## 2028 Monetary and Financial Statistics Manual (MFSM) — Proposed Recommendation 2.5 Reverse Transactions ## Source details **Canonical URL:** [2028 Monetary and Financial Statistics Manual (MFSM) — Proposed Recommendation 2.5 Reverse Transactions](https://www.imf.org/-/media/files/data/statistics/mfsac/recommendations/pr-mfs-update-25-reverse-transactions.pdf) ## Other formats - [Markdown version](/-/media/files/data/statistics/mfsac/recommendations/pr-mfs-update-25-reverse-transactions.pdf.md) - [Structured JSON version](/-/media/files/data/statistics/mfsac/recommendations/pr-mfs-update-25-reverse-transactions.pdf.json) --- ### Summary - Prepared by the MFSAC Secretariat, Monetary and Financial Statistics Advisory Committee (MFSAC). - Links to related guidance: - F.3 Reverse Transactions - 2025 System of National Accounts (SNA) and Integrated Balance of Payments and International Investment Position Manual, Seventh Edition (BPM7) - Global consultations and discussions: - BPM Consultation: February 2021 - BOPCOM: February 2021 - MFSAC Meeting(s): March 2026 - Summary of proposed recommendations: - (i) Maintain the methodological framework of recording reverse transactions. - (ii) Include illustrative example on recording reverse transactions in the MFS for the recording of negative assets for short-sales. - (iii) Provide additional guidance regarding reverse transactions, including clarification on recording of “manufactured interest” or “manufactured dividends” payments. - (iv) Briefly discuss the recording of reverse transactions on commodities. - (v) Stress the analytical value of separate identification of repo-related transactions and positions as supplementary information. ### Background and Issues - Definition and scope: - Reverse transactions are arrangements that involve a change of legal ownership of securities or gold with a commitment to repurchase the same or similar securities or gold, either on a specific date or with open maturity. - MFSMCG references repos, securities lending, gold swaps and gold loans but lacks a general definition beyond that reference (para 4.88). - Key methodological context: - The existing methodological framework based on economic ownership in earlier manuals (2008 SNA, BPM6, MFSMCG and 2014 GFSM) remains fully relevant. - GN F.3 revisited concepts, definitions, and treatments to ensure consistent recording across arrangements and identified areas requiring additional guidance and clarifications. - Issues examined in GN F.3: - Recording of short (negative) positions and their income streams, including from-whom-to-whom implications (BPM7 A7.58-A7.59; 2025 SNA paras 12.83; MFSMCG para 4.77). - Treatment of manufactured dividends/interest and the recommendation to record such payments as positive credits/revenues for the security lender and negative credits/revenues for the security borrower (BPM7 A7.60-A7.63; 2025 SNA paras 8.124-8.125, A4.93). - Clarification that the security lender should identify the partner for manufactured interest/dividends by the economy and sector of the security issuer, not by the security borrower who pays the manufactured interest/dividends. - Recording of reverse transactions on commodities (2025 SNA para 12.85) and encouragement to compile supplementary data on collateralized securities, gold, and other items (BPM7 para A7.67). - Existing MFSMCG coverage: - Discusses repos (paras 4.71-4.79), securities lending (paras 4.80-4.84), and gold swaps and gold loans (paras 4.85-4.87) but lacks an explicit glossary definition for reverse transactions. ### Proposed Recommendations - Adopt the definition of reverse transactions as used in the 2025 SNA Glossary of SNA Terms and Definitions, and add it to the MFSM Glossary, noting the recording of reverse transactions on commodities (SNA para 12.85). - Include illustrative example on recording reverse transactions in the MFS, including when negative positions emerge because of on-selling of underlying securities to third parties. - Reflect the treatment of interest and dividends under reverse transactions as described in: - 2025 SNA (paras 8.124-8.125, A4.93) - BPM7 (paras A7.60-A7.62) - For example, include a box that incorporates illustrative examples in the GN Annex II tables as additional guidance to compilers. - Encourage compiling supplementary data on deposits and collateralized securities, gold, and other items (i.e., commodities) under reverse transactions. - Consider including a reference to manufactured dividends in the discussion on Other accounts payable/receivable – Other[F89] (paras 4.195a, 4.197a). ### Rationale for Proposed Recommendations - Ensure clarity and consistency in the treatment of different types of reverse transactions across statistical frameworks. - Address gaps in MFSMCG by aligning MFSM text with clarifications in the 2025 SNA and BPM7 on negative positions, manufactured interest/dividends, and recording of reverse transactions involving commodities. - Emphasize the analytical value of separately identifying repo-related transactions and positions as supplementary information, particularly for economies active in reverse transactions (BPM7 para A7.67). ### Proposed Text and Illustrative Treatment (Aligned Extracts) - Definition (SNA Glossary): "Contractual arrangements involving a change of legal ownership of securities, gold or other assets (e.g., commodities) with a commitment to repurchase the same or similar securities, gold or other assets, either on a specified date or with open maturity." - 2025 SNA para 8.125: The economic owner of securities continues recording the accrual of interest and dividends on the securities, including when the security is further on-sold to a third party. If the reverse transaction covers the period when interest and dividends are payable, and during that period the taker has on-sold the asset, then the security taker (borrower) is typically obliged to compensate the security provider (lender). In such cases, it is recommended to record positive credit in interest, or dividends, for the security lender, and negative credit in interest, or dividends, for the security borrower. - BPM7 para A7.60: The economic owner of securities continues to record dividends and the accrual of interest on the securities even when the legal ownership changes under a reverse or a custodian has on-sold the securities to a third party. If the reverse transaction covers the period when dividends or coupons are payable, the security taker is typically obliged to pass these amounts on to the security lender. Even if securities under a reverse transaction are on-sold by the security taker to a third party, the security taker is still obliged to compensate the amounts to the security lender. The payments are called “manufactured interest” or “manufactured dividends.” - BPM7 para A7.61: Manufactured interest and dividends corresponding to on-sold securities are recorded as positive credits/revenues for the security lender and negative credits/revenues for the security borrower (i.e., the on-seller who pays the manufactured interest or dividends). The recording of negative credits/revenues for the security borrower provides coherence between income and positions in the underlying instrument. It reflects the negative position in the security the borrower records on the balance sheet and IIP, and for debt securities, it would match an increasing negative asset position when interest accrues. The recording of negative credits/revenues in interest/dividends for the security borrower also offsets the double-recording of positive credit (by the security lender and the security holder to whom the security is on-sold). - SNA para 12.85: Reverse transactions that involve commodities (or potentially other non-financial assets) are recorded in the same way as the above reverse transactions for securities and gold. - BPM7 para A7.67: Reverse transactions are not separately identified in the standard presentation of the external accounts. Provision of cash is recorded under loans or deposits, but assets used as collateral (e.g., securities) are not recorded because there is no change in their economic ownership. To identify these items, a table could be compiled on a supplementary basis to show loans/deposits and collateralized securities, gold, and other items (i.e., commodities) under reverse transactions, covering movements of these assets comprehensively regardless of the change in their economic ownership. This information may have high analytical value, particularly for economies that are actively involved in reverse transactions. --- _Source: https://www.imf.org/-/media/files/data/statistics/mfsac/recommendations/pr-mfs-update-25-reverse-transactions.pdf_