoc basis. - Separate data on the IMF quota subscription should be shown under the nonresident category of Other accounts receivable–other in the sectoral balance sheet of the central bank. - Alternative recording: if net recording is exercised, the resulting Reserve tranche position in the IMF is recorded under other deposits in foreign currency with nonresidents in the sectoral balance sheet of the central bank. (2008 SNA and BPM6 also recommend reporting the Reserve tranche position in the IMF as Other deposits.) (footnote 56) ### Miscellaneous asset items and exceptional recording - Miscellaneous asset items include: - suspense accounts (temporary recording of claims pending proper classification, verifications, notifications, instructions, or documentation; claims under litigation or dispute), - amounts related to taxes, and - prepayments of import duties, rent, wages, or other operating expenses. - In exceptional circumstances, a relatively large transaction may be recorded in Other accounts receivable–other. If so, the financial corporation (FC) should provide supplementary information to compilers on: - the nature and amount of the transaction, and - identification of the sector of the transactor (nonresident or, if resident, identified by economic sector), to ensure appropriate recording in the sectoral balance sheet. (Paragraph 4.196) ### Other accounts payable [MS]–other: composition and disaggregation - Other accounts payable [MS]–other should be disaggregated into: - resident and nonresident categories, and - provisions for losses on assets. - Resident and nonresident categories should cover (not identified separately): - dividends payable recorded when shares go ex-dividend or are payable (see paragraph 5.168b), - settlements accounts recording obligations for payments on future settlement dates for financial assets purchased on trade dates, and - miscellaneous liability items (including suspense accounts, amounts related to taxes, accrued wages, rent, or other operating expenses). (Paragraph 4.197) ### Provisions for losses on assets: treatment and implications - Provisions for losses on assets are presented as if they are liabilities and are classified as a separate component in Other accounts payable [MS]–other, although they are “internal accounts” rather than liabilities to creditors. (Paragraph 4.198) - This accounting treatment contrasts with the 2008 SNA, where such provisions are not recorded in the balance sheet. - To use monetary statistics in accordance with the 2008 SNA methodology, data from monetary statistics need to be adjusted to exclude provisions from Other accounts payable [MS]–other. - Balance-sheet presentation in accounting standards shows estimated recoverable amounts of impaired financial assets obtained by: - direct write-down by the amount of the estimated impairment loss, or - deduction of provisions for losses on assets. - For monetary statistics, treatment of provisions as liabilities facilitates presentation of financial assets on a gross basis and preserves a full set of balance sheet accounts without deducting provisions from asset accounts, but differs from the 2008 SNA. (Paragraph 4.199) - Note: Provisions for loan losses is the main category of this item. (Footnote 57) ### Cross-classification by residency, sector, and currency - Monetary statistics require cross-classification of financial assets and liabilities by: - residency of counterparts, - institutional sector of resident counterparts, and - currency of denomination. (Paragraph 4.200) - For central bank sectoral balance sheets, foreign assets that meet the definition of reserve assets (BPM6, paragraph 6.63) must be identified separately and included in the reserve assets subcategory. - Cross-classification by institutional sector of counterparts: - Monetary statistics focus on FCs’ flows and stocks vis-à-vis other resident institutional sectors and the rest of the world; residency determines foreign/domestic breakdown. (Paragraphs 4.201–4.202) - Where FCs have significant exposure to nonresidents, identifying broad institutional sectors of nonresident counterparts (e.g., general government vs. nongovernment; financial vs. nonfinancial corporations) is useful; a breakdown into financial and nonfinancial corporations for selected instruments is included as a memorandum item in sectoral balance sheets/SRFs. (Paragraph 4.202; footnote 58) - Cross-classification by currency of denomination: - A recommended cross-classification into domestic currency denomination and foreign currency denomination should be provided for all financial assets and liabilities to understand money and credit aggregates and exchange-rate vulnerability. (Paragraph 4.203) - It may be useful to identify major foreign currencies; BPM6 recommends further identification of reserve assets held in currencies in the SDR basket and those not in the SDR basket as the minimum breakdown. (Paragraph 4.204) - Definitions: - Foreign currency instruments: denominated in a currency other than the domestic currency. - Foreign-currency-linked instruments: payable in domestic currency but amounts payable linked to a foreign currency → considered denominated in foreign currency. - Domestic currency instruments: denominated in domestic currency and not linked to a foreign currency. - Domestic-currency-linked instruments: payable in a foreign currency but amounts linked to domestic currency → for monetary statistics, classified by convention as denominated in foreign currency. (Paragraph 4.205) - For debt instruments with interest payable in a foreign currency but principal payable in domestic currency (or vice versa), only the present value of amounts payable in a foreign currency should be classified as foreign currency instrument. (Paragraph 4.205) - Special case: dollarized economies (no domestic currency issued) treat the legal-tender foreign currency as the domestic currency unit of account for compiling sectoral balance sheets; within FC subsectors, distinction is made between positions in the domestic currency unit (the legal-tender foreign currency) and other foreign currencies. Foreign currency that is legal tender is included under domestic currency category for all domestic positions in the Manual. (Paragraph 4.206; footnote 59) ### Cross-classification of monetary liabilities and supplementary classifications - Deposits (transferable and other) and debt securities on liability side of central bank and ODC sectoral balance sheets are cross-classified by inclusion in or exclusion from: - monetary base (only for central bank sectoral balance sheet/SRF), and - broad money (relevant to both central bank and ODCs sectoral balance sheets). - These cross-classifications support compilation of monetary base and broad money in the respective analytical surveys. (Paragraph 4.207; footnotes 60–61) - Supplementary classifications by maturity, type of interest rate, and other breakdowns support additional analytical needs (Sections IV–V). ### Classification by maturity (supplementary) - Debt financial assets and liabilities are classified as: - Short-term: payable on demand or with maturity of one year or less. (Payable on demand refers to a decision by the creditor; an instrument where the debtor can repay at any time may be short- or long-term.) (Paragraph 4.209a) - Long-term: maturity of more than one year or with no stated maturity (other than on demand). (Paragraph 4.209b) - Maturity concepts: - Original maturity: period from issue until final contractually scheduled payment. (Paragraph 4.210a) - Remaining (residual) maturity: period from reference date until final contractually scheduled payment. (Paragraph 4.210b) - Currency is included in short-term maturity. When maturity is unknown, intercompany lending may be classified as long-term by convention. Insurance reserves, pension entitlements, and standardized guarantee provisions can potentially be classified by maturity; absent data, a convention may classify them as long-term. Embedded put options do not determine maturity; residual maturity of debt securities ignores embedded put options. Financial derivatives could be classified by maturity although not debt instruments. (Paragraph 4.211) ### Classification by type of interest rate (supplementary) - Debt instruments may be classified as: - variable-rate, or - fixed-rate. (Paragraph 4.212) - Definitions and rules: - Variable-rate: interest linked to a reference index (e.g., LIBOR), commodity price, or price of a financial instrument that usually changes continuously with market conditions. (Paragraph 4.213) - Fixed-rate: all other debt instruments; an interest rate adjusted only at intervals of more than a year is considered fixed. Rates adjusted each year or more frequently are considered variable. (Paragraph 4.213) - Interest linked to credit rating of another borrower is classified as fixed-rate. (Paragraph 4.214) - Indexed instruments (principal or coupons or both indexed to a variable such as price index) are classified as variable-rate. Foreign-currency-linked instruments are treated as denominated in foreign currency rather than indexed. (Paragraph 4.216) - Instruments with threshold-contingent variability are treated as fixed-rate until the threshold is passed, then reclassified as variable-rate when income becomes variable; conversely, variable until a ceiling/floor is reached then become fixed-rate. Swaps that exchange income streams are recorded as financial derivatives; original debt instruments’ classification is unchanged. (Paragraph 4.217) - IPSGS (insurance reserves, pension entitlements, standardized guarantee provisions, and similar) are usually expected to be classified as variable-rate instruments because applicable rates are not fixed in advance. (Paragraph 4.218) ### Other supplementary classifications - Additional useful cross-classifications may include: - loans broken down by economic activity (standard industry classification), - loans to households by purpose (mortgage, education, vehicle, other durable goods), - loans to nonresidents by jurisdiction (individual country or region), - debt and equity securities distinguished between listed and unlisted, - investment fund shares distinguished between listed and unlisted, and - asset composition of investment funds (debt securities, equity, commodity-linked investments, real estate, shares in other investment funds, structured assets). (Paragraph 4.219) *Monetary and Financial Statistics Manual and Compilation Guide — Classification of Financial Assets and Liabilities (sections cited).* ### 4.220 Many types of contractual financial arrange- ### 4.220 Many types of contractual financial arrangements ### Contingencies and off-balance-sheet exposures (4.220–4.221) - Many contractual financial arrangements do not create unconditional requirements to make payments or provide assets; these are often referred to as contingencies (or off-balance-sheet exposures). - Contingencies are not defined as financial assets or liabilities and should not be recorded in the balance sheets of FCs. - Examples of contingencies: - Guarantees of payment by third parties (payment required only if the principal debtor defaults). - Lines of credit (guarantee that funds will be made available; no loan asset is created until funds are advanced). - Letters of credit (promise to pay only when specified documents are presented). - Note issuance facilities (guarantee to purchase unsold notes; only when funds are made available does the FC acquire an actual asset to be recorded). - Although excluded from monetary and financial statistics, reporting data on contingent liabilities to compilers of monetary and financial statistics is encouraged because of their potential impact on an entity’s exposure. - Standards for measuring contingent liabilities are evolving; no single measurement approach fits all situations. - Monitoring and measurement of contingent liabilities are encouraged to enhance transparency. - The Public Sector Debt Statistics: Guide for Compilers and Users (2013), paragraphs 4.23–4.26, and the External Debt Statistics: Guide for Compilers and Users (2013), paragraphs 9.20–9.46, discuss techniques for measuring contingent liabilities and recommend reporting or disclosure of selected measures. ### Securitization and examples of debt securities (4.222–4.233) - Asset-backed securities (ABSs) and collateralized debt obligations (CDOs): - Payments of interest and principal are backed by payments on specified assets or income streams. - ABSs may be issued by a holding unit or vehicle to raise funds to pay the originator for underlying assets. - CDOs are typically backed by a diversified pool of loan and bond instruments, differentiating them from ABSs backed by homogeneous pools. - ABSs and CDOs are classified as debt securities because issuers have an obligation to make payments while holders do not have a claim on residual value of the underlying assets. - Pass-through securities (4.223): - Backed by a package of assets; payments from underlying assets are passed straight through to holders. - Pass-throughs backed by fixed-rate mortgage loans are a prominent type of ABS. - An FC that originates residential mortgage loans may pool and sell portions to investors, creating mortgage-backed securities whose borrower payments are directly passed through to investors. - Collateralized mortgage obligations (CMOs) (4.224): - CMOs divide issued securities into classes (for example, Class A, Class B, and Class C) providing progressively less protection against prepayment risk. - All prepayments from the CMO mortgage loan pool are channeled first to Class C until fully repaid, then to Class B, and finally to Class A. - Coupon rates vary across classes: Class A coupon rate is lower than Class B rate, which is lower than Class C rate. - CMOs sometimes have Z or R Classes; Z-Class bondholders receive all cash flows as lump sums after all other classes are retired; R-Class (residual-class) investors receive whatever remains after other classes are retired. - CDOs vs CMOs (4.225): - Both use tranches, but CDOs pool cash-flow-generating assets and repackage into discrete tranches where investors contract for a portion of credit risk allocated across tranches, distinct from CMO prepayment-risk allocation. - Mortgage-backed bonds (MBBs) (4.226): - MBBs are asset-backed instruments backed by mortgage loans that provide collateral but lack a direct linkage between mortgage cash flows and MBB principal and interest payments. - Mortgage loans remain on the MBB-issuing FC’s balance sheet in a segregated portfolio monitored by a trustee who assures market value exceeds principal amount of the MBBs. - In contrast, pass-throughs and CMOs are often originated by selling a mortgage loan portfolio to a trust or vehicle company that issues the ABSs. - Credit-linked notes (CLNs) (4.227): - Debt securities backed by reference assets with an embedded CDS allowing credit risk transfer from issuer to investors. - Repayment of principal and interest is conditional on performance of reference assets; if no default occurs, full redemption value is paid at maturity; if default occurs, investors receive redemption value minus default losses. - The CDS is regarded as an integral part of the bond and is not separately classified and valued. - Covered bonds (4.228): - Debt securities with claim on the issuer and, if the issuer defaults, on a cover pool of high-quality collateral which the issuer is required to maintain. - Issued under specific legislation or contracts that emulate this; recourse to the collateral pool and reduced credit risk transfer distinguishes covered bonds from ABSs. - Balance sheet treatment of securitized debt (4.229): - Securitized debt instruments should be included in liabilities on the balance sheet of the ABSs issuer (debt-instrument originator or vehicle company to which debt instruments were sold) irrespective of whether holders have direct or indirect claim on cash flows. - The financial assets backing the securities remain on the asset side of the balance sheet of either the original owner or the vehicle company, depending on the securitization scheme. - An exception may apply to stripped securities. - Stripped securities (4.230–4.233): - Stripped securities (strips) transform a principal amount with coupon payments into zero-coupon bonds matching coupon payment dates and principal redemption dates. - Two cases: a. Payments stripped and separately marketed by the issuer or agents with issuer consent with no new funds raised. b. A third party acquires original securities and uses them to back the issue of stripped securities; new funds have been raised and a new financial instrument is created. - In case (b), FCs purchasing and stripping bonds sell future cash flows separately (principal-only and coupon-only claims); the issuer of the strip records liabilities (under debt securities) for stripped and sold cash flows. - Principal-only and interest-only strips can be created via securitization of mortgage-loan pools as a special form of CMO; interest-only investors receive periodic interest payments, principal-only investors receive principal portions. - When original issuer creates strips, original securities are retired or left in a repository on a “dormant basis” until reissued or redeemed to avoid double counting of the issuer’s liabilities. ### Accounts with the IMF — institutional features and facilities (4.234–4.241) - The IMF is an international financial institution with nearly universal membership; its charter is the Articles of Agreement of the IMF. - The IMF’s key activities are classified under three areas: lending, surveillance, and the provision of capacity-building services. - Fund resources: - Derived from quota payments made by members when joining or when quota subscriptions are increased. - Revolving in character; can be supplemented temporarily by borrowing from members and their institutions, including issuance of debt instruments (such as IMF notes). - Common lending frameworks and instruments (4.237–4.239): - Use of Fund resources under non-concessional terms often occurs within Stand-By Arrangement (SBA) or Extended Fund Facility (EFF); a member acquires Fund resources by using its currency to purchase SDRs or currency of another member from the Fund; repayment by repurchasing its currency using SDRs or currency of another member. - All accounts and transactions of the Fund are denominated in SDRs. - New arrangements introduced in response to the global financial crisis: - Flexible Credit Line (FCL) — for countries with very strong fundamentals, policies, and track records meeting pre-set qualification criteria. - Precautionary and Liquidity Line (PLL) — for countries with sound fundamentals and policies facing moderate vulnerabilities. - Rapid Financing Instrument — introduced to replace and broaden earlier emergency assistance policies. - Concessional arrangements include the Poverty Reduction and Growth Trust (PRGT) and, under PRGT reforms effective in 2010, the Extended Credit Facility (ECF), the Standby Credit Facility, and the Rapid Credit Facility. - Special drawing rights (SDRs) and allocations (4.240): - On three occasions (1970–72, 1979–81, 2009), the Fund created and allocated SDRs to members. - A special one-time allocation of SDR 21.5 billion took effect in September 2009, bringing the total cumulative allocation to about SDR 204 billion. - Fund accounts and departments (4.241): - Financial transactions and operations are conducted through the General Department, the SDR Department, the Administered Accounts, and the IMF Managed trust accounts. - The bulk of transactions between members and the IMF take place through the General Resources Account (GRA), part of the General Department; the GRA handles receipts of quota subscriptions, purchases and repurchases, charges, interest payments, remuneration on creditor positions, and borrowed resources. - Assets held in the GRA comprise currencies of Fund members and the Fund’s own holdings of SDRs and gold. - The SDR Department records all transactions and operations involving SDRs. - Administered Accounts and IMF Managed Trust Accounts are legally and financially separate and represent resources contributed for purposes consistent with the Articles, such as financial and technical assistance. ### Recording of IMF accounts in monetary statistics (4.242–4.244) - Principles for sectoring, classification of financial instruments, and valuation in the Manual apply equally to IMF accounts. - Central bank SDR-denominated positions with the IMF should be valued (in domestic currency) at market exchange rates. - Assets and liabilities should be recorded on a gross basis, except for netting the quota subscription and Fund holdings of the member’s currency for the net presentation of the reserve tranche position. - All transactions with the IMF are classified as transactions with nonresidents denominated in foreign currency because principal and interest are indexed to the SDR. - Data provision note: - Stock and flow data for SDR holdings/allocation and the IMF No. 1 and No. 2 Accounts (and securities substituted for No. 1 Account) are provided to member countries by the IMF’s Finance Department and, upon request, by the IMF’s Statistics Department, and are posted monthly on the Internet; these data should be reconciled with country accounting records. - Case 1 (4.244): where the central bank’s balance sheet includes all Fund accounts - In the majority of member countries the central bank is designated as depository and fiscal agency and is the sole institution that transacts with the Fund. - The central bank records all of the member’s transactions with the Fund and the member’s balances in the various Fund accounts, except when the Fund provides resources to the central government for budget support and they are recorded as a liability of the central government. *Monetary and Financial Statistics Manual and Compilation Guide (selected paragraphs 4.220–4.244).* ### 4.245 The balance sheet of the central bank will then ### mfsmcg-final - 4.245 The balance sheet of the central bank will then ### Central bank balance sheet: typical IMF-related items (assets) - SDR holdings, acquired through allocations by the Fund or through transactions with the Fund or other holders. - Claims on the IMF arising from: - the country’s payment of its total quota subscription in both reserve assets and domestic currency; - loans to the Fund; - holdings of IMF Notes (see paragraph 4.246e). - Claims on the IMF managed trusts arising from the loans made by the member to the IMF managed trusts. ### Central bank balance sheet: typical IMF-related items (liabilities) - Deposits of the IMF at the country’s central bank maintained in the IMF No. 1 and No. 2 Accounts and, in some cases, in the IMF Securities Account (accounts in domestic currency but fully indexed to the SDR). Balances in IMF No. 1 and IMF Securities Accounts are created by: - the payment of the domestic currency component of the quota subscription, and - purchases of the Fund’s resources (usually in the form of SDRs or convertible foreign currency) in exchange for domestic currency, conducted through the GRA; these can include the use of the country’s reserve tranche and use of Fund credit under facilities such as SBA and EFF. - Loans received from the IMF provided through accounts administered by the Fund; loans through the PRGT are the principal example. - SDR allocations provided by the Fund to member countries participating in the SDR Department. - Revaluations, recorded in the Valuation adjustment account under Equity liability [MS], reflecting counterparts to changes in positions with the Fund due to changes in the market exchange rate between the member’s currency and the SDR. ### Analytical presentation in the central bank survey (key IMF-related positions; paragraph 4.246) - Positions to be identified for the central bank survey: - SDR holdings. - Reserve tranche position in the IMF (RTP): an international reserve asset representing a member’s automatic drawing right on the Fund created by payment of the foreign exchange component of the quota subscription and expandable by the Fund’s use of the member’s currency in its transactions with other members. RTP = IMF Quota − Fund’s holdings of the member’s currency that are not subject to exclusions. Calculation of RTP requires detailed accounting records, including data on the use of Fund credit (UFC). - Loans to the IMF (GRA): classify as Loans, IMF (Official reserve assets) if readily encashable to meet balance of payments financing needs; otherwise classify as Loans, IMF (Other). - Loans to IMF managed trusts (MTs): classify as Loans, IMF-MTs (Official reserve assets) if readily encashable; otherwise Loans, IMF-MTs (Other). - Holdings of IMF notes: classify as Debt securities, IMF (Official reserve assets) if readily encashable; otherwise Debt securities, IMF (Other). - Use of Fund credit (UFC): outstanding purchases of Fund resources through the GRA equal all purchases minus repurchases excluding transactions within the reserve tranche; UFC counterparts are increases in the member’s domestic currency liabilities to the Fund. - Loans from the IMF: measures loans from IMF managed trusts (e.g., PRGT loan) and can be directly identified in the central bank balance sheet. ### Classification guidance and importance - Classification of Loans to the IMF, Loans to the IMF MTs, and holdings of IMF notes must reflect encashability to meet balance of payments financing needs to ensure consistency with: - the analytical accounts (Tables 4A.1 and 4A.2), and - International Reserves and Foreign Currency Liquidity: Guidelines for a Data Template (2013). - Detailed guidance is provided to align central bank sectoral balance sheet/SRF-1SR treatment with the Reserves Data Template. ### Example: Table 4A.2 — Balance sheet presentation and analytical transition (figures in domestic currency) - Balance sheet presentation (Assets = 142.0; Liabilities = 207.1) - Assets: - Quota subscription in the IMF 120.0 - SDR holdings 7.0 - Loans to the IMF total 5.0 - Loans to the IMF (Official reserve assets) 3.0 - Loans to the IMF (Other) 2.0 - IMF Notes total 6.0 - IMF Notes (Official reserve assets) 6.0 - IMF Notes (Other) 0.0 - Loans to IMF managed trusts total 4.0 - Loans to IMF managed trusts (Official reserve assets) 0.0 - Loans to IMF managed Trusts (Other) 4.0 - Liabilities: - IMF No. 1 Account 60.0 - IMF No. 2 Account 0.1 - IMF Securities Account 100.0 - Loans from the IMF (for example, PRGT) 15.0 - SDR allocations 32.0 - Calculation of Reserve Tranche Position in the IMF (as shown) - RTP = Quota subscription in the IMF − Fund’s holdings of the member’s currency that are not subject to exclusions - Fund’s holdings of the member’s currency (total) = IMF No. 1 Account + IMF No. 2 Account + IMF Securities Account = 60.0 + 0.1 + 100.0 = 160.1 - Given UFC = 50, Fund’s holdings of the member’s currency that are subject to exclusions = 50.0 + 0.1 = 50.1 - Fund’s holdings of the member’s currency that are not subject to exclusions = 160.1 − 50.1 = 110.0 - RTP = 120.0 − 110.0 = 10.0 - Analytical presentation (Assets = Claims on Nonresidents 32.0; Liabilities = Liabilities to Nonresidents 97.1) - Official reserve assets 26.0 comprising: - Reserve tranche position in the IMF 10.0 - Loans to the IMF (Official reserve assets) 3.0 - IMF notes (Official reserve assets) 6.0 - Reserve position in the Fund 19.0 - SDR holdings 7.0 - IMF No. 2 Account 0.1 - Use of Fund credit and Loans outstanding (Liabilities to Nonresidents) 65.0: - Use of Fund credit 50.0 - Loans from the IMF 15.0 ### Case: Fund accounts included in both central bank and Ministry of Finance - Common arrangements: - Ministry of Finance designated as fiscal agency conducts transactions with the IMF; central bank typically designated as depository agency. - Central bank balance sheet may record only partial balances in IMF quota subscription and IMF No. 1, No. 2 and Securities Accounts, while other Fund positions are government financial assets/liabilities. - Implications for monetary authorities accounts: - Consider compiling monetary authorities accounts to present a member’s full financial relationship with the Fund; the analytical format remains the same as when the central bank alone records Fund positions. - Inclusion of government Fund positions in monetary authorities accounts expands recorded gross foreign assets and liabilities and requires contra-entries to preserve double-entry accounting integrity (for example, creation of a “Fund consolidation account” as a contra-entry reflecting the government’s positions). - Care is required to avoid introducing valuation and other adjustments that could distort the measurement of net claims on government. ### Table guidance summary (Table 4A.3 and related notes) - Treatment of various claims, commitments, notes, and loans in the Reserves Data Template and central bank sectoral balance sheet/SRF-1SR is specified, including: - Bilateral Loan Agreements (BLAs) undrawn amounts: excluded. - Loans drawn by the IMF under BLAs (readily available): increase in reserve position in the Fund (RPF) and classified as Loans, IMF (Official reserve assets). - Note Purchase Agreements Series A (readily available): excluded from Reserves Data Template; holdings increase RPF and are classified as Debt securities, IMF (Official reserve assets). - Series B Notes (not readily available): do not qualify as reserve assets; classified as Debt securities, IMF (Other). - Lending to IMF managed trust accounts readily available: include in other reserve assets (Loans, IMF managed trusts (Official reserve assets)). - Commitments under the GAB and NAB: excluded; drawings under GAB/NAB increase RPF and are Loans, IMF (Official reserve assets). - SDR holdings: report in Section I.A.3 as SDR holdings; SDR allocations: do not report in Reserves Data Template. - Accrued interest on SDR holdings: preferred reporting is to omit from Section I.A.3 and report net interest flows in Section II.1; alternatively, accrued interest can be incorporated in SDR holdings for statistical purposes. *Monetary and Financial Statistics Manual and Compilation Guide* ### 4.255 Ta b l e ### 4.255 Ta b l e ### Islamic Financial Institutions and Instruments (annex introduction) - Annex describes how Islamic financial institutions (IFIs) operate under the Islamic principles (Shariah) and how instruments they use differ from conventional financial instruments. - For the purpose of compiling monetary statistics, various types of Islamic financial instruments are discussed in comparison with those of conventional financial institutions. ### Islamic Financial Institutions (structure, principles, and functions) - Shariah prohibits financial transactions associated with: - (1) interest (Riba) for lending and borrowing; - (2) excessive uncertainty (Al-Gharar)—no contracts or contingents on the occurrence or non-occurrence of an uncertain future event; - (3) speculation or gambling (Al-Maisir)—conversely, trading or transactions entailing a chance of gain or risk of loss are allowed. - IFIs use either trading models or profit and loss sharing models in financing customers’ needs, participate in investments that meet Shariah principles, and earn fees for services rendered. - IFIs offer investors/depositors participation in risk-bearing, open-ended, mutual fund-type packages or profit and loss sharing investment accounts, rather than fixed interest on deposits. - Shariah prohibits transactions associated with businesses producing goods and services considered contrary to its principles (examples given: tobacco, alcohol, gambling, vulgar entertainment). - Murabaha (purchase and resale of goods at trade margins with deferred payments) is commonly used as short-term financing and is dominant due to easiness and low risk compared with profit and loss sharing models; other modes include Ijarah (leasing) and Diminishing Musharaka. - Functional distinctions and balance sheet implications: - IFIs safeguard deposits and form partnerships with shareholders and investment account holders (IAHs). - Demand deposit facilities (Qard, Wadiah, Amanah) pay no returns and IFI is obligated to preserve nominal value; for monetary statistics these should be treated the same as standard deposits in depository corporations (DCs). - IFI assets range from sale-based contracts to leasing and limited partnerships; IFIs issue deposit-like instruments (profit and loss sharing deposits, unrestricted investment accounts, profit sharing investment accounts [PSIA]) to raise funds. - Investments often have properties similar to shares or mutual funds (terms used include “participation term certificates,” “profit and loss sharing (PLS) certificates,” “investment deposit certificates”). - IFIs acting as intermediaries may resemble mutual funds, financial leasing companies, or brokers; restricted investment accounts are similar to mutual funds. - IFIs’ balance sheet structures may differ from conventional institutions (for example, larger equity capital base including equity portion of IAHs; concentration in short-term trade instruments). - Statistical classification practice: - IFIs with liabilities in the form of deposits or close substitutes are classified in the ODCs subsector; most PSIA are treated like regular deposits for statistical reporting. - IFIs not primarily involved in deposit-taking are classified as OFCs. - IFIs investing as long-term partners in business ventures are akin to non-money market investment funds and classified within OFCs. - IFIs mainly engaged in Takaful schemes are classified as insurance corporations. ### Sources of Funds (types of deposits and instruments and their statistical treatment) - IFIs issue deposits (current, savings, fixed-term) or deposit-like instruments as sources of funds. Detailed types and classification guidance: a. Qard, Wadiah, and Amanah deposits: - Withdrawable on demand, at par, generally usable for payments (check, draft, giro order, direct payment facilities). - Not linked to profit-making ventures; IFIs must guarantee nominal value. - Usually offer no (or very small) returns based on gift (hibah). - Classification for monetary statistics: Transferable deposits if directly usable for payments; otherwise Other deposits. b. Mudaraba (PSIA): - Contract between investors and an IFI where IFI invests deposits as a silent partner; profit sharing pre-determined; IFI and investors share profits. - AAOIFI FAS No. 27 identifies Unrestricted Mudaraba and Restricted Mudaraba. - Unrestricted Mudaraba: investor fully authorizes IFI to invest without restrictions; mixing of funds permitted; separate disclosure required. - Restricted Mudaraba: investor restricts investments; no mixing of funds; separate disclosure (off balance sheet) required as Statement of Restricted Mudaraba. - Types of Unrestricted Mudaraba for monetary statistics: - Accepted without a time frame (not fixed): investors can withdraw at any time; similar to savings deposits; classified as Other deposits. - Accepted for a fixed period: similar to time deposits; classified as Other deposits. - Accepted for fixed terms and arranged through negotiable instruments (investment deposit certificates or Mudaraba certificates): characteristics similar to debt securities; classified as Debt security unless it provides a claim on residual value of issuing entity, in which case classified as Equity. c. Qard-hasan deposits: - Return-free deposits voluntarily placed to finance needy individuals or social purposes; classified as Other deposits. d. Zakah funds: - Special funds maintained by IFIs for social purposes, financed by contributions from depositors and IAHs; not part of sources of funds for intermediation and usually recorded off-balance-sheet. - If organized as separate nonprofit institutions (e.g., “Zakah houses”) and not controlled by government, they should be classified as nonprofit institutions serving households (NPISHs) and are nonmarket NPIs; if controlled by government, Zakah funds should be classified as government units. e. Participation term certificates: - Long-term investment instruments entitling holder to a share of a corporation’s profit. - Classified as Other deposits if treated as debt liabilities of an IFI, and as Equity if part of the capital base. f. Profit and loss sharing certificates and investment deposit certificates (e.g., Mudaraba certificates): - Resemble shares but do not provide claim on residual value or participation in governance; classified as Other deposits. - If Mudaraba certificates are negotiable, classify as Debt securities. g. Sukūk (Islamic bonds): - Certificates representing proportional undivided ownership in tangible/intangible assets, monetary assets, usufruct, services, debts, or pools of predominantly tangible assets, or a business venture (e.g., Mudaraba or Musharaka). - Assets must be clearly identifiable and in accordance with Shariah; issuance and utilization must not involve Riba, Gharar, or prohibited activities. - Prominent Sukūk contracts: (1) Sukūk Ijarah, (2) Sukūk Musharaka, (3) Sukuk Murabaha (all negotiable instruments, except Sukūk Murabaha becomes negotiable only when certain conditions are met). - Holders are entitled to share revenues generated by Sukūk assets and proceeds of realization of Sukūk assets; holders claim undivided beneficial ownership in underlying assets. - Issuers can include governments, central banks, financial or nonfinancial corporations, and supranational organizations. - For compiling monetary statistics, Sukūk should be classified as Debt securities, unless the owner of the security has a claim on the residual value of the issuing entity. - Note: For further details on classification of Sukūk by type of underlying contract, see Annex 3 in the Handbook on Securities Statistics. *Source: ANNEX 4.3, Monetary and Financial Statistics Manual and Compilation Guide.* ### 4.267 On the assets side, IFIs invest money collected ### 4.267 On the assets side, IFIs invest money collected ### Primary types of financing provided by IFIs - a. Qard-hasan - Return-free financing made to needy individuals or for some social purpose. - Extended on a goodwill basis; the debtor is required to repay only the principal amount. - The debtor may, at his or her discretion, pay an extra amount beyond the principal (without promising it) as a token of appreciation to the creditor. - Qard-hasan financing is classified as Loans. - b. Murabaha (AAOIFI FAS No. 2) - Defined as a sale of goods at cost plus an agreed profit margin. - IFI purchases goods upon the request of a client; the client makes deferred payments covering costs and an agreed-upon profit margin for the IFI. - The IFI handles payments to the supplier including direct expenses incurred (delivery, insurance, storage, fees for letter of credit, etc.). Operating expenses of the IFI are not included. - Disclosure of cost of the underlying goods is necessary. - Murabaha contracts resemble collateralized loans of conventional financial institutions; underlying goods are often registered under the customer’s name and used as collateral. - In compiling monetary statistics, Murabaha should be classified as Loans. - c. Bai Muajjal - Financing by supplying desired commodities or services with deferred payments. - Classified as Loans in monetary statistics when the supplied commodities or services are from third parties. - d. Bai Salam (AAOIFI FAS No. 7) - Short-term agreement where an IFI makes full prepayments (spot payment) for future (deferred) delivery of a specified quantity of goods on a specified date. - Commonly used with farmers who sell crops to the IFI prior to harvesting; the agreed spot price is generally less than the future price to allow IFI profit. - A Bai Salam should be classified as Loans, given that the produced crops are not for the IFI’s own use. - e. Istisna’a (AAOIFI FAS No. 10) - Partnership where an IFI places an order and provides financing to an enterprise (manufacturer or construction company) to manufacture/construct and/or supply certain goods or buildings. - IFIs usually contract with an ultimate purchaser at a higher price than the original Istisna’a contract, generating profits. - Practically classified as Loans when produced goods or constructed buildings are not for the IFI’s own use. - If goods or buildings are for the IFI’s own use, an Istisna’a is classified as Trade credit and advances within Other accounts receivables. - f. Ijarah (AAOIFI FAS No. 8) - Lease-purchase contract where an IFI purchases capital equipment or property and leases it to an enterprise. - IFI may rent the equipment or receive a share of profits earned through its use. - Two types: Operating Ijarah and Financing Ijarah (Ijarah Muntahia Bittamleek or Ijarah Wa Iktina). - Operating Ijarah: title is not transferred to the client; ownership risks borne by the IFI; expenses related to asset use are client’s responsibility. For monetary statistics, treat as conventional operating lease. - Financing Ijarah: involves a lease over the lease period and transfer of ownership at contract end; resembles conventional financial lease and should be classified as Loans. - g. Musharaka (AAOIFI FAS No. 4) - Partnership where both IFI and enterprise contribute to the capital (rab al maal) of the partnership. - Profits shared according to pre-agreed ratio; losses shared according to contribution ratio. - In compiling monetary statistics, Musharaka financing is classified as Loans, provided the IFI does not acquire a claim on the residual value of the enterprise. - Note: Musharaka financing can be structured in two possible ways according to Islamic scholars: - (1) Musharaka financing offered as a loan where the IFI provides working capital but does not have a claim on residual value of the debtor entity. - (2) Musharaka financing offered as equity participation. - h. Mudaraba (AAOIFI FAS No. 3) - Partnership where the IFI provides capital (rab al maal) and the client provides skillful labor. - Profits shared according to agreement; losses borne fully by the IFI as capital provider except when due to misconduct, negligence or violation of agreed conditions by the client. - Although Mudaraba has features of equity, it has a fixed-term nature and represents a fixed-term claim on the client rather than a claim on any residual value. - In compiling monetary statistics, a Mudaraba financing is classified as Loans. ### Takaful as a form of insurance (paragraphs 4.268–4.270) - A Takaful is Islamic insurance designed as an alternative to conventional insurance and to complement IFIs; invented as an Islamic way of mutual assistance to deal with uncertainties (Al-Gharar). - Takaful deals with both life and nonlife (general) insurance. - Takaful schemes practice pooling risks consistent with Shariah principles; participants share financial responsibilities to assist each other. - Growth of Takaful companies serves as a vehicle for risk pooling and as alternative means of investment. - Classification for monetary statistics: - If a Takaful company meets the definition of insurance corporations (as described in paragraph 3.190), it should be classified as an insurance corporation. - Its claims and liabilities related to Takaful (participants’ contributions, or Tabarru), Re-Takaful contributions, and claims or compensations related to the Takaful policies should be classified as insurance (included in the financial instrument Insurance, pension, and standardized guarantee schemes). ### Stocks, flows, and accounting rules (chapter introduction and key definitions) - Framework basis and purpose - The stock and flow concepts and accounting rules follow the System of National Accounts 2008 (2008 SNA) and other statistical manuals. - The framework measures each financial flow or stock identically for the parties involved, using the same accounting rules. - It divides flows into transactions, revaluations (holding gains and losses), and other changes in the volume of assets (OCVA). - Stocks and flows (definitions) - Stocks: holdings of assets and liabilities at a point in time. - Flows: economic actions and effects of events within an accounting period. - Economic flows reflect creation, transformation, exchange, transfer, or extinction of economic value within a period and constitute the difference between opening and closing stock positions. - Flows consist of transactions and other flows (revaluations and OCVA). - Transactions and related concepts - A transaction is an interaction between institutional units by mutual agreement or through law, involving an exchange of value or transfer, or an action treated analytically as a transaction. - Every transaction is either monetary or nonmonetary; monetary transactions are stated in units of currency and are the primary concern for monetary and financial statistics. - Interest is defined as a form of investment income receivable by owners of certain financial assets (deposits, debt securities, loans, other accounts receivable) and may be a predetermined sum or a fixed/variable percentage of principal; interest payments and principal payments are distinguished. - Revaluations and OCVA - Revaluation: occurs when an asset increases/decreases in monetary value or a liability decreases/increases because of price or exchange rate changes; can be unrealized or realized. - Unrealized revaluation: accrues on assets still owned or liabilities still outstanding at end of reporting period; reflected in closing balance sheet values. - OCVA records changes in assets and liabilities between opening and closing stocks that are neither due to transactions nor to valuation changes. - Examples of OCVA include write-offs of claims, reclassification of assets, and monetization or demonetization of gold. - OCVA categories include economic appearance and disappearance of assets among others relevant to financial corporations. - Stock/flow identity and adding-up requirements - Horizontal identity (stock/flow identity): CS ≡ OS + T + VC + OCVA - CS = Closing Stock; OS = Opening Stock; T = Transactions; VC = Valuation Changes; OCVA = Other Changes in the Volume of Assets. - Vertical adding-up identity: total assets should equal total liabilities including equity. - The Manual recommends compiling separate data for OS, CS, OCVA and, if possible, for at least one of T or VC; flows should be compiled separately for transactions, revaluations, and OCVA to enhance analytical usefulness and consistency across macroeconomic statistics. *Monetary and Financial Statistics Manual and Compilation Guide* ### 5.19 A revaluation is realized when an asset is sold, ### Stocks, Flows, and Accounting Rules (excerpts from Monetary and Financial Statistics Manual and Compilation Guide) ### Revaluations, Realizations, and Adding-up Requirements - A revaluation is realized when an asset is sold, redeemed, used or otherwise disposed of, or a liability incorporating a revaluation is repaid (paragraph 5.19). - Table 5.2 presents stock and flow adding-up requirements with notation: OS = opening stock; T = transactions; VC = valuation changes; OCVA = other changes in the volume of assets; CS = closing stock. - Accounting identity shown: OSTVCOCVACSCS – OS = T – VC – OCVA - Aggregate check: Vertical check: TA – TL000000 - The Manual emphasizes consistent treatment of opening and closing stocks and flows to satisfy the adding-up requirements for assets and liabilities. ### Main Transactions by Asset/Liability Category for Financial Corporations (Table 5.3 highlights) - Monetary gold (central bank asset) - Purchases less sales (between monetary authorities and international financial institutions only) - Plus accrued interest on unallocated gold accounts with nonresidents that give title to claim the delivery of gold - SDR holdings (central bank asset) - New SDR allocation less SDR cancellation - Purchases of SDRs less sales of SDRs - Plus accrued interest on SDR holdings - Plus remuneration receipts in SDRs from the IMF on the reserve tranche position - Plus IMF purchases and loan receipts in SDRs - Plus interest receipts in SDRs on lending to the IMF - Less IMF repurchases and loan repayments in SDRs - Less payments of charges in SDRs to the IMF - Deposits—assets or liabilities - Deposit placements/receipts less withdrawals - Plus accrued interest for the period - Debt securities—assets and liabilities - Assets: Purchases less sales, redemptions and interest payment; Plus accrued interest for the period - Liabilities: Issuances less redemptions, purchases of own debt securities, and interest payments; Plus accrued interest for the period - Loans—assets and liabilities - Loans—assets: Loan extensions less loan principal and interest payments; Plus accrued interest for the period - Loans—liabilities: Loan receipts less loan principal and interest payments; Plus accrued interest for the period - Equity and investment fund shares—assets and liabilities - Assets: Purchases and new contributions less sales and withdrawal of capital - Liabilities (equity): New funds contributed by owners less outflow from dividends when shares go ex-dividend and withdrawal of capital; Plus/minus inflow or outflow of retained earnings for foreign direct investment enterprises only; Plus/minus profit or loss from corresponding transactions - Investment fund shares—liabilities: Sales less redemptions and/or buy-backs - Insurance, pension and standardized guarantee schemes—assets and liabilities - Assets: Prepayments of insurance premiums and net fees for standardized guarantees; Plus/minus change in claims of pension funds on pension managers for any underfunding/overfunding - Liabilities: Amounts of estimated obligations to beneficiaries and holders accrued during the period less payments to beneficiaries from reserves and provisions - Financial derivatives—assets and liabilities - Assets: Purchases less sales and settlements; Minus receipts of nonrepayable margins - Liabilities: Sales less settlements; Minus payments of nonrepayable margins - Other accounts receivable/payable - Transactions in trade credit and advances, etc. - Nonfinancial assets - Acquisitions less disposals; Less consumption of fixed assets - Notes and cross-references in Table 5.3: - Transactions also include SDRs obtained from a new SDR allocation or disposed of because of SDR cancellation. - Includes redemptions/repayments arising from debt reorganization, including debt cancellation by mutual agreement (debt forgiveness). - See paragraphs 5.185, 5.190, 5.197, and 5.199 for more details. ### Goodwill, Appearance/Disappearance of Financial Claims, and OCVA - Goodwill and marketing assets - Purchased goodwill is the difference between the value paid for an enterprise as a going concern and the value of its assets less the value of its liabilities (excluding equity). - Goodwill not evidenced by a sale/purchase is not considered an economic asset and does not enter monetary and financial statistics. - Purchased goodwill is calculated at the time of sale, entered as a nonfinancial asset in the seller’s OCVA account, then recorded as a transaction (sale of goodwill) with the purchaser. Thereafter, purchased goodwill is a nonfinancial asset in the purchaser’s books and is written down via OCVA entries (2008 SNA, paragraph 12.34). - Appearance and disappearance of financial assets and liabilities - Includes write-offs of bad debts by creditors. Debt write-off is a unilateral cancellation of debt by the creditor and should be accounted in OCVA. - Write-downs (partial write-offs) are also accounted in OCVA. ### OCVA: Catastrophic Losses, Uncompensated Seizures, and Other Volume Changes - Catastrophic losses (OCVA) - Volume changes recorded as catastrophic losses arise from large-scale, discrete, recognizable events that destroy assets: natural disasters, acts of war, riots, technological accidents. - Catastrophic losses most commonly apply to nonfinancial assets but may apply to financial assets—especially loss/destruction of currency and bearer-type financial assets or destruction of ownership records. - Uncompensated seizures (OCVA) - Governments or other units may confiscate assets of other institutional units without full compensation for reasons other than non-payment of taxes, fines, or similar levies. - If compensation falls substantially short of market or fair value as shown on the balance sheet, the difference is recorded in OCVA as a decrease in the assets of the unit losing the assets. - Foreclosures and repossession by creditors are treated as transactions (disposals by debtors and acquisitions by creditors), not uncompensated seizures. - Other changes in volume not elsewhere classified (OCVA) - Corrections in the calculation of consumption of fixed capital due to unexpected events or mistaken assumptions are recorded in OCVA. - Life insurance and annuities entitlements: subsequent changes in the underlying relationship between premiums and benefits are recorded in OCVA. - Pension entitlements: changes in actuarial-determined liabilities from changes in model assumptions are shown as OCVA; changes negotiated between parties are recorded as transactions. - Provisions for calls under standardized guarantee schemes: provisions entered for expected excess of calls; changes to provisions when a new scheme is introduced or a significant change in expected calls is recognized are recorded as OCVA. ### Revaluations by Asset/Liability Category (Table 5.4 summary) - Revaluations arise from exchange rate changes and other price changes. - Table 5.4 indicates applicability: - Monetary gold (central bank asset): exchange rate changes √ and other price changes √ - SDRs (central bank asset): other price changes √ - Foreign currency holdings: exchange rate changes √ - Deposits in foreign currency: exchange rate changes √ - Debt securities in foreign currency: exchange rate changes √ and other price changes √ - Loans in foreign currency: exchange rate changes √ and other price changes √ - Equity and investment fund shares (assets) in foreign currency: exchange rate changes √ and other price changes √ - Equity (liabilities) for financial statistics only: other price changes √ (liabilities in the form of equity are valued at market or fair value) - Investment fund shares in foreign currency: exchange rate changes √ and other price changes √ - Insurance, pension, and standardized guarantee schemes: exchange rate changes √ and other price changes √ (applies to components denominated in foreign currency) - Financial derivatives and employee stock options: domestic currency other price changes √; foreign currency exchange rate changes √ and other price changes √ - Other accounts receivable/payable and nonfinancial assets: other price changes √ ### Other Changes in Volume by Asset/Liability Category (Table 5.5 summary) - Categories recorded in OCVA include: - Economic appearance of assets, catastrophic losses (assets only), and uncompensated seizures (assets only) - OCVA not elsewhere classified, including provisions and accounting entries - Changes in classification - Table 5.5 indicates which asset/liability categories can reflect these OCVA items (√ markers), including monetary gold, SDRs, domestic and foreign currency, deposits, debt securities, loans, equity and investment fund shares (assets and liabilities), insurance/pension schemes (assets and liabilities), financial derivatives and employee stock options, other accounts receivable/payable, and nonfinancial assets. - Note: In monetary statistics, OCVA entries for provisions are shown in Other accounts payable [MS] and in Equity liability [MS] (as a reduction in Current year result). The OCVA entry for nonfinancial assets relates to corrections in consumption of fixed capital. ### Changes in Classification (OCVA treatment) - OCVA records changes in classification of institutional units or assets and liabilities, but not corrections of misclassification in earlier periods (paragraph 5.22). - Examples of events leading to OCVA entries: - Changes in sector classification and structure (e.g., reclassification of an FC from one subsector to another transfers its entire balance sheet). - Structural changes (absorption of a corporation by another or split into multiple units) produce OCVA entries; recommended recording at the beginning of the reporting period using asset prices/fair values and exchange rates prevailing at that time. - Expansion of institutional coverage (e.g., coverage of additional FCs) — changes in assets and liabilities of the subsector arising from expansion are to be recorded as OCVA and shown separately. - Changes in classification of assets and liabilities (e.g., loans becoming negotiable reclassified as debt securities; deposits reclassified as included/excluded in broad money; monetization or demonetization of gold with reclassification between nonfinancial and financial assets). - Paragraph 5.22: When unable to correct historical misclassification, provide a clear indication of the break in series. ### Accounting Rules: Time of Recording and Accrual Basis (paragraphs 5.23–5.26) - Accrual accounting records flows and changes in stocks when economic value is created, transformed, exchanged, transferred, or extinguished (paragraph 5.24). - Accrual recording means flows and stocks are recorded when a change of economic ownership takes place, irrespective of payment. - In principle, both parties should record a transaction at the same time; practical adjustments may be needed. - Change of economic ownership is central to timing for financial asset transactions (paragraph 5.25). - A change in economic ownership means the majority of risks, rewards, rights and responsibilities of ownership are transferred. - Practical timing issues (paragraph 5.26) - Exact timing may be uncertain due to mail delays, time zones, and differing time-of-recording conventions; timing adjustments are important where major divergences occur. - Compilers are encouraged to use source data that best match accrual accounting needs (e.g., records of drawings on loans rather than authorization dates). - For deriving accrued interest, use data on positions and contractual interest rates. *Monetary and Financial Statistics Manual and Compilation Guide.