## 2028 Monetary and Financial Statistics Manual (MFSM) — Proposed Recommendation 2.7 Financial Derivatives by Type ## Source details **Canonical URL:** [2028 Monetary and Financial Statistics Manual (MFSM) — Proposed Recommendation 2.7 Financial Derivatives by Type](https://www.imf.org/-/media/files/data/statistics/mfsac/recommendations/pr-mfs-update-27-financial-derivatives-by-type.pdf) ## Other formats - [Markdown version](/-/media/files/data/statistics/mfsac/recommendations/pr-mfs-update-27-financial-derivatives-by-type.pdf.md) - [Structured JSON version](/-/media/files/data/statistics/mfsac/recommendations/pr-mfs-update-27-financial-derivatives-by-type.pdf.json) --- ### Summary - Prepared by the MFSAC Secretariat for the Monetary and Financial Statistics Advisory Committee (MFSAC) for Global Consultation on the 2028 Monetary and Financial Statistics Manual (MFSM). - Links to related guidance: F.4 Financial Derivatives by Type; 2025 System of National Accounts (SNA) and Integrated Balance of Payments and International Investment Position Manual, Seventh Edition (BPM7). - Global Consultation(s): SNA Consultation: May 2021. - Discussions at the Advisory Expert Group on National Accounts (AEG): July 2021. - Discussions at MFSAC Meeting(s): March 2026. - Summary of proposed changes: - Broaden and refine classification and presentation of financial derivatives in line with the 2025 SNA and BPM7. - Introduce more granular classifications by market risk categories in the framework and require supplementary information on classifications by instruments and trading venues. - Explicitly recommend reporting of the notional amounts of derivatives. - Offer methodological guidance for novation and portfolio compression. - Clarify separation of exchange rate changes from other revaluations for financial derivatives. - Clarify when net recording of stock positions in financial derivatives is acceptable while maintaining gross recording as the standard. ### Background and Issues - Existing manuals (SNA 2008, BPM6, MFSMCG and 2014 GFSM) present derivatives largely as two broad categories: forward-type contracts and options, with identification of standard instrument types under each category. - GN F.4 (Financial Derivatives by Type) identifies gaps: - The broad presentation provides no characterization of the risks associated with different types of derivatives. - Some derivatives (e.g., credit default swaps) have a dual nature and cannot be easily classified within the two-category scheme. - GN F.4 proposes classifications by: (a) market risk category as standard component, (b) instrument, and (c) trading venue. - BPM7 (paras 5.109-5.111) and 2025 SNA (paras 12.139-12.140) introduce three breakdowns for financial derivatives: - (a) by market risk — as the standard breakdown; - (b) by instrument — as a supplementary breakdown; - (c) by trading venue — supplementary breakdown. - When derivatives span multiple risk categories and cannot be reported separately, revised manuals recommend reporting them under a single risk category based on the most significant underlying risk. If doubt exists, allocation should follow BIS order of precedence: equity, foreign exchange, single-currency interest rate, credit, commodity, and other. - Importance of identifying foreign currency derivatives as a distinct market-risk category: - Foreign currency derivatives are characterized by very large volumes and may entail actual exchanges of currencies that affect balance-sheet currency composition. - Notional values: - GN F.4 highlights usefulness of reporting notional values of foreign exchange related derivatives to assess currency exposures. - BPM6 memorandum tables require notional amounts as memorandum items; MFSMCG includes notional values as supplementary information. - Few countries could provide these data historically; 2025 SNA (para 12.141) and BPM7 (paras A7.46-A7.48) reflect the usefulness of currency composition of notional values. - 2028 MFSM shall explicitly recommend reporting notional amounts of derivatives. - Post-trade activities: - Absence of methodological guidance in macroeconomic statistics manuals for recording novation and portfolio compression. - Novation: replacement of a bilateral contract between two market participants by two bilateral contracts between each original party and a clearing house (CCP). - Portfolio compression: replacing a number of derivatives contracts among participants with fewer new contracts. - BPM7 (Box A7.1.) and 2025 SNA provide clarification and guidance on recording Post Trading Activities in Financial Derivatives; these should be incorporated into 2028 MFSM. - Revaluation classification for derivatives with foreign exchange component: - GN recommends that where it is not practical to separate exchange rate changes from other revaluations, all such revaluations should be classified as due to other price changes rather than exchange rate revaluations (contrast to BPM6 para 9.31). - BPM7 (para A7.31) supports recording such revaluations as due to other price revaluations when separation is impractical. - Net recording of assets and liabilities: - 2025 SNA (para. 25.83) and BPM7 (A7.26) note net recording of financial derivatives is acceptable only when gross recording is impractical (example: several payments by both counterparties within a period when a derivative switches between asset and liability positions). - MFSMCG recognizes netting needs may be relatively rare due to unavailability of gross source data (para 2.44 f8, 5.62); updated 2028 MFSM should align with 2025 SNA and BPM7 guidance. ### Proposed Recommendations - Consider whether further aspects of the 2025 SNA (Chapter 25, Selected Issues in Financial Instruments, Section C on Financial Derivatives) should be included in the 2028 MFSM (for example, paras 25.84-25.86, 25.42-25.44, 25.63) or direct users to the 2025 SNA for context. - Introduce granular classification of financial derivatives by market risk categories as supplementary reporting in line with 2025 SNA (paras. 12.139 and 25.87-25.92): - Market risk categories: foreign currency derivatives; single currency interest rate derivatives; equity derivatives; commodity derivatives; credit derivatives; and other derivatives. - Introduce supplementary reporting breakdowns in line with 2025 SNA (paras. 12.140 and 25.92-25.93): - By instrument: options; forwards and related instruments (other than futures and swaps); futures; swaps; credit derivatives; and other and hybrid derivatives. - By trading venue: exchange-traded derivatives; OTC derivatives (cleared); and OTC derivatives (not cleared). - Update Table 7A.8 of the MFSMCG to reflect the latest instrument breakdown in the 2025 SNA. - As a memorandum item to the standard MFS presentation, introduce a breakdown of financial derivatives into foreign currency derivatives and all other derivatives. - Provide methodological guidance on novation and portfolio compression in line with 2025 SNA (paras. 12.135-12.136 and 25.76-25.77), including: - Identification of eligible contracts; - Obtaining consent from all parties involved; - Time of recording of the novation. - For portfolio compression: guidance on value, parties involved, and time of recording. - Include guidance on separating exchange rate changes from other revaluations for financial derivatives: - For derivatives with a foreign exchange component where separation is not practical, record all revaluations as due to other price revaluations in line with BPM7 (para A7.31). - Introduce a paragraph to align with 2025 SNA (paras 25.82-25.83) and BPM7 (para A7.26) clarifying net recording conditions: - Net recording is only acceptable in specific cases, such as when several payments by both counterparties occur in a period when a derivative switches between an asset and liability position (para 5.217c). - Emphasize the importance of reporting notional values for derivatives linked to foreign currencies. ### Rationale for Proposed Recommendations - Aim to ensure the updated MFSMCG captures the evolving nature of financial markets. - Assist in providing more analytically useful measures for financial stability analysis and financial sector management. - Bring 2028 MFSM further into alignment with other derivative datasets (in particular the BIS OTC derivatives statistics) by emphasizing granular reporting by the same categories. ### Proposed Text for the 2028 MFSM Update - Expand text on financial derivatives in the 2028 MFSM based on the 2025 SNA and BPM7 as outlined in the recommendations above. --- _Source: https://www.imf.org/-/media/files/data/statistics/mfsac/recommendations/pr-mfs-update-27-financial-derivatives-by-type.pdf_