* ### 5.27 For some financial instruments, the debtor does ### 5.27 For some financial instruments, the debtor does not make any payments to the creditor until the financial instrument matures, at which time a single payment discharges the debtor’s liability; the payment covers the amount of funds originally provided by the creditor and the interest accumulated over the entire life of the financial instrument. ### Deferred-payment instruments and interest accrual - For instruments with no interim payments, the single maturity payment covers: - the funds originally provided by the creditor, and - the interest accumulated over the entire life of the instrument. - Interest accruing in each period prior to maturity: - should be recorded as a financial transaction representing a further acquisition of the financial asset by the creditor, and - an equal incurrence of a liability by the debtor. ### Trade date and settlement date accounting (paragraphs 5.28–5.30) - Recording principle: - Transactions in financial assets are recorded on the trade date (time of change in ownership), not the settlement date (time of delivery). - If settlement occurs after ownership has changed, accounts receivable/payable arise. - When transaction date and settlement date fall in different reporting periods: - First reporting period: - The asset purchase is included in transactions (T). - Any revaluation from the transaction date to the end of the first period is included in valuation changes (VC). - An accounts payable is recorded for the time lag between trade and settlement dates. - Second reporting period: - On settlement, the accounts payable is extinguished and currency and deposits are reduced. - Adjustments: - Adjust settlement-date recorded transactions to a transaction-date basis when settlement occurs in the next reporting period (paragraph 5.30). - Successful adjustment depends on granular data availability and a good information technology (IT) system. - Restatement examples (from settlement-date to transaction-date accounting) are illustrated in Annex 5.4 (reference to annex only). ### Transaction costs and financial service fees — General principles (paragraphs 5.31–5.34) - Valuation of transactions: - Financial asset and liability transactions should be recorded at the prices at which they were bought and sold, excluding transaction costs (service charges, fees, commissions, taxes). - Transaction costs should be recorded separately from the financial transaction so both debtor and creditor record the same amount for the same transaction. - Types of transaction costs (paragraph 5.32): - Explicit transaction costs: - Examples: service charges, fees, commissions (e.g., brokerage commission), domestic taxes expressed as fixed amounts per transaction or as a percentage of asset value. - Implicit transaction costs: - Examples: costs embedded in bid-ask spreads; the spread between bid and ask prices measures transaction costs incurred by buyer and seller combined. - Treatment: - Explicit commissions, service charges, and fees that buyers and sellers pay are treated as payments for services. Taxes and similar compulsory payments are transfers (paragraph 5.33). - Transaction costs are excluded from the valuation of financial transactions and end-period stocks. - Transaction costs reduce/increase Equity liability [MS] through current-year results for payers/payees in the period when the financial asset is acquired/provided. - Data adjustment: - If source data include transaction costs in amounts for asset purchases/sales, explicit and implicit charges must be excluded (paragraph 5.34). ### Bid and ask prices (paragraphs 5.35–5.36) - Recording secondary-market acquisitions: - An FC usually pays the ask (offer) price and records the securities transaction as the full amount paid (ask price × number of securities). - The transaction should be valued at the mid-price between bid and offer prices. - The difference between the offer price and the mid-price is recorded as a transaction cost. - Subsequent revaluation of securities positions should be based on the mid-price. - Foreign-currency-denominated instruments: - Flows and stocks are recorded at the relevant midpoint exchange rate. ### Valuation of stocks and flows — general principles (paragraphs 5.37–5.43) - Main principle: - Flows and stocks should be measured at market prices (current exchange value). - Market prices definition (paragraph 5.39): - Amounts of money that willing buyers pay to acquire something from willing sellers, exchanged between independent parties on a commercial, arm’s length basis. - Stocks valuation (paragraph 5.40): - Stocks should be valued as if acquired in market transactions on the balance sheet reporting date. - If markets are closed on the balance sheet date, use market prices that prevailed on the closest preceding date when markets were open. - Nominal values (paragraph 5.41): - Used for deposits, loans, and other accounts receivable/payable (nontradable instruments). - Nominal valuation requires accrued interest to be included in the outstanding amount of the underlying instrument, not as miscellaneous assets/liabilities. - Reconciliation with other manuals and special cases (paragraph 5.42–5.43): - Principles are consistent with the 2008 SNA. - Valuation of Equity liability [MS] at book value is a feature of monetary statistics; it can be reconciled with 2008 SNA concepts and is consistent with an alternative valuation method called own funds at book value (see paragraph 5.160e and 2008 SNA, paragraphs 13.71 and 13.88). - When source data values are based on commercial, supervisory, tax, or other accounting standards that do not reflect market values, data should be adjusted to reflect market values where appropriate; valuation differences are reflected in Equity liability [MS] as a valuation adjustment. ### Fair values (paragraphs 5.44–5.48 and Box 5.1) - Fair value definition (paragraph 5.44): - Market-equivalent value: amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. - Two general methods for establishing fair values (paragraph 5.45): - Relative valuation: - Use market prices of market-traded but otherwise similar instruments to value nontraded or infrequently traded instruments. - Adjustments may be needed for differences in liquidity, risk, scale, number of outstanding shares, and other differentiating factors. - Example: Fair-value of an infrequently traded 5-year bond might use market price of a publicly traded 5-year bond with comparable risk. - Absolute valuation: - Discounted present values of future cash flows (Box 5.1). - Box 5.1 — Fair valuation using the present value of future cash flows: - Fair value (cashflow) = sum from t = 1 to n of (cash flow_t) / (1 + i)^t using a single discount rate i for all periods. - Requirements: - Future cash flows must be known or estimable, and a discount rate must be estimable for the life of the asset. - Recommended discount rate: pre-tax effective yield (yield to maturity) on actively traded securities with approximately the same risk. - If necessary, yields on government or other actively traded securities with similar duration may be used without adding a risk premium unless evidence supports adding one. - Alternative, more complex approach: - Apply time-variant discount rates i_t to each future cash flow (use forward rates or a zero-coupon yield curve); this requires yields on short-, medium-, and long-term securities in the same risk class as the securities being valued. ### Other valuations and terminology (paragraph 5.49) - Distinctions among valuation terms: - Nominal value: - Outstanding amount debtor owes: funds advanced + subsequent advances + accrued interest − repayments. - For debt instruments indexed to a "narrow" index (commodity price, stock price, or gold price), nominal value can include holding gains/losses from index movements. - For foreign-currency-denominated instruments, nominal value includes holding gains/losses from exchange rate changes. - Amortized value: - Amount measured at initial recognition minus principal repayments and excluding accrued interest. - On scheduled payment dates (after payment), amortized value equals nominal value; otherwise it may differ because nominal includes accrued but unpaid interest. - Face value (par value): - Undiscounted amount to be paid to the holder at or before maturity. - Market value may deviate from face value before maturity; at maturity market value equals face value. - Book value: - Value recorded in entity’s records; used in this Manual to value Equity liability [MS]. - Historic cost: - Cost at time of acquisition; may include occasional revaluations. ### Instruments denominated in foreign currency (paragraphs 5.50–5.51) - Unit of account: - Domestic currency unit is standard for monetary and financial statistics. - Conversion rules: - Convert foreign-currency-denominated stocks and flows into domestic currency using market exchange rates. - Flows: use market exchange rate prevailing at the time the flow occurs. - Stocks: use market exchange rate prevailing at the balance sheet date. - Use the midpoint between buying and selling exchange rates for both flows and stocks so any service charge is excluded (see paragraph 5.36). - Exchange rate sources: - For convertible currencies use market exchange rate quotations from major world markets such as the foreign exchange market in London or New York. - For nonconvertible currencies use regional or specialized foreign exchange market quotations. - If the rate for the last day of the reporting period is unavailable, use the rate quotation for an earlier date as near to the end of the reporting period as possible to convert stock data to domestic currency units. *Monetary and Financial Statistics Manual and Compilation Guide (International Monetary Fund).* ### 5.52 Institutional units sometimes apply exchange ### Institutional units sometimes apply exchange rates that differ from market rates ### Exchange rate conversion and market vs. official rates - Institutional units sometimes convert stocks and flows into domestic currency units using a single official exchange rate or an exchange rate from an official multiple exchange rate system; such data should be adjusted to a market-rate basis to the extent possible. - Definitions: - Market exchange rate: an exchange rate determined by market forces. - Official exchange rate: an exchange rate determined on an administered basis by the national authorities. - Official multiple exchange rate systems are schedules of official exchange rates used to apply separate exchange rates to various categories of transactions and/or transactors. - Rate quotations for weekend days and holidays should be the exchange rates that prevailed at the close of the preceding business day. - For instruments indexed to a foreign currency, treat them as denominated in that foreign currency: - Interest should accrue throughout the period using the foreign currency as the currency of denomination, with flows converted to the domestic currency using midpoint market exchange rates. - Amount outstanding should be valued using the foreign currency as the unit of account, with the end-of-period exchange rate used to determine the domestic currency value (including any accrued interest). ### Indexed financial instruments: types and recording implications - Indexed financial instruments: amounts of interest payments or principal outstanding (or both) are linked to an index (general price index, specific price index, commodity price, or exchange rate index). - Recording and valuation depend on: - Type of index used to adjust principal to which interest is linked. - Currency in which interest and principal are denominated. - Three useful arrangements for indexation: a. Indexation of interest payments only with no indexation of amount to be paid at maturity. b. Indexation of the amount to be paid at maturity with no indexation of interest payments. c. Indexation of both the amount to be paid at maturity and interest payments. - Treatment guidance: - When only interest payments are indexed: the full amount resulting from indexation is treated as interest accruing during the period covered by the coupon. If the coupon date has not passed, use the movement in the index during the part of the reporting period to calculate the interest accrual. - When the amount to be paid at maturity is index-linked: calculation of interest accruals becomes uncertain because the redemption value is unknown; maturity may be several years ahead. - When principal is linked to a general or broad price index: change in principal outstanding between opening and closing stocks due to index movement is treated as interest accruing (a transaction) in the period, in addition to coupon interest; interest accrual can be calculated as the change in the value of the amount outstanding between period end and beginning due to the movement in the relevant index. - When principal is linked to a specific, narrowly defined price index that includes a holding gain motive: preferred approach is to fix the rate of accrual at issuance; interest = difference between issue price and the market expectation, at inception, of all debtor payments, recorded as accruing over the life of the instrument; deviations of the underlying index from expected path are treated as holding gains or losses (valuation changes). - For instruments with both principal and interest indexed to a foreign currency: treat as foreign-currency-denominated instruments (see prior bullets on foreign-currency treatment). ### Aggregation, netting, debt defeasance, and consolidation - Aggregation: - Aggregation = summation of stocks or flows across institutional units (e.g., loans by debtor sectors, deposits by creditor sectors). - Sectoral balance sheets for FCs subsectors should be compiled as aggregated data of institutional units in the same subsector of the FCs sector. - Gross and net recording: - Gross recording: assets and liabilities shown at full values; claims on a unit should not be netted against liabilities to that unit. - Principle: follow gross recording for stocks; netting may only be necessary if gross source data are unavailable. - Transactions should be recorded on a purchases-less-sales (net acquisition) basis for a specific category of financial assets or liabilities. - Analytical measures may be presented on a net basis while continuing to show asset and liability components separately (example: DCS shows net foreign assets and net claims on central government but also the separate stock and flow components). - Debt defeasance: - Debtor can remove liabilities by pairing irrevocably assets of equal value to the liabilities (trust account or transfer to another institutional unit). - If paired assets and liabilities are kept within the same unit’s trust account: no entry is recorded for defeasance and the items remain on the balance sheet. - If transferred to a separate recognized institutional unit: assets and liabilities move to that unit’s balance sheet. - Consolidation: - Consolidation presents statistics for a set of units as if they were a single unit, eliminating stocks and flows between units grouped in the same sector/subsector. - Institutional units consisting of headquarters and branches within the same economy should report consolidated stocks and flows across resident entities of the unit. - For monetary and financial statistics, financial flows and positions between institutional units should be reported on a gross basis at the level of data compilation and reporting; sectoral balance sheets for FCs subsectors and the FCs sector are based on aggregated (not consolidated) data. - For analytical surveys (e.g., FCS, DCS), data are consolidated within subsectors and across subsectors as appropriate (DCS cancels out intra-DC positions so presented stocks and flows are claims on and liabilities to: (1) FCs subsectors other than DCs subsector, (2) other domestic sectors, and (3) nonresidents). - Sectoral balance sheets and surveys underlying consolidated survey results must contain comprehensive data on financial flows between DCs and outstanding claims and liabilities among them to facilitate consolidation. ### Compilation of stocks and flows — estimating flows, transactions, revaluations, and OCVA - General principle: - Distinguish transactions (T), revaluations (VC), and other changes in the volume of assets (OCVA). - Prefer obtaining flow component data directly from FC accounting or recording systems; derive or estimate only when direct data unavailable. - Recommended order of preference for obtaining flow data when opening stock (OS) and closing stock (CS) are available: a. Collect data for all three flow components directly from accounting/recording systems of the FC. b. If accounting records provide two flow components, derive the third using equation 5.1. c. If accounting records provide only one flow component, estimate the other two using equation 5.1 with appropriate assumptions for each category of assets and liabilities. - Transactions: - Transactions can be derived residually if OS, CS, VC, and OCVA are available: - T = CS – OS – VC – OCVA. - If OCVA = 0 and VC = 0, then: - T = CS – OS. - Revaluations: - Assets and liabilities valued at market prices (or fair values) and/or denominated in foreign currency are expected to have non-zero revaluations. - Revaluations can be derived residually if OS, CS, T, and OCVA are available: - VC = CS – OS – T – OCVA. - Estimated revaluations for securities may vary depending on valuation and reporting practices and parameters used for fair value calculations. - Practical estimation method for foreign-currency-denominated assets and liabilities: - Approximate revaluations that arise exclusively from exchange rate movements for financial assets and liabilities measured at nominal value in foreign currency. - When only the sum of T and VC is available, transactions and revaluations must be estimated. - In absence of direct data, estimate foreign-currency-denominated transactions and valuation changes on a currency-by-currency basis using the daily average exchange rate between the domestic currency and each foreign currency. - The daily average should be the average of exchange rates for all days of the period. - If daily rates are not available for all days, use the exchange rate or exchange rate average that most closely approximates the daily average for the period. - Estimation procedure: - Convert OS and CS in domestic currency to each foreign currency using market exchange rates on balance sheet dates. - Calculate transactions in foreign currency units as the difference between OS and CS less any OCVA. - Convert resulting transactions in foreign currency units into domestic currency using the daily average market exchange rates for the period. - Estimate revaluations as a residual based on equation 5.1. - Annex 5.1 provides detailed guidance and numerical examples for estimation in two cases: (1) absence of OCVA, and (2) presence of OCVA. - Other changes in the volume of assets (OCVA): - Some OCVA entries should be available from FC accounting records; OCVA entries include extraordinary/infrequent events and regularly recurring reclassifications. - OCVA arises when a subsector classification of an FC changes (e.g., OFC reclassified to ODC because it begins issuing liabilities included in broad money), producing OCVA entries in accounts of the reclassified FC and in accounts of FCs with claims on or liabilities to the reclassified FC; these entries should be directly available from accounting records. - OCVA entries also arise when transferring a reclassified FC’s data from one sectoral balance sheet to another as part of monetary statistics compilation; these OCVA entries occur at aggregation/consolidation and therefore do not appear in individual FC compilations. *Monetary and Financial Statistics Manual and Compilation Guide (IMF) — Selected excerpts on exchange rates, indexed instruments, aggregation, consolidation, and flow estimation* ### 5.83 A special case of changes in sector classification of ### 5.83 A special case of changes in sector classification of FCs and changes in classification of assets and liabilities ### OCVA arising from changes in sector classification (currency unions and new members) - In the context of currency union statistics when new countries join the union, inclusion of data for entire FCs subsectors of a new member at the union level is recorded as OCVA (Other Changes in Volume of Assets). - OCVA entries also arise in accounts of all FCs of monetary union countries that have claims on (or liabilities to) residents of the new member country; those financial positions must be reclassified as due from (or due to) the appropriate sector of the union residents, rather than nonresidents. (paragraph 5.83) ### Recurring types of OCVA recorded by FCs (paragraph 5.84) - Transfer of profit or loss from current year result to retained earnings within the liability account for equity and investment fund shares. - Transfer (appropriation) of retained earnings to general and special reserves within the liability account for equity and investment fund shares. - Provisions (also referred to as allowances) for losses on financial assets (see paragraph 5.231). - Write-offs of loans, securities, or other types of impaired financial assets. ### Treatment and relation to 2008 SNA (paragraph 5.85) - Recurring OCVA treatment is generally consistent with the 2008 SNA. - The first three types of OCVA in paragraph 5.84 are specific to FCs and monetary statistics because of different measurement of equity on the liability side of the balance sheet and are not discussed in the 2008 SNA (see paragraph 5.167). ### Monetary and nonmonetary gold valuation and transactions (paragraphs 5.87–5.90) - Holdings of both monetary and nonmonetary gold should be valued on the basis of the market price of gold prevailing on the balance sheet date; revaluations should reflect changes in value. - Monetary gold is to be valued at the price established in organized gold markets; in the world market gold is priced by troy ounce. - Recommendation: use the midpoint between the bid-offer prices in the London gold market to value closing stocks of gold. Gold prices quoted in U.S. dollars or another major currency should be translated into domestic currency units using the midpoint of the bid–offer spread for the market exchange rate. (paragraph 5.87) - Value of monetary gold is subject to holding gains and losses through changes in the exchange rate as well as the price of the gold. (paragraph 5.87) - If source-data valuation deviates from market prices or revaluation frequency exceeds monthly, supplementary data on physical quantity of monetary gold should be provided to compilers so they can adjust valuation to a market-price basis. (paragraph 5.88) - Transactions in monetary gold should be valued at actual prices; central bank sales/purchases of monetary gold to/from another central bank or international financial institution are recorded by both parties as transactions in monetary gold. Transactions in gold bullion excluding those among monetary authorities and international financial institutions are treated as transactions in nonfinancial assets (nonmonetary gold). (paragraph 5.89) - When a monetary authority purchases gold bullion from institutional units other than monetary authorities or international financial institutions for inclusion in reserve assets, the gold is monetized, resulting in a reclassification (OCVA) from a nonfinancial to a financial asset (monetary gold). When the monetary authority sells such reserve gold to nonmonetary institutional units, the gold is demonetized, resulting in an OCVA reclassifying the gold from financial to nonfinancial asset before recording the transaction in nonfinancial assets. (paragraph 5.90) ### SDR holdings and SDR allocations (paragraphs 5.91–5.95) - SDRs are denominated in SDRs, a unit of account created in 1969 by the IMF; the SDR exchange rate (SDR rate) is determined daily by the IMF by summing the U.S. dollar value, based on market exchange rates, of a basket of five currencies (the Chinese renminbi, euro, Japanese yen, pound sterling, and U.S. dollar). (paragraph 5.91) - The renminbi was included in the SDR basket starting on October 1, 2016. (footnote 18) - SDRs are considered foreign currency in all cases, including for economies that issue the currencies in the SDR basket. (paragraph 5.92) - Domestic currency value of stocks and flows for SDR holdings/allocations: convert SDR amounts into U.S. dollar equivalents using the SDR rate, then convert U.S. dollar equivalents into domestic currency units using the market exchange rate prevailing between domestic currency and U.S. dollar at end of reporting period and on the transaction date. (paragraph 5.93) - Main transactions in SDR holdings/allocations arise from: (1) SDR purchases and sales between qualified SDR holders; (2) a new allocation or cancellation of SDRs by the IMF; (3) accrued interest receivable/payable on SDR holdings/allocations; (4) member country payments of charges in SDRs to the IMF; (5) remuneration receipts in SDRs from the IMF on the reserve tranche position; (6) IMF purchases/repurchases and loan receipts/repayments in SDRs; and (7) interest receipts in SDRs on lending to the IMF. (paragraph 5.94) - Valuation changes for SDR holdings/allocations can be derived residually from opening and closing stocks and transactions; holdings and allocations should be shown gross. (paragraph 5.95) ### Currency: domestic and foreign currency holdings (paragraphs 5.96–5.99) - Domestic currency notes and coins held by FCs are valued at nominal amount; revaluations are not applicable. OCVA for domestic currency holdings of an FC are rare and arise in exceptional circumstances such as destruction of currency during wars, riots, or confiscation. Given VC = 0 and OCVA = 0, transactions equal period-to-period changes in stock of currency in circulation: T = CS – OS. (paragraph 5.96) - Domestic currency appears as a central bank liability, currency in circulation; central bank accounts show only that liability, currency in circulation, defined as currency outside the central bank. A related concept is currency outside DCs, defined as currency in circulation less ODCs’ holdings of domestic currency (cash in vaults). (paragraph 5.97) - Foreign currency holdings of FCs should be recorded at nominal value when expressed in foreign currency units and converted to domestic currency units using the market exchange rate prevailing on the balance sheet date. (paragraph 5.98) - Transactions in foreign currency are recorded at exchange rates prevailing on transaction dates; for estimating revaluations, apply approach in paragraph 5.78. (paragraph 5.99) ### Deposits: valuation and transactions (paragraphs 5.100–5.102) - Deposits denominated in domestic currency are recorded at nominal value: outstanding deposit balance plus any accrued interest. Nominal values are used to maintain symmetry between debtors and creditors and because deposits are not intended for negotiability. (paragraph 5.100) - Transactions in deposits are recorded as net deposits (placements less withdrawals) plus accrued interest for the reporting period. For domestic-currency-denominated deposits, valuation changes do not apply, so transactions equal period-to-period change in deposits less any OCVA. (paragraph 5.101) - Stocks and flows of foreign-currency-denominated deposits are converted into domestic currency units as described in paragraph 5.50. If transactions and valuation changes data are unavailable, the daily average market exchange rate for the period can be used to estimate valuation changes; provided there is no OCVA, transactions are the residual. (paragraph 5.102) ### Debt securities: valuation, transactions, and fair value (paragraphs 5.103–5.106) - Stocks in debt securities are valued at market prices on the balance sheet date. Asset-side transactions: securities purchases less securities sales, redemptions and interest payment receipts, plus accrued interest earned. Liability-side transactions: new securities issuances less securities redemptions and interest paid, plus accrued interest incurred. (paragraph 5.103) - Source data may value some debt securities at nominal rather than market value; under IFRSs, debt securities are valued at market or fair values except for held-to-maturity investments, which are valued at amortized cost using the effective interest method. Liabilities in the form of debt securities are also valued at amortized cost except for those designated as financial liabilities at fair value through profit or loss. (paragraph 5.104) - For monetary and financial statistics, assets and liabilities in debt securities (other than short-term) not valued at market price need to be restated at market price. The valuation difference is reflected in Equity liability [MS] as a valuation adjustment. Fair values must be applied to securities traded infrequently or in OTC markets; fair value methods discussed in paragraphs 5.44–5.48 and Box 5.1. Present value method should be possible for nearly all debt securities; where contractual terms are too complex, value at acquisition price or amortized cost (if calculable). If market values for short-term securities are not available, nominal value could be an approximation of fair value provided market interest rates have not changed significantly since issuance. (paragraph 5.105) - Nominal value is recommended as a memorandum item for debt security liabilities to support consistency with debt measures. (paragraph 5.106) ### Impaired debt securities and impairment models (paragraphs 5.107–5.108) - Under IAS 39, debt securities are impaired if the creditor has reliable information that the debtor may default on obligation to pay interest and principal per scheduled future cash flows. (paragraph 5.107) - IFRS 9 revises impairment reporting from an incurred loss to an expected loss model, requiring entities to estimate future losses and create prospective buffers for losses. (paragraph 5.107) - Statistical treatment of impaired debt securities depends on market-price availability: if market-price data exist, record using market price; if not available because security is not traded or traded infrequently, estimate a fair value. (paragraph 5.108) *Monetary and Financial Statistics Manual and Compilation Guide* ### 5.109 Valuation of impaired securities by the present ### 5.109 Valuation of impaired securities by the present ### Valuation of impaired securities by present value - Valuation by the present value method is complicated because of uncertainties involved. - OTC price quotations may be available at prices that are heavily discounted from pre-impairment prices if impaired securities are traded in the market. - Future cash flow(s) must be estimated despite high uncertainty in both amount and timing. - The present value method should be applied in such a way as to avoid creditor overstatement of fair value. - The difference between the pre- and post-impairment values represents a holding loss on the securities (revaluation). ### Accrued interest calculations for debt securities - For debt securities, the value of purchase, sale, redemption, and valuation of positions in balance sheets do not depend on the method used for calculation and recording of accrued interest, because: - Purchases and sales are recorded at transaction prices. - Positions are recorded at market prices or fair values. - Treatment of accrued interest only affects the allocation of financial flows between transactions in accrued interest and holding gains or losses. - Bonds and similar instruments pay a fixed or variable coupon; at issuance they may be priced at par, below par (discount), or above par (premium). - Accrued interest on a bond is calculated using the effective yield at the time of issuance, purchase, or the beginning of the period, and can be split into: - Amortization of the discount or premium vis-à-vis the value to be paid at maturity. - Coupon that is earned but not yet paid. ### Three approaches for defining and measuring interest for debt securities - The Manual lists three approaches: a. Debtor approach: - Perspective of the unit issuing the security. - Interest equals amounts debtors will pay over and above repayment of amounts advanced by original creditors. - Interest accrual determined for the entire life by conditions set at inception. - The effective yield established at time of security issuance is used to calculate accrued interest each period to maturity. b. Creditor approach: - Perspective of the unit holding the security. - Effective yield used to compute accrued interest is updated (recalculated) in each period to reflect current market rates. c. Acquisition approach: - Interest follows from applying the discount rate implicit in the cost at which the instrument was acquired. - Accrual reflects market conditions and expectations at time of acquisition. - Interest is determined using the remaining yield-to-maturity at the time the debt instrument is acquired. - The effective interest rate will change only if the security is resold. - The Manual adopts the debtor approach to record interest accrual on debt securities, in accordance with the 2008 SNA methodology. - The debtor and creditor approaches converge when changes in market price during the life of a security are not large. - Under the acquisition and creditor approaches, interest accrues from the time ownership changes hands; for the creditor approach the effective yield is continuously updated. - Amortization of discount or premium under acquisition or creditor approaches may differ significantly from the debtor approach if market interest rates changed appreciably since issuance. ### Dirty price and clean price in the secondary market - In the secondary market a bond has two prices: - Dirty price: market price including accrued but not yet paid coupon. - Clean price: dirty price minus accrued interest between coupon dates. - The creditor (secondary market purchaser) records the dirty price as acquisition cost. - When the coupon is paid, the accrued interest that was included in the dirty price (acquisition cost) is recorded as a reduction in principal. ### Accrued interest examples and specific instruments (Box 5.2) - Coupon-based debt security issued at par: accrued interest (under the debtor approach) is the accrued coupon. - Fixed-coupon bond issued at a discount: - Yield set at a constant rate on issue price (face value less discount). - Accrues interest at the set constant rate on nominal value (principal plus accrued and not paid interest); part paid as coupon, difference increases nominal value. - Paid-at-maturity discount is recorded as interest. - Fixed-coupon bond issued at a premium: - Yield set at a constant rate; interest accrues on nominal value (including premium). - Because coupon payments are higher than interest accrued on nominal value, the excess is considered a prepayment of principal and discounted from nominal value. - Variable-rate bond issued at face value: - Coupon rate reset at beginning of each coupon period and remains unchanged throughout that coupon period. - If an entire reporting period is within a coupon period, accrued coupon earnings for the reporting period are a prorated share of the coupon. - If reporting period spans two coupon segments, accrued coupon = n1-day share of first coupon + n2-day share of second coupon − first coupon payment (where n1/p1 and n2/p2 are day proportions). - Variable-rate bond issued at a discount or premium: - Accrued interest = accrued coupon + amortization of discount (or − amortization of premium). - Amortization for variable-rate securities is the same as for fixed-coupon securities. - Securities with indexed interest and/or principal: - Accounting follows same principles as variable-coupon securities. - Different recording treatments recommended depending on type of index and currency (see paragraphs 5.53–5.59). - Securities with embedded derivatives (call, put, equity conversion options): - Accrued interest treatment is the same as for securities without such features for all periods leading up to exercise. - When the embedded option is exercised, securities are redeemed and accrual of interest (coupon flow and amortization) ceases. ### Accounting standards and adjustments - Many countries’ accounting standards for accrued interest on debt securities contain a combination of the debtor and acquisition approaches. - In IAS 39, accrued interest on securities holdings is effectively based on either the debtor approach or the acquisition approach depending on whether securities were acquired at issuance or later in the secondary market. - In IAS 39 and many national financial reporting standards, accrued interest on securities issued (liabilities) is effectively based on the debtor approach, consistent with the Manual’s recommendation. ### Reporting and compiler adjustments - If accounting data use the creditor or acquisition approach and are reported to the compiler by the FC, supplementary data should be reported for debt securities purchased in the secondary market to allow compilers to adjust accrued interest data to the debtor approach, if feasible. - Ideally supplementary data would be reported on a security-by-security (s-b-s) basis for all securities for which the acquisition or creditor approach had been applied in the accounting data. - For large FCs with hundreds of secondary-market acquisitions, it is recommended that supplementary data be provided only for securities where the accrued-interest adjustment to the debtor approach would be material—such as securities whose price has changed significantly since issuance. ### Security-by-security databases (s-b-s) — overview and benefits - S-b-s reporting collects information on each individual security issued and/or held by reporting FCs; compilers calculate balance sheet totals and breakdowns from the granular data. - Metadata for each security generally include security identifier (e.g., ISIN code), issuer name/code, nominal amount held/issued, acquisition date and price; additional details may include original/remaining maturity, sector of issuer/holder, original denomination, etc. - Some s-b-s systems use a reference database containing traded securities and attributes; reporting institutions may only need to provide ISIN code and quantity held while compilers derive remaining information from the reference database. - Centralizing aggregation ensures common statistical classifications and harmonized calculation of valuation adjustments and transactions. - S-b-s systems increase flexibility for aggregations (e.g., counterparty sector, maturity brackets) and can supply new breakdowns faster and at lower cost than traditional collection systems. - S-b-s databases are valuable for financial stability analysis as sources for assessing risk exposures. - Major challenge: initial investment by compilers to set up and maintain large databases and appropriate IT infrastructure, including reference databases with security attributes. ### Memorandum items for debt securities - The Manual recommends including the following debt security-related memorandum items: 1. Total accrued interest on debt securities for both assets and liabilities. 2. Debt securities with maturity of one year or less by currency and by counterpart sector for both assets and liabilities. 3. Debt securities assets issued by nonresident FCs and debt securities liabilities held by nonresident FCs. 4. Total amount of debt securities at nominal value for liabilities. - While valuation method for debt securities is market value, nominal value is analytically useful as the legal liability from the debtor’s viewpoint because it is the amount the debtor owes at any moment. ### Loans — valuation, recording, and transactions - Loans are outstanding from disbursement until maturity or liquidation (early repayment or default). - Stock data for domestic-currency-denominated loans (assets or liabilities) are recorded at nominal value—the creditor’s outstanding claim (equal to debtor’s obligation), comprising outstanding principal including any accrued but not yet paid interest. - Use of nominal values maintains symmetry between debtors and creditors and reflects that loans are by definition not traded, making market price estimation subjective. - Nominal value is analytically useful as the legal liability of the debtor but provides an incomplete view when loans are nonperforming. - The Manual recommends including data on expected loan losses (disaggregated by debtor sector) as memorandum items accompanying sectoral balance sheets described in Chapter 7; expected realizable value of loans may be calculated from gross loans and expected loan losses. - Loan transactions comprise new loans extended or received plus accrued interest on loans less loan principal and interest payments. - Transactions in loans denominated in domestic currency are equal to the period-to-period change in loans outstanding (that is, CS − OS) less OCVA (such as arising from loan write-offs). - The case of loan repayment after the loan has been written-off is discussed in paragraph 5.231c. *Monetary and Financial Statistics Manual and Compilation Guide* ### 5.125 Stocks and transactions of foreign-currency- ### 5.125 Stocks and transactions of foreign-currency-denominated loans ### Valuation and conversion rules - Stocks and transactions of foreign-currency-denominated loans are converted to domestic currency units as described in paragraph 5.50. - Using data for opening and closing stocks and OCVA, data for the sum of transactions and valuation changes (arising from exchange rate changes) can be derived residually (see Annex 5.1). - The entire loan portfolio is to be valued at nominal value when presenting loan data in the sectoral balance sheets described in Chapter 7. - Outstanding loans should not be adjusted for provisions for loan losses. A loan portfolio is adjusted downward only when: - (1) loans are written off as uncollectible (OCVA), or - (2) the outstanding amount of a loan has been reduced through formal debt reorganization (revaluation or a transaction if it is debt forgiveness). - Loans sold at below (above) nominal value: - The transaction is recorded at the transaction value and the position is recorded at nominal value. - The seller records a revaluation during the period in which the sale occurs equal to the difference between the nominal and the transaction value; the buyer records an opposite amount as a revaluation. - Such revaluations directly impact Equity liability [MS] through valuation adjustment. - Loans denominated in foreign currency follow the same valuation approach as other foreign-currency-denominated loans. ### Recording of specific loan events and instruments - Debt refinancing and debt swaps: - Revaluation is recorded for the debt being replaced prior to its replacement by a new instrument (for example, a new loan to the original debtor or securities issued by the original debtor or by a new debtor). - Debt refinancing and debt swaps transactions are recorded at the value of the new instrument, with revaluation for the original instrument equal to the difference between the value of the new instrument and the value of the instrument being replaced. - Exception: for nonmarketable debt owed to official creditors when the difference in value is intended to convey a benefit to the debtor—the difference is recorded as a debt forgiveness transaction (see subsection Recording of Debt Reorganizations and BPM6, Appendix 2). - Transaction (trade) date for a loan: - The trade date is the date on which funds are disbursed from the creditor to the debtor; the trade date and settlement date are the same. - A loan agreement that disburses in tranches should be recorded as a series of loans on separate trade dates (time 1, time 2, time 3, …). - Disbursement forms for project loans: - Advances to the borrowing entity — recorded when the lender advances funds to the borrower. - Direct payment by the lender to suppliers — recorded when the lender pays the supplier. - Reimbursement basis after borrower paid suppliers — recorded when the lender makes reimbursements to the borrower. - Loan participations: - Transactions comprise principal amount of new participations less principal and interest payments plus accrued interest. - Mortgage loans: - Transactions recorded as amount of new loans less principal and interest payments plus accrued interest. - Principal payments include scheduled principal components and prepayments. - Financial leases: - Treated as interest and principal payments on a loan by the lessee to the lessor (paragraph 5.133). - Financial leases should be valued at nominal value. - At inception, lessor and lessee should record a loan transaction in the amount of the lessor’s net investment in the lease, equal to the market or fair value of the leased property. - The present value of the lessee payment for the residual value of the asset should be included in the valuation of the lease, whether or not the lessee is expected to acquire the asset at termination. - For the lessee’s accounts, the contra-entry to recording the loan is a nonfinancial asset, recorded as if title had been conveyed to the lessee (change of economic ownership). - For the lessor’s account, the contra-entry depends on whether the asset was previously recorded, acquired expressly for lease, or is a sale and lease-back. - Financial leases that become nonperforming are treated the same as nonperforming loans. - Loans that become negotiable in secondary markets: - Should be reclassified as debt securities (see paragraph 4.59) and valued on the basis of market prices like other debt securities. ### Interest accruals, grace periods, and arrears - For loans (or deposits) requiring accrual of interest during a grace period (i.e., relevant interest rate > zero), the accrual of interest should be recorded as increasing the value of the principal. - If the debtor can repay the same principal at the end of the grace period as at the beginning (i.e., relevant interest rate = zero), no interest costs accrue during the grace period. - This treatment applies to loans and deposits but not to debt securities. - Interest should be shown accruing until a nonperforming loan is repaid or the principal is written off, even if interest arrears are being accumulated. - An interest arrear (interest overdue for payment) is included in the value of the outstanding asset/liability; the same applies for principal arrears. - Interest and principal arrears data should be reported in memorandum items that accompany the sectoral balance sheets. - If recognition that interest and/or principal may not be received in the future occurs, an additional provision for expected loss should be made by the creditor as an OCVA flow (provision for expected loss) and reported in Other accounts payable–other [MS], with a contra-entry in Equity liability [MS] through Current year result. - Source data for financial corporations (FCs) may record interest arrears on balance sheet or off balance sheet; the recording approach underlying the source data must be taken into account. ### Nonperforming and impaired loans - Nonperforming loans (NPLs; defined in paragraph 4.100) indicate potential losses and may result in actual losses for the FC. - Recommendation: NPLs should continue to be recorded at nominal value and entries in the amount of provisions for loan losses be included in Other accounts payable–other [MS] (see paragraph 5.231). - A nonperforming or otherwise impaired loan purchased at a fraction of its nominal value should continue to be recorded as a loan if the purchase is a one-off transaction. - Retaining loan classification for such purchased impaired loans facilitates future posting of provisions for loan losses (see paragraph 4.101). - For secured loans where foreclosure is possible, the present value of proceeds expected from repossession should be deducted when calculating expected loss on an uncollectible lease. ### Memorandum items and recommended disclosures - Recommended memorandum items in sectoral balance sheets to allow calculation of aggregate loans based on different valuations: - (1) total accrued interest on loans for both assets and liabilities; - (2) total amount of interest and principal arrears on loan assets and liabilities; - (3) expected loan losses disaggregated by economic sector of debtor. - Further recommended memorandum items: - (1) loans with maturity of one year or less by currency and by counterpart sector for both assets and liabilities; - (2) loans extended to nonresident FCs and loans received from them. - Data on interest and principal arrears should include all overdue payments that are past due. - FCs are recommended to report interest and principal arrears on loan assets disaggregated by borrowing sector. - Expected loan losses should be disaggregated by economic sector of debtor. - Accounting data on provisions for loan losses can be used to estimate expected loan losses if they reasonably reflect total expected losses on nonperforming loans. - Specific provisions are against expected and identifiable losses on loans. - General provisions are against the possibility of unidentifiable losses within a loan portfolio. - For usefulness in estimating expected loan losses, both general and specific provisions must be disaggregated by economic sector of the debtor. *Source: Monetary and Financial Statistics Manual and Compilation Guide (selected paragraphs 5.125–5.144).* ### 5.145 In cases where source data on provisions do not ### mfsmcg-final - 5.145 In cases where source data on provisions do not ### Expected loan losses and memorandum reporting - Compilers of monetary statistics might report in memorandum items a more accurate measure of expected losses when source data on provisions do not reasonably reflect the total expected losses on NPLs (paragraph 5.145). - Expected loan losses definition and measurement (paragraphs 5.146–5.147): - Expected loan losses comprise three categories based on secured/unsecured status and prospects for full or partial loss: - a. Full loss on unsecured loans: expected loss equals the entire nominal value if no future cash flows are expected. - b. Partial loss on unsecured loans: expected loss is less than nominal value because some future cash flow is expected via recourse to borrower assets. - c. Partial loss on secured loans: expected loss equals the nominal value less recoveries from possession and sale of collateral. - The expected loan loss is the difference between nominal amount and recoverable amount (the present value of expected cash flows from borrower or collateral liquidation). - Principles for measuring the recoverable amount (consistent with IAS 39.63–65): - a. The discount rate for present value of expected cash flow is the original yield to maturity on the loan. - b. For variable interest rate loans, use the current yield to maturity as the discount rate. - c. Estimated cash flows from secured loans should be based on expected net proceeds from collateral sale; costs of acquiring, storing, or maintaining collateral should be netted from proceeds or treated as negative cash flows. - Data disaggregation: - Loans and expected loan losses should be disaggregated by economic sector so realizable value per sector can be derived by deducting expected loan losses from nominal loan values (paragraph 5.148). ### Equity and investment fund shares: valuation and recording - Valuation principles (paragraphs 5.149–5.156): - In financial statistics, equity and investment fund shares—whether held as assets or issued as liabilities—are recorded at market or fair values. - Total value of a corporation’s shares = market price (or fair value) per share × number of shares issued and currently outstanding. - In monetary statistics: - Equity and investment fund shares held as assets are recorded at market value. - Investment fund shares issued as liabilities are recorded at market value. - Equity liabilities of FCs other than investment funds are recorded at book value (difference between total assets and total liabilities) to ensure balance sheet identity. - Foreign-currency-denominated shares held as assets are recorded at market or fair value in foreign currency and converted to domestic currency as described in paragraph 5.50 (paragraph 5.151). - Transactions in shares (equity securities) assets are reported on a purchases-less-sales basis; transactions in shares on the liability side consist of proceeds from owners’ contributions, including issuance of new shares, less any outflow of dividends when shares go ex-dividend (paragraph 5.152). - Transactions in other equity mainly reflect owners’ net additions to equity of quasi-corporations and related withdrawals; for quasi-corporations all equity (including retained earnings and reserves) is assumed to be held by the owners (paragraph 5.153). - Financial support to foreign branches by FCs should be recorded as transactions in the financial instruments used to provide support; where instrument type is unclear, payments could be recorded as transactions in loans (paragraph 5.154). - Transactions in shares are valued at the price agreed by institutional units; new shares recorded at issue value; foreign-currency-denominated transactions converted at market exchange rates prevailing at the time (paragraph 5.155). - Current and capital transfers received and provided by FCs are recorded as transactions affecting Equity liability [MS], with the receipt recorded as an increase in currency or deposits (or nonfinancial assets) and contra-entry to Equity liability [MS] in Current year result, and analogous recording for provisions of transfers (paragraph 5.156). - Purchase (buy-back) of own shares (paragraph 5.157): - In financial statistics total value of an FC’s equity shares equals market price per share × outstanding shares other than reacquired shares. - In monetary statistics reacquired shares (treasury shares) are recorded as a transaction in Equity liability [MS] at market value, with contra-entries recorded as a reduction in currency or deposit holdings. - Example recording (Table 5.7, domestic currency units): - Assets - Transferable deposits: OS = 1,500.0; T = −225.2; CS = 1,274.8 - Liabilities (Equity liability [MS]) - Funds contributed by owners: Retained earnings components showing: - Opening components: 750.0 and 400.0 - Transactions and valuation changes: −60.0 and −165.2 - Closing components: 690.0 and 234.8 - Notes to example: - Funds contributed by owners represent book value of 500 shares at 1.5 per share. - Buy-back of 40 shares at a market price of 5.63 (5.63*40 = 225.2). - Buy-back of 40 shares at book value of 1.5 (1.5*40 = 60.0). - Difference between market and book values: 225.2 – 60.0 = 165.2. - Table note abbreviations: OS = opening stock; T = transactions; VC = valuation changes; OCVA = other changes in the volume of assets; CS = closing stock. ### Listed, unlisted, and other equity valuation methods - Listed shares (paragraphs 5.158–5.160): - Listed shares regularly traded on stock exchanges or organized markets should be valued at current market prices in balance sheets. - For monetary statistics, shares on the liability side are recorded at book value. - Market price quotations are usually available daily for listed shares and sometimes daily or less frequent for OTC shares; for listed shares a representative mid-market price observed on the exchange should be used. - Valuation of unlisted/unquoted shares — six alternative methods (paragraphs 5.160–5.161): - a. Recent transaction price: use recent transaction prices (e.g., within the past year) if market conditions and the corporation’s position have not changed materially. - b. Net asset value (NAV): appraisals by management or independent auditors to obtain total assets at current/market value less total liabilities at market value; valuations should be recent. - c. Present-value approach (PVA)/price-to-earnings ratios: discount forecasted future profits or apply market/industry price-to-earnings ratios to smoothed recent past earnings. - d. Market capitalization method (MCM): adjust book values at an aggregate level using ratios based on suitable price indicators (e.g., ratio of market capitalization to book value for listed corporations with similar operations), or revalue assets carried at cost using asset price indices. - e. Own funds at book value: use enterprise book value (sum of equity components); more frequent revaluation of assets and liabilities improves approximation to market values; this method is used to value Equity liability [MS] in monetary statistics (paragraphs 5.167–5.168). - f. Apportioning global value: base global enterprise group market value on listed market price and apportion to each economy using an indicator (sales, net income, assets, or employment), assuming a constant ratio of net market value to that indicator across the group. - If none of these methods or a combination of MCM and PVA is feasible, less suitable source data (e.g., cumulated flows or a prior balance sheet adjusted by subsequent flows) may be used, but such sources should be adjusted for subsequent price developments (e.g., aggregate share price or asset price indexes) and exchange rate movements; unadjusted summing of past transactions is not recommended (paragraphs 5.161–5.163). - Compilers should choose methods based on availability of information and judgments about which best approximates market values and should be transparent about the methods used (paragraph 5.163). - Other equity (equity not in form of securities) should be valued using the NAV method (paragraph 5.164). ### Depository receipts (DRs) - Accounting tenets for DRs (paragraph 5.165): - Avoid double counting of ownership of underlying instruments and ensure revaluation reflects market price or fair value of the DRs, which reflects the market value of underlying shares. - Owners of DRs record DRs as if they were the underlying equity shares or debt securities of the issuer. - If issued by a nonresident, DRs are included in the Nonresident subcategory within the asset category Equity and investment fund shares or Debt securities in the accounts of the DR holder. - Underlying equity shares or debt securities do not appear in the balance sheets of FCs involved in creating the DRs; if DRs are issued before the arranging FC has acquired underlying instruments in custody, the FC would record a negative holding of the underlying shares to avoid double counting. *Monetary and Financial Statistics Manual and Compilation Guide (IMF), paragraphs 5.145–5.165.* ### 5.166 The DRs traded in active markets should be ### Valuation and Recording of Equities, Investment Fund Shares, and Insurance/Pension Liabilities ### Depositary Receipts (DRs) - DRs traded in active markets should be revalued on the basis of the market price quotations for the DRs. - DRs without market price quotes can be revalued on the basis of the market price at which the underlying shares are traded in the country of issuance, converted into domestic currency units at the market exchange rate. - Differences between selling prices of DRs and underlying shares can induce brokerage activity that moves prices toward parity; cross-border trading and cancellation/release mechanisms can operate in reverse. *This Manual* ### Equity liability [MS]: Valuation principle and reconciliation - Principle: Equity (except MMF and non-MMF investment fund shares) is valued on the liability side at book value; this measure is termed Equity liability [MS]. - Reconciliation with national accounts and other measures: - For quasi-corporations, Equity liability [MS] is consistent with own funds at book value in the 2008 SNA. - For FCs with quoted shares, Equity liability [MS] plus Provisions for losses on financial assets is consistent with the market value of equity plus net worth (see Figure 2.2 in Chapter 2). - Provisions are recorded as liabilities in monetary statistics but are not recognized as liabilities in the 2008 SNA; therefore adding provisions to Equity liability [MS] is needed for reconciliation. *This Manual* ### Flows for Equity liability [MS] of financial corporations (FCs) - Flows include: - Funds contributed by owners: transactions valued based on proceeds from issuance of new corporate shares (less own shares purchased and retired); for quasi-corporations, inflow and outflow of other equity. - Retained earnings: as a principle, retained earnings inflow or outflow is recorded as an OCVA. Transactions in retained earnings are recorded for foreign direct investors’ equity in their direct investment enterprises; in these cases retained earnings are imputed as payable to owners and reinvested as an increase in equity. Transactions are also recorded for dividends when shares go ex-dividend (outflows). The valuation is based on the amount of retained earnings inflow or outflow. - Current year result: accumulation of current profit or loss, recorded as transactions, valuation changes, or OCVA depending on whether the originating flows are transactions, valuation changes, or OCVA. - General and special reserves: valued based on the nominal amount appropriated from retained earnings; this appropriation is recorded as an OCVA. Transactions are not recorded. - Valuation adjustment: the net amount of asset and liability (other than equity liabilities) revaluations for the period, excluding gains and losses posted to current year result. - Adjustments to commercial accounting data sources may be needed to meet valuation requirements; any valuation adjustments to source accounting data are reflected both in the relevant asset or liability and in Equity liability [MS], through Valuation adjustment. *This Manual* ### Memorandum items for Equity liability [MS] - Recommendation: include the market value of an FC’s shares (liability side) in memorandum items classified by holding sector, if possible. - Rationale: reporting market valuation as a memorandum item harmonizes monetary statistics with financial statistics, the 2008 SNA, and the International Investment Position data on external liabilities. - Further recommendation: include in memorandum items data on equity assets issued by nonresident FCs and equity liabilities held by nonresident financial corporations. *This Manual* ### Investment fund shares or units - MMF shares: - Historically maintained a constant share price equal to invested amount. - Rule change in 2014 required a floating NAV for institutional prime MMFs, with daily share prices fluctuating with market value of the portfolio, and establishing liquidity fees and redemption gates. - Valuation mechanics for MMFs: - Changes in value of an investor’s equity holding are usually reflected by variation in the number of shares held rather than changes in price per share. - Most MMFs have share values fixed at one unit of currency; capital gains/losses and changes in interest returns are taken into account by increasing/decreasing number of fixed-value shares owned by the investor. - MMF managers provide monthly statements showing current share holdings. - Non-MMF investment funds: - Listed shares: valued using the market price of the share. - Unlisted shares: valued according to one of the methods for unlisted equity. - Closed-end investment fund shares: - Usually traded in OTC markets; if market price quotations are obtainable, current value of an investor’s holding equals market price per share times number of shares held; total equity equals market price per share times fixed number of shares outstanding. - If market price quotations are unavailable, fair value should be based on NAV used for open-end pools, adjusted upward or downward if known market prices would show a substantial premium or discount to NAV. - Open-end investment funds: - Shares are purchased from or sold back to the fund at the current value of shares; total number of shares is open-ended and share price is based on NAV. - NAV per share for a mutual fund without liabilities equals market value of asset portfolio divided by number of shares outstanding. - For a fund with liabilities, NAV per share equals (market value of assets minus value of liabilities) divided by number of shares outstanding. - Funds typically revalue asset portfolios to current market value on a daily basis; NAV quotations are available from account statements or price quotations. - Loads: - A load (up-front commission or sales charge) should be recorded separately as an expense and excluded from the outstanding amount of the financial asset. *This Manual* ### Insurance, pension, and standardized guarantee schemes (IPSGS): General valuation - Principle: liabilities and counterpart assets should be valued in principle at market value. - Reinsurance: treated in the same way as direct insurance. - Compilers should adjust data to reflect market or fair values of all respective financial assets that should be market-valued, even if IFRSs or national financial reporting standards require adjustments. *This Manual* ### Nonlife insurance technical reserves - Composition: prepayments of net nonlife insurance premiums (paid but not earned as of the balance sheet date) and reserves to meet outstanding nonlife insurance claims. - Prepayments: - Recorded on a nominal basis, using straight-line prorating of the premium payment over the period covered. - Most short-term insurance premiums are often paid semi-annually but sometimes monthly, quarterly, or annually. - Deposit component: - If unbundled from the insurance contract, deposit component is classified within deposit accounts (on a non-prorated basis); only prepayment minus deposit component is included in prepayment of insurance premiums (on a prorated accrual basis). - Reserves to meet outstanding claims: - Recorded at the present value of amounts expected to be paid out in settlement of claims, including disputed claims and allowance for incidents occurred but not yet reported. - Discount rate should be a market interest rate of a maturity reflecting the average period over which claims are expected to remain outstanding. - Transactions recorded: amounts of estimated obligations to beneficiaries and holders accrued during the period (not due to changes in model assumptions) less obligations from previous periods that have been paid. - Reinsurance transactions: recorded as a separate set of transactions; no consolidation takes place between direct insurer transactions and reinsurer transactions (gross recording). *This Manual* ### Life insurance and annuities entitlements - Definition: financial claims policyholders have against a corporation offering life insurance or providing annuities. - Balance sheet amount: consists of reserves for prepaid premiums and accrued liabilities to life insurance policyholders and beneficiaries of annuities. - Measurement: - Should be recorded as the present value of all expected future benefits of holders of life insurance (excluding term life insurance) and annuities, based on standard actuarial techniques. - Adjustment to a present-value basis is likely required because many national reporting standards still measure liabilities on an undiscounted basis. - Discount rate: - Determined by reference to market yields (at the balance sheet date) on high-quality long-term corporate bonds or, if unavailable, by market yields on government bonds, consistent with currency denomination. - Annuities: - Relationship between premiums and benefits usually determined when contract entered; subsequent changes in life expectancy affect liability and such changes are recorded as an OCVA. - Transactions to record: amounts of estimated obligations to beneficiaries and holders accrued during the period. *This Manual* ### Pension entitlements - Recording depends on scheme type: - Defined benefit schemes: liabilities estimated using actuarial techniques and discounted to present value; calculation requires assumptions/projections (mortality rates; employee turnover, disability, early retirement; proportion selecting each payment option; discount rate; benefit levels and future salary). - Defined contribution schemes: recorded liability of the pension provider equals current market value of financial assets held by the pension fund on behalf of beneficiaries. - Discount rate recommendation: same as for life insurance and annuities entitlements—market yields on high-quality long-term corporate or government bonds consistent with currency and maturity. - Recommendation on coverage: - If feasible, pension entitlements should be recorded for the full amount of the present value of estimated pension obligations; employment-related pension entitlements are contractual and expected to be enforceable and should be recognized as liabilities towards households, irrespective of existence of segregated assets. - Actuarial-based estimates of present value for fully funded, partially funded, and unfunded defined benefit pension funds are recorded on employers’ balance sheets. - When an obligation to pay pensions passes from one unit to another, record as a transaction in pension liabilities. - Special consideration: - For corporations where additions to pension entitlements would produce zero or negative book values for total equity (technical insolvency) and reporting such book values may be legally or regulatorily prohibited, ongoing additions should follow national regulatory/supervisory policy with the objective of transitioning to full accounting for pension obligations. *This Manual* *Monetary and Financial Statistics Manual and Compilation Guide* ### 5.197 The changes in the volume of reserves for pen- ### Stocks, Flows, and Accounting Rules — pension reserves, guarantees, and valuation of financial derivatives ### Pension entitlements and changes in reserves - Changes in the volume of reserves for pension entitlements apply to defined benefit schemes only; no such adjustments are needed for defined contribution schemes where benefits are determined solely in terms of the investment earnings on contributions fed into the scheme. - As a general rule: - Changes in pension entitlements negotiated between the parties are transactions. - Changes in model assumptions give rise to OCVA for insurance reserves, pension entitlements, and provisions for standardized guarantee schemes. - Any change in the value of pension entitlements because of a change in the interest rate used to discount future benefits should be recorded as a revaluation. ### Claims of pension funds on the pension manager - When the pension manager is a unit different from the administrator, the pension fund has a claim on the manager if the assets of the pension fund do not cover the pension entitlements. - Conversely, the claim of a defined benefit pension fund on the pension manager is negative if the pension fund has investments of greater value than pension entitlements; in that case the difference is a claim of the manager of the pension scheme on the pension fund. ### Provisions for calls under standardized guarantees - Provisions for calls under standardized guarantees consist of prepayments of net fees and provisions to meet outstanding calls under standardized guarantees. - Transactions for provisions for calls under standardized guarantee schemes are the same as for nonlife insurance. - The balance-sheet value for provisions for calls under standardized guarantees is the expected value of claims under current guarantees less any expected recoveries. ### Principles for recording and valuation of financial derivatives and ESOs - Core principles to follow: - Recognize the exchange of claims and obligations at the inception of a derivative contract as a financial transaction creating asset and liability positions that usually have, at inception, zero value if the instrument is a forward and a value equal to the premium if the instrument is an option. - Treat any changes in the market or fair values of derivatives as valuation changes (holding gains or losses). - Record secondary market transactions in traded derivatives, such as options, as transactions. - Record any payments made at settlement as transactions in financial derivative assets or liabilities. - Record, in the sectoral balance sheets, stock positions in financial derivatives at market or fair values. - Valuation approaches: - Use market prices prevailing on balance-sheet recording dates when liquid market quotations are available. - Apply fair value methods (such as present values or option models) when market price quotations are unavailable or unrepresentative of a liquid market. - Presentation: - Positions of the same type of financial derivative held as both asset and liability are presented gross on asset and liability sides of the FCs’ balance sheet; compile gross asset and gross liability data by summing values of individual contracts in asset positions and in liability positions. - Commissions and fees paid at inception or during the life of derivatives to banks, brokers, and dealers are classified as payments for services (except periodic fees swapped under CDS contracts, which are part of the derivative). ### Forward-type contracts and swaps - Forward-type contracts usually have zero value at inception because parties exchange risk exposures of equal market value. - During the life of the contract, changes in the underlying price or the passage of time can create asset and liability positions; the market value of a forward-type contract can switch from asset to liability for the same party between reporting dates. - When a switch in position occurs and there are no settlement payments: - The market value of the gross asset (or liability) position is revalued to zero, and the gross liability (or asset) position is revalued from zero to the market value. - Swap contract value is derived from the difference, appropriately discounted, between expected gross receipts and gross payments. - If ongoing servicing obligations imply cash receipts/payments, these should reduce (increase) financial derivative assets (liabilities) if the contract is in an asset (liability) position. If compilers cannot implement this market-practice approach, record all cash receipts as reductions in financial assets and all cash payments as decreases in liabilities. - Futures: record flows—transactions and valuation changes—in the category of financial derivatives and any associated margin deposit account transactions; settlement in the reporting period is recorded as a transaction while changes in value over time are recorded as valuation changes. ### Options (including warrants) - The writer of an option is considered to have incurred a counterpart liability representing the cost of buying out the rights of the option holder. - Market value of an option is recorded at the prevailing market price; in absence of that, use the estimated cost of buying out the rights of the option holder. - At inception: - The recorded market or fair value of a call or put option equals the premium paid (option purchase) or premium received (option written). - The buyer records the full premium as acquisition of a financial asset; the seller records it as incurrence of a liability. - Premiums paid after inception are recorded as an asset financed by a trade credit within accounts payable from the option writer; the trade credit is extinguished when the premium is paid. - After initial recording, asset or liability positions should be valued at current market price or fair value at each reporting period end. - The option value depends on price volatility of the underlying, time to maturity, interest rates, and the difference between strike price and market price. - Option value components: - Intrinsic value: value if exercised immediately. - Time value: value from potential favorable movements during remaining life. - For a call option intrinsic value = maximum of S – K or zero; for a put option intrinsic value = maximum of K – S or zero. - As expiration approaches, time value declines; at expiration only intrinsic value (or zero) remains. - Recording entries: - Begin when option purchased (asset) or sold (liability). - When traded, record a transaction in the financial derivatives account with a contra-entry for cash received. - Remove asset/liability position when option is sold (asset transaction only), exercised (transaction), or expires out-of-the-money (revaluation). - Settlement and exercise: - Cash settlement: record a transaction equal to cash settlement; no transaction in the underlying item. Cash receipts: reduction in derivative asset and counterpart increase in cash and deposits. Cash payments: reduction in derivative liability and counterpart decrease in cash and deposits. - Delivery of underlying: record two transactions — the underlying at prevailing market price on the day and the derivative as the difference between prevailing market price and strike price multiplied by quantity. - When multiple contracts with the same counterparty are settled simultaneously, record transactions on a gross basis (assets and liabilities separately) rather than netting. - Credit derivatives: - Recording of flows for credit derivatives is similar to forward-type and option-type contracts. - Total return swaps treated like other swaps. - CDSs: periodic fees and other payments under CDSs and secondary market purchases/sales of CDSs are recorded as transactions in credit derivatives; settlement and exercising are recorded as transactions. ### Fair valuing nontraded or infrequently traded derivatives and currency conversion - Use continuously compounded interest rates for compounding or discounting cash flows in valuation models for nontraded or infrequently traded derivatives. - Conversion of foreign-currency-denominated derivatives: calculate market or fair values in foreign currency units and then convert to domestic currency as per standard conversion procedures. ### Employee stock options (ESOs) - ESOs are usually nontradable and must be fair-valued by reference to the price or fair value of the underlying shares. - Fair values of ESOs can be measured from market value of equivalent options or according to options-pricing models such as the binomial-tree or the Black-Scholes model. - ESOs should be recognized on the balance sheet: - Before exercise, the arrangement between employer and employee has nature of a financial derivative and is shown in accounts of both parties. - Entry appears in liability category of financial derivatives in the accounts of the FC that has written the option. - No entry for ESO in asset categories of FCs’ accounts because ESOs are generally assets only of households (though ESOs may, in some cases, be provided to suppliers). - Valuation timing: - Estimate ESO value at the “grant date.” If not possible, record at the “vesting date.” - In principle, change in value between grant date and vesting date should be treated as part of compensation of employees; change between vesting date and exercise date is treated as a holding gain or loss. - For pragmatic reasons, the whole increase between grant date and exercise date is treated as a holding gain or loss. - An increase in share price above the strike price is a holding gain for the employee and a holding loss for the employer, and vice versa. ### Box on compounding and discounting at continuously compounded rates (definitions and examples) - Definitions: - Future value (FV) of amount C invested today for N years at continuously compounded rate R: FV = Ce^{RN}, where e^{RN} is the compounding factor and N = (days until the cash flow)/(days in a year). Examples: N = 0.25, N = 0.37, N = 1, N = 2.31. - Present value (PV) of a cash flow C at time T = N discounted at continuously compounded rate R: PV = Ce^{−RN}, where e^{−RN} (or 1/e^{RN}) is the discounting factor. - Conversions between a continuously compounded rate (R_c) and an m-times-per-year-compounded rate (R_m) use: R_m e^{R_m} ln R_m (1) and [1(/)]. - Examples: - Combining forward rates: with one- and two-year forward rates of 10.5 percent followed by a third-year forward rate of 11.4 percent, the three-year forward rate R is 0.108 = (0.105 + 0.105 + 0.114)/3. The three-year (N = 3) compounding factor is e^{RN} = e^{(0.108)(3)} = 1.383 and the corresponding discounting factor is e^{−RN} = 0.723. - Present value formulations: - A three-year zero-coupon bond with face value of 1,000: PV = Ce^{−RN} = 1,000 * 0.723 = 723. - A three-year 10 percent coupon bond with face value of 1,000 using time-variant discount rates results in PV = 965.91 (illustrated with component terms Ce^{−Rt} etc. as shown in the example). *Monetary and Financial Statistics Manual and Compilation Guide (selected excerpts).* ### 5.223 At the time of granting an ESO, the employer ### mfsmcg-final - 5.223 At the time of granting an ESO, the employer ### Employee stock options (ESOs) accounting (paragraphs 5.223–5.225) - The Manual records that at the time of granting an ESO, the employer records a liability in ESO, with the contra-entry a decrease in Equity liability [MS] reflecting an expense for compensation of employees (reducing Current year result). (5.223) - Subsequent measurement: - The ESO liability in the FCs balance sheet should be valued at fair value at the end of each reporting period with a contra-entry in Equity liability [MS] through valuation adjustment. (5.224) - When the option is exercised and settled in cash: - A redemption transaction in the ESO liability (reduction) is recorded at the fair value of the ESO, along with a transaction in currency and deposits assets (reduction). (5.224) - When the option is exercised and underlying shares are delivered: - A redemption transaction in the ESO liability (reduction) is recorded at the fair value of the ESO. - A transaction in currency and deposits assets (increase) is recorded in the amount paid by the employee (at the strike price). - A transaction in Equity liability [MS] (increase) is recorded in the amount of the difference. (5.224) - The Equity liability [MS] entry is recorded in Funds contributed by owners at the book value of shares and in one of the other (than Funds contributed by owners) components of equity in the amount of the difference between the market and book values of the issued shares. (5.224) - Cross-border/group treatment: - When an employee of a subsidiary is issued a stock option in the parent company, the subsidiary is shown as acquiring an option from the parent with a corresponding ESO liability to the employee because the parent is not the employer. Such instances might arise when the subsidiary is resident in a different economy than the parent. (5.225) ### Trade credit and advances (paragraphs 5.226–5.228) - Valuation: - Trade credit and advances should be valued at nominal value for both creditors and debtors, defined as the outstanding amount that debtors are contractually obliged to pay creditors when the obligation is extinguished. (5.226) - Discounts and interest: - When a discount is offered to the debtor for early payment, this is reflected in the value of the goods and services. If payment is not made within the discount period, the discount is recorded as interest. (5.227) - Long-term trade credits: - For trade credits of longer maturity, apply the 2008 SNA treatment (paragraph 3.144). When the billing period becomes “unusually long” and the amount of trade credit extended is very large, conclude that interest may have been implicitly charged and adjust the value of the trade credit (valuation change) so interest can accrue at the appropriate discount rate over the period to the final payment date. (5.228) ### Other accounts receivable/payable—other (paragraphs 5.229–5.231) - Nominal valuation: - Nominal value is used to value most subcategories, including settlement accounts, items in the process of collection, and most categories of miscellaneous asset and liability items. (5.229) - Special cases: - The IMF quota subscription (applicable to the central bank only) should be valued on the basis of market exchange rates at the balance sheet dates, and for monetary statistics revaluations should be recorded in Equity liability [MS] (valuation adjustment). (5.229) - Provisions for losses on assets included in Other accounts payable[MS]–other are valued at book value. (5.229) - Interest treatment: - Interest due on other accounts receivable or payable, if any, is included here. Interest accrued on financial assets and liabilities other than Other accounts receivable/payable should not be included here but should be included in the outstanding amount of the financial asset or liability. (5.230) - Provisions for losses on loans and other financial assets: - The 2008 SNA does not contain accounts for provisions for losses on loans and other financial assets; such provisions are bookkeeping entries internal to the corporation and do not appear in the 2008 SNA, except as memorandum items for expected losses on NPLs. In monetary statistics, provisions for losses on assets are classified under Other accounts payable[MS]—other and treated as precursor of a loan (or other asset) write-off and as OCVA flows. (5.231) - OCVA entries and contra-entries: - a. Provisions for losses on financial assets: An OCVA entry in the amount of the provision created during the reference period is posted to Provisions for loan losses (a subcategory of Other accounts payable [MS]—other). The OCVA contra-entry is a reduction in Equity liability [MS] (Current year result). (5.231.a) - b. Financial asset (loan) write-offs: An asset (loan) write-off is shown as an OCVA reduction in the outstanding amount of the financial asset (loan). The OCVA contra-entry is a reduction in Provisions for loan losses within Other accounts payable [MS]—other. If the full amount of the financial asset (loan) write-off has been provisioned, the negative OCVA entry for the reduction in the amount of the financial asset (loan) is matched with the OCVA entry for a reduction in Provisions for loan losses (a liability account), and the adding-up condition is maintained for the OCVA column shown in Table 5.2. If no provision or an insufficient provision exists, all or part of the OCVA contra-entry is posted as a reduction in Equity liability [MS] (Current year result or General and special reserves). (5.231.b) - c. Reversal of provisions for financial asset (loan) losses: Financial asset (loan) recoveries lead to an OCVA entry reversing the earlier provisioning and an OCVA contra-entry increasing Equity liability [MS] (Current year result) to reverse the previous entry. Recoveries may be full or partial; in exceptional cases repayment after write-off is handled by first recording an OCVA increase in the financial asset (loan) with a contra-entry increase in Equity liability [MS] (Current year result), reversing earlier entries, then recording the repayment as a transaction reducing the financial asset (loan) with a contra-entry for the cash or other form of payment. (5.231.c) ### Nonfinancial assets (paragraphs 5.232–5.234) - Role and valuation: - Stock positions and flows of financial assets and liabilities of FCs are the primary focus of monetary and financial statistics, but accurate data on nonfinancial assets are required for completing stock and flow data in the balance sheet framework. The recommendation is that produced and nonproduced nonfinancial assets should be valued at market value on the balance sheet date consistent with SNA principles. (5.232) - Practical data issues: - Source data compiled under national financial reporting standards often use other valuation methods; depreciation allowances may not represent consumption of fixed capital as specified by the 2008 SNA and may be based on tax and policy considerations rather than useful lives and replacement costs. (5.233) - Importance for accounts linkage: - Accurate data on production, acquisition, disposal, and consumption of nonfinancial assets are needed for analysis of linkages between the financial account and other accounts (especially the capital account) of the 2008 SNA. Stock data for nonfinancial assets are needed for 2008 SNA sectoral balance sheets, and nonfinancial assets in monetary and financial statistics should be valued consistent with national accounts needs—even though source data often record nonfinancial assets at acquisition cost rather than market or fair value. (5.234) ### Recording of debt reorganization (paragraphs 5.235–5.243) - Definition and main types: - Debt reorganization (debt restructuring) alters terms established for servicing an existing debt. Four main types described in the 2008 SNA are: (1) debt forgiveness, (2) debt rescheduling or refinancing, (3) debt conversion, and (4) debt assumption. (5.235) - Debt forgiveness: - Debt forgiveness is a reduction in the amount of, or extinguishing of, a debt obligation by the creditor via contractual arrangement with the debtor. It is voluntary cancellation by mutual agreement, recorded as a transaction in the form of a capital transfer from the creditor to the debtor. In the balance sheet, the debtor’s liability and creditor’s asset are reduced by the amount forgiven, with a counterpart increase in equity of the debtor and reduction in equity of the creditor. Valuation of the amount forgiven is at market prices for flows and stocks, except for loans where the nominal value is used. (5.236) - Debt rescheduling/refinancing: - Debt rescheduling: existing contract extinguished and a new contract created; typically the outstanding amount of the loan is the same before and after rescheduling so valuation of a loan should not be affected, though market/fair value of a debt security would usually be affected. Transactions are valued at the value of the new debt with any difference recorded as a revaluation. (5.237–5.238) - Debt refinancing: similar treatment to rescheduling; the old debt is extinguished and replaced with a new instrument, transactions valued at the new debt; the balance sheet reflects transactions extinguishing the old debt and creating the new instrument along with any revaluation. Exception: non-marketable debt owed to official creditors where the old debt is extinguished at its original value and the difference with the new instrument is recorded as debt forgiveness. (5.239) - Debt conversion and prepayments: - Debt conversion (swap) and prepayments: debt conversion exchanges debt—typically at a discount—for a non-debt claim such as equity, including debt-for-equity swaps; writing down the original debt before conversion records any holding loss in the revaluation account. Debt prepayments are repurchase or early payment of debt; when a discount relative to nominal value is involved (buybacks), any difference in value is recorded as a valuation change. (5.240–5.241) - Debt assumption and repudiation: - Debt assumption: one unit assumes responsibility for another unit’s outstanding liability; recording depends on whether the debt-assuming party acquires a claim on the original debtor. In all cases the debt-assuming party records creation of a new liability to the creditor (financial account entry). (5.242) - Debt repudiation: unilateral cancellation of a financial claim by a debtor and is not recognized in macroeconomic statistics. (5.243) ### Estimation of transactions and valuation changes from exchange rate movements (paragraphs 5.244–5.247) - Scope: - Equations for estimating transactions (T) and valuation changes (VC) are presented for two cases: (1) a category of foreign-currency-denominated deposits with no OCVA entry for the period, and (2) a category of foreign-currency-denominated loans that has an OCVA entry arising from a provision for loan losses. (5.244) - Exchange rate representation: - Each transaction should be valued at the exchange rate that applied at the time of the transaction. If timing/amounts are unknown, choose a single representative exchange rate for all transactions during the period. (5.245) - The Manual recommends using the daily average exchange rate (the midpoint between the buying and selling rate) for the period—denoted as e_m—as the representative single exchange rate for all transactions during the period. e_m is viewed as most representative for categories of financial assets or liabilities transacted day-to-day throughout the reporting period. (5.246) - Estimation formula in absence of OCVA: - For a deposit category denominated in a single foreign currency with opening stock S0 and closing stock S1 (both in foreign currency units), foreign-currency-denominated transactions equal S1 – S0. Transactions expressed in domestic currency units are estimated by applying e_m to the foreign-currency flow: - T = e_m(S1 – S0). (5.247) *Monetary and Financial Statistics Manual and Compilation Guide* ### 5.248 The VC expressed in domestic currency units ### 5.248 The VC expressed in domestic currency units ### Formulas for valuation change (VC) and transactions (T) in domestic currency units - VC expressed from exchange rates (e0 and e1) and foreign-currency opening and closing stocks: - VC = e1 S1 – e0 S0 – em (S1 – S0) = (e1 – em) S1 – (e0 – em) S0. (5.5) - Equivalently, using stocks translated into domestic currency units OS = e0 S0 and CS = e1 S1: - T = (em / e1) CS – (em / e0) OS. (5.6) - VC = [1 – (em / e1)] CS – [1 – (em / e0)] OS. (5.7) - Alternative residual derivation: - VC = CS – OS – T, where T is the transaction estimate from equation (5.4) or (5.6). ### Numerical example (deposits denominated in euro) - Given: - Opening stock in foreign currency, S0: €112 - Closing stock in foreign currency, S1: €122 - Beginning-of-period exchange rate, e0: N2.10/€ - End-of-period exchange rate, e1: N2.20/€ - Daily average exchange rate, em: N2.18/€ - Opening stock in domestic currency, OS: N235.20 [ = (N2.10/€)(€112)] - Closing stock in domestic currency, CS: N268.40 [ = (N2.20/€)(€122)] - Transactions estimate: - T = (2.18) (€122 – €112) = N21.80 (see equation (5.4)) - T = (2.18/2.20) (N268.40) – (2.18/2.10) (N235.20) = N21.80 (see equation (5.6)) - Valuation-change estimate: - VC = (2.20 – 2.18) (€122) – (2.10 – 2.18) (€112) = N11.40 (see equation (5.5)) - VC = [1 – (2.18/2.20)](N268.40) – [1 – (2.18/2.10)](N235.20) = N11.40 (see equation (5.7)) - VC = N268.40 – N235.20 – N21.80 = N11.40 (derived) ### Estimation in presence of OCVA (other changes in volume analysis) - When an OCVA entry (e.g., provision for loan losses) applies, include OCVA denominated in foreign currency in equations: - From foreign-currency-denominated stocks: - T = em (S1 – S0 – OCVA). (5.8) - VC = e1 S1 – e0 S0 – e1 OCVA – em (S1 – S0 – OCVA) = (e1 – em) S1 – (e0 – em) S0 – (e1 – em) OCVA. (5.9) - From stocks converted into domestic currency units: - T = (em / e1) CS – (em / e0) OS – em OCVA = (em / e1) CS – (em / e0) OS – em OCVA. (5.10) - VC = (1 – em / e1) CS – (1 – em / e0) OS – (e1 – em) OCVA. (5.11) - Residual alternative: - VC = CS – OS – OCVA – T, where T is from equation (5.8) or (5.10). ### Numerical example with OCVA (euro-denominated loans) - Given: - Opening stock in foreign currency, S0: €152 - Closing stock in foreign currency, S1: €137 - e0: N2.10/€ - e1: N2.20/€ - em: N2.18/€ - OS: N319.20 [= (N2.10/€)(€152)] - CS: N301.40 [= (N2.20/€)(€137)] - OCVA = –€13 - Transactions estimate: - T = (2.18) (€137 – €152 + €13) = – N4.36 (see equation (5.8)) - T = (2.18/2.20) (N301.40) – (2.18/2.10) (N319.20) – (2.18)(–€13) = – N4.36 (see equation (5.10)) - Valuation-change estimate: - VC = (2.20 – 2.18) (€137) – (2.10 – 2.18) (€152) – (2.20 – 2.18) (–€13) = N15.16 (see equation (5.9)) - VC = [1 – (2.18/2.20)] (N301.40) – [1 – (2.18/2.10)] (N319.20) – (2.20 – 2.18) (–€13) = N15.16 (see equation (5.11)) - VC = N301.4 – N319.2 – (–N4.36) – (2.20) (–€13) = N15.16 ### Scope and practical application - The estimation method applies to foreign-currency holdings and any category of foreign-currency-denominated assets or liabilities recorded at nominal value in foreign-currency units—principally foreign-currency-denominated deposits and loans. - Separate estimation is required for each foreign currency of denomination and for each economic sector that issues or holds the foreign-currency-denominated assets or liabilities in each financial asset/liability category. - Accuracy depends on how representative the daily average exchange rate, em, is of actual exchange rates applied to individual transactions: - Estimates are more reliable when transaction volumes are large, uniform, and spread across the reporting period. - Estimates are less reliable when the exchange rate has fluctuated considerably, or depreciated/appreciated sharply during the period. ### Guidance on exchange-rate choice and accrued interest - Recommendation: use the daily average exchange rate (em) in the estimation and implicitly treat accrued interest as if it had been posted on a daily basis throughout the period. - Alternative: if most transaction volume occurred on a single day or week, an exchange rate for that day or week may be used. - Availability of timing and amount data on transactions indicates capacity to collect transactions data directly, eliminating the need to estimate T and VC. ### Valuation principles for debt securities (overview) - Market valuation is the key principle for valuing transactions and stocks in debt securities. - Market prices may deviate from nominal value due to market price changes driven by market interest rates, issuer creditworthiness, demand for a security, or market liquidity. ### Fair value methods for infrequently traded debt securities - Apply fair value methods where market price quotations are not available regularly. - Exception: an earlier price quotation in the reporting period may be used for end-of-period valuation only if market prices of comparable securities have been relatively stable. ### Present value calculation and discount rates - Present value calculation requires data on future cash flows and an appropriate discount rate. - Discount rate selection should represent yields for securities with comparable maturity and credit risk. ### Special valuation cases - Perpetuities: - PV = C / r, where C is the coupon payment and r is the discount rate (recommended: effective yield on a long-term conventional bond with similar credit risk). - Variable-rate bonds: - Features include reference rate (e.g., LIBOR), variable-rate specification (e.g., LIBOR plus 200 basis points), reset period, and possible interest/principal indexation. - Recommendation: when market price is unavailable and future cash flows are uncertain, fair values should be based on discounted expected cash flows. - Caps, floors, or collars on interest variation should be taken into account when estimating interest payments. - Securities with embedded derivatives: - Common embedded derivatives: call option, put option, conversion option. - Recommendation: record the total value of the security inclusive of embedded derivatives as a single instrument within debt securities. - Host security and embedded derivative should be valued according to national financial reporting standards. - Composite valuation preserves classification of embedded derivative as inseparable from the host instrument and aids consistent estimation of accrued interest. - Securities with indexed interest and/or principal: - Apply general principles for indexed financial instruments: estimate future cash flows as determined by the indexation and select appropriate discount rate. - Securities with coupon and principal indexed to a foreign currency are treated as denominated in that foreign currency. - Nonparticipating preferred stocks: - Treated as debt securities when they pay fixed income and do not provide participation in residual value on dissolution. - Fair values estimated by methods for debt corporate bonds, accounting for discretionary timing of dividend payments (cumulative dividends must be paid before common dividends). - Preferred shares are classified as debt securities unless they convey a right to residual value upon liquidation. *Monetary and Financial Statistics Manual and Compilation Guide* ### 5.274 To estimate the fair value of not-actively traded ### 5.274 To estimate the fair value of not-actively traded ### Valuation of not-actively traded preferred shares - Assumptions needed on whether dividends will be paid as scheduled or will accumulate, and if/when preferred shares are likely to be called or converted into common shares. - Recommendation: assume dividends will be paid on schedule unless skipped dividends are already present and appear likely to persist, or objective information (for example, expectation of weak or negative earnings performance of the preferred-share-issuer corporation) indicates dividends are likely to be skipped. - If dividends have accumulated (or are likely to accumulate), the amount and timing of expected cash flows from eventual payment must be predicted. - Recommended discount rate: the effective yield on actively traded preferred shares deemed to have the same credit risk and about the same expected maturity as the preferred shares to be valued. - If necessary, the discount rate can be specified as the effective yield on actively traded corporate bonds that are of comparable credit risk and have a maturity that approximates the expected term to maturity, call, or conversion of the preferred shares. - Note: preferred stock with no stated maturity and no embedded call or convertibility options is treated as a perpetuity; fair value is calculated using the perpetuity formula with dividends as the cash flow and the effective yield on similar actively traded preferred shares (or, if necessary, on actively traded long-term bonds) as the discount rate. ### Mortgage pass-through securities: forecasting and models - Forecasting cash flows from mortgage pass-through pools is complex because of uncertainty about future mortgage prepayments. - Issuers (FCs) use models for initial pricing and ongoing valuation that account for expected prepayments. - Best-known models include: - PSA model: an empirical prepayment model developed by the Public Securities Association (PSA) to estimate average monthly prepayment rates for specific mortgage loan pools using current and past data. - Proprietary PSA-type models: in-house models developed by FCs that issue, trade, or deal in pass-through mortgage securities. - Options-pricing models: treat prepayments as equivalent to the exercise of a call option—an option written by holders of the pass-through securities and owned by the debtors. - Estimated yield on mortgage pass-through securities = yield on otherwise similar securities not subject to prepayments + estimated yield on the “call option” provided by pass-through securities holders. - FCs that originate and sell pass-through securities must provide a monthly statement showing current value of investor holdings and related cash flows (interest payments and principal repayments including prepayments) for the reporting period. ### Stripped securities - An FC may purchase bonds, strip coupon payments, and sell future cash flows separately (principal claim to one investor set; coupon claims to another). - Market price quotations for strips may be available; otherwise strips are valued using the present value method. ### Numerical examples: valuation, recording, and examples overview - Fair value in examples = sum of present values of all future cash flows discounted at the market interest rate (first equation in Box 5.1). Calculations follow the debtor approach. - Prevailing market interest rate used to discount all future cash flows. - Semi-annual accrued interest is calculated on a compound basis. - Four illustrative securities (all issued in domestic currency, original maturity three years, annual coupon at end of each year, principal paid in one installment at maturity): 1. Fixed-interest-rate bond issued at par. 2. Fixed-interest-rate bond issued at a discount. 3. Fixed-interest-rate bond with principal linked to the consumer price index (CPI). 4. Fixed-interest-rate bond with principal linked to a foreign currency. - Table of issuance parameters (as specified): - Face value (in domestic currency): 1,000; 1,000; 1,000; 1,000 - Issue price (in domestic currency): 1,000; 900; 1,000; 1,000 - Coupon, %: 10.00; 5.98; 5.00; 10.00 - Indexation: No; No; Principal to CPI; Principal to US$ ### Example A — Fixed-interest-rate bond issued at par - Coupon: 10 percent; face/nominal/market value at issuance: 1,000. - Interest accrues and is reinvested, increasing nominal value from 1,000 to 1,100 at year end before coupon payment. - Coupon payment: 100 by debtor at year end treated as partial redemption reducing nominal from 1,100 to 1,000. - At end of first semester Year 1: - Nominal before coupon payment: 1,048.8 - Accrued interest: 48.8 - Market value (dirty price): 1,048.8 - Market value (clean price): 1,000.0 - With market interest rate change to 9 percent at end of first semester of Year 2: - Discounted cash flow of bond = 1,062.4 (includes accrued interest 48.8 and revaluation change 13.6). - At redemption end of life, market value equals nominal value irrespective of prevailing market interest rate. - Recording entries (selected flows and stocks, presented as OSTVCOCVACS): - At inception/purchase: Assets — Debt securities 1,000.0; Deposits −1,000.0 - First semester Year 1: Assets — Debt securities 1,000.0 + 48.8; Interest income 48.8 - Second semester Year 1: Assets — Debt securities 1,048.8 −48.8 + 54.2 = 1,054.2; Deposits 100.0; Interest income 51.2; Valuation adjustments 54.2 - Flows for three-year period after purchase: Deposits 300.0; Interest income 300.0; Valuation adjustments 0.0 - Redemption: Debt securities −1,000.0; Deposits 1,000.0 ### Example B — Fixed-interest-rate bond issued at discount - Coupon: 5.98 percent; issue price: 900; market interest rate at inception: 10 percent. - Fair value calculation results in initial price: 900. - Discount of 100 accrues through life and is paid at maturity when principal 1,000 is cancelled. - Bond accrues interest of 10 percent per year on nominal value (yield to original buyer). - Example flows: - End-Year 0 nominal value before coupon: 900.0; accrued interest (coupon) 29.5; accrued interest (discount) 14.5. - End-Year 1 before coupon: Nominal 943.9; coupon payment −59.8; nominal after coupon 930.2. - Market value (dirty price) at various dates e.g., End-Year 0: 900.0; Mid-Year 1: 943.9; End-Year 1: 1,041.3; Mid-Year 2: 988.5; End-Year 2: 1,014.6; Mid-Year 3: 1,001.4; End-Year 3: 1,059.8. - Clean price at Mid-Year 3: 890.9 (accumulated revaluation loss of 9.1 compared with issue price 900). - Recording entries (selected): - At inception/purchase: Assets — Debt securities 900.0; Deposits −900.0 - Second semester Year 1: Assets — Debt securities 943.9 −13.7 + 51.3 = 981.5; Deposits 59.8; Interest income 46.0; Valuation adjustments 51.3 - First semester Year 3: Assets — Debt securities 954.8 + 47.0 −0.4 = 1,001.4; Interest income 47.0; Valuation adjustments −0.4 - Second semester Year 3 (before redemption): Assets — Debt securities 1,001.4 −10.5 + 9.1 = 1,000.0; Deposits 59.8; Interest income 49.3; Valuation adjustments 9.1 - Redemption: Debt securities −1,000.0; Deposits 1,000.0 ### Example C — Fixed-interest-rate bond linked to the CPI - Coupon: 5 percent; principal indexed to CPI. - Assumption: inflation observed during past 12 months will prevail; past year inflation = 5.24 percent. - Fair value at inception results in issue at par and expected redemption value of 1,165.6 (face value 1,000 + expected revaluation due to CPI 165.6). - Revaluation due to principal indexation is recorded as accruing of interest (transactions). - Nominal value for subsequent periods includes face value + accrued and not-yet-paid coupon + actual inflation during past periods. - Example developments: - CPI base end t0 = 100; Mid-Year 1 CPI = 103.0; End-Year 1 CPI = 104.5; Mid-Year 2 CPI = 107.4; End-Year 2 CPI = 111.3; Mid-Year 3 CPI = 113.4; End-Year 3 CPI = 117.0. - During first year CPI increased 4.5 percent bringing nominal after coupon payment to 1,045.0. - Expected redemption price fell from 1,165.6 to 1,141.2 because of drop in inflation compared with inception expectation; market interest rate dropped from 10 percent to 7 percent. - Fair value at end of first year after coupon paid (dirty price): 1,087.1 (includes accrued interest for 45.0 due to indexation of principal). Clean price: 1,042.1 (valuation change 42.1 compared with issue price). - Table of semi-annual stocks and flows (selected values): - Nominal value before coupon payment: End-Year 0: 1,000.0; Mid-Year 1: 1,054.7; End-Year 1: 1,095.0; Mid-Year 2: 1,098.2; End-Year 2: 1,163.0; Mid-Year 3: 1,158.2; End-Year 3: 1,220.0 - Accrued interest (coupon): 24.7; 25.3; 24.7; 25.3; 24.7; 25.3 - Accrued interest (indexation): 30.0; 15.0; 28.5; 39.5; 20.5; 36.5 - Market value (dirty price) at End-Year 1: 1,137.1; at End-Year 3: 1,220.0 - Market value (clean price) at End-Year 1: 1,042.1; at End-Year 3: 1,000.0 - Recording entries (selected): - At inception/purchase: Assets — Debt securities 1,000.0; Deposits −1,000.0 - Second semester Year 1: Assets — Debt securities 1,071.2 −9.7 + 25.6 = 1,087.1; Deposits 50.0; Interest income 40.3; Valuation adjustments 25.6 - First semester Year 3: Assets — Debt securities 1,113.0 + 45.2 −10.4 = 1,147.8; Interest income 45.2; Valuation adjustments −10.4 - Flows for three-year period after purchase: Deposits 179.4; Interest income 279.4; Valuation adjustments 0 - Redemption: Debt securities −1,000.0; Deposits 1,000.0 *Monetary and Financial Statistics Manual and Compilation Guide (selected excerpts)* ### 5.301 The last example is a bond with a fixed coupon of ### 5.301 The last example is a bond with a fixed coupon of ### Description of the foreign-currency-linked fixed-coupon bond - Bond pays a fixed coupon of 10 percent per year on its face value in domestic currency, but principal is linked to a foreign currency (US$). - It is assumed that the spot exchange rate will prevail in the future; under that assumption the fair value at issuance equals the fair value of the comparable plain domestic bond (i.e., 1,000) and the security is issued at par. - Changes in the spot exchange rate affect: - the nominal value when the face value is converted into domestic currency using the market exchange rate; and - the market value through impacts on the expected redemption price and thus fair value. - Because the bond is linked to a narrow index, valuation changes due to exchange rate movements are recorded as valuation changes (VC) and not as transactions; only coupon accruals are recorded as transactions. ### Semi-annual valuation and market-price examples (selected observations and calculations) - End of first semester Year 1: - Exchange rate dropped to 9 units of domestic currency per US$. - Market interest rate remained at 10 percent per year. - Nominal value fell from 1,000 to 948.8, corresponding to expected redemption price of 900 plus accrued and not paid interest of 48.8 (10 percent of 1,000). - Fair value calculation (dirty price includes accrued interest of 48.8): fair value = 970.0 (calculation steps shown in source lead to dirty price 970.0). - Clean price at that date: 921.2. - Revaluation loss for the semester: −78.8. - End of second year (before coupon payment): - Nominal value before coupon payment: 1,100.0. - Dirty price: 1,091.0. - Clean price: 991.0. - Revaluations during the semester: 21.3. - Table 5A.6 (selected rows and semester observations preserved exactly as in source): - Nominal Value Before coupon payment: 1,000.0, 948.8, 950.0, 998.8, 1,100.0, 1,098.8, 1,200.0 - Accrued interest (coupon): 48.8, 51.2, 48.8, 51.2, 48.8, 51.2 - Coupon payments: 0.0, −100.0, 0.0, −100.0, 0.0, −100.0 - Market Value (dirty price): 1,000.0, 970.0, 1,023.2, 1,018.5, 1,091.0, 1,086.6, 1,200.0 - Market Value (clean price): 1,000.0, 921.2, 923.2, 969.7, 991.0, 1,037.8, 1,100.0 - Accumulated revaluations: –78.8, 76.8, –30.3, –9.0, 37.8, 100.0 - Holding gains and losses: –100.0, –150.0, –50.0, 0.0, 50.0, 100.0 - Other market price changes (incl. disc. holding gains/losses): 21.2, 73.2, 19.7, –9.0, –12.2, 0.0 - Revaluation (semi-annual change): –78.8, 2.0, 46.4, 21.3, 46.8, 62.2 - Selected stocks-and-flows snapshots from illustrative OSTVCOCVACS tables (numbers preserved exactly): - At inception/purchase: Debt securities OS 0 T 1,000.0 CS 1,000.0; Deposits T −1,000.0. - Second semester Year 1: Debt securities OS 970.0 VC −48.8 OCVA 2.0 CS 923.2; Deposits T 100.0; Interest income 51.2; Valuation adjustments 2.0. - First semester Year 3: Debt securities OS 991.0 T 48.8 VC 46.8 CS 1,086.6; Interest income 48.8; Valuation adjustments 46.8. - Second semester Year 3 (before redemption): Debt securities OS 1,086.6 VC −48.8 OCVA 62.2 CS 1,100.0; Deposits T 100.0; Interest income 51.2; Valuation adjustments 62.2. - Redemption flow for three-year example (flows for the three-year period after purchase of debt securities): - Assets: Debt securities T 1,000.0 VC 170.0 CS 1,170; Deposits T 150.0. - Interest income 320.0; Valuation adjustments 0. - Redemption: Debt securities T 1,170.0 −1,170.0 Account closed; Deposits 1,170.0. - Alternative three-year flow example (other scenario shown): - Assets: Debt securities T 1,000.0 T 0.0 T 100.0 CS 1,100; Deposits 300.0; Interest income 300.0; Valuation adjustments 100.0. - Redemption: Debt securities T 1,100.0 −1,100.0 Account closed; Deposits 1,100.0. ### Recording entries and accounting implications for monetary statistics - Revaluation gains do not necessarily cancel if the bond is held to maturity because any difference in domestic currency between the issue price of 1,000 and the redemption price due to foreign exchange changes will be recorded at maturity. - For an FC (financial corporation) holding the bond, entries reflect coupon accruals as transactions and changes in market value from exchange-rate movements as valuation changes (VC). - The clean price excludes accrued interest; the dirty price includes accrued interest. Revaluation effects over semesters are split among holding gains and losses and other market price changes as shown in Table 5A.6. ### Forward contracts: notation, valuation relationships, and accounting rules (selected extracts) - Notation (as used in valuation equations): - N: Time until delivery or cash settlement (in years). - S0: Spot price of underlying asset. - F0: Forward price of underlying asset. - K: Delivery price. - r: Risk-free rate of interest per annum (continuous-compounded). - Forward price relationships: - Asset with no cash flow: F0 = S0 e^{rN} - Asset with cash flows (discrete): F0 = (S0 – CF) e^{rN}, where CF denotes present value of all cash flows through N. - Asset with known yield (continuous): F0 = S0 e^{(r − q)N}, where q denotes average yield per annum with continuous compounding. - Fair value of forward contracts (long and short): - fL = (F0 – K) e^{-rN} - fS = (K – F0) e^{-rN} - At origination, F0 = K so f = 0. - Forward contracts on currencies: interest rate parity relationship: - F0 = S0 e^{(rA − rB)N}, where rA and rB are risk-free rates in currencies A and B. - Values of long- and short-forward on currencies given by formulas in source (preserved conceptually). - Recording valuation changes and switches between asset and liability positions: - General balance-sheet relation: CS = OS + VC (when no switch). - When value change leads to switch asset→liability or liability→asset, record VC to close prior position (VC_A or VC_L) and remaining VC as liability- or asset-account valuation change per rules in source. - When settled by cash at delivery date, settlement amount equals (S0 – K) for long position if S0 > K (payoff); both parties record a transaction (T) for the payoff and a valuation change equal to payoff minus opening stock: VC = T – OS = (S0 – K) – OS. - Numerical currency-forward example (preserved figures and steps): - Example contract: Bank A sells and Bank B buys $10,000 on September 30; spot on June 30 S = 1.250 units/domestic per USD; r_US = 3 percent; r_domestic = 5 percent; forward exchange rate computed as: - F = 1.250 * ((1 + 0.05)^{3/12} / (1 + 0.03)^{3/12}) = 1.256 - Fair value measured in domestic currency uses prevailing market rates and spot rate. - Accounting periods (examples and exact results preserved): - July (domestic currency depreciates to 1.278; interest rates unchanged): - Fair value (Bank A) = 10,000 * ((1.256 * (1 + 0.05)^{-2/12}) – 1.278 * (1 + 0.03)^{-2/12}) = –258.9 - Fair value (Bank B) = 258.9 - MFS recording end-July (OS/T/VC/OCVA/CS format shown in source): Bank A records Financial derivatives 0 −258.9 −258.9 and Current year result (loss) −258.9; Bank B records symmetrical entries with Current year result (profit) 258.9. - August (rates and spot unchanged; time to settlement shorter): - Fair value (Bank A) = 10,000 * ((1.256 * (1 + 0.05)^{-1/12}) – 1.278 * (1 + 0.03)^{-1/12}) = –239.5 - Fair value (Bank B) = 239.5 - Recorded change from prior month yields a profit/loss reversal of 19.4 in current year result entries as shown in source. - September (settlement; spot = 1.267): - Fair value (Bank A) = 10,000 * ((1.256 * (1 + 0.03)^{0/12}) – 1.267 * (1 + 0.05)^{0/12}) = –110 - Fair value (Bank B) = 110 - Settlement entries record delivery of currencies and closure of derivative positions; example entries show currency and deposits adjustments of −12,670.0 / +12,560.0 and profit/loss entries of +129.5 / −129.5 in the third-period table preserved exactly in source. - Notes on future contracts: - Market price quotations usually available on organized exchanges and typically include commodity/asset and delivery month, exchange, contract size, pricing unit, opening/highest/lowest/settlement price, daily change, highest/lowest over life, and open interest. *Monetary and Financial Statistics Manual and Compilation Guide (selected annex material on valuation and recording of debt securities and financial derivatives).* ### 5.332 The opening and closing stocks for futures con- ### 5.332–6.4 Valuation and Recording of Financial Derivatives; Money, Liquidity, Credit, and Debt ### Futures contracts; opening and closing stocks - The opening and closing stocks for futures contracts are always zero, given that the futures contract value at inception is zero and that any change in the value of the futures contract is settled on a daily basis by margin payments (settlements). - The change in daily value of futures contracts is recorded as a valuation change in profits and loss, with a contra-entry in transactions (currency and deposits) to settle the open position. ### Forward Rate Agreements (FRAs) - Definition: An FRA is an OTC agreement to apply a specified interest rate to a notional principal (L) for a specified future period from time N1 to time N2. - Notations for the interest rates used in the valuation of an FRA are: - RK Interest rate to be applied, as specified in the FRA - RF Forward LIBOR interest rate for the time interval between N1 and N2 - R Actual LIBOR interest-rate observed at future time N1 for a maturity N2 - R2 LIBOR zero (that is, zero-coupon) rate for a maturity N2 - Compounding frequency: RK, RF, and R correspond to the term to maturity (N2 – N1), whereas R2 is a continuous-compounded rate. - Valuation expressions as presented in the source: - "For the recipient of the payment based on RK, the value of the FRA is: VLRRNNe()(). FRAKF RN21 22 =−− −" - "For the provider of the payment based on RK, the value of the FRA has the opposite sign: VLRRNNe()(). FRAFK RN21 22 =−− −" - Alternative valuation: An FRA can be valued by assuming the forward rate will be realized (that is, by assuming R = RF) and substituting R for RF in the preceding equations; this treats an FRA as equivalent to an interest-rate swap that has only one exchange of fixed-rate payment for floating-rate payment—that is, RF ∗ L swapped for R ∗ L. - Typical initial value and subsequent recording: - An FRA usually has zero value at inception because RK is set equal to the forward rate (RF) at the outset. - As RF changes over the life of the FRA, the VFRA equations are used to calculate the current value of the FRA. - The end-of-period value of VFRA is recorded as a valuation change (VC) that constitutes the closing stock (CS) for the FRA: CS = VC = VFRA. - Settlement and accounting: - An FRA is usually settled at time N1 when the settlement amount can be determined. - At time N1, the actual LIBOR rate (R) for a LIBOR loan of (N2 – N1) maturity can be used to calculate the FRA cash flows at time N2 and to discount the cash flows back to time N1. - The cash settlement received or paid is recorded as a transaction (T) with a contra-entry for the cash received or paid. - The closing stock for the reporting period is: CS = OS – T – VC = 0, and VC is the amount of the change in VFRA in the pre-settlement period within the reporting period. ### Interest-rate swap contracts - Definition: An interest-rate swap is an agreement through which fixed-rate based payments by one party are swapped for variable-rate based payments by the other party. The notional principal, L, is the amount to which a fixed rate and a variable rate is applied for calculating the cash flows. - Valuation notation: - L Notional principal in the swap agreement - ti Time until the ith payments (i = 1, . . ., n) are exchanged - ri LIBOR zero rate (that is, zero-coupon rate) corresponding to time ti - k Amount of fixed payment at the end of each payment period - ki* Amount of floating-rate payment at the end of the ith payment period, which is a known amount as of the beginning of the ith period - Valuation principle: - An interest-rate swap can be viewed as a long position in one bond and a short position in another bond. - For the provider of fixed-rate based payments (and variable-rate based payment recipient), the value of the swap (Vswap) is equal to the difference between the floating-rate bond value (Bfl) and the fixed-rate bond value (Bfix): Vswap = Bfl – Bfix. - For the party with the opposite position, Vswap = Bfix – Bfl. - The fair value of the swap can be calculated as the discounted values of the two bonds’ cash flows. - Accounting entries depend on: - Whether payments have been exchanged during the reporting period. - Whether Vswap switched from positive to negative (asset to liability) or vice versa during the reporting period. - Specific accounting treatments: - If no switch in sign of Vswap during the reporting period: - a. If no payments have been exchanged during the reporting period, Vswap as of the end of the period is recorded as the closing stock (CS), and the valuation change (VC) is the amount by which Vswap changed during the period (VC = CS – OS) given that T = 0. - b. If payments have been exchanged during the reporting period, the total flow is divided into a transaction (T) for the net swap payment/receipt (with a contra-entry to cash) and a valuation change (VC) to account for the post-payment change in Vswap in the latter part of the reporting period. VC can be derived residually, using VC = CS – OS – T. - If Vswap switched sign during the reporting period, the same accounting principles as for a forward contract that switched from an asset to a liability (or vice versa) apply. ### Currency swaps - Valuation principles: Similar to fixed-for-fixed interest-rate swaps; the value of the swap can be derived as the difference between the values of two bonds. - Key structural difference: For a currency swap, two actual principals—one on each side of the contract—are exchanged at the beginning and end of the swap contract, whereas an interest-rate swap has a single notional principal. - Typical initial accounting: - Currency swaps usually are structured so that, at inception, Vswap is equal to zero. - At the outset of the contract, the principals are exchanged, and each party records the resulting increase/reduction in currency holdings. - Settlement valuation and transactions: - At inception the parties exchange the underlying currencies at prevailing market exchange rates. - At settlement there may be a difference between the agreed and the prevailing exchange rate of the swapped currencies; this difference is allocated to a transaction in a financial derivative. - The underlying swapped currencies are valued at the prevailing market exchange rate at the time of the settlement and recorded as transactions in the underlying currencies. - Reporting-period adding-up requirements: - For the first reporting period (assuming Vswap = 0 at inception and no payments other than initial principal exchange): CS = VC (= Vswap). - For subsequent reporting periods: CS = OS + T + VC, where T denotes the net amount from the exchange of payments. - If Vswap switches sign during the life of the swap, accounting entries are analogous to those for interest-rate swaps or forward contracts that switch from asset to liability (or vice versa). ### Pricing models for valuing OTC options contracts - Market pricing: - Exchange-traded options valuation is based on market prices for the contracts. - Options dealers provide market-price quotations for some OTC options. - Need for empirical models: - For OTC options without market-price data, empirical models are needed for valuing options in categories such as stock options, bond options, futures options, caps and floors, exotic options, etc. - Within categories, valuations of call and put options are addressed separately; stock options require separate models for non-dividend and dividend-paying corporate shares. - Two widely used empirical methods cited: - a. Black-Scholes options pricing model: the basic Black-Scholes model applies directly to the pricing of European and American call options and European put options on nondividend-paying corporate shares. Variants have been developed for dividend-paying stock options, bond options, and many other types of European and American options. - b. Binomial-tree model: extension of the two-state binomial model into a multi-period framework in which the price of an option can take many possible paths (different branches of a pricing “tree”) during the life of the option. - Practical guidance: Users may consult textbooks and option dealers or brokers for option price estimates, valuation software, or other support. ### Settlement date and transaction date accounting; examples - IAS 39—Implementation Guidance (IG), Section D.2.1 provides examples of settlement-date and transaction-date accounting for purchase of a financial asset. The Manual uses a modified and expanded version to illustrate settlement-date and transaction-date accounting for either purchase or sale of securities other than shares. - Example 1: Purchase of Debt Securities (FCA) - Transaction facts: - Trade date: December 29; FCA acquires debt securities denominated in domestic currency (NC) at a price of NC 1,000. - Settlement date: January 4 of the next year. - Market value at end of first reporting period (December 31): NC 1,002. - Market value on settlement date: NC 1,003. - Market value at end of second reporting period (January 31): NC 1,005. - The Manual’s methodology requires only end-of-period revaluation; in the example the end-of-period value NC 1,005 is included. - Settlement-date accounting summary (as presented in source): - First period (December): Debt Securities OS 0 T 2 VC 2 CS ? - Second period (January): Debt Securities OS 2 T 1,000 VC 3 CS 1,005; Deposits: payment for securities (January 4) −1,000 - Transaction-date accounting summary (as presented in source): - First period (December): Debt Securities OS 0 T 1,000 VC 2 CS 1,002; Other accounts payable: securities settlement account 1,000 1,000 - Second period (January): Debt Securities OS 1,002 T 3 CS 1,005; Deposits: payment for securities (January 4) −1,000; Other accounts payable: securities settlement account 1,000 −1,000 - Example 2: Sale of Debt Securities (FCB) - Transaction facts: - FCB sells the securities on December 29 and uses settlement-date accounting. - Opening balance as of December 1: NC 996. - Settlement-date accounting summary: - First reporting period (December): Debt Securities OS 996 T 4 VC 1,000 CS ?; Current year result (change through profit or loss) 4 - Second reporting period (January): Debt Securities CS 1,000 −1,000 Account closed; Deposits: received for securities (January 4) 1,000 - Transaction-date accounting summary: - First reporting period (December): Debt Securities OS 996 T −1,000 VC 4 Account closed; Other accounts receivable: securities settlement account 1,000 1,000 - Second period (January): Debt Securities Account closed; Deposits: received for securities (January 4) 1,000; Other accounts receivable: securities settlement account 1,000 −1,000 - Example 3: Purchase or Sale of Debt Securities where settlement and transaction dates are in the same reporting period - Facts: - Trade date December 15; FCA acquires securities at price NC 1,000; settlement date December 19. - FCB, seller, shows market value NC 996 at December 1. - Market values: settlement date (December 19) NC 1,002; end of period (December 31) NC 1,005. - Using either settlement-date or trade-date accounting, the reporting-period data are: - FCA (December): Debt Securities OS 0 T 1,000 VC 5 CS 1,005; Deposits: payment for securities (December 19) −1,000; Current year result (change through profit or loss) 5 - FCB (December): Debt Securities OS 996 T −1,000 VC 4 Account closed; Deposits: received for securities (December 19) 1,000; Current year result (change through profit or loss) 4 ### Money, liquidity, credit, and debt — introduction (Chapter 6 opening) - Chapter focus: Concepts and definitions for constructing money, liquidity, credit, and debt aggregates. - Structure: - Covers broad money in two sections. - One section dedicated to monetary base (also called base money or reserve money). - One section on liquidity aggregates. - Final section discusses credit and debt aggregates. - Six annexes focus on currency-union currency, dollarized economies and co-circulation, reserve requirements, seasonal adjustment of economic time series, debt securities issued by economic sector, and Divisia money. - Relationship to other chapters: - Concepts and definitions are in line with Chapter 3 (sectoring of institutional units) and Chapter 4 (classification of financial instruments). - Sets the stage for Chapter 7, which presents the statistical framework for compilation of monetary statistics in accordance with the methodology of this Manual. - Notes on broad money: - The System of National Accounts 2008 (2008 SNA) does not define broad money; this Manual provides a definition of broad money that was absent in the earlier Monetary and Financial Statistics Manual (MFSM). - In describing money aggregates, the chapter classifies financial instruments on the liability side of FC’s sectoral balance sheets into included-in or excluded-from broad money, and splits institutional sectors/subsectors into money-issuing, money-holding, and money-neutral sectors to support three basic dimensions of broad money: - (1) financial instruments that are components of broad money; - (2) institutional sectors that are money issuers; and - (3) institutional sectors that are either money holders or money neutral. *Monetary and Financial Statistics Manual and Compilation Guide (International Monetary Fund)* ### 6.5 The definition of broad money in this Manual is ### 6.5 The definition of broad money in this Manual is ### A. Basic Functions of Money - Money has four basic functions: - a. Medium of exchange—a means for acquiring nonfinancial assets (goods, merchandises, equipment, etc.), services, and financial assets without resorting to barter. - b. Store of value—a means of holding wealth. - c. Unit of account—a standard for denominating the prices of goods and services, and the values of financial instruments and nonfinancial assets, thereby providing a means for comparisons of values and for preparation of financial accounts. - d. Standard of deferred payment—a means for settling liabilities and, in this way, of relating current and future values in financial contracts. ### B. Rationale for Compiling a Money Aggregate - Money aggregates measure the money available to money-holding sectors for making purchases of goods and services that contribute to GDP, or for investing in other assets. - Money aggregates are closely monitored by the central bank when making decisions that affect the short-term policy interest rate and/or the level of the monetary base. - In some countries, change in the money aggregates is one of the intermediate objectives facilitating price stability (monetary targeting). - For other monetary policy frameworks (inflation targeting, interest rate targeting, exchange rate targeting), monitoring money aggregates contributes, together with macroeconomic variables, to policy determination. ### A. Definition (of broad money) - 6.10–6.16: The focus for defining broad money is on the usability of financial instruments as medium of exchange and store of value. - 6.11: Broad money is the sum of: - all liquid financial instruments held by money-holding sectors that are widely accepted in an economy as a medium of exchange, plus - those that can be converted into a medium of exchange at short notice at, or close to, their full nominal value. - 6.12–6.13: Inclusion requires evaluation of the degree of moneyness, focusing on liquidity and store of nominal value; liquidity subsumes negotiability, transferability, marketability, convertibility, and divisibility. - 6.14: Store of value assessment includes capacity to maintain purchasing power (through indexation, interest income, or dividends), not merely preservation of face value. - 6.15: Maturity is a major determinant. Long-term debt securities are less reliable as stores of nominal value. "Maturity of one to two years at issuance would usually be acceptable as the upper maturity limit for inclusion in broad money." Maturity at issuance is usually used for deposits; original maturity is used in practice for debt securities. - 6.16: Definition should be applied based on domestic circumstances; empirical tests on relationships between broad money and real/financial variables can inform instrument coverage and should be updated over time. ### B. Financial Instruments Included in Broad Money - 6.17–6.19: Currency and transferable deposits are the most liquid assets and meet the definition of broad money. Other financial assets must possess significant moneyness. - 6.18: Foreign-currency-denominated instruments can be included if they are legal tender or widely accepted for payments in the economy. - Box 6.1 — Broad money structure (holders, issuers, instruments): - Broad money holders: Other financial corporations; State and local government; Nonfinancial corporations; Households and nonprofit institutions serving households (NPISHs). - Broad money neutral: Central government (domestic currency holdings are usually included in broad money); Nonresidents (domestic currency holdings are usually included in broad money). - Broad money issuers and liabilities: - Issued by resident depository corporations: - Currency and transferable deposits (including demand deposits, cashier’s checks, traveler’s checks if used for transactions with residents, deposits otherwise commonly used to make payments). - Other deposits (nontransferable savings deposits, term deposits, deposits denominated in foreign currency, other). - Money market funds’ shares. - Debt securities (Certificates of deposit, Commercial paper, Other). - Issued by sectors other than resident depository corporations: - Domestic currency issued by central government. - Foreign currency where widely accepted: transferable deposits (including at central government or postal system, traveler’s checks issued by units other than DCs, other). - Other deposits at central government or postal system. - Debt securities (Treasury bills, Other). - Box 6.1 notes (verbatim characteristics and examples): - Due to lack of data, domestic currency holdings of central government and nonresidents are usually included in broad money. - Transferable deposits may include deposits denominated in foreign currency. - Other deposits may include repurchase agreements included in broad money; sight deposits immediately redeemable but not transferable; electronic money issued by card or otherwise transferable. - Any other debt securities issued by resident depository corporations that meet the definition of broad money (e.g., savings certificates or cash certificates, bankers’ acceptances traded in efficient secondary markets). - Electronic money (including mobile money) issued by units other than depository corporations may be included. - Debt securities issued by the central government, such as savings certificates, may be included. ### Currency and Transferable Deposits (detailed characteristics) - 6.21: Currency and transferable deposits meet the definition of broad money due to: - a. Legal tender or general acceptability. - b. Fixed nominal (face) value. - c. Transferability. - d. Low transaction costs. - e. Divisibility. - f. No maturity and immediate accessibility. - g. No or low yield. - 6.22: Domestic currency consists of banknotes and coins issued by resident units used as a medium of exchange; "Currency in circulation is the amount of currency outside the central bank (and any other issuing unit) held by all other resident sectors and nonresidents." - 6.23: "Currency outside DCs is the domestic currency included in broad money and is compiled as currency in circulation less currency holdings in the vaults of other depository corporations (ODCs)." - 6.24–6.25: Currency is placed into circulation when transported from the central bank to an ODC. Currency is included in broad money only when ODCs’ customers exchange deposits for currency. Commemorative coins and gold/precious metal coins are excluded except where they are fungible with standard coins, issued at or near face value, and redeemable by the issuer. - 6.26: In a currency union, estimating common currency in circulation by member country is difficult because notes and coins circulate throughout the union. ### Deposits and Maturities - 6.27: Transferable deposits held by money-holding sectors are included in broad money; demand deposits transferable by check, giro order, or similar means form the bulk. - 6.34–6.35: Fixed-term deposits of short-term original maturity are included in broad money within other deposits; longer-term deposits are excluded. The Manual does not recommend a particular maturity limit but considers "a range of one to two years acceptable." Other deposits denominated in foreign currency have somewhat lower moneyness due to exchange rate risk; nonetheless, those that can be drawn upon at short notice to make domestic payments are included in broad money. *Monetary and Financial Statistics Manual and Compilation Guide* ### 6.36 Repurchase agreements resembling a standard ### 6.36 Repurchase agreements resembling a standard deposit ### Classification of repurchase agreements - Repurchase agreements that resemble a standard deposit and are liabilities of the money-issuing sector to a money-holding sector are classified as other deposits and included in broad money, applying the same maturity limit as for fixed-term deposits (paragraph 6.34). - All other repurchase agreements are classified as loans (see paragraphs 4.43j and 4.71–4.73). ### Deposits excluded from broad money - Restricted deposits (defined in paragraph 4.46): - Withdrawals restricted for periods up to one year may still be included in broad money; in general, deposits restricted for periods of over one year are excluded from broad money (paragraph 6.37). - Restricted deposits in the form of compulsory savings deposits are excluded from broad money unless withdrawal privileges make the deposits liquid (paragraph 6.40). - Other restricted deposits (escrow accounts, judicial deposits, good-faith deposits for privatization auctions or bids) are excluded because the restriction period is undetermined at inception; if the restriction period is known at inception, treat like fixed-term deposits (paragraph 6.41). - Import deposits (paragraph 6.38) are excluded from broad money because they are generally not available to resident holders and are eventually transferred to nonresident exporters. - Deposits unavailable for use until transferable items clear through the central bank or other clearing institution: - Such unavailable deposits should be recorded within other deposits but excluded from broad money (paragraph 6.39). - Deposits with ODCs in liquidation: - All deposit liabilities of ODCs in the process of liquidation are excluded from broad money, irrespective of deposit insurance status (paragraph 6.42). - Reorganization, sale, merger, or reimbursement by a deposit insurance scheme may result in deposits becoming available again (paragraph 6.42). - Compilers should ensure uninterrupted coverage of assets and liabilities through restructuring or liquidation (paragraph 6.43). - In absence of direct reporting by ODCs in liquidation, counterpart data from operating FCs should be reported as memorandum items to enable aggregation in sectoral balance sheets (paragraph 6.44). - Reserve deposits of nonoperating FCs at the central bank that are restricted or frozen should be excluded from reserve deposits and thus from the monetary base (paragraph 6.45). - Long-term saving schemes held by households that are intended for long-term objectives (real estate, pension, college) are not included in broad money because holders view early withdrawal as a last resort despite possible partial redemption; penalties or less-favorable tax/interest treatments make them illiquid for broad money purposes (paragraph 6.46). ### Maturity and notice guidance affecting inclusion - Deposits redeemable at short notice are included in broad money within other deposits if the period of prior notice is short; the Manual does not set a specific limit but notes country practices set the limit between three to six months (paragraph 6.33). - For fixed-term deposits and similar instruments, the Manual recommends an original maturity limit in a range of one to two years for inclusion in broad money (paragraph 6.34 and referenced in paragraph 6.48). ### Transferable items and instruments - Cashier’s checks, banker’s drafts, and similar liabilities issued by deposit-taking corporations at the request of a money-holding unit are included (until redemption) in broad money within transferable deposits (paragraph 6.28). - Traveler’s checks are generally expected to be used predominantly abroad and therefore should in principle be excluded from broad money; where used for domestic transactions they should be included (paragraph 6.29). - Electronic money (as defined in Chapter 4, paragraphs 4.38–4.42) issued by resident DCs and usable for direct payments to third parties are included in broad money within transferable deposits (paragraph 6.30). ### Other deposits (nontransferable) - Other (nontransferable) deposits issued by DCs account for a predominant portion of broad money in many economies (paragraph 6.31). - Nontransferable savings deposits and sight deposits redeemable at full value upon request without penalty are included in broad money within other deposits; if equipped with automatic transfer service features they are classified as transferable deposits (paragraph 6.32). ### Treatment of unavailable transferable-deposit items - Transferable items posted to depositors’ accounts but unavailable for use until clearing should be recorded within other deposits and excluded from broad money; items used to make payments to third parties within the domestic economy are included in broad money (paragraph 6.39). ### Money market fund shares and short-term debt securities - All MMF shares held by money-holding sectors are included in broad money because they are highly liquid and typically a reliable store of value; note that deposits of MMFs held at ODCs are excluded from broad money because MMFs are money issuers (paragraph 6.47 and footnote 10). - Some short-term debt securities issued by DCs can meet the definition of broad money if convertible into currency or transferable deposits at short notice at or close to full nominal value and traded in efficient secondary markets; examples include negotiable certificates of deposit, commercial papers issued by ODCs, and possibly bankers’ acceptances (paragraph 6.48). - Short-term debt securities denominated in foreign currency traded in efficient secondary markets may be included in broad money (paragraph 6.48). - Savings certificates or cash certificates convertible into currency or transferable deposits at short notice at or close to full nominal value meet the definition of broad money (paragraph 6.48). - Long-term debt securities are recommended to be excluded from broad money even if traded in efficient secondary markets because of price uncertainty when market interest rates change (paragraph 6.48). ### Financial instruments issued by other sectors (non-DC) - Domestic currency issued by central government: - In some countries the central government issues currency coins and may issue banknotes; currency in circulation issued by the central government should be included in broad money (paragraph 6.49). - The central government purchases currency from a mint and delivers it to the central bank; the central bank records the nominal value as vault cash with a corresponding increase in its liability to the central government (paragraph 6.50). - When the central government places currency into circulation through direct transactions with money-holding sectors, it should provide monthly data on total currency placed into circulation to compilers of monetary statistics (paragraph 6.52). - The central government’s holdings of currency that has already been placed in circulation should be excluded from broad money, if data are available to compilers (footnote to paragraph 6.52). - Foreign currency holdings: - Foreign currency widely accepted as a medium of exchange within an economy should be included in the currency component of broad money when held by resident units other than DCs and central government (paragraph 6.53). - Deposits issued by PNFCs and central government: - PNFCs (e.g., post office, telecommunications units) that accept transferable or other deposits from households: - If financial activity is recorded in a separate set of accounts, that unit is treated as part of the ODCs subsector and its liabilities meeting broad money definitions are included in broad money (paragraph 6.54). - If deposit-taking constitutes a pass-through with re-deposit at a DC, either the PNFC’s deposit liabilities or its deposit at the DC should be included in broad money (to avoid double-counting); detailed information from the PNFC should be used where available (paragraph 6.54a). - If funds deposited with a PNFC are channeled directly to the central government, such deposits are treated as central government deposits and included in broad money within other deposits, applying the same maturity guidance as for fixed-term deposits (paragraph 6.54b). - The treasury or other central government units may accept deposits or issue debt securities (treasury bills, saving certificates) that meet the definition of broad money; only amounts held by money-holding sectors are included, with the same maturity guidance as for fixed-term deposits (paragraph 6.55). - NFCs issuing traveler’s checks or electronic money (including mobile money) as an ancillary activity: - Traveler’s checks and electronic money issued by NFCs that meet the definition of broad money are included in broad money within transferable deposits (issued by sectors other than DCs) (paragraph 6.56). - If payment services become the major activity of a nonfinancial corporation, consider reclassification as an FC, and an ODC if engaged in issuance of broad money liabilities (footnote to paragraph 6.56). ### Financial instruments excluded from broad money - Categories excluded from broad money include: - Loans - Equity and investment fund shares (except money market fund shares) - Financial derivatives and employee stock options (ESOs) - Insurance, pension, and standardized guarantee schemes - Other accounts payable/receivable (paragraph 6.57) - Many types of loans are illiquid due to the direct and specific nature of contracts; some repurchase agreements included in broad money are classified as other deposits, while others are classified as loans (paragraph 6.58). *Monetary and Financial Statistics Manual and Compilation Guide* ### 6.59 Equity and investment fund shares serve as a store ### 6.59 Equity and investment fund shares serve as a store of value ### Equity, investment fund shares, and broad money - Paragraph 6.59: Equity and investment fund shares: - Serve as a store of value. - May be converted to cash or transferable deposits through sale in organized securities exchanges or over-the-counter markets. - Experience price variability, and their sale involves transaction costs and time delays. - Are therefore excluded from broad money. - Exception: The nature of MMF shares makes them an exception (see paragraph 6.47). - Paragraph 6.60: Other instruments excluded from broad money: - Insurance, pension, and standardized guarantee schemes are illiquid and excluded. - Financial derivatives, despite tradability, are excluded because of price variability and lack of use as a store of value. - Other accounts receivable/payable lack sufficient liquidity to be included. ### Money-issuing, money-neutral, and money-holding sector classification (overview) - Paragraph 6.61: After identifying instruments included in broad money, institutional sectors/subsectors must be classified into three groups for the DCS: money issuers, money neutral, or money holders. - Money-issuing sector (DCs) - Paragraph 6.62: All FCs that issue broad money liabilities are classified as DCs; thus the DCs sector constitutes the money-issuing sector by definition. - Paragraph 6.62: The Manual recommends compiling a DCS showing broad money liabilities of DCs on one side and asset counterparts (sources) of those liabilities on the other side. - Paragraph 6.63: Financial claims of DCs on other resident DCs are not included in broad money; intra-DC positions are consolidated in the DCS (see Chapter 7). - Paragraph 6.64: When some broad money liabilities are issued by institutional units other than FCs, those liabilities must be combined with DC liabilities to compile total broad money (Box 6.1). - Paragraph 6.65: Multiple national aggregates may exist; for broad money issued by DCs a single aggregate as defined in paragraph 6.11 must be specified to construct the DCS described in Chapter 7. - Money-neutral sectors - Paragraph 6.66: Money-neutral sectors are institutional sectors that are neither money issuers nor money holders (except special cases); they comprise the central government and nonresidents. - Paragraph 6.67: Nonresidents’ deposit holdings are excluded from broad money because they are used primarily for international rather than domestic transactions; the predominant center of economic interest of the nonresident lies outside the domestic economy. - Paragraph 6.68: Deposits held by migrant workers with ODCs in their home countries that are freely usable by authorized family members or others in the home country should be included in broad money of the home country (see paragraphs 3.89–3.91 for sectoring). - Paragraph 6.69: Deposits held by cross-border workers at ODCs in an economy where they work should not be included in broad money of that economy but recorded as liabilities to nonresidents, provided such workers do not have a center of predominant economic interest in the economy where they work (see paragraphs 3.62–3.63). - Central government deposits: - Paragraph 6.70: Deposits of central government are always excluded from broad money; central government deposits do not respond to macroeconomic influences in the same way as deposits of money-holding sectors. - Paragraph 6.71: Exclusion can be explained analytically—DCS shows net claims on the central government (total claims less deposits and other liabilities) as a counterpart to broad money rather than including central government deposits in broad money. - Paragraph 6.72: Domestic currency holdings of the central government and nonresidents should be excluded from broad money; estimation efforts may not be justified if amounts are relatively small. Adjustment may be warranted if a substantial amount of domestic currency circulates outside the domestic economy and is used as legal tender or widely accepted in other countries. - Money-holding sectors - Paragraph 6.73: Money holders include: (1) OFCs; (2) state and local governments; (3) NFCs; and (4) households and NPISHs. Broad money includes all money holdings of these sectors. Broad money measures the spending capacity or potential purchasing power of money-holding sectors. ### Special cases and exceptions - Paragraph 6.74: Grouping sectors into money-issuing, money-holding, and money-neutral is one dimension for defining broad money; the coverage of the DC sector should be kept under continued review as the financial system evolves. Exceptions include: - a. Money can be issued by money-neutral sectors (e.g., central government/treasury issuing coins, treasury accepting deposits from money holders, foreign currency issued by a non-resident central bank circulating widely). - b. Money can be issued by money-holding sectors (e.g., post offices accepting deposits, NFCs issuing traveler’s checks or electronic money as an ancillary activity). - c. Holdings of domestic currency by nonresidents and by central government may not be excluded from broad money measurement because of a lack of reliable source data. - Paragraph 6.75: Some OFCs provide intermediation services to ODCs (e.g., CCPs). CCPs are classified as OFCs and therefore as money holders, but: - Deposits of CCPs at DCs that reflect settlement of transactions among financial market participants should not be included in broad money. - Direct collection of data from CCPs on deposit balances may be necessary; if feasible, CCP deposit balances should be split between amounts related to principal business (exclude) and amounts maintained for operating expenses (include in broad money if available). ### Broad money levels, aggregates, and counterparts - Paragraph 6.76: Two levels of broad money are distinguished: - a. Broad money issued by DCs only. - b. Broad money issued by DCs and other sectors. - Paragraph 6.77: The Manual recommends compilers focus on broad money but recognizes national aggregates named M1, M2, M3, etc., where each broader aggregate subsumes the previous one. - Paragraph 6.78: M1 is the narrowest aggregate in almost all countries and includes all media of exchange (currency and transferable deposits in domestic currency); contents of M2, M3, etc., vary across economies. The more encompassing M aggregate usually corresponds to broad money. - Broad money counterparts (sources) - Paragraph 6.79: Understanding changes in broad money and their causes is important for monetary policy; broad money is compiled using sectoral balance sheets of the central bank and ODCs. - Paragraph 6.80: Compilers identify on the liability side of DCs’ sectoral balance sheets all financial instruments meeting the definition of broad money and assemble them on one side of the DCS. - Paragraph 6.81: All assets held by DCs and liabilities not part of broad money are assembled on the other side of the DCS as broad money “counterparts” or “sources.” For counterparts: - Claims on and liabilities to money-issuing and money-neutral sectors (nonresidents, central government, and DCs) are presented on a net basis (assets less liabilities). - For money-holding sectors, counterparts include gross claims of DCs on money holders. - DCs’ liabilities to money holders not included in broad money are shown separately. - Broad money counterparts provide information on underlying sources of broad money growth (e.g., credit growth to resident units other than DCs). - Paragraph 6.82: Chapter 7 presents the DCS structure and counterparts in detail. The term broad money “counterparts” refers to the accounting identity between the two sides of the DCS (stocks), while broad money “sources” refers to factors affecting expansion and contraction of money (flows). *Monetary and Financial Statistics Manual and Compilation Guide (extract: paragraphs 6.59–6.82).* ### Box 6.2 Standard Components and National Aggregates of Broad Money (at end-September 2015) ### Box 6.2 Standard Components and National Aggregates of Broad Money (at end-September 2015) ### National aggregates and standard components (selected economies) - India — M3 - Money issuers: Reserve Bank of India (RBI) and commercial and cooperative banks. - Money holders: Private sector; quasi-government; selected financial institutions, primary dealers; foreign central banks and governments; and international agencies. - Financial instruments: - Currency outside the banking system (currency banknotes and coin in circulation less currency banknotes and coin holdings of the commercial and cooperative banks); - Demand deposits with the banking system, which include primarily current deposits and the transferable liabilities’ portion of savings deposits; - “Other“ deposits with the RBI, which comprise deposits of quasi-government, selected domestic financial institutions, primary dealers, foreign central banks and governments, and international agencies; - Time deposits with the banking system, which include fixed deposits an time liabilities’ portion of savings deposits. - Mexico — M4, M4A, M4 –National Currency, M4 –Foreign Currency - Money issuers: Bank of Mexico and ODCs: commercial banks, development banks, credit unions, savings and loans associations, investment funds, financial leasing companies, and specialized lending institutions. - Money holders: Private sector, pension funds, and nonresidents. Also public sector for M4A. - Financial instruments (in national and foreign currency): - M4: Banknotes and coins outside the depository corporations; deposits in checking and current accounts that can be withdrawn through debit cards; demand and time deposits in national and foreign currency of the private sector; debt securities of the public sector held by residents; other instruments held by pension funds; demand and time deposits of nonresidents; debt securities of the public sector held by nonresidents; and deposits of residents and nonresidents in branches abroad of domestic ODCs. - M4A: M4, plus deposits and instruments of the public sector. - M4 National Currency: all instruments denominated in national currency. - M4 Foreign Currency: all instruments denominated in foreign currency. - Russian Federation — M2 - Money issuers: Central Bank of Russia (CBR) and ODCs: commercial banks and Vneshekonombank. - Money holders: OFCs, public nonfinancial corporations, private nonfinancial corporations, and households. - Financial instruments (in national and foreign currency): Currency in circulation and demand, time, and savings deposits in national and foreign currency, including accrued interest on deposits with the CBR and ODCs. - Saudi Arabia — M3 - Money issuers: Saudi Arabian Monetary Authority (SAMA) and commercial banks. - Money holders: Businesses, individuals, and government entities. - Financial instruments (in national and foreign currency): Currency outside banks (banknotes and coins issued by SAMA less the amount held by commercial banks); demand deposits in national currency with commercial banks; time and savings deposits; foreign currency deposits; margin deposits for letters of credit; outstanding remittances; and banks’ repurchase agreements with the private sector. - South Africa — M3 - Money issuers: South African Reserve Bank and ODCs. - Money holders: Households, local governments, public and private nonfinancial corporations, and other financial corporations. - Financial instruments: Banknotes and coins in circulation outside the DCs; check, transferable, other demand, other short-, medium-, and long-term deposits; negotiable certificates of deposits and promissory notes; and savings certificates issued by the Postbank. ### Counterparts of broad money: recommendations and approaches (paragraphs 6.83–6.88) - Table 6.1 presents a summary DCS highlighting broad money and its counterparts. In the table, subcomponents of counterparts carrying a minus sign originate from the liability side of the sectoral balance sheets (paragraph 6.83). - When broad money includes liabilities issued by institutional units other than FCs, compiling counterparts becomes less straightforward unless sufficiently detailed balance sheets of these money issuers are available (paragraph 6.84). - Inclusion of such issuers may distort analysis because issuance of broad money often accounts for a marginal part of their balance sheet and their balance sheet structure differs from DCs (paragraph 6.84). - The Manual recommends compiling counterparts of broad money within the perimeter of the DCS and not for other measures of broad money that include instruments issued by units other than FCs (paragraph 6.85). - Countries may elect to compile counterparts for the added components; two acceptable approaches are described (paragraph 6.85): a. Record a single contra-entry for the full amount of the added components (example: contra-entry for currency/deposits/debt securities issued by central government recorded under Net claims on central government; contra-entry for deposits with the postal system recorded under Claims on nonfinancial corporations). b. Identify main counterpart assets, particularly financial assets acquired by the issuer against the instruments issued (if possible), obtain supplemental information from the issuer, record those under relevant counterpart claims, and record the residual amount under Other items net. - Both approaches are considered acceptable; components added to broad money and their contra-entries should be separately identified for users (paragraph 6.86). - Table 6.2 illustrates the first approach by adding three additional broad money components: (1) coins in circulation issued by the treasury (central government unit and money-neutral); (2) demand and saving deposits of money-holding sectors with the postal system (a nonfinancial public corporation and money holder); and (3) an estimated amount of foreign currency circulating in the economy issued by a nonresident central bank (money neutral) (paragraph 6.87). - Other additional components may include holdings by money-holding sectors of electronic money and traveler’s checks issued by institutional units other than FCs (contra-entry in Claims on other resident sectors); transferable and saving deposits of money-holding sectors with the treasury (contra-entry in Net claims on central government); and debt securities issued by the treasury or by NFCs (with contra-entries in Net claims on central government or Claims on other resident sectors respectively) (paragraph 6.88). ### Monetary base: definition, components, and compilation guidance (section IV, paragraphs 6.89–6.98) - Definition and role - The monetary base comprises central bank liabilities that support the expansion of credit and broad money and is also called high-powered money (paragraph 6.89). - The monetary base is a measure of the funding base that underlies the money aggregates and includes at least two components excluded from broad money: (1) ODCs’ holdings of deposits with the central bank, and (2) ODCs’ holdings of domestic currency (paragraph 6.90). - The monetary base is calculated exclusively from the liability side of the central bank balance sheet; the central bank is the sole issuer of the monetary base (paragraph 6.91). - Central government and nonresidents are not monetary base-holders (i.e., central bank liabilities to these sectors are excluded from the monetary base, except for their holdings of domestic currency due to lack of reliable data) (paragraph 6.91). - Components to include - The monetary base is defined as currency in circulation, ODCs’ deposit holdings at the central bank, and those deposits of money-holding sectors at the central bank that are also included in broad money (paragraph 6.92). - Central bank deposits that ODCs use to satisfy reserve requirements and for clearing purposes are always included in the monetary base (paragraph 6.93). - ODCs’ restricted deposits with the central bank that do not qualify for satisfying reserve requirements are excluded from the monetary base. Deposits of ODCs under liquidation should be excluded because they are frozen (paragraph 6.93). - Deposits in foreign currencies to satisfy reserve requirements, and for clearing and external payments purposes, are included in the monetary base. Re-deposited funds that are restricted should not be included. Import deposits in domestic currency held on behalf of clients are not to be included because their use is restricted (paragraph 6.94). - Treatment of central bank securities and repurchase agreements - When a central bank sells securities to ODCs under repurchase agreements, the transaction is recorded as a liability to ODCs accompanied by a reduction in ODC deposits within the monetary base. Inclusion in the monetary base depends on the central bank’s objective: - If the objective is to affect liquidity of ODCs, the central bank’s liabilities to ODCs would not count towards reserve requirements and so would be excluded from the monetary base. - If the objective is to provide an interest-earning alternative to ODCs’ non-interest-bearing reserves in the central bank, they would be included in the monetary base (paragraph 6.95). - Long-term securities issued by the central bank that do not qualify for satisfying reserve requirements should not be included in the monetary base. Short-term securities issued by the central bank should not be included if used to affect liquidity (open market operations), but short-term securities held by ODCs that can be used to satisfy reserve requirements are included. Short-term securities issued by the central bank held by money-holding sectors included in broad money should also be included (paragraph 6.96). - National definitions and compliance with principles - Countries can have different definitions of the monetary base depending on policy and analytical needs, but components should comply with the Manual’s principles (paragraph 6.97). - Some compilers include all central bank liabilities to FCs and other domestic sectors (excluding central government holdings of central bank liabilities other than currency), whereas others use narrower definitions that include only currency in circulation and ODCs’ deposits used to satisfy reserve requirements (paragraph 6.97). - Presentation in the Central Bank Survey (CBS) - The category Liabilities to ODCs within the Monetary base section of the CBS includes separate lines for Reserve deposits and Other liabilities. Both lines apply where countries have separate accounts for required reserves and ODC balances used for clearing purposes (paragraph 6.98). - For countries that use reserve averaging, only the line for Reserve deposits within the Monetary base section is applicable. Additional information about required reserves is presented in Annex 6.3 of the chapter (paragraph 6.98). ### Box 6.3 — Monetary base components (representative) - Currency in circulation - Comprises currency holdings of all sectors other than the central bank. Holdings of the central government and nonresidents are usually included along with holdings of other sectors for lack of data. The currency component of the monetary base in the CBS includes only the domestic currency issued by the central bank. - Central bank liabilities to ODCs - Transferable deposits: Includes reserve requirements (including any excess reserves) that are based on averaging of reserve holdings (see paragraph 4.37). - Other deposits: Includes reserve requirements (including any excess reserves) that are pre-specified fixed amounts of required reserves (without averaging of reserve holdings). May include repurchase agreements with ODCs. - Debt securities issued by the central bank: If holdings of these debt securities can be used in satisfying reserve requirements, they are included in the monetary base. Otherwise inclusion depends on specific formulation and analytical use. - Central bank liabilities to non-ODCs included in broad money - Transferable deposits; Other deposits; Debt securities issued by the central bank. - Includes only short-term debt securities issued by the central bank and held by money-holding sectors that are included in broad money. ### Box 6.4 — Standard and national components of the monetary base (selected end-September 2015 examples) - Monetary base in this Manual (standard components) 1) Currency in circulation 2) Deposits with the central bank: - ODCs’ deposits - Money-holding sectors’ deposits 3) Debt securities issued by the central bank included in monetary base - Note: Excludes central bank liabilities to central government and nonresidents - United States — Monetary base 1) Total reserves2) Required clearing balances and adjustments to compensate for float at Federal Reserve Banks 3) Currency component of the money stock 4) For all quarterly reporters on the “Report of Transaction Accounts, Other Deposits and Vault Cash” and for all those weekly reporters whose vault cash exceeds their required reserves, the difference between current vault cash and the amount applied to satisfy current reserve requirements. Currency and vault cash figures are measured over computation periods ending on Mondays - United Kingdom — M0 1) Banknotes and coin in circulation outside the Bank of England 2) Bankers’ operational balances with the Bank of England - Euro area — Monetary base 1) Currency in circulation 2) Reserves (required and excess) held by counterparties with the Eurosystem 3) Recourse by credit institutions to the Eurosystem’s deposit facility. In the Eurosystem’s minimum reserve system, counterparties are obliged to hold reserves with the NCBs. Beyond that, credit institutions hold a small amount of excess reserves with the Eurosystem - China — Base money 1) Currency issued by the People’s Bank of China (PBC) 2) Deposits of banking institutions with the PBC - Korea — Monetary base 1) Currency in circulation (excluding commemorative issues) 2) Deposits with the central bank: reserve deposits, and liquidity adjustment deposits (LAD) 3) Debt securities issued by the central bank included in monetary base (if any—none at present) *Monetary and Financial Statistics Manual and Compilation Guide (end-September 2015).* ### Box 6.4 Standard and National Components of the Monetary Base (at end-September 2015) ### Box 6.4 Standard and National Components of the Monetary Base (at end-September 2015) ### Components of the monetary base — country examples - Brazil — Reserve money - 1) Currency issued - 2) Deposits with the central bank: deposits of ODCs including banking reserves, other reserve requirements, and deposits from insufficiency in credit applications, such as the requirements referring to real estate credit, rural, or micro-credits - 3) Debt securities issued by the central bank included in monetary base (if any) - India — M0 - 1) Currency in circulation - 2) Bankers’ deposits with the RBI comprise: required reserves and excess reserves maintained by banks with RBI - 3) Other deposits with the RBI: deposits of quasi-government, selected domestic financial institutions, primary dealers, foreign central banks and governments, and international agencies - Mexico — Base Money - 1) Bills and coins outside the Bank of Mexico - 2) Demand deposits of commercial and development banks with the Bank of Mexico - Russian Federation — Broad Monetary Base - 1) Currency issued by the Central Bank of Russia (CBR) (excluding cash in its vaults) - 2) ODCs’ required reserves and correspondent accounts in national currency with the CBR - 3) CBR bonds held by ODCs valued at market price - 4) Other funds on operations of ODCs with the CBR - Saudi Arabia — Monetary Base - 1) Currency in circulation (banknotes and coins issued by Saudi Arabian Monetary Authority [SAMA]) - 2) Bankers’ deposits with SAMA - South Africa — M0 - 1) Banknotes and coins in circulation outside the central bank - 2) ODC’s deposits with the central bank in national currency - Note: ODC = other depository corporation. ### Liquidity: definition, purpose, and framework (The Manual) - The Manual defines liquidity and liquidity aggregates from the perspective of issuers of financial liabilities included in measures of liquidity. - Liquidity aggregates are defined as the sum of broad money liabilities and other liabilities that are somewhat liquid but not included in broad money. - Liquidity aggregates share three underlying dimensions with broad money: - (1) financial instruments—components of liquidity aggregates, - (2) liquidity-issuing sectors, - (3) liquidity-holding sectors. - The Manual presents a nonprescriptive framework on how liquidity aggregates are compiled and what financial instruments are included (see Box 6.5). ### Liquidity aggregates: composition and rationale (Box 6.5 and related text) - Rationale and scope - 6.100: The 2007–2009 global financial crisis showed that broad money may not capture the full range of liquidity-creating mechanisms and instruments, given the increasing importance of OFCs and substitution between instruments. - 6.101: Liquidity aggregates are broader than broad money in both instrument types and issuing sectors; they include other liabilities that are somewhat liquid but not broad money. - 6.102: A key difference is maturity—liquidity aggregates can include instruments with longer original maturities, increasing sensitivity to yield-curve changes and market interest rates. - Liquidity holders (as listed in Box 6.5) - Central government (inclusion possibly pertains only to domestic currency holdings) - Other financial corporations - State and local government - Nonfinancial corporations - Households and NPISHs - Nonresidents (inclusion possibly pertains only to domestic currency holdings) - Broad money liabilities (see Box 6.1) plus liabilities issued by: - Depository corporations - Long-term deposits and saving schemes - Debt securities - Commercial paper (if not already included in broad money) - Bankers acceptances - Other financial corporations - Long-term deposits and saving schemes - Commercial paper - Other debt securities - Traded shares (including non-MMF investment fund shares) - Central government - Long-term deposits accepted by the national treasury, etc. - Short-term securities (for example, treasury bills) - Savings bonds - Other debt securities - State and local government - Municipal debt securities - Other debt securities - Public nonfinancial corporations - Long-term deposits accepted by the postal system - Commercial paper - Other debt securities - Traded shares - Other nonfinancial corporations - Commercial paper - Other debt securities - Nonresidents (pertains to holdings by resident liquidity holders of listed instruments issued by nonresidents) - Transferable deposits - Other deposits - Debt securities - Traded shares (including MMF and non-MMF investment funds shares) - Other: liabilities not classified elsewhere, such as repurchase agreements resembling deposits not included in broad money. - Notes from Box 6.5 - Definitions of liquidity aggregates may differ considerably across countries. - If not already included in broad money. - Short-term deposits accepted by these units typically are included in the broad money component of the liquidity aggregate (see paragraph 6.54). - Pertains to holdings by resident liquidity holders of the listed instruments issued by nonresidents. - Liabilities not classified elsewhere, such as repurchase agreements resembling deposits not included in broad money. - Note: NPISHs = nonprofit institutions serving households; MMF = money market fund. - International and country practice - 6.103: Countries often compile multiple liquidity aggregates (L1, L2, L3, L4) with progressively broader coverage. - 6.104: Monetary statistics compilers focus on liquidity aggregates issued by the entire FCs sector derived from the FCs survey (FCS) discussed in Chapter 7; FCs’ liabilities can be grouped into core liabilities (DCs’ liabilities included in broad money) and noncore liabilities (all other FC liabilities included in liquidity aggregates). ### Example measures of liquidity aggregates (Box 6.6) - Liquidity measures and coverage (example) - L1 — Issuers: DCs, other issuers of broad money, and OFCs - Coverage: Broad money plus long-term deposits and long-term saving schemes - L2 — Issuers: All FCs and government units - Coverage: L1 plus short-term and long-term debt securities issued by ODCs (not included in broad money) and debt securities issued by OFCs and government units, as well as non-MMF investment fund shares - L3 — Issuers: All FCs, government units, and nonfinancial corporations - Coverage: L2 plus debt securities issued by nonfinancial corporations - L4 — Issuers: All FCs, government units, nonfinancial corporations, and nonresidents - Coverage: L3 plus shares of nonfinancial corporations, and deposits, debt securities, and shares issued by nonresidents - Note: DC = depository corporation; OFC = other financial corporation; FC = financial corporation; ODC = other depository corporation. ### Credit and debt: definitions, scope, and compilation guidance (Section VI) - Conceptual framing - 6.105–6.107: Credit and debt are two perspectives of the same concept; definitions are drawn from BPM6, the Public Sector Debt Statistics: Guide for Compilers and Users (2013), the External Debt Statistics: Guide for Compilers and Users (2013), and the 2008 SNA. The Manual uses the term claims on for financial assets that are liabilities of another unit. - Credit definition and dimensions - 6.108–6.111: Credit creation is provision of resources by a creditor to a debtor; measures of credit have the same three dimensions as broad money: (1) financial assets included, (2) issuing sectors (lenders), (3) holding sectors (borrowers). - Credit measures may cover the total domestic economy or be limited to specific issuing sectors or lender/borrower relationships. - 6.111: Credit measures exclude contingent positions (lines of credit, loan commitments, guarantees) though supplementary information on such contingent positions may be useful. - Financial assets included in credit measures - 6.112–6.114: - Narrow domestic credit measures: loans, debt securities, trade credit and advances; exclude deposits, equity, and other accounts receivable (other than trade credit). - Deposits may be treated as credit where economically equivalent to loans (e.g., government units maintaining deposits to fund specific activities). - Financial derivatives, and claims on insurance corporations and pension funds are always excluded from credit measures. - Broader credit measures may include deposits and equity; equity differs because it represents a residual claim rather than a debt obligation. - Credit aggregates can provide breakdowns by currency denomination, original maturity, instrument type, sector of lender and borrower, and lending purpose. - Lenders: scope and issues - 6.115–6.119: - Lending sectors may be narrow (only DCs’ claims) or broad (all FCs and other sectors). - OFCs may provide credit similarly to DCs but are funded by instruments not in broad money (long-term deposits, debt securities, borrowing from DCs, external borrowing, issuance of equity). - Government units may provide credit and should be recorded appropriately: if government incurs direct liability and on-lends, record as government liability and government credit to the final recipient; if government acts as agent/guarantor, record the nonresident as providing the credit directly to the final recipient. - Similar recording conventions apply when government provides funds to FCs to finance specific credit: distinguish direct liability and on-lending from agency roles. - Nonfinancial sectors and nonresidents as credit suppliers/borrowers - 6.119–6.120: - NFCs often supply trade credit; households and NPISHs can be credit providers (buying government bonds or NFC debentures); NPISH trust funds can hold large debt portfolios. - Residents can acquire credit from nonresidents; interbank foreign borrowing can be important and should be recorded separately within foreign liabilities in the DCS if available. - Borrowers: scope and analytical uses - 6.121: - Broad credit measures typically treat all nonfinancial sectors as borrowing sectors. - Specific measures commonly produced: credit to central government; credit to total or nonfinancial public sector; credit to NFCs; credit to nonfinancial private sector; credit to households. - Data on credit to nonresidents are needed to capture total credit provided and assess FCs’ foreign exposure. - Credit flows between FCs are often excluded from broad credit measures; credit received by FCs from abroad is necessary to assess domestic credit conditions. *Source: Monetary and Financial Statistics Manual and Compilation Guide (excerpts).* ### 6.122 The surveys of the FCs sector presented in ### 6.122 The surveys of the FCs sector presented in ### Credit measures and survey frameworks - The surveys of the FCs sector presented in Chapter 7 provide aggregate measures of credit covering claims on the central government, state and local government, PNFCs, other NFCs, and households and NPISHs. - Sectoral balance sheets used to compile these surveys contain data used to compile the broad domestic credit aggregate, broken down by: - sector of borrower, - type of financial asset, and - currency of denomination (into domestic and foreign). - Additional credit measures important for monetary and macroeconomic policy (6.123): - Central bank credit: - Extension of credit by the central bank to ODCs (and sometimes to OFCs) can be used to (1) provide liquidity for ODC operations, (2) respond to seasonal credit demand, (3) influence domestic financial conditions and the amount of broad money, or (4) provide emergency assistance, including equity participation. - The central bank can place deposits in, or extend loans to, FCs; either method provides ODCs funds that can support expansion of credit and growth of broad money. - Central banks regulate the cost and attach terms and conditions to access to such credit, thereby influencing credit and monetary conditions. - Central government credit: - Central governments supply credit to FCs by extending loans or by providing deposits intended for credit extension by FCs. - Governments also provide credit to nonfinancial sectors to foster public policy goals or to provide emergency aid; such credit is often extended at subsidized (i.e., below-market) interest rates. - Comprehensive measures of government credit include lending by the central government and other levels of government. - The CBS and ODCS, presented in Chapter 7, provide a comprehensive framework for developing credit measures; the FCS in Chapter 7 provides the framework for expanding coverage to include credit by OFCs and DCs (6.124). - Financial statistics described in Chapter 8 provide the framework for compiling measures of inter-sectoral credit, including borrowing from nonresidents, identifying both lending and borrowing sectors (6.125). ### Definition, composition, and presentation of debt - Debt instruments: instruments that require payment of principal and/or interest at some point(s) in the future (6.126). - Debt liabilities include: Special Drawing Rights (SDR) allocations; currency and deposits (including unallocated gold accounts); debt securities; loans; insurance, pension, and standardized guarantee schemes; and other accounts payable, including trade credit and advances. - Equity and investment fund shares, and financial derivatives and ESOs, are excluded from the definition of debt. (Footnotes reference the 2008 SNA and BPM6.) - Provisions for losses on financial assets are treated as liabilities and included in Other accounts payable [MS], but they are not debt instruments in this Manual. - Surveys in Chapter 7 provide a framework for compiling measures of debt owed to the FCs sector and the debt of FCs to other sectors (6.127). - Debt of the total economy may be presented: - as an aggregation of the debt of all domestic sectors, or - on a consolidated basis that eliminates all debts that are assets of residents, leaving only liabilities to nonresidents (external debt) (6.127). ### Analytical significance, risks, and maturity structure - Positive roles of debt (6.128): - Channels funds from savers to borrowers, directly or through the FCs sector. - Enables financing of capital investments, smoothing of expenses, and use of future income for current needs across different sectors (FCs leverage to expand intermediation; NFCs finance production and capital formation; governments finance expenses and capital investments; households finance consumption and asset purchases). - Negative aspects and risks (6.129): - Borrowing entails cost (interest payments) and repayment obligations that create future payment liabilities. - High levels of debt liabilities can create vulnerability to liquidity (including debt rollovers) and solvency risks at unit, sector, and economy levels. - Strong analytical interest exists in debt measures because of these risks. - Maturity analysis (6.130): - Debt data should be disaggregated, at a minimum, into short- and long-term categories; more detailed breakdowns are often useful. - Data can be compiled on either an original maturity basis (consistent with macroeconomic datasets) or a remaining maturity basis (more relevant for liquidity analysis), or both. - Features such as the ability to “call” the debt early should be identified when analyzing maturity. ### Common debt measures and sectoral breakdowns - Countries compile a wide range of debt measures covering specific sectors/subsectors and the entire economy; credit measures often correspond to specific types of debt (6.131). - Household debt (6.132–6.134): - Purposes: finance real estate and vehicles (often pledged as collateral), current consumption, education, medical expenses, small business development, and purchase of financial assets. - Factors affecting household borrowing: interest rates, size of monthly payments for installment loans, expectations regarding future income, and wealth. - Household debt disaggregation and common loan types (6.133): - a. Loans that ODCs and OFCs provide directly to clients (personal loans, mortgage loans, equity loans backed by net value of real estate, consumer loans for durables). - b. Trade credit with repayment by installments provided by sellers of goods and services. - c. Credit card loans. - d. Loans provided by insurance corporations collateralized by borrowers’ reserves in such entities. - e. Financial leases permitting consumers to use and eventually acquire durables in lieu of conventional loan contracts. - Consumer debt data are usually derived from creditor sources due to difficulty obtaining data directly from households (6.134). - Business debt (6.135): - Corporations incur short-term debt to finance current production, inventories, and recurring expenses; long-term debt to finance capital formation. - Financing channels include trade credit, borrowing from FCs, or issuing debt securities. - Public sector debt (6.136–6.138): - Debt data should be compiled for the central government, general government, and entire public sector. - Often disaggregated by debt to residents and to nonresidents. - Supplementary data should be compiled on debt incurred by other sectors but guaranteed by the government if guarantees are significant. - The IMF’s Government Finance Statistics Manual 2014 provides guidelines for constructing government debt measures. - The inter-agency Task Force on Finance Statistics (TFFS) published the Public Sector Debt Statistics: Guide for Compilers and Users (2013). - Government financial balance sheets are integral to fiscal risk and sustainability analysis and should cover the general government and public sector, including memorandum information on contingent liabilities and arrears if significant; information on foreign currency debt is important for vulnerability analysis (6.138). - External debt (6.139–6.142): - External debt: debt liabilities of a country, sector, or unit to nonresidents; includes debt service payments and is used to analyze vulnerability to solvency and liquidity problems. - The IIP statement described in BPM6 covers stock positions of external financial assets and liabilities, including external debt; IIP components can be reconciled with 2008 SNA financial asset categories (6.140). - Vulnerability analysis requires data beyond the IIP, including: - (1) nominal amount actually owed (as opposed to market value), - (2) debt service schedule, and - (3) extent to which financial derivatives are used to hedge or increase exposure to risk (6.141). - The TFFS published External Debt Statistics: Guide for Compilers and Users (2013) for methodological guidance (6.142). ### Currency-union currency framework and estimation - In a currency union (6.143–6.146): - A supranational central bank issues the union-wide currency (examples: ECB, ECCB, BCEAO, BEAC). - Union-wide currency is the medium of exchange and domestic unit of account in each member country. - Actions at union inception include: - a. Announce a fixed exchange rate between the domestic currency and the union currency. - b. Withdraw domestic currency banknotes and coins from circulation, gradually or within a preannounced period. - c. Translate financial records of institutional units into union currency units as the new unit of account. - d. Place union currency banknotes and coins in circulation by member-country central banks. - Introduction of union currency is reflected in sectoral balance sheets and FC surveys of each member country (6.144). - Specific balance sheet and reporting implications: - Currency in circulation account shows union-currency banknotes and coins issued by (or treated as if issued by) the national central bank, and domestic currency issued earlier still not removed from circulation. - Union currency banknotes and coins are classified as in domestic currency. - Deposits in sectoral balance sheets/SRFs are disaggregated into separate categories for domestic currency and foreign currency; for union participants, the common currency is the domestic currency of all participants (6.144c). - Estimation challenges and practices (6.145–6.147): - Estimating union currency in circulation in individual countries is difficult due to lack of data on cross-border currency flows, which do not appear in FCs’ accounts. - Euro area practice: each national central bank records euro banknote liabilities equal to its share of total euro banknotes issued; each country’s share is calculated in proportion to its share in the ECB’s capital, with 8 percent of the issue allocated to the ECB; plus coins issued by the national central bank intended for circulation (6.146). - ECCB/ECCU practice: ECCB exclusively issues common currency banknotes and coins; member countries do not have national central banks; currency is placed in circulation through ODCs; amount issued in each member country is based on each country’s equity share in the ECCU; all currency banknotes and coins are marked with a letter designating the country of issue and are repatriated when spent in other member countries (6.147). - BCEAO and BEAC member-country banknotes include identifying signs to facilitate repatriation of banknotes circulating outside the country of issue (6.148). - When the exchange period lapses, the national central bank liability for issued domestic currency expires and it records extraordinary revenues for non-redeemed national currency as an OCVA; in the euro area, domestic currency was reclassified outside of currency in circulation 12 months after adoption of the union currency (footnote to 6.146). ### Dollarized economies and currency co-circulation - Functions of foreign currencies in other countries (6.149): - a. Store of value: foreign currency banknotes and coins held by all sectors constitute a separate category of claims on nonresidents in FCs’ sectoral balance sheets and in balance sheets of nonfinancial institutional units. - b. Foreign unit of account: institutional units hold foreign-currency-denominated assets (deposits, loans, debt securities, financial derivatives); DCs may accept foreign-currency-denominated deposits and make foreign-currency-denominated loans; corporations and government units sometimes issue foreign-currency-denominated debt securities or hold positions in financial derivatives. - c. Medium of exchange: in some countries a foreign currency is the only or widely used medium of exchange, or both domestic and foreign currency serve as media of exchange. - Classification rules (6.150): - Foreign-currency-denominated assets and liabilities may be claims on/liabilities to residents or nonresidents. - Foreign-currency-denominated deposits that meet the definition of broad money are included in broad money. - All foreign-currency-denominated claims on and liabilities to nonresidents should be classified as foreign assets and foreign liabilities, respectively, regardless of the functions foreign currencies serve. - Dollarization and co-circulation definitions and implications (6.151–6.152): - Dollarized economies: a foreign currency is the only or principal medium of exchange and is used as the domestic unit of account; these countries are referred to as “dollarized” economies regardless of which foreign currency serves (6.151). - Dollarization has implications for measurement of money aggregates and classification of financial assets and liabilities in FCs’ sectoral balance sheets. - Currency co-circulation: countries that use their own domestic unit of account but permit both domestic and foreign currency as media of exchange; co-circulation affects measurement of money aggregates but does not affect classification of financial assets and liabilities in FCs’ sectoral balance sheets (6.152). - Footnotes clarify that domestic currency in fully dollarized countries is sometimes limited to coins or old banknotes, Panama’s balboa is on par with the U.S. dollar, and the Manual uses a narrower definition of dollarization than some literature (footnotes to 6.151–6.152). *Monetary and Financial Statistics Manual and Compilation Guide (Chapter 6).* ### 6.153 During the transition to a dollarized economy, ### 6.153 During the transition to a dollarized economy ### Transition steps and immediate actions - The Monetary and Financial Statistics Manual and Compilation Guide states that during the transition to a dollarized economy the following actions are taken: - The financial records of institutional units in all sectors of the economy are converted from the domestic unit of account to U.S. dollars (or other foreign unit of account) at an exchange rate announced by the central bank or government. - Domestic currency banknotes are withdrawn from circulation, either gradually or within a pre-announced period in which currency holders are entitled to exchange the domestic currency for U.S. dollars (or another foreign currency) at the preannounced exchange rate. ### Reflection of dollarization in sectoral balance sheets and FC surveys - Currency in circulation: - After dollarization is completed, the central bank’s liability account “currency in circulation” shows only the amount of domestic-currency-denominated coins and old domestic currency banknotes, if any, that are still in circulation. - Dollarization currency banknotes and coins: - Holdings of the “dollarization currency” are included in the same category as holdings of other foreign currencies and, along with other foreign currencies, are classified as claims on nonresidents (foreign assets). - Financial instrument disaggregation by currency of denomination: - In the sectoral balance sheets in Appendix II, all domestic positions in dollarization currency are included under the domestic currency category. - Positions in dollarization currency with nonresidents are included under foreign currency. - This distinction matters for adherence to the definition of official international reserves, which includes only foreign-currency assets. ### Co-circulation of foreign and domestic currency - Definition and characteristics: - Co-circulation is a situation where foreign currency is allowed to co-circulate with domestic currency; the foreign currency serves as a medium of exchange and store of value while the domestic currency continues to serve as medium of exchange, store of value, and the domestic unit of account. - Co-circulation may be legally sanctioned or permitted as an informal practice acceptable to the authorities. - Co-circulation may involve the use of two or more foreign currencies, along with the domestic currency, as media of exchange. - Effects on classification and accounts: - Co-circulation does not affect the classification of accounts in the sectoral balance sheets of the FCs or other institutional units. - Unit of account: Financial records in all sectors continue to be based on the domestic currency as the standard unit of account. - Currency in circulation: The central bank’s account for currency in circulation shows its liability for outstanding domestic currency issued; liabilities for co-circulating foreign currency appear only in the records of the foreign central bank or central government that issued the currency. - Co-circulating banknotes and coins: Holdings of co-circulating foreign currency are included with other foreign currencies and classified as claims on nonresidents (foreign assets). - Financial asset/liability disaggregation by currency of denomination: All financial assets and liabilities denominated in a foreign currency (whether or not a co-circulating foreign currency) are classified as in foreign currency. ### Example: monetary integration with co-circulation and dollarization features - Common Market Area (CMA) arrangement: - The rand is the domestic currency of South Africa and a co-circulating currency in Lesotho, Namibia, and Swaziland. - Each CMA country has a domestic currency that, along with rand notes and coins, serves as a medium of exchange and the domestic unit of account. - The domestic currencies (Lesotho loti, Namibian dollar, and Swazi lilageni) have exchange rates pegged to the South African rand, which makes the rand akin to a domestic unit of account. - Under the monetary arrangements, all CMA members share the seigniorage that South Africa obtains from the issuance of rand banknotes and coins. ### Estimation of dollarization and co-circulation currency - Overview of techniques: - Estimation methods include surveys of currency holdings, historical information about currency holdings, and econometric techniques; similar techniques apply to estimating domestic currency outflows from countries that provide the dollarization or co-circulation currency to other countries. - Survey and reporting sources: - Collection of survey data on currency flows across the domestic border is a first step; surveys typically cover currency transactions within the banking system or customs-type reports of currency carried by travelers. - Some countries construct statistical estimates of international flows of currency by netting outflows and inflows associated with balance of payments transactions (gross outflows from tourism, emigrant remittances, etc., netted against gross inflows). - Some countries have formal customs reports requiring reporting of currency taken across borders; reporting thresholds and sampling vary. - Currency shipments: - Wholesale shipments of U.S. currency are provided by a few large FCs that specialize in this service; local financial institutions acquire or repatriate U.S. dollars through wholesale shippers. - For large shipments of U.S. currency, the U.S. Customs Department requires that a currency and monetary instrument report be filed by the shipper; the reporting applies only to cross-border currency shipments of $10,000 or more. - Survey design and reliability: - Direct surveys of households and businesses can ask amounts of U.S. dollars, euros, and other foreign currencies held, motives for foreign currency holding, identification of currency exchanges frequented, and propensities for overseas travel. - A general aversion to disclosure of personal or confidential information about currency transactions and holdings undermines reliability of direct survey data. - A technique to improve accuracy is to survey households only about their foreign currency holdings relative to domestic currency holdings, then apply an estimate of households’ total domestic currency holdings to infer foreign currency holdings. - Use of historical data and econometrics: - Analyzing data on domestic currency holding before introduction of dollarization or widespread co-circulation may offer insight but requires care because pre-dollarization data may reflect flight to currency during instability. - Estimation can be based on econometric modeling of the demand for money where the quantity of money (observed deposits and domestic currency plus unobserved co-circulation currency) depends on macroeconomic variables (a measure of domestic income, interest rates, expected inflation, etc.). Applying econometric methods can yield an estimate of the unobserved quantity of co-circulating currency. - Treatment in monetary aggregates: - When reliable and frequent estimates of the foreign currency circulation are available to monetary statistics compilers, the data should be added to broad money (see paragraph 6.87 and Table 6.2). ### Annex: Reserve requirements (selected definitions and procedures) - Terminology for reserve requirements with averaging: - Reservable liabilities: categories of deposits and, if applicable, debt securities subject to reserve requirements. - Reserve-computation period: period over which reservable liabilities are averaged to determine amounts to which reserve ratios are applied; alternatively, computation may be based on reservable liabilities as of a single date (for example, end-of-month levels). - Reserve-maintenance period: period over which the specified average amount of required reserves is to be held; in some countries large ODCs have different maintenance and computation periods than small ODCs. - Required reserves: ODC deposit holdings at the central bank (reserves deposits) used to satisfy reserve requirements; in many countries ODC holdings of domestic currency in vault also qualify; in a few countries foreign currency deposit holdings in the central bank also qualify. Required reserves are average holdings during a reserve-maintenance period; the reserve holdings may be interest-bearing or non-interest-bearing. - Lagged reserve requirements: required reserve holdings in the reserve-maintenance period are based on average levels of reservable liabilities in a reserve-computation period that precedes the maintenance period; the reserve-computation period may immediately precede the maintenance period or precede it by one or more weeks or months. - Reserve settlement: accounting for required reserves at the end of the reserve-maintenance period; excess reserves arise when holdings exceed the average required amount; a reserve deficiency (maintenance-period average holding less than required) results in (1) a penalty, (2) ODC borrowing of reserves from the central bank, or (3) augmentation of required reserves for the next period if regulations include a reserve deficiency carry-over provision. - Reserve requirements (ratios): average reservable liabilities during the reserve-computation period are multiplied by required reserve ratios, usually stated as percentages of reservable liabilities; many countries have differential reserve ratios across categories of ODC liabilities (examples: transferable vs other deposits, short- vs long-term other deposits, household vs corporate deposits, deposits in domestic vs foreign currency). - Classification implications: - All ODC deposits to be used in satisfying reserve requirements with averaging (and for settlement) are classified as transferable deposits in sectoral balance sheets of the central bank and ODCs unless restricted in use. - Terminology for reserve requirements without averaging: - Reserve-computation date: reservable liabilities measured as of a particular date (for example, end-month). - Reserve-maintenance period: period over which a specified level (rather than average amount) of required reserves must be maintained. - Reserve settlement: accounting for required reserves on a daily basis; the fixed amount applies for each day of the maintenance period; excess reserves are synonymous with ODCs’ other deposits in the central bank; those used for check clearing and other settlement purposes are classified separately from required reserves. - Reserve requirements: levels of reservable liabilities as of the reserve computation date are multiplied by required reserve ratios. - Classification of fixed required-reserve amounts: - ODC deposits that are pre-specified fixed amounts of required reserves (without averaging) and excess reserves are classified as other deposits (nontransferable deposits) in sectoral balance sheets of the central bank and ODCs. - ODC deposits held in the central bank for settlement purposes are classified as transferable deposits in the sectoral balance sheets of the central bank and ODCs. _The Monetary and Financial Statistics Manual and Compilation Guide (IMF)._ ### 6.174 From a cost viewpoint, the level of data disag- ### Seasonal Adjustment of Economic Time Series (extract: 6.174–6.199) ### Cost and level of aggregation - From a cost viewpoint, the level of data disaggregation for which seasonal adjustment is calculated increases, in general, the amount of resources needed to maintain the seasonal adjustment of the monetary statistics (6.174). - Direct seasonal adjustment of main aggregates may be preferable from a cost standpoint because the procedure is only performed on a few series (6.174). - Recommendation: If a cost-effective choice is necessary, the analyst responsible for seasonal adjustment should concentrate on a thorough application of the direct approach on main aggregates, utilizing as many diagnostic tools and other advanced features of the seasonal adjustment software as possible (6.175). ### Additivity, direct vs indirect seasonal adjustment - Seasonal adjustment is a nonlinear operation and is not additive; a choice must be made about which series in a balance sheet identity to adjust directly or indirectly to preserve additivity (6.176). - Two main indirect-application forms: - (1) Directly adjust all components and derive the aggregate as the sum (example: A = currency plus transferable deposits; B = broad money less A; directly adjust A and B and sum to obtain broad money) (6.177). - (2) Directly adjust the aggregate and some components, leaving one component as a residual (6.177). - No unambiguous decision rule exists; the choice is case-by-case after experimentation with both methods (6.178). - Practical criteria for choosing the method include: - (1) Minimization of residual seasonality in the seasonally adjusted series, usually leading to smoother adjusted series (6.178). - (2) Minimization of revision errors (6.178). - (3) Stability of seasonal components (6.178). - (4) Out-of-sample forecasting accuracy (6.178). - Informal rules of thumb: - (1) Direct adjustment has advantages when components of the aggregate time series are highly correlated (6.178). - (2) Indirect adjustment has advantages for minimization of estimation and revision errors when components have dissimilar stochastic properties (6.178). - (3) Indirect adjustment has advantages when the contribution of each component, as a proportion of the aggregate, fluctuates significantly over the estimation period (6.178). ### Multivariate approach and software limitations - The multivariate approach is not advocated in this Manual because of computational complexity and software limitations; most widely used packages are designed for univariate seasonal adjustment (6.179). - Major advantages of common univariate programs: ease of use; diversity of modeling specifications; breadth of advanced statistical tools for model specification, estimation of seasonal components, and diagnostic testing (6.179). ### Seasonal adjustment software and IMF practice - Most popular packages: X-12-ARIMA (U.S. Census Bureau) and TRAMO/SEATS (Bank of Spain) (6.180). - RegARIMA (ARIMA module in X-12-ARIMA) and TRAMO both use time-series regression models for forecasting/backcasting and for detecting/correcting outliers, calendar effects, missing observations (6.181). - X-11 (in X-12-ARIMA) and SEATS decompose series into trend-cycle, seasonal, and irregular components using different methods: X-12-ARIMA uses moving-average filters; SEATS uses ARIMA-based signal extraction with filters derived from ARIMA modeling (6.181). - The IMF uses X-12-ARIMA to seasonally adjust monthly Money and Broad Money data in the International Financial Statistics (IFS) country pages; as of end-2013, requirements have been satisfied for nearly all countries, and Money, Seasonally Adjusted and Broad Money, Seasonally Adjusted in most IFS country pages have been based on X-12-ARIMA techniques (6.182). - The IMF employs the automatic options in X-12-ARIMA to ensure consistency across countries, while encouraging national compilers to undertake more detailed investigations in the national context (6.182, footnote). ### Structure and stages of X-12-ARIMA - X-12-ARIMA modular structure has three main stages (6.183–6.186): - Stage 1 — RegARIMA: ARIMA model with regressors prepares data input and extends series with backcasts and forecasts to enable symmetric moving-average decomposition at series extremes (6.184). - Stage 2 — X-11: Decomposes series into trend/cycle, seasonal, and irregular components by first filtering the trend to stationarize the series, then estimating the seasonal component using symmetrical seasonal moving averages (6.185). - Stage 3 — Statistical analysis: Diagnostics on X-11 output, standard statistical tests, out-of-sample forecasts of seasonally adjusted data; iterative repetition of RegARIMA and X-11 may be needed until seasonal adjustment is satisfactory (6.186). - X-13-ARIMA-SEATS combines X-12-ARIMA and TRAMO/SEATS features: second stage may use X-11 or SEATS and provides comparison of seasonal patterns identified by the two methods (6.187). ### Custom application, model identification, estimation, diagnostics - RegARIMA customization requires specification of regression variables and ARIMA model for regression errors; automatic outlier identification can be complemented by user knowledge about events that influenced the series (6.188). - ARIMA identification follows Box-Jenkins procedures requiring examination of sample autocorrelation and partial autocorrelation functions generated by X-12-ARIMA; spectral analysis may also be useful (6.189, footnote) . - Parsimony is a fundamental principle to avoid over-specification and poor estimation (6.190). - Estimation of RegARIMA parameters is by maximum likelihood with an iterative generalized least-squares algorithm (6.191). - Diagnostic checking analyzes residuals for model inadequacies; X-12-ARIMA produces diagnostics for additive outliers and level shifts, and produces forecasts, forecast standard errors, and prediction intervals (6.192). ### Decomposition of an economic time series - For seasonal adjustment, a time series is decomposed into three components (6.193–6.194): - Trend-cycle component (Tt): underlying path combining long-term trend and business-cycle movements (6.193a). - Seasonal component (Sc_t): comprises seasonal effects narrowly defined (St) and calendar-related systemic effects not stable in timing from year to year, including end-of-period effects (TDt) and moving-events effects (MEt). Seasonal effects narrowly defined are calculated as seasonal moving averages of the detrended series (6.193b). - Irregular component (Ic_t): comprises irregular effects narrowly defined (It), outlier effects (OUTt), and other irregular effects (OIt); analytically contains economically significant information on short-term developments (6.193c). - Decomposition form: - Additive or multiplicative specification can be used; X-12-ARIMA default is multiplicative because it has proved superior for nonstationary series (6.194). - For monetary statistics, multiplicative form aligns with most balance sheet series having an exponential long-run trend; seasonal and irregular components of the multiplicative model are ratios centered on a value of 1 (6.194). ### Seasonal adjustment revision policy - Seasonal adjustment is iterative; seasonally adjusted data can be improved as additional observations become available and may be revised several times before considered final (6.195). - General rule: repeat seasonal adjustment until revisions in seasonal factors from successive re-estimations are small; where possible, quantify “small” and analyze revision statistics (6.195). - Recommendation: yearly review of seasonal factors and models based on new data (6.196). - A shorter review period may be warranted in specific cases (e.g., large revisions) (6.196). - Formalize the data revision policy and publicize the schedule for revised data release (6.196). ### Annex — Determining holding sectors of debt securities issued by financial corporations - Financial corporations (FCs) issuing debt securities may be unable to disaggregate liabilities by holding institutional sector as prescribed (6.197). - If debt securities are issued and held exclusively within the FCs sector, no sectoring problem arises (6.198). - Example: central banks issuing debt securities purchasable only by ODCs gives the institutional sector of holders (6.198). - Where secondary market trading prevents issuers from having required holder-sector information, compilers may use FCs’ reporting on their debt securities holdings disaggregated by issuing sector to derive disaggregation for the ODCs subsector (but not for an individual ODC) (6.198). - Sectoral disaggregation is more complicated when FC-issued debt securities are held by several domestic sectors and nonresidents; security ownership surveys can assist disaggregation and are used in some countries for balance of payments statistics (6.199). - Footnote practice note: If OFC reporting is quarterly or annual, monthly data for their holdings need to be estimated for compiling DCs data; compilers receive monthly total securities issuance by ODCs and central bank and ODC holdings disaggregated by issuer sector, allowing OFC-held shares to be derived residually (footnote to 6.198). *Monetary and Financial Statistics Manual and Compilation Guide (International Monetary Fund).* ### 6.200 The broader recommendation in this Manual ### 6.200 The broader recommendation in this Manual ### Securities holdings, ownership classification, and surveys - The Manual recommends that, "if no other information on current holders is available, debt securities issued by all institutional sectors are initially classified by sector of the original purchasers of the securities." - Compilers "need to adjust the data to take account of cross-sector trading in the secondary market" once custodial or other ownership data are available. - Compilers "will have access to quarterly data on debt securities holdings of all FCs (assuming that OFCs report quarterly), disaggregated by institutional sector of issuer." - Custodial repositories (including centralized securities depositories and FCs that provide custodian accounts) are potential sources of information on securities ownership by resident sectors other than FCs. - Where custodial reporting does not exist, "monetary statistics compilers, in consultation with compilers of other macroeconomic statistics, will need to develop a securities ownership survey" to obtain holdings of sectors other than the FC sector. - Scope of recommended surveys: - For monetary statistics: cover only non-FC sectors’ ownership of debt securities issued by the central bank, ODCs, and OFCs. - For financial statistics: cover debt securities issued by all domestic sectors. - Frequency recommendation for the securities ownership survey: "conducted on a quarterly or at least annual basis (assuming that a monthly survey is not feasible), in close coordination with national accounts and external sector statistics compilers." - If debt securities are also held by nonresidents, portfolio investment surveys for external sector statistics "would provide additional input for the sectoral disaggregation in the monetary and financial statistics." - Transactions data requirement for financial statistics: transactions on debt securities issued by "central government, state and local government, public nonfinancial corporations, and other nonfinancial corporations—disaggregated by institutional sector of the debt securities purchaser/seller—are needed for the financial statistics." - Example of harmonized practice: The European Central Bank’s Securities Holdings Statistics (SHS) - SHS provide quarterly harmonized sectoral data on (1) holdings of securities by euro area resident investors, and (2) holdings by non-euro area residents of securities issued by euro area residents. - SHS cover both debt securities and equity securities (including investment fund shares). - SHS mainly rely on two sources: (1) security-by-security (s-b-s) reporting of holdings by euro area financial institutions, and (2) reporting by custodian institutions resident in the euro area for other sectors (including nonresidents). - Reporters transmit limited information (e.g., amount held and ISIN code); compilers enrich received information using the Centralized Securities Database (CSDB). ### Divisia money: purpose, weighting, and formulations - The Manual contrasts the simple broad money measure Mm = sum_{i=1}^n m_i (components treated as perfect substitutes) with Divisia money, which accounts for differing degrees of moneyness. - Divisia money is described as "a quantity index measuring the change of quantity of money between two time periods by assigning different weights to the growth rates of money components—currency, transferable deposits, other deposits, etc.—according to the usefulness of each component for transaction purposes." - User costs (opportunity costs) proxy the relative relevance of each component for transactions; a user cost is measured by "the spread between a benchmark rate—the interest rate paid on a financial asset that cannot be used for making transactions in the short run—and the interest rate paid on a particular component of the money aggregate." - Economic intuition for weighting: - Higher weights attach to components directly usable as media of exchange (domestic currency and non-interest-bearing transferable deposits). - Smaller weights attach to components not directly usable as media of exchange, whose interest rates are closer to the benchmark rate. - The Manual notes that "the general formula of the Divisia index is shown in Box 6A.2" and that the Bank of England’s formulation is shown in Box 6A.3. - The Bank of England (BOE) has published Divisia money series since 1993 and provides Divisia series for broad money and for money holdings of separate money-holding sectors (household, private NFCs, OFCs). - Key technical expressions included in the Manual: - Simple broad money: Mm = sum_{i=1}^n m_i. - Continuous-time Divisia differential form: dM_Dt = sum_{i=1}^n w_it d log m_it. - Nominal user cost definition: π_i,t = P_t^{-1} (r_B,t - r_i,t) + ... (as presented in Box 6A.2). - Discrete-time Tornqvist-Theil-Divisia monetary quantity index approximation and the logarithmic form for percentage change of the Divisia index are provided (see Boxes 6A.2 and 6A.3 for full formulae and definitions). - The Manual records that the Divisia index originated with François Divisia (Divisia (1925)) and references methodological developments (Barnett (1980); Anderson and Jones (2011); Barnett and Serletis (2000); BOE-related literature). ### Compilation, source data, and dissemination of monetary statistics - Chapter 7 frames compilation and presentation of monetary statistics consistent with the Manual’s methodology, covering stock and flow data on assets and liabilities of the financial corporations (FCs) sector and its subsectors. - Main elements of the compilation and dissemination framework: - Data reporting by FCs: collection and assembly of data individual FCs report to compilers of monetary statistics. - Data compilation: validation, aggregation, and compilation of reported data to construct sectoral balance sheets and consolidation into FCs sector surveys. - Data reporting to the IMF: reporting of sectoral balance sheet data (stocks only) for analytical use and publication by the IMF. - Data dissemination: release and publication of the monetary data (stocks only) for a country, including publication in the IMF’s International Financial Statistics (IFS). - Chapter 7 organization and annexes: - Annex 7.1: numerical examples of Other changes in the volume of assets (OCVA) entries. - Annex 7.2: presentation of consolidation adjustments needed in compiling the FC surveys. - Appendix III: numerical examples of FCs surveys based on sectoral balance sheets of Appendix II and adjustments of Annexes 7.1 and 7.2; includes illustration of the central bank survey (CBS) and monetary authorities accounts. - Annex 7.3: illustrative scheme for compilation of supplementary data on financial assets and liabilities. ### Analytical surveys, the DCS, and links to other macroeconomic statistics - Two levels of compilation and presentation (Chapter 2 framework reiterated): - First level: aggregation of stock and flow data reported by individual institutional units into sectoral balance sheets for the central bank, other depository corporations (ODCs), and other financial corporations (OFCs). - Second level: consolidation of balance sheet data into analytical surveys for FCs subsectors and the entire FCs sector. - Surveys and consolidations: - Central bank survey (CBS) shows components of the monetary base. - Other depository corporations survey (ODCS). - Depository corporations survey (DCS) consolidates the CBS and the ODCS and is "the principal set of monetary statistics for monetary policy." The DCS is structured to facilitate analysis of broad money, credit aggregates, DCs’ claims on and liabilities to nonresidents, and other assets and liabilities. - Financial corporations survey (FCS) consolidates the DCS and OFCS and provides a comprehensive measure of liquidity and credit extended by FCs. - The DCS maintains balance sheet identity so that broad money liabilities (BML) are presented with counterparts as claims on nonresidents and other sectors of the domestic economy, and as other assets and liabilities; DCORS (counterparts to broad money) can be disaggregated into transactions, valuation changes, and OCVA for detailed analysis. - The DCS is to be determined by compilers using the definition of broad money in Chapter 6: all institutional units that (1) are included in the FCs sector, and (2) issue liabilities included in broad money are classified as DCs and included in the DCS. - Sectoral balance sheets provide disaggregated information by instrument, currency, and counterpart sector and form the basis for the surveys; aggregation across all institutional units within a subsector is the standard compilation practice. ### Sectoral balance sheets: data sources and aggregation - Sectoral balance sheet data are obtained from accounting and, in some cases, administrative records of individual institutional units within FCs subsectors. - Reported data for each unit are classified into standard components in accordance with sectoring, instrument classification, valuation methods, and other accounting principles described in Chapters 2 to 6. - Aggregation is the first compilation step: summation of stock or flow data across all institutional units within a subsector and within each asset or liability category (as explained in Chapter 5, paragraph 5.60). - The term "survey" in the Manual refers to comprehensive data for all units in a subsector (not sample survey data). *Source: Monetary and Financial Statistics Manual and Compilation Guide* ### 7.20 The sectoral balance sheets are presented in ### Sectoral balance sheets (Monetary and Financial Statistics Manual and Compilation Guide) ### Presentation and structure - Sectoral balance sheets are presented in domestic currency units and contain separate columns for opening (beginning of period) and closing (end of period) stocks. - Ideally, sectoral balance sheets also contain data for flows arising from transactions, revaluations, and OCVA during a particular period, as described in Chapter 5 (subsection II.B). - Financial assets and liabilities are classified by instrument, by currency, and by counterpart sector (creditor/debtor sector), distinguishing liabilities included in broad money from those excluded. - Memorandum items to the sectoral balance sheets provide additional data needed for the compilation of the CBS, DCS, and OFCS and to support reconciliation of certain indicators (for example, the market value of equity liabilities). - Supplementary items, if compiled, provide data useful for analysis of broad money and credit aggregates (for example, disaggregation by maturity). ### Accounting identities and flows (DCS and broad money) - The DCS identity linking broad money liabilities (BML) to components: - BML ≡ NFA + DCR − OIN - where DCR comprises net claims on central government and gross claims on other resident sectors. - OIN denotes other liabilities less other assets, where other liabilities include all liabilities not included in broad money, and other assets include nonfinancial and miscellaneous assets (see Chapter 6, Table 6.1). - Total flows (closing stocks less opening stocks) for the DCS: - ∆BML ≡ ∆NFA + ∆DCR − ∆OIN - where ∆ denotes a total flow (period-to-period change). - Flow data in each category in the DCS are decomposed into separate flows for transactions, valuation changes, and OCVA. - Components of ∆DCR: - ∆DCR ≡ ∆NCG + ∆CORS - where NCG and CORS denote net claims on central government and gross claims on other resident sectors, respectively. - Analytical links: - Components of ∆NCG are directly linked to government finance statistics; growth in NCG—through a rise in DCs’ holdings of government securities and/or reduction in deposit liabilities to government—will exert an expansionary influence on the broad money liabilities of DCs. - ∆CORS captures total flows from changes in DCs’ claims on resident sectors other than central government: a positive ∆CORS has an expansionary effect on broad money liabilities; a decrease has a contractionary effect. Sectoral components of ∆CORS can be used to analyze sources of expansionary or contractionary effects. ### Memorandum items: purposes and recommended breakdowns - Memorandum items accompanying sectoral balance sheets (illustrated in Tables A2.1–A2.3 in Appendix II) provide additional data needed for survey compilation and for detailed macroeconomic and macroprudential analysis. - For loan data, memorandum items include: - (1) total accrued interest on loans; - (2) total amount of interest and principal arrears on loans; - (3) expected losses on loans; - (4) loans with maturity of one year or less; - (5) loans extended to households (in the sectoral balance sheets for ODCs and OFCs). - Recommendations and uses: - Include interest arrears together with the underlying instrument, with a matching provision on the liability side; memorandum items on interest arrears allow adjusting accounting data to monetary and financial statistics requirements. - Memorandum items for expected losses on loans enable readjusting loan data reported as expected realizable values back to nominal values where needed. - Memorandum items on FCs’ claims on and liabilities to ODCs in liquidation or under reorganization (disaggregated by type of financial asset/liability) are needed to complete ODC sector information when direct reporting by those ODCs is unavailable. - Memorandum items on central bank float (applicable to central bank only) are needed where the central bank provides funds to ODCs for items in the process of collection (availability prior to collection). - Memorandum items identify total positions with nonresidents for selected financial instruments with an "of which" subcategory specifying positions with FCs; interbank positions with nonresident deposit-takers with an "of which" subcategory specifying positions with nonresident affiliates are also identified. - Memorandum items for the central bank and ODCs separately identify total loans to and deposits of MMFs, allowing compilation of interbank positions as defined in the System of National Accounts 2008 (SNA), by eliminating positions with money market funds from intra-DC positions. ### OCVA (Other changes in the volume of assets) and reclassification - OCVA entries are analytically important and are included in a single OCVA column in sectoral balance sheets. - OCVA reported in single-column format by each reporting institution can be aggregated across ODCs and OFCs to obtain OCVA data for sectoral balance sheets; however, OCVA reported by individual institutions will not cover OCVA arising from Changes in classification and structure of FCs (e.g., reclassification of an OFC as an ODC). - Reclassification procedures and effects: - When an OFC is newly authorized to operate as an ODC or commences issuing liabilities included in broad money, it must be reclassified as an ODC; prior notification allows counterparties to reclassify their accounts. - Compilers are responsible for two sets of OCVA entries when changing classification and structure: (1) removal of the full set of balance sheet accounts of the reclassified FC from the OFCs sectoral balance sheet; and (2) insertion of the full set of these accounts into the ODCs sectoral balance sheet. - Examples of OCVA categories discussed in Annex 7.1 and cross-referenced to paragraphs 5.21 and 5.80–5.85: - a. Catastrophic losses: Loss on nonfinancial assets resulting from a catastrophic event. - b. Appearance and disappearance of financial assets: Write-off of loans, some previously provisioned for loss in full and some not provisioned. - c. Changes in sector classification and structure: Reclassification of an OFC as an ODC. - d. Changes in classification of assets and liabilities: examples include (1) Monetization of gold (central bank); (2) reclassification of loans as debt securities; (3) changes in the type of debt securities included in broad money; and (4) an appropriation from retained earnings to general and special reserves. ### Further disaggregation and data needs - The Manual encourages additional disaggregation of ODCs and OFCs for national analysis; separate aggregated balance sheet data can be compiled for categories such as: - money market funds; - large and small ODCs; - government- and private-owned ODCs; - foreign- and domestic-owned ODCs, including foreign branches and subsidiaries; - offshore FCs. - Recommendation for OFCs subsectoring: - Compile separate aggregated data for at least two OFCs subsectors: (1) insurance corporations and pension funds (ICPF), and (2) OFCs other than ICPF. This is consistent with the minimum subsectoring requirement of templates developed in the context of the G-20 Data Gaps Initiative (DGI). - Additional recommended memorandum-item disaggregation: - Disaggregate interest arrears and expected loan losses by sector, regardless of whether reporting of such data is mandated by law, regulation, or national practice. - Supplementary classifications and templates: - Chapter 4, Section V, and Box 7.1 present examples of further disaggregation of financial instruments and sectoral balance sheets; Table 7A.8 in Annex 7.3 and the subsection on supplementary data present illustrative disaggregated data for possible reporting to the IMF. - Box 7.2 contains examples of additional categories of data relating to financial derivatives and contingent items to accompany the sectoral balance sheets. ### Standardized Report Forms (SRFs) - To ensure methodological soundness and facilitate cross-country comparability, the IMF introduced the SRFs for monetary data reporting in 2004. - The SRFs for the central bank, ODCs, and OFCs use a harmonized accounting presentation of assets and liabilities (stocks only) of the FCs, with primary breakdowns by: - financial instrument (presented in order of relative liquidity, including nonfinancial assets), - currency of denomination (domestic and foreign), - counterpart sector (corresponding to the main sectors of the 2008 SNA). *Source: Monetary and Financial Statistics Manual and Compilation Guide.* ### 7.49 This uniform presentation of the assets and ### Financial Corporations Surveys (Sections 7.49–7.64) ### Purpose and scope - The Monetary and Financial Statistics Manual and Compilation Guide presents a uniform presentation of the assets and liabilities of the FCs to allow detailed cross-country comparison, in line with the concepts and definitions of the other macroeconomic statistical systems (7.49). - Reporting to the IMF using the SRFs is for stocks only; illustrative SRFs in Appendix II also contain flows disaggregated into transactions, valuation changes, and OCVA (7.49). - The sectoral balance sheets for the central bank, ODCs, and OFCs are the sources of all data for compilation of the CBS, ODCS, OFCS, and FCS (7.50). ### Survey construction and analytical focus - Each FCs subsector survey is built around the accounting identity underlying the sectoral balance sheets and structured to provide an analytical presentation of intermediation by the subsector (7.51). - Asset-side focus: financing extended to nonresidents and to each domestic sector. - Liability-side focus: - CBS: components of the monetary base. - DCS: liabilities that are included in broad money. - FCS: separately identifies insurance, pension, and standardized guarantee schemes (7.51). - The FCS contains consolidated data for the entire FCs sector and is the broadest set of monetary statistics in institutional coverage (7.52). ### Presentation of stocks and flows - Illustrative surveys utilize and rearrange sectoral balance sheet data into analytical presentations, showing both stocks and flows, with flows broken down into transactions, valuation changes, and OCVA (7.53). ### Gross versus net presentation and key aggregates - All survey categories of assets and liabilities are presented on a gross basis, except claims on and liabilities to nonresidents, claims on and liabilities to central government, and OIN (7.54). - FCs’ net claims on nonresidents (NFA) and net claims on central government (NCG) are shown in each survey, along with separate lines for total claims and total liabilities (7.54). - OIN are defined as other liabilities less other assets consisting of all liabilities and assets not included elsewhere in a survey (7.54). ### Analytical uses of specific aggregates - Movements in NFA provide an indication of the direct domestic monetary impact of subsectors’ transactions with the rest of the world (7.55). - Presentation of claims on central government on a net basis facilitates analysis of FCs’ financing of central government operations (7.55). ### Common disaggregation and classification features - Claims on domestic sectors (other than central government) are disaggregated into: - state and local government; - public nonfinancial corporations; - other nonfinancial corporations; and - households and NPISHs (7.56a). - Claims on and liabilities to each FCs subsector are separately identified to enable consolidation in the DCS and FCS (7.56b). - Primary liability disaggregation is by instrument; for CBS and ODCS a distinction is made between liabilities included in broad money and those excluded (7.56c). - Deposits included in broad money are disaggregated into Transferable deposits and Other deposits, further disaggregated by money-holding sector (7.56c). - Debt securities included in broad money are disaggregated by money-holding sector (7.56c). - Equity liability [MS] in CBS, ODCS, and OFCS is presented at book value and disaggregated into Funds contributed by owners, Retained earnings, Current year result, General and special reserves, and Valuation adjustments (7.56d). - Funds contributed by owners for OFCs and ODCs are allocated to resident and nonresident holders (7.56d). - Inter-sectoral holdings of equity by FCs are sectored on the asset side but not on the liability side of the issuing institution, causing a consolidation discrepancy (7.56d). ### Specific compilation notes and memo items - Required reserves component of Liabilities to ODCs in the CBS comprises ODCs’ transferable deposits, denominated in domestic and foreign currency, held at the central bank and included in monetary base (7.57a). - In the ODCS, the Currency component of Claims on central bank pertains to ODCs’ holdings of domestic currency (7.57b). - The OIN component in the CBS equals other liabilities less other assets; other liabilities and other assets are defined and described in detail, and OIN for ODCS and OFCS includes a Consolidation adjustment that nets out claims and liabilities within the subsector (7.57c). - Central bank float is a memorandum item in the central bank sectoral balance sheet and is deducted from the Transferable deposits component of broad money with a contra-entry in Other liabilities; failure to deduct float results in double counting in broad money (7.57d). ### DCS and FCS specifics - DCS focus is broad money and shows total broad money liabilities of the FCs sector disaggregated into Currency outside DCs, Transferable deposits, Other deposits, MMF shares, and Debt securities (7.58). - Currency outside DCs comprises Currency in circulation from the CBS less the Currency component of ODCs’ claims on the central bank in the ODCS (7.58). - Liabilities not included in broad money are shown by category; liabilities to OFCs are shown separately as “of which” items to enable consolidation in compiling the FCS (7.59). - The FCS provides comprehensive claims and liabilities of the FCs sector to all domestic sectors and nonresidents; it contains the same asset categories as the DCS but fewer liability subcategories because FCS is not structured to show liability components of broad money (7.60). - Some components of broad money (for example, OFCs’ currency holdings and their holdings of deposits and debt securities issued by DCs) have been netted out in FCS consolidation (7.60). - The FCS contains a separate liability category for insurance, pension, and standardized guarantee schemes; countries may elect an alternative FCS liability presentation focused on liquidity aggregates issued by FCs (7.60). ### Consolidation principles and adjustments - Consolidation cancels out stocks and flows between institutional units within the same sector or subsector covered by a survey; consolidations occur at multiple levels: sectoral balance sheets, ODCS/OFCS, and DCS/FCS (7.61). - Sectoral balance sheets include Consolidation adjustment for branches and headquarters in Other accounts payable—other, showing net discrepancies from consolidating head office and branches (7.61a). - Consolidation adjustment within OIN in the ODCS or OFCS shows the discrepancy remaining after netting out inter-ODCs or inter-OFCs claims and liabilities (7.61b). - Consolidation adjustment within OIN in the DCS or FCS shows the discrepancy remaining after netting out inter-DCs or inter-FCs claims and liabilities (7.61c). - Consolidation adjustment in ODCS, OFCS, DCS, and FCS are illustrated using numerical examples and linked tables in Annexes and Appendices; calculation is facilitated by including “Of which: OFCs” lines in DCS and “Of which: DCs” lines in OFCS to enable transparent consolidation (7.62–7.64). *Monetary and Financial Statistics Manual and Compilation Guide (sections 7.49–7.64).* ### 7.65 The CBS covers only central banking functions ### 7.65 The CBS covers only central banking functions ### Monetary authorities accounts versus the Central Bank Sheet (CBS) - Paragraph 7.65: The CBS covers only central banking functions performed by the central bank and any specialized subunits within the central bank subsector (for example, accounts of a currency board). - Paragraph 7.65: When certain central banking functions—such as currency issuance, the holding of international reserves, and the conducting of transactions with the IMF—are performed wholly or partly by the central government, consideration could be given to compiling a monetary authorities account in addition to the CBS; alternatively, data on monetary authorities’ activities outside the central bank may be shown as memorandum items accompanying the CBS. - Paragraphs 7.66–7.68: A monetary authorities account is obtained by adding to the CBS line items representing central banking functions performed by the central government. In the illustration (Table A3.6 in Appendix III) these include: - a government liability for the issuance of currency (typically coins); - a government liability for financial obligations to the IMF; - government assets (typically, foreign exchange holdings) that are part of official reserve assets. - Paragraph 7.67: A government liability included in the monetary authorities accounts is matched by a contra-entry representing a claim on the central government; a government asset entry is matched by a contra-entry representing a liability to the central government in the monetary authorities accounts. - Paragraph 7.68: The Manual recommends presenting each entry and contra-entry arising from central banking functions performed by the central government as a separate line item in the monetary authorities accounts under Net claims on central government. The relevant entries in the monetary authorities accounts are specified as: - Currency issuance—central government (a component of the Monetary base) and Contra-entry to currency issue—central government (a component of Net claims on central government) - Liabilities to IMF—central government (a component of Liabilities to nonresidents) and Contra-entry to liabilities to IMF—central government (a component of Net claims on central government) - Reserve assets—central government (a component of Claims on nonresidents) and Contra-entry to reserve assets—central government (a component of Net claims on central government) - Paragraph 7.69: Where monetary authorities accounts are compiled, compilers could consider compiling augmented DCS and FCS that use the monetary authorities account instead of the CBS. ### Source data recommendations and periodicity - Paragraph 7.70: The Manual recommends that source data for monetary statistics be obtained, to the extent possible, from the accounting records of resident financial corporations (FCs). - Paragraph 7.71: General and subsidiary accounting ledgers are constructed in accordance with a chart of accounts; ledgers facilitate double-entry bookkeeping. - Paragraph 7.72: Implementing the Manual’s methodology requires expanding an FC’s information system to include data conforming to the Manual’s classification of economic sectors (Chapter 3) and financial assets and liabilities (Chapter 4). Expansion can be by enlarging ledgers or creating separate databases when ledger expansion is impractical. - Paragraph 7.73: Recommended periodicity for source data reporting and compilation: monthly for deposit-taking corporations (DCs), and monthly or quarterly for other financial corporations (OFCs). Monthly source data should be reported within the month immediately following the reference month; a longer lag may be required for quarterly data by OFCs (see paragraph 2.66). - Paragraphs 7.74–7.76: From an FC’s perspective, source data include: (1) accounting records; (2) accounting records adjusted for conformity with the Manual; (3) estimated data obtained outside the accounting system and directly usable; and (4) other reported data used as inputs to adjustments and estimations. From a compiler’s perspective, source data include reported data from FCs and other suppliers, and adjusted or estimated data produced by compilers. Trade associations and regulatory/supervisory agencies may supply source data for ODCs and OFCs not supervised by the central bank. - Paragraph 7.76: Compilers are recommended to provide report forms and instructions on specific data to be reported by FCs, while allowing each FC latitude in designing information management processes; the recommendation has legal implications where statistical authorities cannot mandate expansions of corporate information systems. - Paragraph 7.78: Stock data for monetary and financial statistics should be end-of-period amounts for a calendar month, quarter, or year; flows should be measured over a calendar month, quarter, or year. If needed, data should be adjusted to meet this calendar convention. ### Accounting records, ledgers, and double-entry principles as source data - Paragraphs 7.79–7.81: The general ledger summarizes all balance sheet and profit and loss entries; subsidiary ledgers contain more disaggregated data and link to the general ledger. Each account has an accounting code and descriptor drawn from the chart of accounts. Charts of accounts may be standardized by national policy or designed by each corporation subject to financial reporting standards and reporting requirements. - Paragraph 7.82: Double-entry accounting can be implemented when source data are incorporated in or linked to the general and subsidiary ledgers. The double-entry rule requires that every entry be accompanied by a contra-entry or set of contra-entries so that assets equal liabilities (inclusive of equity) is always satisfied. Double-entry accounting is the framework for monetary statistics that ensures reconciliation of stock and flow data. - Paragraphs 7.83–7.86: Flow data in an accounting system are defined by debits and credits. The trial balance summarizes debits and credits; equality of debits and credits indicates accuracy. Examples illustrate single-debit/single-credit transactions, asset–asset transactions, and transactions involving accrued interest. Flow data for monetary statistics can be derived from debit/credit entries to balance sheet and profit and loss accounts; ledger subaccounts can track accrued interest so that accrued amounts are incorporated into outstanding balances and memorandum items. ### Treatment and disaggregation of gains, losses, valuation changes, and profit/loss - Paragraph 7.87: Profit and loss accounts can be disaggregated to provide gain and loss data. For monetary statistics, gains and losses need not be distinguished by realized/unrealized status or by source (price vs exchange rate changes). Source data for gains and losses must be disaggregated by: - asset/liability category, - domestic/foreign currency of denomination, - economic sector of creditor/debtor. - For deposits and debt securities issued by DCs, disaggregation by liability categories Included in broad money and Excluded from broad money, as well as by domestic/foreign currency and economic sector, is needed. - Paragraph 7.88: Revaluations of financial assets and liabilities may be recorded either in profit and loss or in valuation adjustment within equity. Monetary statistics require the total amount of revaluation for individual categories of assets and liabilities within a period; the total revaluation for a category equals the sum of: - (1) the net gain or loss recorded in Current year result (profit and loss), and - (2) the net gain or loss recorded in Valuation adjustment within Equity liability [MS]. - Paragraph 7.89: Net profit or loss for the period is shown as the change in current year result. The Current year result for the period, inclusive of net gains/losses, is disaggregated into transactions (T), valuation changes (VC), and other changes in volume of assets (OCVA) within Equity liability [MS]. The net amount of gain/loss through the profit and loss accounts is recorded in the VC column of the Current year result; a separate OCVA column is used for OCVA recorded through profit or loss. The net amount of transactions for the Current year result equals net profit or loss for the period minus the sum of: (1) net amount of gain/loss through profit or loss, and (2) OCVA. *Monetary and Financial Statistics Manual and Compilation Guide (selected paragraphs 7.65–7.89).* ### 7.90 A numerical example of the stock and flow data ### 7.90 A numerical example of the stock and flow data ### Numerical example: Equity liability [MS] — stock and flow decomposition - Profit for the period = 425 - (1.1) T = transactions (other than new issue of shares) = 400 - (1.2) VC1 = Gain or loss through profit or loss = 100 - (1.3) OCVA1 = Expense for Provision for losses on assets = − 75 - (2) VC2 = Gain or loss recognized directly in equity = − 50 - (3) EQ = Issuance of equity shares = 3,200 - (4) OCVA2 = Appropriation of retained earnings to increase General and Special Reserves = 300 - Opening/Closing stock and flow table (labels: OS = opening stock; T = transactions; VC = valuation changes; OCVA = other changes in volume of assets; CS = closing stock): - Equity liability [MS]: OS 1,017,300; T 3,600; VC 50; OCVA −75; CS 1,020,875 - Funds contributed by owners: OS 1,000,000; T 3,200 [3]; CS 1,003,200 - Retained earnings: OS 10,000; OCVA −300 [4]; CS 9,700 - Current year result: OS 4,300; T 400 [1.1]; VC1 100 [1.2]; OCVA1 −75 [1.3]; CS 4,725 - General and special reserves: OS 1,000; OCVA2 300 [4]; CS 1,300 - Valuation adjustment: OS 2,000; VC2 −50 [2]; CS 1,950 - Notes: - T = transactions; VC = valuation changes; EQ = equity; OCVA = other changes in volume of assets; OS = opening stock; CS = closing stock. ### Reporting burden, cost–benefit analysis (CBA), and decision rules - Compilers must ensure data are reported by financial corporations (FCs) while minimizing reporting burdens and respecting authorities’ concerns. - Standard CBA techniques should be adapted to statistical reporting given subjectivity in valuing benefits of data quality. - Components of a CBA for monetary and financial statistics include: - a. Systematic identification of all potential statistical reports. - b. Estimation of reporting costs for each statistical report. - c. Assessment of benefits measured as the incremental contribution of each statistical report to overall quality. - d. Formulation of decision rules for approval of statistical reports based on costs and benefits. - Decision-rule approaches: - Set a budget ceiling for reporting compliance costs and maximize total benefits within that limit. - Impose minimum quality standards that reported data must meet or exceed. - Example procedural elements (illustrated by the ECB merits and costs procedure): - Assess whether new requirements can be met using existing statistics. - Conduct a fact-finding exercise to analyze feasibility and relevance. - Use cost-assessment questionnaires addressed separately to FCs and national central banks (NCBs), with grading scale 1–5 (1-limited cost to 5-fundamental increase in cost). - Reassess user requirements in light of reported costs; consider cheaper alternatives (e.g., quarterly instead of monthly data). - Match merits and costs and take final decisions at the appropriate governance level. ### Estimation, data adjustment, and responsibilities - Compilers should evaluate alternative methods of data adjustment and estimation to determine most efficient, cost-effective approaches to complete monetary statistics data sets. - Recommendation: data reporters should undertake all adjustments/estimations that can be efficiently implemented at the reporter level (examples include restating debt securities to market or fair value and estimating fair values for non‑traded derivatives). - Rationale: reporters can preserve the balance sheet identity (total assets = total liabilities) when adjustments are incorporated, providing an inherent quality check. - Compilers may delegate adjustments/estimations when more efficient at aggregate level (for example, disaggregation by economic sector of securities holdings or estimation of flow data using stock data). - Custodial repositories or centralized securities depositories can be alternative sources to reduce FC reporting burden. - Compilers are responsible for: - Data interpolation where reporters provide data at lower periodicity than required (e.g., interpolating monthly from quarterly or producing quarterly from annual reports). - Estimation of flow components (transactions, valuation changes, OCVA) from stock data when direct flow reporting is unavailable. - Flow decomposition may require assumptions about market price/fair value behavior and, for foreign-currency instruments, exchange-rate behavior. - Estimation techniques for decomposition are described in Chapter 5 (Section IV.A, and Annex 5.1) and in Box 10.2 of the BPM6 Compilation Guide (as referenced). ### Data reporting by financial corporations and central bank reporting practices - Prerequisite: accurate, comprehensive, and timely reporting by FCs, aligned with financial asset classifications, economic sectoring, valuation methods, and accounting rules from Chapters 2–6. - Comprehensive reporting enables compilers to: - Verify and, if needed, adjust data to finalize the central bank sectoral balance sheet. - Collect monetary data from Other Depository Corporations (ODCs) and Other Financial Corporations (OFCs). - Compile sectoral balance sheets for ODCs and OFCs. - Consolidate data for FC sector surveys (CBS, ODCS, DCS, OFCS, and FCS). - Report and publish monetary statistics. - In practice, most FCs report only stock data; guidance aims to support future reporting of both stocks and flows. - Central bank-specific guidance: - The central bank should report stock and flow data in accordance with the Manual’s recommended classifications and rules. - At minimum, the accounting department should share a single consolidated set of data (headquarters, domestic branches, specialized subunits) with monetary statistics compilers. - Additional departments (for example, foreign exchange or securities departments) may need to share data for completion of sectoral balance sheets or memorandum items. - Close collaboration and full documentation of accounting rules, supplemented by ongoing technical support from monetary statistics compilers, are essential for data quality and timeliness. *Monetary and Financial Statistics Manual and Compilation Guide, selected section 7.90–7.112.* ### 7.113 In addition, read-only access to account- ### 7.113–7.136 Reporting, validation, institutional coverage, and IMF reporting of monetary statistics ### Read-only access and benefits for compilers - Read-only access to accounting records of the central bank by the compilers has proven helpful when addressing specific data issues and/or questions. - This practice promotes efficiency in the use of resources and improves the timeliness of data validation and availability. ### Reporting requirements for Other Depository Corporations (ODCs) - ODCs should report stock, and possibly flow, data in standard reporting forms (based on charts of accounts or standard statistical returns) that are sufficiently detailed to allow compiling monetary and financial statistics in accordance with the financial asset classifications, economic sectoring, valuation methods, and accounting rules of this Manual. - Advantages of standardized reporting: - a. Compilation efficiency: reported data are comparable across ODCs and facilitate aggregation; a common chart of accounts allows ODCs to report balance sheet and income statement based on the standard chart of accounts, reducing the need for additional forms. - b. Data quality: reporting of own accounting records in a standardized format containing all details needed for compiling monetary statistics is preferable to reliance on summarized balance sheet and income statement data supplemented by additional report or call forms. ### Major elements of implementing a new ODC reporting system (7.115) - a. Reporting forms: - Design with reference to the line items of the SRF 2SR. - Initially may require only stock data for an ODC’s balance sheet accounts and memorandum items. - Design numeric (or alphanumeric) data-coding system that can be extended to include flows—transactions, valuation changes, and OCVA. - b. Reporting instructions and other documentation: - Develop instructions with reference to the Guidance Notes accompanying SRF 2SR and other material in this Manual. - c. Training sessions: - Central bank should convene training for ODC reporters and support staff on methodology of monetary statistics, sectoral balance sheets, and reporting procedures. - d. Technical support: - Central bank should provide a communication channel between ODCs and monetary statistics compilers for methodological and implementation assistance; technical assistance likely extends beyond introduction of new forms. ### Reporting requirements and challenges for Other Financial Corporations (OFCs) (7.116–7.119) - OFCs should report data in standard reporting forms sufficiently detailed to allow compilation in accordance with the Manual’s classifications, sectoring, valuation methods, and accounting rules. - Reported OFC data usually encompass fewer and less diverse categories of assets and liabilities than ODCs; liability accounts of OFCs seldom include deposits and often have few categories of debtor/creditor disaggregation. - Major reporting challenges: - Large number and diversity of operating OFCs and multiple reporting channels. - Incomplete or untimely reporting in some countries; reporting by some OFC categories may not exist. - Many OFCs are supervised by agencies other than the central bank, or not supervised at all, complicating compilation. - Data collection approaches: - Direct reporting to the central bank, coordination with supervisory agencies, national statistical offices, trade associations, or other non-government entities. - Implementation of an OFC reporting system involves the same four major elements as for ODCs, with reference to SRF 4SR and its Guidance Notes. ### Validation and plausibility testing of reported data (7.120–7.127) - Purpose: Ensure quality of source data reported by FCs to produce aggregate outputs fit for analytical purposes. - Validation checks (can be largely automated for electronic submissions): - Confirm all required data cells have been completed. - Check that balance sheet accounting identities are satisfied. - Ensure subtotals and totals sum correctly. - Determine consistency in reciprocal positions between FCs subsectors. - Plausibility testing: a three-phase process to identify reporting errors not caught by validation - a. First-round filtering (often automated) to identify outliers or large variations. - b. Diagnostic testing to decide which flagged data should be edited or queried with the data provider. - c. Second-round diagnostic testing after compilation and initial analysis to reveal outlier behavior relative to peer group norms. - First-round filtering criteria examples: - Period-to-period change exceeding a specified absolute value. - Period-to-period change exceeding a specified percentage movement. - Change causing a reported position to show, or cease showing, a zero position. - Model-based filtering: - Use ARIMA modeling to generate forecasted confidence intervals for new observations; common software examples for outlier detection include X-12-ARIMA and Tramo for ERROR. - Diagnostic testing: - Can be analyst-judgment-based or computationally based (e.g., examining relationships between items within a reporter’s submission). - Second-round diagnostic testing: - Reviews individual reporter data relative to data for all reporters; requires availability of reported data from a major subset of the reporting population and may be delayed until most reports are submitted. - Cost–benefit analysis (CBA) of plausibility testing: - Objective: expend resources to identify data inaccuracies that materially affect analytical content of aggregate outputs. - Avoid pursuing potential reporting errors without regard to materiality to prevent excessive compiler and reporter costs. - General principles: - a. Absolute movement rules should focus on materiality of the cell item to aggregate outputs. - b. Percentage-movement rules should be specified carefully to encompass normal variability and avoid excessive alerts; focus may be on percentage-change thresholds for large institutions. - c. “To/from zero” rule can be useful to alert when data are entered on wrong lines or when an institution begins holding a new instrument or offering a new service. ### Institutional coverage of monetary statistics (7.128–7.135) - Monetary statistics cover all institutional units in the FCs sector as subdivided into nine subsectors in the 2008 SNA; for monetary statistics the FCs sector is divided into the DCs subsector (central bank and ODCs) and the OFCs subsector. - Recommendation: institutional coverage should include all FCs, with possibly lower frequency of reporting for smaller ODCs and OFCs, consistent with benefits and compliance costs. - Frequency of reporting depends on: - (1) number and size distributions of ODCs and OFCs; - (2) range of OFCs’ activities; - (3) assortment of stock and flow data required; and - (4) periodicity and frequency of data reporting. - Monthly reporting requirement for ODCs: - May apply to all ODCs or exclude the smallest ODCs. - Universal (census) reporting provides the most comprehensive data but may impose highest total costs. - If size distribution of ODCs is highly skewed, excluding smallest ODCs can reduce reporting costs without significant loss of accuracy. - Exemption approaches: - Explicit: set a minimum-size threshold for reporting institutions. - Implicit: set minimum institutional coverage measured as a percentage of estimated total for a key aggregate (example: total assets of ODC subsector); the latter approach has been adopted by the ECB for ODCs resident in the euro area. - OFC reporting exemptions: - Exempting small OFCs from frequent reporting reduces compilation cost while maintaining a representative sample. - Truncated high-frequency reporting can be combined with universal reporting at less frequent intervals (example: small ODCs exempted from monthly but required quarterly; large OFCs quarterly, small OFCs annual). - If truncated reporting is adopted: - Compilers should periodically review minimum-size thresholds relative to exempted FCs because of evolution, mergers, acquisitions, reorganizations, and failures. - Census surveys: - Sent to all ODCs and OFCs at least annually to update information needed for revisions in lists of exempted FCs and to implement decision rules for adding or deleting reporters. ### Reporting to the IMF (7.136) - The SRFs for monetary data reporting to the IMF were revised with the publication of this Manual. - The SRFs correspond to the sectoral balance sheets presented in Appendix II and need be reported only for stock data. - SRFs applicable to countries reporting monetary data directly to the IMF: - a. SRF 1SR – Central Bank - b. SRF 2SR – Other Depository Corporations - c. SRF 4SR – Other Financial Corporations - d. SRF 5SR – Money Aggregates *Monetary and Financial Statistics Manual and Compilation Guide, paragraphs 7.113–7.136.* ### 7.137 SRFs 1SR, 2SR, and 4SR are the same as sec- ### mfsmcg-final - 7.137 SRFs 1SR, 2SR, and 4SR are the same as sec- ### SRFs, reserve assets, and currency-union reporting - 7.137: SRFs 1SR, 2SR, and 4SR correspond to sectoral balance sheets of the central bank, ODCs, and OFCs, respectively. SRF 5SR is based on the DCS and contains additional line items for components of money aggregates issued by institutional units other than FCs. - 7.138: SRF 1SR—Central Bank contains lines to distinguish a central bank’s holdings of foreign assets that qualify as reserve assets. Reporting on reserve assets in SRF 1SR must follow the principles of BPM6 (paragraphs 6.64–6.92) and the International Reserves and Foreign Currency Liquidity: Guidelines for a Data Template (2013). - 7.139–7.140: For members of currency unions (for example, euro area) that report monetary data to the union central bank: - Reporting formats are consistent with SRFs but include additional line items to capture within-union nonresidents and outside-union nonresidents. - Statistics are compiled on the basis of both national residency and currency-union-wide residency. - Using euro-area-wide residency: all institutional units located in euro-area countries are treated as resident; units outside the euro area are nonresident. Under euro-area-wide residency, the ECB is a resident unit (central bank) of the euro area as a whole, but not of any specific country. Under national residency, the ECB is treated as a nonresident unit for all countries. ### Supplementary data for sectoral balance sheets - 7.141: An illustrative set of supplementary data for sectoral balance sheets of the central bank, ODCs, and OFCs is shown in Table 7A.8 in Annex 7.3. The categories in Table 7A.8 represent supplementary data of analytical interest for FCs sectors. The Manual recommends compiling supplementary data for end-of-period stocks, though some countries may compile flow data for supplementary categories. - 7.142: Major cross-classification dimensions for assets and liabilities (debt securities and loans) in Annex 7.3: - a. Term to maturity: Short-term (payable on demand or with a maturity of one year or less) and long-term (maturity of more than one year or with no stated maturity), both preferably at remaining maturity. - b. Currency of denomination: Domestic currency and foreign currency. - c. Interest rate: Fixed rate or variable rate. - 7.143: For analyzing maturities of deposit and debt security liabilities, short- and long-term deposits/debt securities data complement disaggregated sectoral balance sheet data, which for the central bank and ODCs are divided into included in and excluded from broad money. - 7.144: Financial derivatives in Annex 7.3 are divided into separate categories for forward contracts (disaggregated by type of contract), call options, put options, and credit derivatives. No category is shown for futures contracts because futures contracts are settled daily and do not have outstanding balances (nonzero stock positions). Off-balance-sheet data for notional principal of futures and swap-type forward contracts are shown as memorandum items to supplementary data in Table 7A.8. Data on notional principal contracts are important for analysis of activity in these financial derivatives. ### Data dissemination: national and international channels - 7.145: Most countries disseminate monetary statistics through national websites, press releases, central bank bulletins and/or other national publications, and through reporting of monetary data for country presentations in the IMF’s IFS and for analytical use within the IMF. - 7.146: Hyperlinks to summary monetary data at national websites are shown on the Dissemination Standards Bulletin Board (DSBB) at the IMF’s external website (www.imf.org). Posting summary monetary data is a requirement for countries that subscribe to the Special Data Dissemination Standard (SDDS), established by the IMF in 1996. The General Data Dissemination System (GDDS) was established by the IMF in 1997. - 7.147: Adoption and implementation of international standards for monetary statistics are supported by this Manual, the e-GDDS, SDDS or SDDS Plus, and the SRFs and accompanying guidelines for submission of monetary statistics to the IMF. The DSBB presents metadata for SDDS Plus adherents, SDDS subscribers, or GDDS participants. For monetary and financial statistics, national compilers and IMF staff work closely on methodology implementation and documentation based on this Manual. - 7.148: The IFS country pages present monetary data in formats of the CBS, ODCS, and DCS for Central Bank, Other Depository Corporations, and Depository Corporations Survey, respectively. Sections for Other Financial Corporations and Financial Corporations Survey are included where OFC reporting is established. A Money Aggregates section presents broad money and its components; broad money on a seasonally adjusted basis; and the national definition of money. ### Annex: Other changes in the volume of assets (OCVA) — structure and examples - 7.149: Tables 7A.1–7A.3 show examples of OCVA entries in sectoral balance sheets for the central bank, ODCs, and OFCs. OCVA is arranged in separate columns for: - Column A: Changes in the classification of assets/liabilities. - Column B: Sectoral reclassification. - Column C: Write-offs and provisions for loan losses. - Column D: Other types of OCVA. - 7.150: Examples for the central bank (from Table 7A.1): - a. Monetization of commodity gold (gold bullion only) recorded in Column A as a decrease in Nonfinancial assets (−311) and an increase in Monetary gold (+311). - b. Loan write-offs recorded in Column C as reductions in Loans to public nonfinancial corporations (−54) and Loans to other nonfinancial corporations (−274) with a corresponding reduction in Provisions for loan losses in the resident-sector category of Other accounts payable [MS]—Other (−328), given these loans were already provisioned in full. - c. OFC reclassified as an ODC recorded in Column B as: - decrease in Claims in financial derivatives on OFCs (−111) with corresponding increase in Claims in financial derivatives on the ODCs (+111); - decrease in Transferable deposits in foreign currency of the OFCs, which were included in broad money (−58) with corresponding increase in Transferable deposits in foreign currency of the ODCs, which are now excluded from broad money (+58); - decrease in Financial derivatives liabilities to the OFCs (411) with corresponding increase in Financial derivatives liabilities to the ODCs (+411). - d. Catastrophic loss of nonfinancial assets recorded in Column D as a decrease in Nonfinancial assets (−68) with a corresponding decrease in Current year result (−68). - e. Appropriation of retained earnings to general and special reserves recorded in Column D as a decrease in Retained earnings (−2,130) and an increase in General and special reserves (+2,130). - Table 7A.1 (selected numeric checks and totals shown in source): - TOTAL (assets side) for example central bank entries: 0 0 −328 −68 −396 (Columns A–E as shown). - Vertical check: 0 0 0 0 0. - 7.151: Examples for ODCs (selected illustrations): - a. OFC reclassified as an ODC recorded in Column B as an increase in Total assets (+39,746) and an increase in Total liabilities (+39,746). Increases in ODC asset holdings included: Currency (+1,171), Transferable deposits (+440), Other deposits (+2,598), Debt securities (+8,756), Loans (+21,902), Investment fund shares (+2,900), Equity (+418), Financial derivatives (+672), Other accounts receivable (+138), Nonfinancial assets (+751). Increases in ODC liabilities included: Debt securities, included in broad money (+1,701), Debt securities, excluded from broad money (+2,754), Loans (+1,747), Financial derivatives (+947), Other accounts payable [MS] (+11,949), Equity liability [MS] (+20,648). - b. Loans reclassified as debt securities recorded in Column A as a decrease of Loans to other nonfinancial corporations (−2,780) and an increase in Debt securities issued by other nonfinancial corporations (+2,780). - c. Change in the definition of broad money recorded in Column A as a decrease in Debt securities in domestic currency held by OFCs and included in broad money (−509) and an increase in Debt securities in domestic currency held by OFCs and excluded from broad money (−509). - d. Loan write-offs recorded in Column C as decreases in Loans to public nonfinancial corporations (−274), other nonfinancial corporations (−4,400), and households and NPISHs (−4,032) with a corresponding decrease in Provisions for loan losses within Other accounts payable [MS]—other (−8,432). Write-offs of non-provisioned loans are recorded as a decrease in Current year result (−274). - e. Catastrophic loss of nonfinancial assets recorded in Column D as a decrease in Nonfinancial assets (−196) and a decrease in Current year result (−196). - f. Appropriation of retained earnings to general and special reserves recorded in Column D as a decrease in Retained earnings (−684) and an increase in General and special reserves (+684). *Monetary and Financial Statistics Manual and Compilation Guide (IMF).* ### 7.152 Examples of OCVA entries and contra-entries ### 7.152 Examples of OCVA entries and contra-entries ### Illustrative examples (a–d) - Example a — OFC reclassified as an ODC (column B): - Decrease in total assets: −39,746 - Decrease in total liabilities: −39,746 - Decreases in OFC asset holdings by category: - Currency: −1,171 - Transferable deposits: −440 - Other deposits: −2,598 - Debt securities: −8,756 - Loans: −21,902 - Investment fund shares: −2,900 - Equity: −418 - Financial derivatives: −672 - Other accounts receivable: −138 - Nonfinancial assets: −751 - Decreases in OFC liabilities by category: - Debt securities, excluded from broad money: −4,455 - Loans: −1,747 - Financial derivatives: −947 - Other accounts payable [MS]: −11,949 - Equity liability [MS]: −20,648 - Example b — Debt securities converted into equity (column A): - Decrease in Debt securities of other nonfinancial corporations: −250 - Increase in Equity of other nonfinancial corporations: +250 - Example c — Loan write-offs (column C): - Decrease in Loans to households and NPISHs: −867 - Decrease in Provisions for loan losses in Other accounts payable [MS]—Other: −530 (reflecting that some loans were provisioned) - Decrease in Current year result (non-provisioned portion): −337 - Example d — Recovery of nonperforming loans (column D): - Increase in Loans to nonfinancial corporations: +694 - Increase in Current year result: +694 ### OCVA—Other Depository Corporations (selected entries and totals) - Total OCVA for Other Depository Corporations: - TOTAL: 0 | 39,746 | −8,706 | −188 | 30,852 (columns A, B, C, D, E respectively as shown) - Assets (selected net changes by column where shown): - Currency and deposits (breakdown shows positive entries of 4,209; within that Currency domestic 1,171; Transferable deposits 440; Other deposits 2,598) - Debt securities (components summing to entries including 2,780 and 8,756) - Loans (notable entries include −2,780, 21,902, 959, 13,178, 7,660, −8,706) - Investment fund shares (Money market funds): 2,900 - Equity (Other nonfinancial corporations): 418 - Financial derivatives: 672 - Other accounts receivable: 138 - Nonfinancial assets (Fixed assets and Other nonfinancial assets): 751 - Liabilities (selected net changes): - Deposits included in broad money (Transferable deposits and Other deposits entries such as −2,237 and −2,050) - Deposits excluded from broad money (offsetting entries such as 2,237 and 2,050) - Debt securities included and excluded from broad money (entries include −509 and positive 509, and larger reallocations) - Loans (Central government and Nonresidents): 0 | 1,747 (sectoral reclassification) - Financial derivatives and employee stock options: 947 - Other accounts payable (including Provisions for loan losses and Provisions for other losses): 11,949 with notes on provisions used against write-offs (−8,432) and new provisions (+7,496) - Equity (Funds contributed by owners, Retained earnings, Current year result, General and special reserves): 20,648 with subentries and adjustments (e.g., −8,318, −188, 684) ### OCVA—Other Financial Corporations (selected entries and totals) - Total OCVA for Other Financial Corporations: - TOTAL: 0 | −39,746 | −867 | 658 | −39,955 (columns A, B, C, D, E respectively as shown) - Assets (selected net changes by category): - Currency and deposits: −4,209 (breakdown includes −1,171 domestic currency, −860 transferable deposits, −2,598 other deposits) - Debt securities: −250 and larger reallocations such as −8,756; nonresidents −622 - Loans: −21,902 with sectoral splits (−959, −13,178, −7,660, −105); write-offs −867; nonperforming loans recovered +694 - Investment fund shares: −2,900 - Equity: +250 (securities converted into shares) and −418 (reclassification) - Financial derivatives: −672 - Other accounts receivable: −138 - Nonfinancial assets: −751 (Fixed assets −503; Other nonfinancial assets −248; catastrophic loss entries) - Liabilities (selected net changes): - Debt securities excluded from broad money: −4,455 (with component entries such as −4,247, −1,507, −1,587, −1,114) - Loans: −1,747 (central government/nonresidents split −1,674 and −73) - Financial derivatives and employee stock options: −947 - Other accounts payable (including Provisions for loan losses and Provisions for other losses): −11,949 with use of provisions for loan write-offs (−530) and increase in provisions for other losses; net adjustments yield entries such as −12,467 and −10,903 in reconciliation rows - Equity Liability [MS]: −20,648 with detailed subentries (Retained earnings −9,843; Funds contributed by owners −9,460; Current year result −912; other adjustments including −337 for nonprovisioned loan write-offs and +646 for recoveries) ### Key operational notes and vertical checks - Reclassification impacts are a dominant source of OCVA in the examples, particularly OFCs reclassified as ODCs, producing large symmetric entries in assets and liabilities (column B totals of 39,746 mirrored between sectors). - Write-offs and recoveries produce offsetting entries across asset, provision, and current-year result categories (examples: write-offs −867 with provisions used −530 and current year result −337; recovery +694 recorded to loans and current year result +694). - Table-level vertical checks reported: - For Other Depository Corporations: Vertical check entries show 0 in several columns and TOTAL E column value 30,852 for OCVA: Total. - For Other Financial Corporations: Vertical check shows 0 entries across the check rows and OCVA: Total of −39,955. *Monetary and Financial Statistics Manual and Compilation Guide* ### 7.153 This annex comprises Ta b l e 7A.4, Consolida- ### Annex: Consolidation Adjustments and Supplementary Data (Tables 7A.4–7A.8) ### Scope and components - The annex comprises Table 7A.4, Consolidation Adjustments: Other Depository Corporations Survey; Table 7A.5, Consolidation Adjustments: Depository Corporations Survey; Table 7A.6, Consolidation Adjustments: Other Financial Corporations Survey; and Table 7A.7, Consolidation Adjustments: Financial Corporations Survey. - The Manual notes OCVA = other changes in the volume of assets; ODC = other depository corporation; OFC = other financial corporation; CBS = central bank survey; ODCS = other depository corporations survey; OFCS = other financial corporations survey; DCS = depository corporations survey; CB = central bank; ESO = employee stock option. ### Consolidation adjustments — key balances and aggregates - Table 7A.4 (Other Depository Corporations Survey) — Liabilities (ODCs sectoral balance sheet): - Opening stock: 393,444 - Transactions: 8,193 - Valuation changes: −1,780 - OCVA: 4,904 - Closing stock: 404,761 - Table 7A.4 — Assets (ODCs sectoral balance sheet, minus:): - Opening stock: 401,799 - Transactions: 5,559 - Valuation changes: 406 - OCVA: 8,026 - Closing stock: 415,790 - Table 7A.4 — Consolidation Adjustment: Liabilities − Assets: - Opening stock: −8,355 - Transactions: 2,634 - Valuation changes: −2,186 - OCVA: −3,122 - Closing stock: −11,029 - Table 7A.5 (Depository Corporations Survey) — Selected aggregates: - Liabilities to other depository corporations (CBS) opening stock: 406,175 with components shown (e.g., Reserves (CBS) 16,389; Other liabilities included in monetary base (CBS) 2,192; Other liabilities excluded from monetary base (CBS) 387,594). - Consolidations adjustment for CB and ODCs: 1,041 (opening stock), −1,507 (transactions), 1,029 (valuation changes), −622 (OCVA), −60 (closing stock). - Consolidation adjustment for ODCs (ODCS): −8,355 (opening stock), 2,634 (transactions), −2,186 (valuation changes), −3,122 (OCVA), −11,029 (closing stock). - Total Consolidation Adjustment: −7,315 (opening stock), 1,126 (transactions), −1,157 (valuation changes), −3,744 (OCVA), −11,089 (closing stock). - Table 7A.6 (Other Financial Corporations Survey) — Liabilities (OFCs sectoral balance sheet): - Opening stock: 162,136 - Transactions: 679 - Valuation changes: 2,830 - OCVA: −2,055 - Closing stock: 163,591 - Table 7A.6 — Assets (OFCs sectoral balance sheet, minus:): - Opening stock: 199,017 - Transactions: 6,216 - Valuation changes: 190 - OCVA: −295 - Closing stock: 205,128 - Table 7A.6 — Consolidation Adjustment: Liabilities − Assets: - Opening stock: −36,881 - Transactions: −5,537 - Valuation changes: 2,640 - OCVA: −1,760 - Closing stock: −41,537 - Table 7A.7 (Financial Corporations Survey) — Selected items and consolidation entries: - Liabilities to depository corporations (OFCS) opening stock: 173,447; transactions: 6,278; valuation changes: 681; OCVA: −111; closing stock: 180,296. - Liabilities to other financial corporations (DCS) opening stock: 501,222; transactions: 10,579; valuation changes: −1,452; OCVA: −3,318; closing stock: 507,031. - Claims on depository corporations (OFCS) opening stock: 472,050; transactions: 41,186; valuation changes: 808; OCVA: −9,117; closing stock: 504,927. - Consolidation adjustment (OFCS): −36,881 (opening stock), −5,537 (transactions), 2,640 (valuation changes), −1,760 (OCVA), −41,537 (closing stock). - Consolidation adjustment (DCS): −7,315 (opening stock), 1,126 (transactions), −1,157 (valuation changes), −3,744 (OCVA), −11,089 (closing stock). - Consolidation Adjustment (aggregate reported): −36,876 (opening stock), −25,253 (transactions), 654 (valuation changes), 0 (OCVA), −61,476 (closing stock). ### Supplementary data: guidance and recommended coverage - Data periodicity: - The Manual recommends that the supplementary data should be compiled on a quarterly basis. - Financial instrument coverage and applicability: - A single format for supplementary data for the central bank, other depository corporations (ODCs), and other financial corporations (OFCs) is shown in Table 7A.8; most categories in Table 7A.8 are applicable to each subsector of the financial corporations (FCs) sector. - Exceptions applicable to all countries: - Assets: Debt securities issued by the central bank — not applicable to the central bank because a central bank does not hold its own securities. - Liabilities: Deposits included in broad money and Debt securities included in broad money — not applicable to OFCs, which do not issue liabilities included in broad money. - Some line items in Table 7A.8 are not applicable to all countries; examples noted include: - Some central banks do not issue Deposits included in broad money and/or Debt securities. - Central bank securities, if issued, may be eligible for purchase by ODCs only and may be excluded from broad money. - Central bank, central governments, and/or other institutional sectors in some countries do not issue foreign-currency-denominated debt securities. - For OFCs, the liability category Deposits excluded from broad money applies only in exceptional circumstances in which OFCs accept deposits, all of which are excluded from broad money. - Disaggregation by maturity: - Only two maturity categories—short-term and long-term—are used for the supplementary data, as defined in Chapter 4, paragraph 4.209. - For supplementary data, remaining maturity is desirable, although in most countries information on the latter is not available. - Fixed- and variable-rate classification: - In Table 7A.8, long-term loans are disaggregated into separate categories for fixed-rate and variable-rate loans. - Long-term Debt securities are disaggregated into: - fixed-rate securities sold on a coupon basis; - variable-rate securities sold on a coupon basis; and - securities sold on a zero-coupon basis (an atypical category for long-term securities). *Source: Monetary and Financial Statistics Manual and Compilation Guide (annex comprising Tables 7A.4–7A.8).* ### 7.160 Disaggregation of short-term loans or short- ### 7.160 Disaggregation of short-term loans or short-term securities ### Rationale and guidance on rate-based disaggregation - The Manual deems disaggregation of short-term loans or short-term securities into separate categories for fixed-rate and variable-rate instruments to be unnecessary. - Reasoning: - Variable rates are seldom applied to loans or securities having original maturities of less than one year. - If maturity disaggregation is based on remaining maturity, all fixed- and variable-rate loans maturing within a year are indistinguishably included in the category of short-term loans; likewise for securities with remaining maturities of one year or less. - Given the short term to maturity, the market risk from movements in the reference rate (for example, London interbank offered rate, or LIBOR, a prime rate for domestic loans, or a country-specific market rate) for the variable-rate loan or security is relatively small. - Most contracts for variable-rate loans and securities specify that interest rates are subject to annual or semiannual resetting or, at most, quarterly resetting. - During the year just prior to maturity: - Loans and securities subject to annual resetting have fixed rates for the remaining term. - Those subject to semi-annual resetting have, at most, one remaining interest rate reset. ### Implications for compilation and presentation - When compiling short-term categories by remaining maturity, compilers should include: - All fixed- and variable-rate loans maturing within one year in the single category of short-term loans. - All fixed- and variable-rate securities with remaining maturities of one year or less in the single category of short-term securities. - The Manual implies that separate fixed-/variable-rate breakdowns for short-term instruments offer limited additional analytical value given: - The infrequency of variable-rate application to original maturities under one year. - The limited market-rate sensitivity in the short remaining maturities described above. ### Supplementary data structure (extracts from Table 7A.8) - The Manual lists detailed supplementary data categories for central bank, other depository corporations (ODCs), and other financial corporations (OFCs), including short-term and long-term breakdowns by currency of denomination and by fixed-rate vs. variable-rate for long-term instruments. Examples from the table include: - Deposits — Other Deposits—Claims on nonresidents: - Short-term deposits - Long-term deposits - Debt securities (by issuer and sector) — Short-term securities—By currency of denomination (domestic/foreign) and Long-term securities—By currency of denomination (domestic/foreign); for some issuers, further breakdowns: - Fixed-rate securities on a coupon basis (including deep-discount basis) - Variable-rate securities on a coupon basis - Other securities (mainly, zero-coupon bonds) - Loans — Loans to public nonfinancial corporations; loans to other nonfinancial corporations; loans to other resident sectors (mainly households); loans to nonresidents: - Short-term loans—By currency of denomination (domestic/foreign) - Long-term loans—By currency of denomination (domestic/foreign) - Fixed-rate loans - Variable-rate loans - For households, long-term loans—Denominated in domestic currency include: - Fixed-rate loans — Real estate (mortgage and home equity loans); Other consumer loans - Variable-rate loans — Real estate (mortgage and home equity loans); Other consumer loans - Loans—Liabilities to nonresidents include: - Short-term loans—By currency of denomination (domestic/foreign), of which Nonresident banks, of which Affiliates - Long-term loans—By currency of denomination (domestic/foreign), of which Nonresident banks, of which Affiliates - Fixed-rate loans - Variable-rate loans - Financial derivatives, equity and investment fund shares, and memorandum items (e.g., notional principal for derivatives) are also detailed in the supplementary layout. ### Context within the Manual and financial statistics framework - The Manual situates this guidance within its broader coverage of financial statistics, which: - Cover stocks and flows of financial assets and liabilities between all sectors of the economy and with the rest of the world (paragraph 8.1). - May be compiled as two-dimensional (financial account and balance sheets similar to 2008 SNA chapters 11 and 13) or three-dimensional (from-whom-to-whom) statistics (paragraphs 8.2–8.4). - Encourage quarterly or annual compilation, with a preference for quarterly compilation where feasible, and suggest a time lag of around one quarter for quarterly data (paragraph 8.8). - Follow the 2008 SNA framework for institutional sectors, instrument categories, valuation, and recording principles (paragraphs 8.7, 8.10–8.12). - Analytical uses emphasized include: - Highlighting the role of financial corporations in intermediation through from-whom-to-whom information (paragraph 8.5). - Supporting macroprudential analysis such as the balance sheet approach (BSA) to assess interconnections among sectors (paragraph 8.5). *Source: Monetary and Financial Statistics Manual and Compilation Guide (excerpts: 7.160; Table 7A.8; Chapter 8).* ### 8.15 The accumulation accounts cover changes in ### 8.15 The accumulation accounts cover changes in assets and liabilities, and net worth. ### Accumulation accounts: composition and role - Accumulation accounts record all changes between opening and closing balance sheet dates for a subsector, sector, or the entire economy. - Accumulation accounts comprise: - the capital account, - the financial account, - the other changes in the volume of assets account (OCVA), - the revaluation account. - The financial account shows how a sector with net lending makes surplus resources available by acquiring net financial assets or reducing net liabilities, and how a net borrowing sector obtains financial resources by reducing net holdings of assets or increasing net liabilities. - Changes in assets, liabilities, and net worth between opening and closing balance sheets result from transactions and other changes recorded in the accumulation accounts. ### Flow accounts (financial flows and their interpretation) - Flow accounts include the current accounts and all accumulation accounts; from a financial statistics perspective, flow accounts comprise financial account and other changes in financial assets and liabilities only. - Financial flow accounts comprise flows of financial assets and liabilities of all sectors of the economy and with the rest of the world. - Following the 2008 SNA: - saving in the use of disposable income account should, in principle, match the capital account (which covers transaction flows in nonfinancial assets and net lending/borrowing). - the financial account records net acquisition of financial assets and net incurrence of liabilities for all institutional sectors by type of financial asset and shows how net lending or net borrowing is reflected in transactions in financial assets. - In practice, differences between net lending/borrowing from the capital account and the financial account may occur and are presented as statistical discrepancy or distributed to residual sectors by instrument. - Financial account entries may result from: - (1) transactions exchanging financial assets and liabilities; and/or - (2) counterpart entries to nonfinancial transactions (for example, sales of goods or nonfinancial assets with counterparts in currency or transferable deposits, trade credit, or other receivable/payable categories). - The financial account does not identify counterpart sectors; adding counterpart sectors enables from-whom-to-whom analysis to track allocation of surpluses and financing of deficits by instrument and sector. - From-whom-to-whom analysis is critical to analyze the role of financial corporations (FCs) in financial intermediation, including transformation of instrument characteristics such as maturity. ### Stock accounts (balance sheets) and linkage to flows - Stock accounts comprise financial balance sheets of all sectors and the rest of the world. - SNA balance sheets show opening and closing stocks for each instrument category and changes during the period, but do not identify counterpart sectors; adding counterpart sectors enables from-whom-to-whom analysis and highlights the intermediation role of the FCs sector. - Conceptually and analytically, the capital account and financial account are linked through the net lending/net borrowing balancing item: net lending/net borrowing derived from the capital account should equal that from the financial account. ### Two-dimensional financial statistics: formats and examples - Two-dimensional financial statistics can be prepared for: - transactions, - stocks, - other flows (revaluations and OCVA separately if data allow), - or all flows together, for one or several periods. - For transactions, net financial investment is used (net acquisition of financial assets less net incurrence of liabilities). - For each sector, sum of all columns for transactions in financial assets equals sum for liabilities and net worth if all transactions are covered; discrepancies indicate assets-liabilities mismatches by sector or instrument. - Selected illustrative figures from example tables: - Table 8.1 (Transactions) subtotals for changes in financial assets and liabilities across sectors: 120.1 (changes in financial assets, total domestic), 94.9 (changes in liabilities, total domestic), −16.0 (changes in financial assets, rest of the world), 9.2 (changes in liabilities, rest of the world). - Table 8.1, Net financial investment (net acquisition of financial assets less net incurrence of liabilities): −5.9, −6.9, −18.4, 56.4, 25.2, −25.2 (sectoral entries as shown in the example). - Table 8.2 (Closing stocks, subtotal for total domestic): assets 14,455.8; liabilities 14,560.4. - Table 8.2, example net financial position entries: −2,207.7; −161.2; –899.9; 3,164.2; −104.6; 132.2. - Combined presentations (opening stocks, transactions, other flows, closing stocks) highlight the adding-up requirements for each sector and instrument. ### Other flows (revaluations and OCVA) - Other flows tables can be presented in the same two-dimensional format as transactions and show net other flows (change in assets less change in liabilities). - Separate tables for revaluations and OCVA may be constructed where data permit, bridging transactions and period-to-period stock changes. - Example numbers from other flows presentation (Table 8.3) include net other flows: −13.7, 0.6, 8.4, 4.2, 0.9 (sectoral entries as shown in the example). ### Integrated capital and financial account: example reconciliation - An integrated example shows net lending/net borrowing equality across capital and financial accounts by drawing on: - net incurrence of liabilities (95 for the total economy), - net acquisition of financial assets (120 for the total economy), - net acquisition of nonfinancial assets (192), - changes in net worth due to savings and capital transfers in the capital account (217). - The integrated example demonstrates Resources = Saving and capital transfers + Net incurrence of liabilities and Uses = Capital accumulation + Net acquisition of financial assets + Statistical discrepancy, with memorandum totals illustrated (for example, Resources = 312; Uses = 312 in the memorandum example). ### Compilation and presentation guidance - Compilers must balance sufficient detail with clarity for users; overly detailed tables may impede extraction of trends and relationships. - Presentation options include sector-specific, instrument-specific, from-whom-to-whom tables, and multi-period templates to trace changes over time. - Standard templates (developed in the context of the G-20 Data Gaps Initiative) provide minimum and encouraged classifications for sectors, financial assets and liabilities, and nonfinancial assets, but do not identify counterpart sectors; from-whom-to-whom detail requires additional counterpart information. - Two-dimensional and three-dimensional presentations (the latter not detailed in the excerpt) offer varying levels of cross-classification to meet user needs and to highlight financial intermediation functions of sectors such as FCs. *Monetary and Financial Statistics Manual and Compilation Guide, Chapter 8.* ### 8.36 Three-dimensional financial statistics add the coun- ### 8.36 Three-dimensional financial statistics add the counterpart sector to the two-dimensional financial statistics ### Concept and framework - Three-dimensional financial statistics extend two-dimensional financial statistics by adding the counterpart sector, enabling from-whom-to-whom analysis across: - who finances whom, - by which category of financial instrument, - and the financing amount. - For transactions the three-dimensional presentation shows both parties and the financial instrument (also called flow-of-funds statistics). For stocks the presentation shows creditor and debtor for each financial instrument category (also called BSA). - The three-dimensional framework can present flows and stocks for all categories of instruments for all sectors or subsectors by counterpart sector. ### Extensions for cross-border and global analysis - The three-dimensional presentation may be expanded by breaking down the rest of the world by country and even sector, producing from-whom-to-whom data by country and sector. - An expansion across many countries allows constructing bilateral financial statistics at the global level, enabling analysis of: - interconnectedness, - global liquidity flows, - global financial networks, - possible spill-over channels of external shocks into the domestic economy and its sectors. ### Three-dimensional stocks presentation (Table 8.5 and example) - Table 8.5 presents stocks with creditor and debtor sectors for each financial instrument category: - Assets (A), Liabilities (L), and Net position (NP = financial assets less liabilities) are shown for each sector and instrument. - Example (Table 8.5a): - The net financial position of the Financial Corporations (FCs) with the general government is 394.1, indicating a net claim on the general government and showing a negative position of the general government vis-à-vis FCs. - Entries for debt securities include 610.7 under liabilities in the top-right cell and 610.7 under assets in the lower-left cell, representing debt securities issued by central, state, and local governments and held by FCs. ### Presentation of flows and other flows - The same three-dimensional layout can be used for transactions and other flows on a from-whom-to-whom basis: - Transactions presentation shows net financial investment. - Other flows presentation shows net other flows. - In principle, from-whom-to-whom tables for revaluations and OCVA can be constructed for financial assets if data sources permit. ### Compilation recommendations: unconsolidated data - The Manual recommends compiling three-dimensional financial statistics on an unconsolidated basis: - If a financial instrument is both an asset and a liability of the same sector, both positions are shown (shaded diagonal cells in Table 8.5). - Unconsolidated data preserve reciprocal asset/liability positions; consolidation can remove analytical value because diagonal cells representing intra-sector stock positions become empty. ### Balance Sheet Approach (BSA) and applications - A common use of three-dimensional statistics is Balance Sheet Approach (BSA) analysis to: - analyze vulnerabilities from balance sheet positions and mismatches at a point in time and their buildup over time, - run simulations of spillovers of shocks from one sector to another (for example, sudden withdrawal of bank deposits or inability to roll over maturing external debt). - BSA identifies four main types of balance sheet mismatches for all sectors: 1. currency mismatches (borrowers’ liabilities denominated in a foreign currency larger than assets in that currency, or vice versa); 2. remaining maturity mismatches (short-term liabilities versus longer-term assets creating funding and interest rate risks); 3. capital structure problems (excessive reliance on debt rather than equity; high leverage); 4. solvency or counterpart risk (assets of a debtor not sufficient to cover liabilities, including contingent liabilities). - BSA identifies inter-sector linkages and mismatches by instrument, counterpart sector, currency, and possibly maturity. - BSA may include memorandum items (for example, nonfinancial assets and other assets/liabilities without identified counterpart sectors, and off-balance-sheet contingent liabilities) to allow calculation of control totals. ### Statistical discrepancies and treatment - Typical discrepancy: statistical discrepancy between net lending/borrowing (NL/NB) from the capital account and net financial investment (NFI) from the financial account; conceptually they should equal. - Identities: - NL/NB ≡ Net Saving + Net Capital Transfers – Net Capital Formation - NFI ≡ Net Acquisition of Financial Assets – Net Incurrence of Liabilities - No clear international consensus on treatment: - One approach: keep the discrepancy as a residual balancing item to help users gauge magnitude of errors and data quality. - Alternative: remove the discrepancy by distributing it across items in the capital account, financial account, or treating it as a transaction, valuation change, or OCVA. - Recommendation consistent with the 2008 SNA: provide users with recorded data for NL/NB and NFI and do not distribute the discrepancy, while indicating which data set is more reliable. - For compilers, discrepancy data provide valuable information to identify areas needing improvement in data collection, estimation, and compilation. ### Main and supplementary data sources and their reliability - Monetary statistics are often the main source for financial statistics because FCs play a central intermediation role and monetary statistics provide good coverage and detailed counterpart information via standardized forms (SRFs). - Conceptually, data can be obtained from both parties to a transaction, but in practice compilers may rely on one party’s reporting (e.g., deriving household positions from FC records). - Standard sources: - SRFs/sectoral balance sheets for FCs provide detailed counterpart information for many financial assets and liabilities and enable from-whom-to-whom tables for stocks. - Remaining stock and flow data can come from government finance statistics, external sector statistics (IIP and BOP), and securities statistics compiled with counterpart detail. - Reliability categories (typical): - Highly reliable: directly obtained from FCs’ reported data and IIP and balance of payments statistics. - Moderately reliable: involve estimation with some data available annually or in surveys. - Less reliable: difficult to obtain; often estimated by residual calculations. - Compilers should assess relative quality when multiple or overlapping sources exist and use the most comprehensive and reliable data aligned with statistical principles. ### Techniques to fill data gaps and ensure control totals - When full disaggregation is not available (particularly for negotiable instruments and holders), compilers allocate aggregated data among issuers and holders using: - counterpart data techniques, - residual data techniques. - Principle applied: every financial claim (other than gold bullion included in monetary gold) has a counterpart liability; net acquisitions across sectors must equal net incurrence of liabilities. - A residual sector may be designated to allocate totals where data exist for all but one sector. - Control totals (stocks and flows of an instrument issued and held) help fill gaps and can be obtained from: a. balance sheet data of FCs (mainly for nonnegotiable instruments such as deposits and loans); b. government records for government debt; c. custodians/security registration offices (mainly for negotiable instruments such as debt securities and shares). - For flow data, compilers may need to estimate transactions, revaluations, and OCVA; securities price indices are often used to estimate valuation changes when market values are unavailable. ### Handling multiple or conflicting data sources - When multiple or overlapping sources present different numbers, compilers should: - assess relative quality of sources, - investigate reasons for differences, - use the most comprehensive and reliable data aligned with statistical principles. - Example: government-reported lending to PNFCs versus PNFC-reported borrowings may differ; compilers should use the most comprehensive and reliable reporting to estimate asset and liability positions. *Monetary and Financial Statistics Manual and Compilation Guide* ### 8.62 Multiple data sources used for compiling financial ### 8.62 Multiple data sources used for compiling financial ### Multiple data sources and reconciliation challenges - Multiple data sources for compiling financial statistics may not follow the definitions, classifications, and accounting principles of the 2008 SNA. - Two monetary-statistics-specific inconsistencies highlighted: - Equity on the liability side of sectoral balance sheets is book-valued in monetary statistics but needs to be market-valued for financial statistics. - Provisions for expected losses on financial assets are included in other accounts payable in monetary statistics but are not recognized in the 2008 SNA and thus not in financial statistics. - Monetary statistics are reconciled with the 2008 SNA for these cases (Figure 2.2 in Chapter 2 referenced). ### Supplementary data sources and their possible uses (Table 8.8) - Surveys: Data on nonfinancial sectors’ financial activities such as household savings, borrowings, or business financing. - Tax records: Balance sheet data of nonfinancial corporations and nonprofit institutions. - Trade association publications: Stocks and activities of OFCs not covered in monetary statistics, and transactions in different types of financial instruments. - Market data, including exchange rates and price indices (for example, share price index): Data on specific financial market activities such as asset securitization, securities trading, and financial derivatives; market exchange rates and price indices—to separate transactions from revaluations. - Company accounting records, including profit and loss statements: To separate transactions from OCVA such as loan write-offs. - Non-national data sources: Use as mirror statistics, for instance Coordinated Portfolio Investment Survey and Coordinated Direct Investment Survey, or Bank for International Settlement’s banking statistics. ### Common adjustments needed to align data sources with financial statistics (paragraph 8.63) - Sectoring: Disaggregation with respect to counterpart sectors may differ between source and required sectoring. - Classification of financial instruments: Instrument categories in sources may differ from those required. - Valuation: Negotiable or foreign-currency-denominated instruments may not be valued at current market price, market exchange rate, or fair value. - Time of recording: Transactions may not be recorded on an accrual basis; timing may differ between parties. - Coverage: Macro data for a sector may include units that do not belong or may exclude units that do belong (example: nonresident branch of a financial corporation included in parent accounts but should be excluded). ### Inconsistencies, reporting gaps, and source reliability (paragraphs 8.64–8.65) - Data reporting can be inconsistent, partial, indirect, or absent for certain units, subsectors, or sectors. - When both parties report a transaction/position, errors may arise from different valuations, timing, or classifications—these inconsistencies must be adjusted based on the more reliable source. - Types of adjustments vary by circumstance. ### Estimation of missing data (paragraphs 8.66–8.67) - Compilers may need to estimate incomplete data to meet timely release calendars or to produce higher-frequency series from lower-frequency data. - Estimation techniques for delayed observations with historical series: - Repeating the previous observation. - Extending the trend of historical series. - Interpolation methods for estimating higher-frequency data from lower-frequency data include: - Constant ratios. - Data smoothing. - Regression methods. ### Editing, validation, and plausibility checks (paragraphs 8.68–8.70) - Apply validation and plausibility checks for rows and columns to identify data problems. - Use charts and tables of time series to reveal outliers for verification or correction. - Unexpected movements in aggregate data should be explained by economic behavior unless attributable to data collection, estimation, or compilation errors; apply basic macroeconomic relationships and consult experts as needed. - Time-series formats (differences, percentage-change form, or ratios) are particularly useful for identifying outliers; single-period or end-of-period formats help check adding-up and broad plausibility. ### Systematic development of financial statistics and levels of detail (paragraphs 8.71–8.73; Tables 8.9–8.10) - Countries need a wide range of data sources and close cooperation among statistical agencies to compile full financial statistics; level of detail depends on data availability and analytical needs. - Three characteristic levels of compiling financial statistics (Table 8.9): - Basic: - Uses flow components mostly from period-to-period changes in positions. - Aggregated sectors (for example, central government, deposit-taking corporations, other sectors, rest of the world). - Basic instrument categories (loan and deposits, debt securities, equity). - Relies mostly on aggregate data from the depository corporations survey and external sector statistics. - Intermediate: - Uses both stock and flow data; may rely on period-to-period changes in stocks when flow data are not available; some from-whom-to-whom presentation. - Expanded domestic sector coverage (for example, state and local government; simplified financial sector breakdown; NFCs, households and NPISHs). - Expanded instrument categories (currency and deposits, debt securities, loans, equity, financial derivatives, insurance and pension entitlements). - Relies substantially on balance-sheet data for financial corporations supplemented by government finance statistics, external sector statistics, and capital market sources. - Full details: - Full details on positions and components of flows; reconciles stock and flow data for transactions, revaluations, and OCVA on a from-whom-to-whom basis. - Full set of sectors in line with the 2008 SNA with important subsectors separately identified (examples listed). - Full set of financial instruments in line with the 2008 SNA and this Manual with important subcategories separately shown (examples listed). - Uses a wide variety of sources in addition to standard sources, including national accounts, administrative records, market and trade data, and special surveys. - Examples of disaggregated sectors and instruments are provided (Table 8.10) including detailed financial corporations subsectors, general government breakdowns, households, nonfinancial corporations breakdowns, monetary gold and SDRs, currency and deposits breakdowns, debt securities (including structured financing products), loans by type, equity and investment fund shares detail (MMF shares, non-MMF shares), insurance and pension categories, financial derivatives by type, employee stock options, and other accounts receivable/payable categories. ### Overview of the 2008 System of National Accounts (paragraphs 8.74–8.86) - The 2008 SNA provides the overarching framework for developing financial statistics, covering comprehensive stocks and flows for the total economy and each sector. - The 2008 SNA serves as a coordinating framework for macroeconomic statistics and provides consistency with other internationally accepted standards. - Key conceptual elements of the integrated economic accounts: - Institutional units grouped into sectors. - Transactions and other flows. - Assets and liabilities. - The 2008 SNA is a closed system designed to record all flows by all resident units; two facilitating aspects: - Quadruple-entry accounting (simultaneous vertical and horizontal entries). - The rest-of-the-world account. - Quadruple-entry accounting: - Each transaction yields four entries: a pair recording provision/acquisition of goods/services/assets or incurrence of liabilities, and a second pair often in the financial account recording provision/receipt of means of payment. - Ensures accounts add up horizontally and vertically; all transactions of an individual sector/subsector sum to zero and transactions across sectors sum to zero; liability positions have counterpart financial asset positions except monetary gold held as a reserve asset. - Rest-of-the-world account: - Records transactions between residents and nonresidents as if nonresidents form a single institutional sector. - Flows to the rest of the world are shown as uses of the rest of the world and flows from the rest of the world as resources. - The rest-of-the-world account mirrors the balance of payments. *Monetary and Financial Statistics Manual and Compilation Guide* ### 8.87 The goods and services account is not an account ### 8.87 The goods and services account is not an account ### Goods and services account — purpose and structure - The goods and services account reflects transactions in goods and services undertaken by institutional units; it is not part of the sequence of accounts. - It shows how total supply of goods and services from output (domestic production) and imports is used for capital formation, intermediate consumption, final consumption, and exports. - The account can be rearranged to show GDP from the expenditure side as the sum of final consumption expenditures, capital formation, and net exports (exports less imports). - Memo figures for the goods and services account: - Output 3,604 - Imports 499 - Taxes less subsidies on products 133 - Intermediate consumption 1,883 - Final consumption expenditure 1,399 - Gross capital formation 414 - Exports 540 - Total 4,236 ### Current accounts — composition - The current accounts comprise: - The production account - The distribution of income accounts (primary and secondary) - The use of income account ### Production account — recording production results - Records results of production (output) and use of goods and services in production (intermediate consumption). - Consumption of fixed capital is presented separately (wear and tear of capital is not intermediate consumption). - The balancing item for a given sector or unit is value added; for the total economy it is gross domestic product or net domestic product. - Taxes on products less subsidies on products are added to value added to derive the balancing item for the total economy; taxes on products are allocated to the economy as a whole, not to individual units. ### Distribution of income accounts — primary and secondary - Primary distribution of income account shows how value generated through production is distributed to labor, capital, government, and the rest of the world. It consists of: - Generation of income account - Allocation of primary income account - Generation of income account: - Shows distribution of value added among compensation of employees, taxes less subsidies on production and imports, and the balancing item operating surplus. - For unincorporated enterprises owned by households, the balancing item may be mixed income (includes some compensation to owners/family members). - Allocation of primary income account: - Presents operating surplus or mixed income as a resource and shows compensation of employees receivable by households, taxes less subsidies receivable by government, and property income receivable and payable by institutional sectors. - Shows which sectors received primary incomes, complementing the generation account’s view of who paid them. - Balancing item: - The balancing item of the primary distribution of income account is the balance of primary incomes for the institutional sector and national income (gross or net) for the total economy. - Secondary distribution of income account: - Records redistribution of income through current transfers; resources and uses are recorded similarly because a transfer may be a resource for one sector and a use for another. - The balancing item is disposable income. - Redistribution of income in kind account: - Shows social transfers in kind made by government and NPISHs to households; balancing item is adjusted disposable income. - At the total economy level, disposable income and adjusted disposable income are the same. ### Use of income account — allocation between consumption and saving - May be presented as: - Use of disposable income account - Use of adjusted disposable income account - Shows allocation of disposable income (or adjusted disposable income) between final consumption and saving. - Corporations do not undertake final consumption; final consumption is recorded only for government, NPISHs, and households. - Adjustment for the change in pension entitlements is recorded as a resource for households and as a use for pension funds or other pension providers. - Balancing item: saving (final balancing item of the current accounts). Saving may be positive or negative depending on whether disposable income exceeds final consumption expenditure. ### Accumulation accounts — capital, financial, OCVA, revaluation - The accumulation accounts consist of: - Capital account - Financial account - Other changes in the volume of assets (OCVA) account - Revaluation account - Together with balance sheets, they provide the framework for financial statistics covering stocks and flows of financial assets and liabilities. - Capital account: - Records changes in value of nonfinancial assets due to transactions. - Nonfinancial assets include produced and nonproduced assets. - Produced assets comprise: - Fixed assets (used repeatedly in production for more than one year, including dwellings, buildings, machinery and equipment, cultivated assets, intellectual property products) - Inventories (materials and supplies, work-in-progress, finished goods, goods for resale) - Valuables (held primarily as stores of value) - Nonproduced assets comprise: - Natural resources (land, water, uncultivated forests) - Contracts, leases and licenses (where contractual terms create price differentials) - Purchased goodwill and marketing assets (recorded only on acquisition) - Records values of nonfinancial assets acquired or disposed of by residents through transactions (including consumption of fixed capital) and shows changes in net worth due to saving and capital transfers. - Balancing item: Net lending/Net borrowing (changes in net worth due to saving and capital transfers less net acquisition of nonfinancial assets). - Capital transfers: - Defined as unrecompensed transfers where the donor realizes funds by disposing of an asset (other than cash or inventories), relinquishing a financial claim (other than accounts receivable), or the recipient is obliged to acquire an asset (other than cash). - Financial account: - Final account in the sequence for recording flows due to transactions; records transactions in financial instruments (instruments here relate only to items on the financial balance sheet). - Net lending/net borrowing in the financial account equals that in the capital account. - For the financial account net lending/net borrowing is presented under changes in liabilities and net worth. - When transactions of all sectors including the rest of the world are taken into account, net acquisition of financial assets (excluding gold bullion) equals net incurrence of liabilities. - The balance shown is net lending or net borrowing of each sector; equivalent to the capital account balancing item with sign reversed. - The financial account shows how net lending sectors make surplus resources available (acquire net financial assets or reduce net liabilities) and how net borrowing sectors obtain financial resources (reduce net holdings of assets or increase net liabilities). - OCVA account: - Records changes in value of assets and liabilities not due to transactions or price/exchange rate changes. - Records five types of changes: 1. Economic appearance and disappearance of assets, including newly discovered subsoil assets where ownership is established. 2. Catastrophic losses (exceptional, unanticipated external events such as natural disasters or wars). 3. Uncompensated seizures of assets. 4. Other changes in volume not elsewhere classified. 5. Changes in classifications of institutional units and assets, and in the structure of institutional units. - Increases in assets and reductions in liabilities from OCVA increase net worth; decreases in assets and increases in liabilities from OCVA decrease net worth. - Revaluation account: - Records nominal holding gains and losses on nonfinancial and financial assets and liabilities due to price and exchange rate changes. - Nominal holding gain on a nonfinancial asset: value benefit to owner from price change over a period. - Nominal holding gain on a financial asset: increase in value other than by transactions (including accrual of interest) and OCVA. - Nominal holding gain on a liability: decrease in value other than by transactions or other volume changes. - The difference between nominal holding gain/loss and neutral holding gain/loss is the real holding gain/loss. - Neutral holding gain: value at beginning of period multiplied by proportionate change in a comprehensive price index selected to measure the change in the general price level. ### Balance sheets — stocks and linking with flows - Balance sheets record stocks of nonfinancial assets and financial assets and liabilities by sector, the total economy, or the rest of the world. - The balance sheet for the total economy reflects national wealth: the sum of nonfinancial assets and net claims on the rest of the world. - Balancing item: net worth (assets less liabilities), indicating present value of the stock of economic value by sector. - Link between opening and closing balance sheets for a given asset: - Value of stock at beginning of period (opening balance sheet) - plus: value of acquisitions through transactions - less: value of disposals through transactions (as recorded in capital and financial accounts) - plus: value of net changes in volume (OCVA account) - plus: value of holding gains (or less holding losses) during period (revaluation account) - equals: value of stock at end of period (closing balance sheet) - Rest-of-the-world balance sheet: - Shows stock of assets originated in domestic economy and held by nonresidents and the stock of foreign assets held by residents. - Nonfinancial (produced) assets are not reflected in the rest-of-the-world account because ultimate use of products (capital formation or final consumption) is of concern only to the domestic economy. *Monetary and Financial Statistics Manual and Compilation Guide — Overview of the 2008 System of National Accounts.* ### 8.122 For nonproduced assets, land and other natural ### 8.122 For nonproduced assets, land and other natural ### Treatment of nonproduced assets and ownership - 8.122: The Manual states that land and other natural resources are always considered assets of the domestic economy and therefore are not covered as nonproduced assets held by nonresidents. - If a nonresident purchases land or natural resources in the domestic economy, a notional resident unit in the form of a quasi-corporation is established in the accounts as being the owner of this asset. The nonresident is then considered to be the owner of this notional unit. ### Household sector balance sheets - 8.123: The balance sheets of the household sector include dwellings. - Consumer durables (cars, appliances) are not included in the balance sheets because they are not considered fixed assets; these are considered consumption goods. - If the household owns an unincorporated enterprise, the value of the proportion of assets used in production for this enterprise is included in the balance sheets. ### Appendix I — Overview and purpose - A1.1–A1.5: The Appendix describes the relationship between monetary statistics and government finance statistics (GFS) and external sector statistics, and emphasizes that the Manual extends and elaborates on the 2008 System of National Accounts (2008 SNA). - The Manual’s conceptual framework is consistent, in principle, with the 2008 SNA and accords with the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6) and the GFSM 2014. - The Appendix highlights the importance of coordination among national agencies (central bank, ministry of finance, national statistics office) to ensure consistency in macroeconomic datasets. - Monetary statistics often serve as an input to other datasets because of their relatively high reliability, comprehensiveness, frequency, and short time lag. ### Consistency of principles and institutional definitions - A1.6–A1.9: Statistical principles and concepts (delineation of resident/nonresident, sectoring, classification of financial assets and liabilities, accrual recording) are, in principle, consistent across manuals. - The Manual introduces the concept of depository corporations (DCs), which differs from the national accounts/BPM6 concept through inclusion of money market funds (MMFs) in DCs and exclusion of deposit-takers whose deposit liabilities are not included in broad money. - The Manual defines the general government sector identically to the national accounts, balance of payments, and GFS. The Manual emphasizes central government within the public sector context used in GFS. ### Linkages between monetary statistics and GFS - A1.10–A1.13: Linkages arise because governments hold accounts at financial corporations (FCs) and FCs hold government instruments; consistent net asset/liability positions between general/central government and FCs are expected or reconcilable. - The DQAF (Reports on Observation of Standards and Codes–Data Module) specifies consistency checks: - a. Central government records on government deposits in, and government borrowing from, the DCs in GFS should be largely consistent with comparable monetary statistics. - b. FCs’ data (usually compiled by the central bank) are often used as the preferred fiscal measure sub-annually; differences must be documented with size and reasons for discrepancy. - Common reasons for differences include: - a. Coverage: government accounts held across multiple financial institutions; extra-budgetary or dormant accounts may be included in monetary statistics but not in GFS. - b. Sectoring: institutional units may not be correctly identified or sectored as government in FCs’ accounts. - c. Classification and coverage of financial instruments: instruments may be classified differently (e.g., accounts receivable/payable vs loans vs equity). - d. Time of recording: government accounting periods may record transactions at different times than when economic ownership changes. - e. Accrual versus cash recording: GFS compilers may use cash-based data as a proxy for accrual data, while FCs may implement accrual recording inconsistently. - f. Valuation: FCs’ holdings of central government debt securities may be recorded at market/fair value in monetary statistics but at nominal value in GFS. - g. Holders of debt instruments: secondary market holdings, nominees, and centralized depositories can complicate identification of actual creditors, introducing inconsistencies. ### Linkages between monetary statistics and external sector statistics - A1.14–A1.18: The Manual and BPM6 are consistent on resident/nonresident delineation, recording times, classification and valuation of financial assets/liabilities, and aggregation/consolidation; monetary data are often used to compile external sector statistics. - A significant difference concerns treatment of money market funds (MMFs): in the Manual, MMFs are part of the other depository corporations (ODCs) subsector; in BPM6, MMFs are part of the other financial corporations (OFCs) subsector. - A1.16–A1.17: Monetary statistics designate all FCs that issue liabilities included in broad money as DCs (central bank, other deposit-taking corporations, and MMFs forming the ODCs subsector). External sector compilers should request separate data on MMFs’ balance of payments transactions and IIP to classify OFCs correctly. - Compilers should confirm institutional coverage of the deposit-taking corporations subsector since some deposit-takers (e.g., offshore banks not accepting resident deposits) may be classified differently between frameworks. ### Classification, valuation, and reporting differences affecting external statistics - A1.18–A1.23: - Classification of financial instruments follows 2008 SNA and BPM6, though levels of breakdown differ and BPM6 uses functional categories. - Monetary statistics’ sectoral balance sheets and analytical surveys do not generally classify loans and debt securities by maturity; SRFs include some maturity breakdowns. BPM6 classifies key instruments by maturity into short-term (original maturity of one year or less) and long-term. - The Manual requires breakdown by currency (domestic vs foreign) for all instruments except equity liabilities; BPM6 recommends breakdowns by major currency for external financial assets and liabilities (excluding equity). - Valuation: the Manual records Equity liabilities [MS] by components at book value (Funds contributed by owners; Retained earnings; Current year result; General and special reserves; Valuation adjustments), consistent with “own funds at book value.” BPM6’s standard approach values equity securities at market/fair value with identification of nonresident holdings. - SRFs include a memorandum item requesting market or fair value of equity by counterpart sector because monetary equity liabilities at book value may underestimate nonresident holdings. - A1.22: The majority of countries do not report the SRF memorandum item, implying monetary statisticians often do not compile market-value equity by counterpart; IIP compilers should coordinate with monetary statistics compilers to promote compilation of the memorandum item and avoid duplication. - A1.23: Monetary statistics generally do not use functional categories to classify financial assets/liabilities or economic sectors, posing challenges when estimating balance of payments/IIP direct investment data for deposit-takers and OFCs. ### Reconciliation guidance and compilation implications - A1.24: Appendix 6 of the BPM6 Compilation Guide contains a reconciliation exercise between balance of payments and monetary statistics; sectoral balance sheet data for ODCs can be used for the “deposit-taking corporations, except the central bank” subsector of the IIP, though classification differences prevent full reconciliation. *Monetary and Financial Statistics Manual and Compilation Guide* ### appendix shows how sectoral balance sheet data for ### Illustrative Sectoral Balance Sheets / Standardized Report Forms (SRFs) — Appendix (IMF STA guidance) ### Submission, Coverage, and Structure of SRFs - SRFs to be submitted to the IMF Statistics Department (STA) using the Integrated Correspondence System (ICS); electronic mail permitted if ICS cannot be used. - SRFs: 1SR (Central Bank), 2SR (Other Depository Corporations), 4SR (Other Financial Corporations), 5SR (Money Aggregates). - Each SRF should be submitted as soon as its data are finalized; SRFs need not be submitted all at once. - All assets and liabilities must be reported by residence of customers and expressed in domestic currency units; domestic positions should be disaggregated by counterpart sector. - SRF 1SR covers central bank accounts (headquarters, branches, currency board or independent currency authority). Supplementary data should record monetary authorities’ functions performed outside the central bank (for example, official foreign exchange holdings by the government, currency issuance by the government, transactions with the IMF performed by the government). - SRF 2SR should include all resident financial corporations that issue liabilities included in broad money (including MMFs and offshore banks that issue broad-money liabilities). Accounts of ODCs that are not operating but legally exist should be included. - SRF 4SR should include resident insurance corporations and pension funds, non-MMF investment funds, other financial intermediaries, captive financial institutions and money lenders, and financial auxiliaries; partial coverage acceptable until full coverage achieved. ### Classification by Instrument, Sectoring, and Disaggregation - Financial instruments in SRFs are presented by type: (a) Monetary gold and SDRs; (b) Currency and deposits (transferable and other deposits); (c) Debt securities; (d) Loans; (e) Investment fund shares; (f) Equity; (g) Insurance, pension, and standardized guarantee schemes; (h) Financial derivatives and employee stock options (ESOs); (i) Other accounts payable/receivable (Trade credit and advances; Other). - Instruments are disaggregated by domestic and foreign currency where relevant. - Deposits, debt securities, and MMF shares are disaggregated between those included in and excluded from broad money. - Positions for each instrument are disaggregated by counterpart sectors/subsectors: - Nonresidents - Financial corporations (Central bank; ODCs; OFCs) - General government (Central government; State and local government) - Nonfinancial corporations (Public; Other) - Households and NPISHs - Residence is determined by center of predominant economic interest; examples of nonresidents always treated as such include embassies, international organizations, foreign military personnel, foreign students, tourists, and short-term foreign technical assistance personnel. ### Compilation Issues: Units, Valuation, and Recording - Standard unit of account: domestic currency unit. All foreign-currency-denominated stocks must be translated at the market exchange rate prevailing at the balance sheet date; use the midpoint between buying and selling exchange rates. - General valuation principle: market prices or approximations of market prices at the balance sheet reporting date. Service charges, fees, commissions, taxes, and similar payments are income flows and excluded from instrument valuation. - Loans denominated in domestic currency: valued at nominal value (outstanding principal including accrued interest) without adjustment for expected loan losses. - Accrued interest on deposits, loans, and debt securities should be incorporated into the outstanding amount of the instrument; separate memorandum items on accrued interest by instrument should be provided. - Valuation adjustments that are not recorded in Current year result should be recorded in Valuation adjustment within Equity liability [MS] in the SRF. - Provisions for losses on financial assets are recorded within Other accounts payable [MS] (even if national accounting/IFRS treat them differently). ### Detailed Instrument Definitions and Treatment (selected highlights) - Monetary gold: gold held by the central bank as part of reserve assets; valued at market price. (Appears only in SRF 1SR.) - SDR holdings: reserve assets created by the IMF; represent assured and unconditional rights to obtain freely usable currency. (Relevant only for SRF 1SR.) - Transferable deposits: deposits exchangeable on demand at par and usable for third-party payments; includes certain special savings accounts and some frozen transferable deposits classified as Other deposits. - Other deposits: sight deposits not usable for third-party payments, nontransferable savings and fixed-term deposits, non-negotiable CDs, members’ redeemable shares, repayable margin cash for derivatives and repos. - Debt securities: negotiable instruments (treasury bills, bonds, commercial paper, negotiable CDs); loans that became negotiable are classified here; preferred stocks that pay fixed income but do not participate in residual distribution are classified as debt securities. - Loans: financial assets created when creditor lends funds directly to debtor, evidenced by non-negotiable documents; includes mortgages, consumer loans, hire-purchase, financial leases, securities repurchase agreements, overdrafts. Repurchase agreements are separately identified. - Investment fund shares: shares/units of investment funds, divided into MMFs and non-MMF investment funds; MMF shares may be functionally close to transferable deposits. - Equity: claims on residual value after creditors are satisfied; includes proprietors’ net equity and preferred stock providing residual participation. - Insurance, pension, and standardized guarantee schemes: life insurance and annuity entitlements of households, pension entitlements, nonlife technical reserves and provisions for calls under standardized guarantees, and claims/liabilities of pension funds on/to pension managers. - Financial derivatives: forward-type and option contracts; derivatives with nonresidents in foreign currency included in reserve assets are separately identified in SRF 1SR. - Other accounts receivable/payable: Trade credit and advances; Other (settlement accounts, dividends receivable/payable, items in process of collection, miscellaneous asset/liability items). IMF quota subscription is separately identified in SRF 1SR. ### Memorandum Items and Special Lines - Central bank float appears only in SRF 1SR. - Separate memorandum items: accrued interest (by deposits, loans, debt securities); arrears on loans (principal and interest); expected losses on loans (disaggregated by sector); claims on and liabilities to ODCs in liquidation; positions with nonresident financial corporations; positions with MMFs (loans and deposits); loans to households (separate of which). - Maturity breakdowns: debt securities and loans with maturity of one year or less disaggregated by counterpart sector and currency. - Market value of equity liabilities should be provided as a memorandum item. - SRF 5SR (Money Aggregates) accommodates cross-country differences in national definitions of money aggregates; the line Deposits in DCs in SRF 5SR should equal Deposits included in broad money in SRF 1SR plus Deposits included in broad money in SRF 2SR. - SRF 5SR upper section focuses on Broad money; lower section reports national definitions of monetary base and broad money and can include seasonally adjusted series when produced. ### Illustrative Central Bank SRF — Key tabulated figures (selected extracts from Table A2.1) - TOTAL ASSETS (Opening stock) 874,898; Trans­actions 1,438; Valuation changes 8,018; OCVA −396; TOTAL ASSETS (Closing stock) 883,958. - TOTAL LIABILITIES (Opening stock) 874,898; Trans­actions 1,438; Valuation changes 8,018; OCVA −396; TOTAL LIABILITIES (Closing stock) 883,958. - Currency in circulation: Opening stock 174,384; Trans­actions 20,879; Closing stock 195,264. - Deposits included in broad money (central bank): Opening stock 1,814; Trans­actions 761; Valuation changes 5; OCVA −58; Closing stock 1,848. - Deposits excluded from broad money: Opening stock 96,996; Trans­actions −12,909; Valuation changes 201; OCVA 5; Closing stock 84,346. - Debt securities excluded from broad money: Opening stock 393,369; Trans­actions −7,396; Valuation changes −1,591; OCVA 0; Closing stock 384,383. - Loans (central bank liabilities side, other depository corporations): Opening stock 126,970; Trans­actions 3,410; Closing stock 130,380. - Other accounts receivable (central bank assets): Opening stock 15,372; Trans­actions 2,922; Valuation changes 135; Closing stock 18,430. - Other accounts payable (central bank liabilities): Opening stock 5,394; Trans­actions −541; Valuation changes 1; OCVA −258; Closing stock 4,596. - Equity (liability components, selected): Opening stock 43,093; Trans­actions −3,718; Valuation changes 9,941; OCVA −138; Closing stock 49,178. - Retained earnings: Opening stock 54,704; Trans­actions 180; Valuation changes 0; OCVA −2,130; Closing stock 52,754. - Current year result: Opening stock −16,580; Trans­actions −3,001; Valuation changes 2,596; OCVA −138; Closing stock −17,122. - Valuation adjustment: Opening stock 1,139; Valuation changes 7,344; Closing stock 8,483. - Monetary gold and SDRs: Opening stock 33,836; Trans­actions 361; Valuation changes 182; OCVA 311; Closing stock 34,690. - Monetary gold: Opening stock 27,258; Valuation changes 100; OCVA 311; Closing stock 27,669. - SDR holdings: Opening stock 6,578; Trans­actions 361; Valuation changes 82; Closing stock 7,021. - Financial derivatives (assets): Opening stock 11,371; Trans­actions 128; Valuation changes 85; Closing stock 11,584. - Insurance, pension, and standardized guarantee schemes (assets): Opening stock 685; Trans­actions 137; Closing stock 822. - Nonfinancial assets (central bank): Opening stock 2,058; Trans­actions −567; OCVA −379; Closing stock 1,112. - Memorandum: End of period exchange rate 4,411 4,466. *Source: IMF Statistics Department — Illustrative Sectoral Balance Sheets/Standardized Report Forms (Appendix to the Monetary and Financial Statistics Manual and Compilation Guide).* ### 1. Central bank float1551900174 ### 1. Central bank float1551900174 ### Assets: headline balances and changes - Accrued interest on deposits: 1,644137001,781 - Accrued interest on loans: 82213700959 - Arrears on loans (principal and interest): 00000 - Expected losses on loans: 32800−3280 - Other depository corporations: 00000 - Other financial corporations: 00000 - Central government: 00000 - State and local government: 00000 - Public nonfinancial corporations: 5400−540 - Other nonfinancial corporations: 27400−2740 - Households and NPISHs: 00000 - Nonresidents: 00000 - Accrued interest on debt securities: 7,535137007,672 - Financial derivatives nonresidents: 3,425−3114403,538 - Of which: With financial corporations: 2,740−27427402,740 - Debt securities nonresidents: 618,401−2,8805,7820621,303 - Of which: Issued by financial corporations: 203,4451375480204,130 - Loans nonresidents: 3,723964903,868 - Of which: To financial corporations: 00000 - Equity: 2,6920602,698 - Of which: Issued by financial corporations: 00000 - Loans other depository corporations: 27,334−1710027,162 - Of which: Loans to money market funds: 00000 ### Assets: short-term instruments (maturity ≤ 1 year) - Debt securities with maturity of 1 year or less: 553,617−10,7846,5370549,370 - In domestic currency: 27,400−5,6170021,783 - Central government: 27,400−5,6170021,783 - In foreign currency: 526,217−5,1676,5370527,587 - Nonresidents: 526,217−5,1676,5370527,587 - Loans with maturity of 1 year or less: 27,400−1370027,263 - In domestic currency: 27,400−1370027,263 - Other depository corporations: 27,400−1370027,263 - In foreign currency: 00000 ### Liabilities: headline balances and changes - Accrued interest on deposits: 20002 - Accrued interest on loans: 2,466137002,603 - Arrears on loans (principal and interest): 00000 - Of which: Loans from IMF: 00000 - Accrued interest on debt securities: 9,042−1,370007,672 - Equity: Market value by holding sector: 43,09306,085049,178 - Central government: 43,09306,085049,178 - Other sectors: 00000 ### Liabilities: sectoral deposits, loans, and short-term debt - Debt securities nonresidents (liabilities): 19,200−3,566−390015,244 - Of which: Held by financial corporations: 17,810−3,425−411013,974 - Transferable deposits other depository corporations: 16,389−2,7480013,641 - Of which: Transferable deposits from money market funds: 00000 - Other deposits other depository corporations: 2,19218927582,466 - Of which: Other deposits from money market funds: 00000 - Loans other depository corporations (liabilities): 126,9703,41000130,380 - Of which: Loans from money market funds: 00000 ### Liabilities: short-term instruments (maturity ≤ 1 year) - Debt securities with maturity of 1 year or less (liabilities): 348,291−5,611−9250341,755 - In domestic currency: 348,291−5,611−9250341,755 - Other depository corporations: 248,773−1,515−1,0100246,247 - Other financial corporations: 44,388−959−494042,935 - Central government: 20,2041,330148021,682 - Public nonfinancial corporations: 2,950596003,546 - Other nonfinancial corporations: 11,041−8381,362011,565 - Households and NPISHs: 1,830−714−5410575 - Nonresidents: 19,105−3,511−390015,205 - In foreign currency: 00000 - Loans with maturity of 1 year or less (liabilities): 126,9703,41000130,380 - In domestic currency: 126,9703,41000130,380 - Other depository corporations: 126,9703,41000130,380 - In foreign currency: 00000 *Source: Monetary and Financial Statistics Manual and Compilation Guide — Table A2.1 Illustrative Sectoral Balance Sheet/Standardized Report Form for the Central Bank.* ### 15. Debt securities nominal value395,519−6,35200389,167 ### 15. Debt securities nominal value395,519−6,35200389,167 ### Debt securities (Other Depository Corporations) - Total debt securities (opening stock): 936,425 - Transactions: 13,544 - Valuation changes: 2,814 - OCVA: 11,536 - Closing stock: 964,319 - In domestic currency: - Opening stock: 846,059 - Transactions: 12,488 - Valuation changes: 1,542 - OCVA: 11,536 - Closing stock: 871,625 - By counterparty: - Central bank: opening 249,983; transactions −1,007; valuation −1,459; OCVA 0; closing 247,517 - Other depository corporations: opening 110,851; transactions −1,184; valuation 978; OCVA 2,535; closing 113,180 - Other financial corporations: opening 7,168; transactions −197; valuation 862; OCVA 487; closing 8,305 - Central government: opening 239,650; transactions 15,033; valuation 2,237; OCVA 3,096; closing 260,016 - State and local government: opening 1,644; transactions 200; valuation 117; OCVA 0; closing 1,781 - Public nonfinancial corporations: opening 59,607; transactions 774; valuation −284; OCVA 185; closing 60,282 - Other nonfinancial corporations: opening 168,933; transactions −486; valuation −648; OCVA 4,733; closing 172,532 - Households and NPISHs: opening 81; transactions −100; valuation 79; OCVA 0; closing 60? (table shows 79 under valuation changes and 0 OCVA) - Nonresidents: opening 8,143; transactions −464; valuation 632; OCVA 622; closing 8,933 - In foreign currency: - Opening stock: 90,366 - Transactions: 1,056 - Valuation changes: 1,273 - OCVA: 0 - Closing stock: 92,695 - All recorded under Nonresidents: opening 90,366; transactions 1,056; valuation 1,273; OCVA 0; closing 92,695 ### Debt securities included/excluded from broad money (Selected) - Debt securities included in broad money: - Opening stock: 27,515 - Transactions: −3,108 - Valuation changes: 1,363 - OCVA: 1,192 - Closing stock: 26,962 - In domestic currency: same as above (26,962 closing) - Counterparty highlights: - Other financial corporations: opening 6,300; transactions 1,497; valuation −65; OCVA −1,548; closing 6,184 - Other nonfinancial corporations: opening 16,249; transactions −3,542; valuation 859; OCVA 1,587; closing 15,153 - Households and NPISHs: opening 4,762; transactions −1,150; valuation 584; OCVA 1,114; closing 5,310 - Debt securities excluded from broad money: - Opening stock: 196,717 - Transactions: 7,215 - Valuation changes: −2,527 - OCVA: 3,263 - Closing stock: 204,668 - In domestic currency: - Opening stock: 191,081 - Transactions: 6,814 - Valuation changes: −2,603 - OCVA: 3,055 - Closing stock: 198,347 - Counterparty highlights: - Other depository corporations: opening 110,815; transactions 3,325; valuation −1,350; OCVA 2,546; closing 115,336 - Other financial corporations: opening 33,576; transactions 3,038; valuation −670; OCVA 509; closing 36,453 - Public nonfinancial corporations: opening 22; transactions 95; valuation −50; OCVA 22; closing 89 (table shows 2295−50229 — preserved as presented) - Other nonfinancial corporations: opening 5,911; transactions 568; valuation −890; OCVA 6,390; closing 6,390 - Households and NPISHs: opening 34,614; transactions −212; valuation −473; OCVA 0; closing 33,929 - In foreign currency (excluded from broad money): - Opening stock: 5,636 - Transactions: 401 - Valuation changes: 762 - OCVA: 0 - Closing stock: 6,321 - Nonresidents: opening 5,088; transactions 477; valuation 710; closing 5,636 ### Loans (Other Depository Corporations) - Total loans: - Opening stock: 2,710,280 - Transactions: −10,710 - Valuation changes: 2,118 - OCVA: 10,416 - Closing stock: 2,712,104 - In domestic currency: - Opening: 2,574,637 - Transactions: −12,344 - Valuation changes: 0 - OCVA: 10,416 - Closing: 2,572,708 - Selected counterparties: - Central bank: opening 127,630; transactions 4,746; closing 132,376 - Repurchase agreements: opening 35,627; transactions −125; closing 35,502 - Other: opening 92,003; transactions 4,871; closing 96,874 - Other depository corporations: opening 158,850; transactions 4,931; closing 163,781 - Repurchase agreements: opening 41,100; transactions −6,850; closing 34,250 - Other: opening 117,750; transactions 11,781; closing 129,531 - Central government: opening 104,602; transactions −11,890; closing 92,713 - Other nonfinancial corporations: opening 732,399; transactions 2,711; valuation 0; OCVA 5,998; closing 741,107 - Households and NPISHs: opening 1,205,042; transactions −12,942; valuation 0; OCVA 3,628; closing 1,195,727 - Nonresidents: opening 18,139; transactions 346; valuation 0; OCVA 518; closing 18,589 - In foreign currency: - Opening: 135,644 - Transactions: 1,634 - Valuation changes: 2,118 - OCVA: 0 - Closing: 139,396 - Selected counterparties: - Other depository corporations: opening 5,199; transactions −368; valuation 600; closing 4,891 - Other financial corporations: opening 4,883; transactions 705; valuation 121; closing 5,709 - Public nonfinancial corporations: opening 2,158; transactions 127; closing 2,186 - Other nonfinancial corporations: opening 81,715; transactions 126; valuation 1,315; OCVA 0; closing 83,157 - Nonresidents: opening 41,528; transactions 1,219; valuation 593; OCVA 0; closing 43,340 ### Money market fund shares - Total opening stock: 637,050 - Transactions: 20,558 - Valuation changes: 1,568 - OCVA: 0 - Closing stock: 659,176 - Money market fund shares included in broad money: - Opening: 548,000 - Transactions: 16,588 - Valuation: 1,702 - Closing: 566,290 - Transferable money market fund shares: - Opening: 130,150 - Transactions: 4,592 - Valuation: 340 - Closing: 135,082 - In domestic currency transferable: opening 102,750; transactions 4,110; closing 106,860 - Money market fund shares excluded from broad money: - Opening: 89,050 - Transactions: 3,970 - Valuation changes: −134 - OCVA: 0 - Closing: 92,886 - In domestic currency (excluded): opening 68,500; transactions 3,797; valuation −372; closing 71,925 - In foreign currency (excluded): opening 20,550; transactions 173; valuation 238; closing 20,961 ### Investment fund shares and equity - Investment fund shares: - Opening stock: 143,850 - Transactions: 3,094 - Valuation changes: 285 - OCVA: 2,900 - Closing stock: 150,129 - In domestic currency: opening 123,300; transactions 1,580; valuation 0; OCVA 2,900; closing 127,780 - In foreign currency: opening 20,550; transactions 1,514; valuation 285; OCVA 0; closing 22,349 - Equity: - Opening stock: 64,110 - Transactions: −3,411 - Valuation changes: −861 - OCVA: 418 - Closing stock: 60,256 - In domestic currency: opening 60,185; transactions −3,361; valuation −919; OCVA 418; closing 56,323 - In foreign currency: opening 3,925; transactions −505; valuation 90; OCVA 3,934 ### Financial derivatives and related instruments - Financial derivatives (other): - Opening stock: 13,837 - Transactions: 2,455 - Valuation changes: −1,894 - OCVA: 672 - Closing stock: 15,070 - In domestic currency: opening 9,316; transactions 2,126; valuation −1,948; OCVA 644; closing 10,138 - Central bank: opening 6,165; transactions 548; valuation −1,096; OCVA 411; closing 6,028 - Other depository corporations: opening 3,151; transactions 1,578; valuation −852; OCVA 233; closing 4,110 - In foreign currency: opening 4,521; transactions 329; valuation 542; OCVA 84; closing 4,932 - Other financial corporations: opening 2,740; transactions 798; valuation 240; OCVA 3,562 - Nonresidents: opening 1,781; transactions −469; valuation 302; OCVA 81; closing 1,370 - Financial derivatives and employee stock options (aggregate later table): - Opening stock: 15,618 - Transactions: 1,377 - Valuation changes: −680 - OCVA: 947 - Closing stock: 17,262 - In domestic currency: opening 15,344; transactions 1,490; valuation −656; OCVA 947; closing 17,125 ### Other accounts receivable / payable, provisions, and equity components - Other accounts receivable: - Opening stock: 75,343 - Transactions: 9,630 - Valuation changes: 913 - OCVA: 885 - Closing stock: 85,120 - Trade credit and advances (domestic): opening 2,136; transactions −290; valuation 12; OCVA 2,228 - Other (total): opening 73,207; transactions 9,660; valuation 917; OCVA 82; closing 82,893 - Other accounts payable: - Opening stock: 244,363 - Transactions: −23,345 - Valuation changes: 0 - OCVA: 11,561 - Closing stock: 232,580 - Trade credit and advances: opening 4,838; transactions 399; valuation 0; OCVA 544; closing 5,781 - Other: opening 239,525; transactions −23,743; valuation 0; OCVA 11,017; closing 226,799 - Provisions for losses: opening 131,607; transactions −374; valuation 0; OCVA 114; closing 131,348 - Provisions for loan losses: opening 92,499; transactions −374; valuation 0; OCVA −434; closing 91,691 - Provisions for other losses: opening 39,109; transactions 0; valuation 5; OCVA 483; closing 39,657 - Consolidation adjustment for headquarters and branches: −911; transactions −234; valuation 0; OCVA 0; closing −1,145 - Equity (Other Depository Corporations): - Total equity: - Opening stock: 386,623 - Transactions: −383 - Valuation changes: 1,920 - OCVA: 12,142 - Closing stock: 400,302 - Components: - Funds contributed by owners: opening 214,394; transactions 1,814; valuation 0; OCVA 9,843; closing 226,051 - Residents: opening 186,544; transactions 1,814; valuation 0; OCVA 9,843; closing 198,202 - Nonresidents: opening 27,850; transactions 0; valuation 0; OCVA 0; closing 27,850 - Retained earnings: opening 101,424; transactions −13,527; valuation 0; OCVA 8,776; closing 96,673 - Current year result: opening 23,136; transactions 11,763; valuation −1,369; OCVA −7,594; closing 25,936 - General and special reserves: opening 33,420; transactions −433; valuation 0; OCVA 1,117; closing 34,103 - Valuation adjustment: opening 14,249; transactions 0; valuation 3,289; OCVA 0; closing 17,538 ### Nonfinancial assets and insurance/pension reserves - Nonfinancial assets: - Opening stock: 76,636 - Transactions: −1,456 - Valuation changes: 0 - OCVA: 56 - Closing stock: 75,743 - Fixed assets: opening 53,818; transactions 719; valuation 0; OCVA 30; closing 54,844 - Other nonfinancial assets: opening 25,284; transactions −2,175; valuation 0; OCVA 248; closing 23,357 - Accumulated depreciation: 2,466; transactions 0; valuation 0; OCVA −8; closing 2,458 - Insurance, pension, and standardized guarantee schemes: - Total opening stock: 2,055 - Transactions: 137 - Valuation changes: 0 - OCVA: 0 - Closing stock: 2,192 - Nonlife insurance technical reserves and provisions: same as above (2,055 opening; 137 transactions; closing 2,192) - All recorded in domestic currency and under Other financial corporations ### Aggregate totals and memorandum - TOTAL ASSETS: - Opening stock: 4,207,402 - Transactions: 19,538 - Valuation changes: 3,848 - OCVA: 30,852 - Closing stock: 4,261,641 - TOTAL LIABILITIES: - Opening stock: 4,207,402 - Transactions: 19,538 - Valuation changes: 3,848 - OCVA: 30,852 - Closing stock: 4,261,641 - Deposits included in broad money: - Opening stock: 2,184,210 - Transactions: 40,680 - Valuation changes: 396 - OCVA: −2,237 - Closing stock: 2,223,049 - Deposits excluded from broad money: - Opening stock: 171,140 - Transactions: −19,667 - Valuation changes: 792 - OCVA: 2,237 - Closing stock: 153,789 - Debt securities nominal value headline figures (as presented in title): - 395,519−6,35200389,167 - Memorandum item: - End of period exchange rate: 4,411 and 4,466 (two values presented) *Monetary and Financial Statistics Manual and Compilation Guide* ### 1. Accrued interest on deposits1,6440001,644 ### Illustrative Sectoral Balance Sheet / Standardized Report Form for Other Depository Corporations (continued) ### Assets — accrued items, arrears, and expected losses - Accrued interest on deposits: 1,644 (Opening stock), 000 (Transactions), 1,644 (Closing stock). - Accrued interest on loans: 20,550 (Opening stock), 1,756 (Transactions), 0 (Valuation changes), 16,222 (OCVA), 22,468 (Closing stock). - Arrears on loans (principal and interest): 103,243 (Opening stock), −421 (Transactions), 051 (Valuation changes), 610 (OCVA), 103,338 (Closing stock). - Expected losses on loans: 34,310 (Opening stock), 00 (Transactions), 0 (Valuation changes), −6,473 (OCVA), 27,837 (Closing stock). - Public nonfinancial corporations: 685 (Opening stock), 00 (Transactions), −274 (OCVA), 411 (Closing stock). - Other nonfinancial corporations: 9,714 (Opening stock), 00 (Transactions), −2,200 (OCVA), 7,514 (Closing stock). - Households and NPISHs: 23,911 (Opening stock), 00 (Transactions), −3,999 (OCVA), 19,912 (Closing stock). ### Debt securities, loans, and nonresident positions (assets) - Accrued interest on debt securities: 10,275 (Opening stock), 520 (Transactions), 0 (Valuation changes), 12,604 (Closing stock). - Debt securities nonresidents: 98,508 (Opening stock), 593 (Transactions), 1,905 (Valuation changes), 622 (OCVA), 101,628 (Closing stock). - Of which: Issued by financial corporations: 70,829 (Opening stock), 571 (Transactions), 1,470 (Valuation changes), 425 (OCVA), 73,295 (Closing stock). - Loans nonresidents: 59,667 (Opening stock), 1,564 (Transactions), 593 (Valuation changes), 105 (OCVA), 61,929 (Closing stock). - Of which: To financial corporations: 55,485 (Opening stock), 1,554 (Transactions), 541 (Valuation changes), 975 (OCVA), 57,677 (Closing stock). - Equity: 11,337 (Opening stock), −503 (Transactions), 740 (Valuation changes), 11,660 (Closing stock). - Of which: Issued by financial corporations: 6,867 (Opening stock), 0 (Transactions), 257 (Valuation changes), 707 (Closing stock). ### Short-term instruments and maturities - Debt securities with maturity of 1 year or less (total): 732,552 (Opening stock), 5,844 (Transactions), 266 (Valuation changes), 8,507 (OCVA), 747,169 (Closing stock). - In domestic currency: 652,133 (Opening stock), 4,825 (Transactions), −907 (Valuation changes), 8,507 (OCVA), 664,558 (Closing stock). - Central bank: 249,983 (Opening stock), −1,007 (Transactions), −1,459 (Valuation changes), 0 (OCVA), 247,517 (Closing stock). - Other depository corporations: 108,093 (Opening stock), −1,117 (Transactions), 908 (Valuation changes), 2,264 (OCVA), 110,148 (Closing stock). - Central government: 165,907 (Opening stock), 7,120 (Transactions), −173 (Valuation changes), 3,048 (OCVA), 175,902 (Closing stock). - Other nonfinancial corporations: 87,817 (Opening stock), −261 (Transactions), −424 (Valuation changes), 2,466 (OCVA), 89,598 (Closing stock). - Nonresidents: 3,243 (Opening stock), −730 (Transactions), 831 (Valuation changes), 13,855 (OCVA), 16,199 (Closing stock inferred from components). - In foreign currency: 80,419 (Opening stock), 1,019 (Transactions), 1,173 (Valuation changes), 0 (OCVA), 82,611 (Closing stock). - Nonresidents: 80,419 (Opening stock), 1,019 (Transactions), 1,173 (Valuation changes), 0 (OCVA), 82,611 (Closing stock). - Loans with maturity of 1 year or less (total): 1,513,891 (Opening stock), −1,016 (Transactions), 1,520 (Valuation changes), 4,216 (OCVA), 1,518,611 (Closing stock). - In domestic currency: 1,435,326 (Opening stock), −1,785 (Transactions), 0 (Valuation changes), 4,216 (OCVA), 1,437,757 (Closing stock). - Central bank: 127,630 (Opening stock), 4,746 (Transactions), 0 (Valuation changes), 0 (OCVA), 132,376 (Closing stock). - Other depository corporations: 143,439 (Opening stock), 4,247 (Transactions), 0 (Valuation changes), 0 (OCVA), 147,686 (Closing stock). - Households and NPISHs: 546,904 (Opening stock), −1,701 (Transactions), 0 (Valuation changes), 331 (OCVA), 545,534 (Closing stock). - In foreign currency: 78,565 (Opening stock), 769 (Transactions), 1,520 (Valuation changes), 0 (OCVA), 80,854 (Closing stock). - Nonresidents: 37,949 (Opening stock), 803 (Transactions), 567 (Valuation changes), 0 (OCVA), 39,319 (Closing stock). ### Liabilities — accrued interest, deposits, and equity - Accrued interest on deposits (liabilities): 18,386 (Opening stock), −15,500 (Transactions), 0 (Valuation changes), 15,760 (OCVA), 18,646 (Closing stock). - Accrued interest on loans (liabilities): 4,015 (Opening stock), −910 (Transactions), 99 (Valuation changes), 4,023 (Closing stock). - Arrears on loans (liabilities): 4,076 (Opening stock), −15,782 (Transactions), 0 (Valuation changes), 15,760 (OCVA), 4,054 (Closing stock). - Accrued interest on debt securities (liabilities): 4,485 (Opening stock), 119 (Transactions), 0 (Valuation changes), 294 (OCVA), 4,633 (Closing stock). - Equity: Market value by holding sector (liabilities): 482,235 (Opening stock), 0 (Transactions), 14,613 (Valuation changes), 10,093 (OCVA), 506,942 (Closing stock). - Other depository corporations: 4,685 (Opening stock), 0 (Transactions), −920 (Valuation changes), 4,593 (Closing stock). - Other financial corporations: 53,490 (Opening stock), −3,425 (Transactions), −915 (Valuation changes), 49,150 (Closing stock). - Central government: 28,848 (Opening stock), −2,308 (Transactions), 1,147 (Valuation changes), 27,687 (Closing stock). - Other nonfinancial corporations: 191,907 (Opening stock), 3,425 (Transactions), 4,823 (Valuation changes), 5,667 (OCVA), 205,822 (Closing stock). - Households and NPISHs: 140,528 (Opening stock), 2,308 (Transactions), 5,155 (Valuation changes), 4,426 (OCVA), 152,417 (Closing stock). - Nonresidents: 62,778 (Opening stock), 0 (Transactions), 4,495 (Valuation changes), 0 (OCVA), 67,273 (Closing stock). ### Liabilities — nonresident positions, interbank, deposits, and short-term debt - Debt securities nonresidents (liabilities): 6,283 (Opening stock), 477 (Transactions), 560 (Valuation changes), 6,815 (Closing stock). - Of which: Held by financial corporations: 1,507 (Opening stock), 115 (Transactions), 220 (Valuation changes), 1,644 (Closing stock). - Loans nonresidents (liabilities): 132,238 (Opening stock), −2,645 (Transactions), 1,606 (Valuation changes), 731 (OCVA), 131,272 (Closing stock). - Of which: Held by financial corporations: 110,559 (Opening stock), −2,474 (Transactions), 1,408 (Valuation changes), 621 (OCVA), 109,555 (Closing stock). - Financial derivatives and employee stock options nonresidents: 2,740 (Opening stock), −79 (Transactions), −351 (Valuation changes), 142 (OCVA), 2,740 (Closing stock). - Of which: With financial corporations: 2,740 (Opening stock), −79 (Transactions), −351 (Valuation changes), 142 (OCVA), 2,740 (Closing stock). - Interbank position nonresident total (liabilities): 61,787 (Opening stock), −137 (Transactions), −548 (Valuation changes), 274 (OCVA), 61,376 (Closing stock). - Of which: Affiliates: 20,824 (Opening stock), 0 (Transactions), −137 (Valuation changes), 137 (OCVA), 20,824 (Closing stock). - Deposits of households and NPISHs: 1,417,150 (Opening stock), 21,021 (Transactions), 160 (Valuation changes), 1,438,186 (Closing stock). - Of which: Households: 1,377,398 (Opening stock), 16,972 (Transactions), 160 (Valuation changes), 1,394,386 (Closing stock). ### Selected short-term liabilities by maturity - Debt securities with maturity of 1 year or less (liabilities): 146,566 (Opening stock), 594 (Transactions), −302 (Valuation changes), 1,701 (OCVA), 148,558 (Closing stock). - In domestic currency: 141,478 (Opening stock), 117 (Transactions), −373 (Valuation changes), 1,701 (OCVA), 142,922 (Closing stock). - Other depository corporations: 108,093 (Opening stock), 958 (Transactions), −1,248 (Valuation changes), 2,345 (OCVA), 110,148 (Closing stock). - Other financial corporations: 6,302 (Opening stock), 2,758 (Transactions), −550 (Valuation changes), −2,345 (OCVA), 6,165 (Closing stock). - Other nonfinancial corporations: 16,249 (Opening stock), −3,542 (Transactions), 859 (Valuation changes), 1,587 (OCVA), 15,153 (Closing stock). - Households and NPISHs: 4,762 (Opening stock), −150 (Transactions), 584 (Valuation changes), 114 (OCVA), 5,310 (Closing stock). - Nonresidents: 1,195 (Opening stock), 0 (Transactions), −150 (Valuation changes), 1,179 (Closing stock). - In foreign currency: 5,088 (Opening stock), 477 (Transactions), 710 (Valuation changes), 0 (OCVA), 5,636 (Closing stock). - Nonresidents: 5,088 (Opening stock), 477 (Transactions), 710 (Valuation changes), 0 (OCVA), 5,636 (Closing stock). - Loans with maturity of 1 year or less (liabilities): 249,524 (Opening stock), 2,241 (Transactions), 1,069 (Valuation changes), 0 (OCVA), 252,835 (Closing stock). - In domestic currency: 175,133 (Opening stock), 4,184 (Transactions), 0 (Valuation changes), 0 (OCVA), 179,317 (Closing stock). - Central bank: 27,584 (Opening stock), −200 (Transactions), 0 (Valuation changes), 0 (OCVA), 27,384 (Closing stock). - Other depository corporations: 143,439 (Opening stock), 4,247 (Transactions), 0 (Valuation changes), 0 (OCVA), 147,686 (Closing stock). - In foreign currency: 74,391 (Opening stock), −1,942 (Transactions), 1,069 (Valuation changes), 0 (OCVA), 73,518 (Closing stock). - Other depository corporations: 4,247 (Opening stock), 429 (Transactions), 80 (Valuation changes), 4,387 (Closing stock). - Nonresidents: 70,144 (Opening stock), −1,984 (Transactions), 971 (Valuation changes), 0 (OCVA), 69,131 (Closing stock). *Monetary and Financial Statistics Manual and Compilation Guide* ### 16. Debt securities nominal value215,22783801,354217,419 ### 16. Debt securities nominal value215,22783801,354217,419 ### Debt securities — aggregate and currency breakdown - Debt securities (total) - Opening stock: 688,622 - Transactions: 10,452 - Valuation changes: 4,993 - OCVA: −9,006 - Closing stock: 695,060 - In domestic currency - Opening stock: 623,334 - Transactions: 10,631 - Valuation changes: 3,963 - OCVA: −9,006 - Closing stock: 628,921 - In foreign currency - Opening stock: 65,288 - Transactions: −179 - Valuation changes: 1,030 - OCVA: 0 - Closing stock: 66,139 ### Debt securities — selected counterpart sectors (domestic currency) - Central bank - Opening stock: 55,436 - Transactions: 1,145 - Valuation changes: −243 - OCVA: 0 - Closing stock: 56,339 - Other depository corporations - Opening stock: 53,242 - Transactions: 5,114 - Valuation changes: 407 - OCVA: −2,535 - Closing stock: 56,228 - Other financial corporations - Opening stock: 12,108 - Transactions: 1,266 - Valuation changes: 154 - OCVA: −248 - Closing stock: 13,280 - Central government - Opening stock: 291,426 - Transactions: 4,786 - Valuation changes: 3,720 - OCVA: −3,096 - Closing stock: 296,836 - State and local government - Opening stock: 27,811 - Transactions: −576 - Valuation changes: 556 - OCVA: −117 - Closing stock: 27,674 - Public nonfinancial corporations - Opening stock: 62,908 - Transactions: 1,498 - Valuation changes: −301 - OCVA: −185 - Closing stock: 63,920 - Other nonfinancial corporations - Opening stock: 110,570 - Transactions: −2,217 - Valuation changes: −717 - OCVA: −2,203 - Closing stock: 105,433 - Households and NPISHs - Opening stock: 5,486 - Transactions: 225 - Valuation changes: 0 - OCVA: 0 - Closing stock: 5,711 - Nonresidents - Opening stock: 4,346 - Transactions: −611 - Valuation changes: 387 - OCVA: −622 - Closing stock: 3,501 ### Debt securities — selected counterpart sectors (foreign currency) - Other depository corporations - Opening stock: 4,073 - Transactions: 701 - Valuation changes: 0 - OCVA: 30 - Closing stock: 4,245 - Other financial corporations - Opening stock: 78 - Transactions: −100 - Valuation changes: 77 - OCVA: 0 - Closing stock: 55 - Public nonfinancial corporations - Opening stock: 1,596 - Transactions: −969 - Valuation changes: 300 - OCVA: 65 - Closing stock: 656 - Other nonfinancial corporations - Opening stock: 5,842 - Transactions: −471 - Valuation changes: 178 - OCVA: 0 - Closing stock: 5,549 - Nonresidents - Opening stock: 53,696 - Transactions: 1,193 - Valuation changes: 720 - OCVA: 0 - Closing stock: 55,609 ### Related balance sheet totals and memorandum items - TOTAL ASSETS - Opening stock: 2,110,337 - Transactions: 43,384 - Valuation changes: 4,828 - OCVA: −39,955 - Closing stock: 2,118,594 - TOTAL LIABILITIES - Opening stock: 2,110,337 - Transactions: 43,384 - Valuation changes: 4,828 - OCVA: −39,955 - Closing stock: 2,118,594 - Debt securities excluded from broad money - Opening stock: 51,509 - Transactions: 1,697 - Valuation changes: 937 - OCVA: −4,455 - Closing stock: 49,688 - End of period exchange rate - 4,411 - 4,466 *Monetary and Financial Statistics Manual and Compilation Guide* ### 1. Accrued interest on deposits3,014470−533,008 ### 1. Accrued interest on deposits3,014470−533,008 ### Context - Table A2.3 Illustrative Sectoral Balance Sheet/Standardized Report Form for Other Financial Corporations from the Monetary and Financial Statistics Manual and Compilation Guide. - Table columns reflected: Opening stock, Transactions, Valuation changes OCVA, Closing stock. ### Selected asset entries (Opening stock — Transactions — Valuation changes OCVA — Closing stock) - 1. Accrued interest on deposits: 3,014 470 −533 3,008 - 2. Accrued interest on loans: 15,481 −5570 −789 14,135 - 3. Arrears on loans (principal and interest): 17,599 −3,583 0 −2,204 17,443 - 4. Expected losses on loans: 16,514 651 0 0 17,165 - Other depository corporations: 0 0 0 0 0 - Other financial corporations: 730 710 0 80 1 - Central government: 0 0 0 0 0 - State and local government: 0 0 0 0 0 - Public nonfinancial corporations: 90 −500 0 85 - Other nonfinancial corporations: 6,597 670 0 6,664 - Households and NPISHs: 9,091 524 0 9,615 - Nonresidents: 6 −6 0 0 - 5. Accrued interest on debt securities: 28,907 −1,794 0 −535 26,578 - 6. Claims on other depository corporations in liquidation: 0 0 0 0 0 (all subcategories zero) - 7. Debt securities nonresidents: 58,043 582 1,107 −622 59,110 - Of which: Issued by financial corporations: 33,428 576 822 −302 34,524 - 8. Loans nonresidents: 267 −491 −105 1 14 - Of which: Issued by financial corporations: 132 −100 −75 47 - 9. Equity: 103,127 −20,544 1,278 0 83,861 - Of which: Issued by financial corporations: 16,988 −1,855 211 0 15,344 - 10. Insurance, pension, and standardized guarantee schemes nonresidents: 213 120 0 0 225 - Of which: With financial corporations: 213 120 0 0 225 - 11. Financial derivatives nonresidents: 237 −104 0 −28 105 - Of which: With financial corporations: 237 −104 0 −28 105 - 12. Total assets with financial corporations nonresidents: 54,389 −6,028 685 0 49,046 - Of which: Affiliates: 16,577 −1,644 137 0 15,070 - 13. Loans to households and NPISHs: 171,528 −7,660 0 −8,527 155,341 - Of which: Households: 158,509 −4,864 0 −7,672 145,973 - 14. Debt securities with maturity of 1 year or less: 430,180 1,323 −116 −6,633 424,754 - In domestic currency: 387,573 194 −768 −6,633 380,366 - Central bank: 44,388 −959 −4940 42,935 - Other depository corporations: 6,302 163 0 −300 6,165 - Central government: 221,666 −522 411 −2,355 219,200 - Public nonfinancial corporations: 30,140 890 −893 0 30,140 - Other nonfinancial corporations: 82,611 1,070 −685 −3,536 79,460 - Nonresidents: 2,466 353 0 −353 2,466 - In foreign currency: 42,607 1,129 652 0 44,388 - Nonresidents: 42,607 1,129 652 0 44,388 - 15. Loans with maturity of 1 year or less: 119,464 9,603 0 −6,315 122,752 - In domestic currency: 119,464 9,603 0 −6,315 122,752 - Other depository corporations: 4,110 137 0 4,247 - Other financial corporations: 10,549 0 0 10,549 - Public nonfinancial corporations: 685 198 0 −198 685 - Other nonfinancial corporations: 58,225 4,393 0 −3,845 58,773 - Households and NPISHs: 45,895 4,875 0 −2,272 48,498 - In foreign currency: 0 0 0 0 0 (all subcategories zero for nonresidents) ### Selected liability entries (Opening stock — Transactions — Valuation changes OCVA — Closing stock) - 1. Accrued interest on deposits: 0 0 0 0 0 - 2. Accrued interest on loans: 7,645 212 0 −707 7,787 - 3. Arrears on loans (principal and interest): 2,055 0 0 0 2,055 - 4. Accrued interest on debt securities: 2,329 141 0 −213 2,257 - 5. Equity: Market value by holding sector: 520,647 39,912 33,554 −10,093 584,020 - Other depository corporations: 29,834 −3,369 −748 0 25,717 - Other financial corporations: 34,304 3,214 0 0 37,518 - Central government: 157,333 0 12,006 0 169,339 - State and local government: 1,626 0 0 1,626 - Other nonfinancial corporations: 76,346 29,963 9,828 −5,667 110,470 - Households and NPISHs: 150,035 10,104 11,372 −4,426 167,085 - Nonresidents: 71,169 0 1,096 0 72,265 - 6. Liabilities to other depository corporations in liquidation: 0 0 0 0 0 (all subcategories zero) - 7. Debt securities nonresidents: 5,866 1,664 131 0 7,660 - Of which: With financial corporations: 5,206 1,522 122 0 6,850 - 8. Loans nonresidents: 24,643 270 312 −732 5,152 - Of which: With financial corporations: 24,643 270 312 −732 5,152 - 9. Equity nonresidents: 61,650 −17,558 981 0 45,073 - Of which: With financial corporations: 57,677 −15,207 548 0 43,018 - 10. Insurance, pension, and standardized guarantee schemes nonresidents: 18,776 −261 128 0 18,644 - Of which: With financial corporations: 3,425 0 0 0 3,425 - 11. Financial derivatives and employee stock options nonresidents: 1,895 −245 1 −114 1,537 - Of which: With financial corporations: 1,895 −245 1 −114 1,537 - 12. Total liabilities with financial corporations (except equity) nonresidents: 35,483 −5,695 685 −593 0,414 - Of which: Affiliates: 11,097 −1,763 137 −189 9,453 - 13. Deposits of households and NPISHs: 0 0 0 0 0 - 14. Debt securities with maturity of 1 year or less: 6,302 −209 720 6,165 - In domestic currency: 6,302 −209 720 6,165 - Other depository corporations: 6,302 −209 720 6,165 - 15. Loans with maturity of 1 year or less: 80,556 −896 153 0 79,813 - In domestic currency: 68,637 −1,507 0 67,130 - Other depository corporations: 58,088 −1,507 0 56,581 - Other financial corporations: 10,549 0 0 10,549 - In foreign currency: 11,919 611 153 0 12,683 - Other depository corporations: 4,110 497 510 4,658 - Nonresidents: 7,809 114 102 0 8,025 *Monetary and Financial Statistics Manual and Compilation Guide — Table A2.3 Illustrative Sectoral Balance Sheet/Standardized Report Form for Other Financial Corporations.* ### 16. Debt securities nominal value50,8271,7810−3,42549,183 ### 16. Debt securities nominal value ### Summary line (table header) - The Monetary and Financial Statistics Manual and Compilation Guide reports for "16. Debt securities nominal value": - Opening stock: 50,827 - Transactions: 1,781 - Valuation changes: 0 - OCVA (other changes in the volume of assets): −3,425 - Closing stock: 49,183 ### Context within money aggregates and surveys - Table A2.4 Standardized Report Form for Money Aggregates highlights related debt securities and components of broad money: - Debt Securities issued by depository corporations: 41,160 −2,327 1,363 1,192 41,388 - Debt Securities issued by central government: 20,550 2,055 −685 0 21,920 - Money market fund shares included in broad money: 548,000 16,588 1,702 0 566,290 - Broad money (aggregate): 2,943,584 71,113 2,791 −1,963 3,015,526 - Currency in circulation outside depository corporations: 142,662 13,786 0 −860 155,588 ### Depository corporations and financial corporations aggregates (selected debt securities and related items) - Depository Corporations Survey (Table A3.3) — debt securities: - Debt securities: 41,160 −2,327 1,363 1,192 41,388 - Debt securities included in broad money: 27,515 −3,108 1,363 1,192 26,962 - Debt securities excluded from broad money: 177,471 −760 −1,571 717 175,856 - Other Depository Corporations Survey (Table A3.2) — debt securities: - Debt securities included in broad money: 27,515 −3,108 1,363 1,192 26,962 - Debt securities excluded from broad money: 74,880 3,323 −1,233 717 77,687 - Central Bank Survey (Table A3.1) — debt securities: - Debt securities (claims on nonresidents): 618,401 −2,880 5,782 0 621,303 - Debt securities included in broad money: 13,645 781 0 0 14,426 - Debt securities excluded from broad money: 102,591 −4,084 −339 0 98,169 - Other Financial Corporations Survey (Table A3.4) — debt securities: - Debt securities: 30,283 848 398 −2,948 28,582 - Of which: claims on depository corporations — 12,197 559 145 0 12,900 - Financial Corporations Survey (Table A3.5) — aggregate debt securities: - Debt securities: 100,536 −5,632 1,684 0 96,588 ### Cross-cutting numeric points and linkages - The reported nominal-value movements reflect distinct components: - Transactions and valuation changes are tracked separately from OCVA. - OCVA entries include negative adjustments (for example, −3,425 in the specific line and other negative OCVA entries elsewhere). - Examples of exact numeric values preserved from the Manual: - Broad money liabilities: 2,917,691 68,784 3,476 −1,963 2,987,989 - Monetary base: 194,779 18,397 430 213 219 - Net foreign assets (Depository corporations survey): 834,419 27,290 11,459 1,207 874,375 *Monetary and Financial Statistics Manual and Compilation Guide* ### 2011. X-12-ARIMA Reference Manual, Version 0.3. ### 2011. X-12-ARIMA Reference Manual, Version 0.3. ### Major thematic coverage cited by the manual - Statistical standards and national accounting frameworks referenced include the System of National Accounts 1993 (1993 SNA) and System of National Accounts 2008 (2008 SNA). - Balance of payments and external statistics frameworks cited include BPM5 and Balance of Payments and International Investment Position Manual, sixth edition (BPM6). - Government and public-sector statistical frameworks cited include Government Finance Statistics Manual 2014 (GFSM 2014). - Monetary and financial statistics frameworks and guides referenced include Monetary and Financial Statistics Manual, Monetary and Financial Statistics Compilation Guide, and BPM6 Compilation Guide. - Central banking and European-level guidance cited include multiple European Central Bank publications: Seasonal Adjustment of Monetary Aggregates and HICP for the Euro Area; Handbook for the Compilation of Flows Statistics on the MFI Balance Sheet; Methodological Notes for the Compilation of the Revaluation Adjustment; Monetary Financial Institutions and Markets Statistics Sector Manual; Manual on MFI Balance Sheet Statistics; ECB Regulation ECB/2013/33; and ECB Guideline ECB/2014/15. - Accounting and reporting standards referenced include International Financial Reporting Standards 2015 and International Financial Reporting Standards Consolidated Without Early Application 2015. - Software, methods, and algorithmic approaches cited include TRAMO and SEATS, X-12-ARIMA, and ARIMA-based seasonal adjustment methods. - Monetary measurement and aggregation methods discussed in the citations include Divisia measures of money and specific work on Divisia indices. - Financial derivatives and option-pricing theory cited include foundational works on option pricing and continuous-time finance. ### Methodological and disciplinary intersections reflected in the citations - Intersections between seasonal adjustment methodology (X-12-ARIMA, TRAMO/SEATS) and the compilation of monetary and financial statistics are emphasized. - Links between national accounting standards (SNA) and financial/flow/stock measurement practices are indicated through cited handbooks and studies on Financial Production, Flows and Stocks in the System of National Accounts. - Cooperation and institutional arrangements for macroeconomic statistics production are documented in cited IFC/BIS and IMF working papers addressing institutional cooperation between central banks and statistical offices. - The references reflect engagement with both theoretical finance literature (option pricing, continuous-time finance) and practical statistical compilation guidance for central banks and national statistical offices. ### Implicit usage and intended audience - The manual situates X-12-ARIMA within a broader ecosystem of IMF, ECB, BIS/IFC, and national central bank statistical guidance, indicating intended use by statistical compilers in monetary and financial statistics. - Citations to technical software instructions, methodological notes, and working papers suggest the manual’s audience includes practitioners implementing seasonal adjustment and time-series modeling for monetary aggregates. *Source: 2011. X-12-ARIMA Reference Manual, Version 0.3.* ### Chapter 8. Blackwell. Malden, Massachusetts. ### Chapter 8. Blackwell. Malden, Massachusetts. ### Glossary and core definitions - Acceptance: Bill of exchange received and “accepted”—stamped and signed—by the party on whom it is written, at which point the bill of exchange becomes a promissory note. - Accrual accounting: Recording of flows and changes in the corresponding stocks at the time economic value is created, transformed, exchanged, transferred, or extinguished. - Asset: Store of value, over which ownership rights are enforced and from which their owners may derive economic benefits by holding them over a period of time. - Liability: Established when one unit (the debtor) is obliged, under specific circumstances, to provide funds or other resources to another unit (the creditor). - Equity: All instruments and records acknowledging claims on the residual value of a corporation or quasi-corporation after the claims of all creditors have been met. - Financial assets: Subset of economic assets that are financial instruments and are unconditional creditor claims on economic resources of other institutional units. - Nonperforming loan (NPL): Loan for which (1) payments of interest and/or principal are past due by 90 days or more; or (2) interest payments equal to 90 days or more have been capitalized or delayed by agreement; or (3) evidence exists to reclassify a loan as nonperforming even in the absence of a 90-day past due payment, such as when the debtor files for bankruptcy. ### Balance sheets, accounts, and presentation - Balance sheet: Statement of the values of the stock position of assets owned and of the liabilities owed by an institutional unit, or group of units, drawn up at a particular point in time. - Sectoral balance sheet: Presentation in a balance-sheet-like form of the asset and liability positions (and corresponding flows) of the financial corporations subsectors. - Balance sheet approach (BSA): Framework to analyze vulnerabilities arising from balance sheet positions and mismatches (currency, maturity, capital structure, solvency) between sectors of the economy and with the rest of the world. - Accumulation accounts and flow presentation: Accumulation accounts appear in coverage of capital, current, and financial accounts and in flow presentation (references: 8.10, 8.12, 8.15–8.17, 8.85–8.86, 8.100–8.117, Figure 8.1, Table 8A1). - Accounts referenced: balance sheets, current accounts, financial accounts, flow accounts, rest-of-the-world accounts (references include 2.19, 2.21, 8.3, 8.7, 8.11–8.19, 8.79, 8.85–8.99, Figure 8.1, Table 8A1). ### Accounting rules, valuation, and recording conventions - Accrued interest: Accounting for accrued interest is treated in multiple contexts including calculations for debt securities (5.110–5.119, Box 5.2), reporting (5.109–5.112), in sectoral balance sheets (7.32), and in memorandum items (A2.77). - Acquisition approach: Approach that reflects market conditions and expectations at the time of acquisition of a debt instrument when calculating accrued interest; interest is determined using the remaining yield-to-maturity at the time the debt instrument is acquired (see 5.112, 5.115, 5.118–5.119). - Creditor approach vs. Debtor approach: Creditor approach recalculates effective yield to reflect current market rates; Debtor approach determines interest by amounts the debtors will have to pay to their creditors over and above principal (see creditor/debtor approach definitions). - Valuation terms: Fair value defined as market-equivalent value; book value and historic cost defined and contrasted; nominal valuation and amortized value referenced (5.49, 5.41, 5.49). - Recording moments: Time of recording, trade date accounting, settlement date accounting, and related rules referenced (time of recording 5.24–5.30; settlement date accounting 5.28–5.30; trade date accounting 5.28–5.30). ### Monetary and financial statistics concepts - Monetary statistics vs. Financial statistics: Monetary statistics cover stocks and flows of assets and liabilities of the resident financial corporations sector with respect to all other resident institutional sectors and nonresidents; Financial statistics cover stock and flows of assets and liabilities between all sectors and with nonresidents. - Broad money: Sum of all liquid financial instruments held by money-holding sectors widely accepted as a medium of exchange, plus those convertible into a medium of exchange at short notice at, or close to, their full nominal value. Definitions and aggregation rules for broad money and its components are referenced (6.10–6.16; 6.17–6.60). - Monetary base: Central bank liabilities that support the expansion of credit and broad money. - Money-issuing sector: Sector constituted by all financial corporations that issue broad money liabilities; i.e., the depository corporations sector. - Monetary gold vs. Gold bullion: Monetary gold includes gold bullion and unallocated gold accounts with nonresidents that give title to claim delivery of gold; gold bullion defined as coins, ingots, or bars with purity of at least 995 parts per thousand. ### Institutional sectors, units, and residency - Institutional unit: Economic entity capable, in its own rights, of owning assets, incurring liabilities and engaging in economic activities and transactions with other entities. - Institutional sector: Units are allocated according to the nature of their economic activity. Major sectors covered include central bank, depository corporations, other financial corporations, general government sector, nonfinancial corporations, households and NPISHs. - Residence and center of predominant economic interest: Residence defined by strongest connection expressed as center of predominant economic interest; center of predominant economic interest operational definition includes actual or intended location for one year or more. - Central government subsector: Consists of institutional units of the central government plus nonmarket nonprofit institutions controlled by the central government; the central government’s political authority extends over the entire territory of the country. ### Financial instruments, markets, and contracts - Debt security, bond, bill, note, and related instruments: Definitions provided for bond, bill, debenture, deep-discount bond, zero-coupon bond, and face value. Accrued interest calculations for bonds highlighted (5.110–5.119, Box 5.2). - Derivatives and options: Financial derivative defined; option contract, American option, Bermuda option, European option, barrier option, binomial-tree and Black-Scholes pricing models referenced. - Securitization and structured products: Asset-backed security (ABS), collateralized debt obligation (CDO), collateralized mortgage obligation (CMO), securitization vehicle/SPE/SPV definitions included. - Repos and tri-party repos: Repurchase agreement (repo) and tri-party repo definitions included; reverse repo defined as repo from perspective of securities taker. - Money market instruments and MMFs: Money market fund (MMF) definition and eligible instrument characteristics stated. ### Risk, provisions, and adjustments - Provisions for loan losses: Allowances constituted by financial corporations against bad or impaired loans, based on their judgment as to the likelihood of losses. - Revaluation and holding gains/losses: Revaluation defined as increase/decrease in monetary value of assets or liabilities because of changes in prices and/or exchange rates. - Nonperforming loan (NPL) definition and thresholds reiterated (90 days or other evidence of impairment). *Chapter 8. Blackwell. Malden, Massachusetts.* ### Box 6.1 ### Box 6.1 ### Scope and main topics - Addresses foreign currency: "foreign currency, 6.52" - Identifies "holder and issue sectors of, Box 6.1" - Addresses "levels of, 6.76, Box 6.1" ### Financial instruments and deposit types referenced - money market fund (MMF) shares, 6.47 - nontransferable deposits, 4.43–4.51, 6.31–6.36 - transferable deposits, 4.30–4.42, 6.21, 6.27–6.30 ### Institutional and sectoral scope - "sectors within, 6.61–6.75" *Monetary and Financial Statistics Manual and Compilation Guide — Box 6.1* ### Box 3.1 ### Box 3.1 ### Institutional sectors, units, and related definitions - Households: referenced at 2.26, 3.7–3.10, 3.259–3.262, Box 3.1; includes domestic staff (3.261); institutional households (3.262); residence of households (3.58). - Household unincorporated market enterprises: 3.220–3.221, 3.263–3.266. - Institutional sectors: changes in number of subsectors of (1.11); examples of disaggregated sectors in Table 8.10; main types of institutional sectors in 3.101, Box 3.1; differences between monetary statistics and 2008 SNA in 2.26–2.29. - Institutional units: attributes (3.4); definition (3.3); legal or social entities (3.11–3.50); residence rules (3.55–3.99). - Legal or social entities: corporations (3.13–3.38); nonprofits (NPIs) 3.39–3.48, 3.82; government units (3.49–3.50); definition (3.11). - Money-related institutional types listed in Box 3.1: Money lenders, Money market funds (MMF) definition (3.144) and recording (5.171–5.172), Market nonprofit institutions (NPIs) 3.42–3.44, National private nonfinancial corporations (NFCs) 2.28, 3.216–3.218, Box 3.1. - Local governments and related entries: Local governments 2.29, 3.250–3.254, Box 3.1. - Insurance corporations and related: Insurance corporations 2.27, 3.190–3.195, Box 3.1; Insurance auxiliaries 3.170; Insurance contracts 4.188, 5.183. ### Monetary and financial statistics framework and manuals - Monetary and Financial Statistics Manual and Compilation Guide (Manual): structure (1.17–1.39); differences with 2008 SNA (2.23–2.44); purposes (1.1–1.3); revisions (1.10–1.16). - Monetary and Financial Statistics Manual (MFSM) and MFS Guide references: MFSM (1.2, 1.4, 1.9, 1.10–1.16); Monetary and Financial Statistics Compilation Guide (MFS Guide) (1.2, 1.5, 1.9, 1.10–1.16). - Monetary and financial statistics: framework for (7.6–7.18, Figure 2.1); institutional coverage (7.128–7.135); scope (2.4–2.6); relationship with 2008 SNA and other manuals (2.21–2.23). - Monetary statistics specifics: compilation framework Figure 2.1; differences with 2008 SNA Table 2.1; external sector statistics links A1.14–A1.24; government finance statistics links A1.10–A1.13; overview 2.7–2.16. - Monetary statistics reporting standards: accrual accounting (2.59); loan asset values (2.62–2.63); presentation/classification/valuation overview (2.45–2.49); periodicity and timeliness (2.65–2.69); revaluation (2.58); sectoring (2.53–2.54); terminology (2.50–2.52); time of recording (2.60–2.61); valuation (2.57). ### Financial instruments, valuation, and accounting treatments - Gold and monetary gold: allocated account (4.18–4.19); unallocated account (4.18–4.19, 4.44); monetary gold (4.15–4.19, 5.87–5.89); valuation (5.87–5.89); monetized and demonetized (5.90); nonmonetary gold (4.20, 4.27, 5.87, 5.89); Gold bullion (4.7, 4.16, 4.17, 5.89, 5.90); Gold loans (4.87, 4.88); Gold swaps (4.85–4.86, 4.88, 4.188). - Loans: definition (4.69); comparison vs. debt securities (4.116); vs. deposits (4.102–4.115); domestic-currency-denominated (5.127); foreign-currency-denominated (5.125); forms of disbursements (5.130); financial leases (4.89–4.92); expected losses on loans (5.144–5.148); impaired loans (4.100–4.101, 5.137–5.141); negotiation and participation (4.59, 4.94–4.97, 5.131–5.132); repurchase agreements (repo) (4.71–4.79); valuation principles (5.122–5.135); memorandum items (5.142–5.148); nonperforming loans and interest arrears (5.137–5.141); types of loans Box 5.4; loan valuation (2.57). - Debt securities and indexed instruments: Indexed debt securities (4.68, 5.53–5.59, 5.271, Box 5.2); indexed instruments (4.216, 5.53–5.59); Indexed basis debt securities (4.55); Infrequently traded debt securities valuation (5.261–5.262). - Deposits and related items: Giro account (4.102); import deposits (4.46, 6.38); impaired deposits (4.46); insured deposits (4.107); items in process of collection (4.195, 5.229, 7.34, 7.57). - Financial derivatives and margins: Interest rate swaps entries (4, 4.169, 170, Table 4.2) and valuation/recording (5.337–5.342); initial margin and margins (4.48; 4.43, 4.47–4.51, 4.109, 4.189); margin account (4.109); initial recognition (2.50). - Investment funds, shares, and valuation: Institutions for collective investment (3.149); Investment fund shares recording and valuation (4.134–4.136, 5.171–5.177, 2.37); investment pooling and pools (3.149, 3.184, 5.174); non–money market (MMF) investment funds (2.27, 4.134, 4.136, Box 3.1) and valuation (2.37, 5.173); Market capitalization method (MCM) (5.160); Net asset value (5.160). - Valuation concepts and practices: Market price (5.38–5.39); Market value/market-equivalent value (2.51, 5.49, 5.160, 5.260, 5.279); valuation of holdings (2.57, 4.120); holding gains and losses (revaluations) references. ### Accounts, aggregates, and reporting - IMF-related accounts and instruments: IMF accounts recording (4.242–4.243); IMF Managed Trust Accounts (4.241); IMF No. 1 Account and No. 2 Account (4.36, 4.195, 4.245); IMF Securities Account (4.36, 4.195, 4.245); IMF quota subscription (4.195, 5.229); IMF functions and accounts (4.235–4.240, 4.241). - Monetary base and monetary liabilities: Monetary base components and definition (6.89–6.100; components Box 6.3; definition 6.93; standard and national components Box 6.4); monetary liabilities cross-classification (4.207); monetary liabilities and net claims on central government (5.64, 6.85, 7.14, 7.68). - Money aggregates and classification: Money aggregates (6.77–6.78, Box 6.2); rationale for aggregates (6.8–6.9); measures of liquidity and examples (Box 6.6; Box 6.5 for sectors and liabilities); money-holding/issuing/neutral sectors (6.62–6.66, 6.73–6.74). - International reserves and external statistics: International reserves entries (3.115, 3.117, 6.154, 7.65); International Reserves and Foreign Currency Liquidity: Guidelines for a Data Template (4.246, 4.248, 7.38); International Investment Position references (5.170, 6.140–6.141, A1.14, A1.17, A1.24); links to external sector statistics A1.14–A1.24. - Reporting and metadata: Metadata references (7.147, Box 5.3); macroeconomic datasets and systems (2.21–2.22, 7.49); national data release and national publications (7.145–7.147). ### Selected cross-references and specialized topics - Insurance, pension, and standardized guarantee schemes (IPSGS): 4.137–4.142, 6.60; claims of pension funds on pension manager (4.150–4.151); life insurance and annuity entitlements recording (5.179, 5.186–5.190); nonlife insurance technical reserves (4.143); pension entitlements (4.148); reinsurance (4.145); recording valuation of insurance (5.178–5.180). - Impairment and provisions: Impaired financial assets disposal and provisions (3.163; 4.199; 5.231); impaired debt securities (5.107–5.109); impaired deposits (4.46); write-offs and recoveries (5.84; 5.231). - Net positions and flow measures: Net foreign assets (5.64); net financial investment (8.30, 8.33, 8.47); net lending/borrowing (8.18–8.19, 8.47); net worth comparisons with 2008 SNA (2.35). *Monetary and Financial Statistics Manual and Compilation Guide — Box 3.1.* ### Box 3.1 ### Box 3.1 ### Scope and focus - Box 3.1 in the Monetary and Financial Statistics Manual and Compilation Guide groups and highlights specific institutional sectors, subsectors, and related statistical surveys referenced elsewhere in the Manual. - Entries linked to Box 3.1 in the index include public sector subsectors, nonprofit subsectors, and categories of financial corporations and depository corporations. ### Institutional sectors and subsectors referenced - Public: 2.28, 3.207–3.214, Box 3.1 - Public nonfinancial corporations (PNFCs): 2.28, 3.207–3.214, Box 3.1 - State, provincial, or regional governments: 2.29, 3.245–3.249, Box 3.1 - Nonmarket nonprofit institutions (NPIs): 3.45–3.48 - Nonmarket NPIs — central-government controlled: 3.231–3.232 - Nonmarket NPIs — state-government controlled: 3.245–3.249 - Nonmarket NPIs — local-government controlled: 3.250–3.254 - Nonprofit institutions serving households (NPISHs): 2.26, 3.267–3.270, Box 3.1 - Pension funds: 2.27, 3.196–3.201, Box 3.1 - Pension fund auxiliaries: 3.170 - Pension entitlements and recording: 4.148, 5.21, 5.179, 5.191–5.197 - Other resident sectors and other nonfinancial corporations: 3.100, 6.22, 6.88, 6.91, 7.14, 7.50; 3.215, 7.56 ### Financial corporations, depository corporations, and related surveys - Other depository corporations (ODCs) - definition: 3.123 - deposit-taking corporations except central bank: 3.124–3.143 - money market funds (MMFs): 3.144–3.146 - in liquidation: 6.42–6.44 - data reporting by ODCs: 7.114 - Other depository corporations survey (ODCS): 2.11, 2.27, 7.7, Box 3.1, Table A3.2 - Other financial corporations (OFCs) - general references: 2.27, 3.147–3.148, 6.116, Box 3.1 - subcategories identified: captive financial institutions (2.27, 3.34, 3.35, 3.181–3.189, Box 3.1); financial auxiliaries (2.27, 3.166–3.179, Box 3.1); insurance corporations (2.27, 3.190–3.195, Box 3.1); money lenders (2.27, 3.184, Box 3.1); non–money market funds (non-MMFs) (3.149–3.152); other financial intermediaries except ICPFs (2.27, 3.153–3.165, Box 3.1) - data reporting by OFCs: 7.116–7.119 - Other financial corporations survey (OFCS): 2.11, 2.16, Table A3.4 ### Data, sectoring, and reporting context - Box 3.1 entries are tied to sectoring and surveys used for compiling monetary and financial statistics (see references to source-data and reporting guidance in 7.7, 7.70–7.78, 7.91–7.106). - The Box’s items link institutional definitions with practical data-collection instruments such as ODCS and OFCS and with the Manual’s sector classification guidance. --- _Source: https://www.imf.org/-/media/files/data/guides/mfsmcg-final.pdf_