## Handbook on Securities Statistics

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### Foreword, purpose, and institutional authorship
- Handbook objective: clarify concepts and provide guidance on harmonized presentation of securities data to enable better collection and international comparability (Bank for International Settlements; European Central Bank; International Monetary Fund).
- Identified as the first publication focused exclusively on the conceptual framework for securities statistics; prepared jointly by BIS, ECB, and IMF under the Working Group on Securities Databases (WGSD), chaired by the ECB.
- Sponsors and lead officials named: Claudio Borio (BIS), Aurel Schubert (ECB), and Louis Marc Ducharme (IMF).

### Scope, conceptual foundations, and structure
- Scope:
  - Treatment of debt securities, equity securities, and investment fund shares or units, including special and borderline cases and specific operations (mergers, restructuring, securitization, privatization, nationalization, debt-for-equity swaps).
  - Extension of guidance beyond the 2008 SNA and BPM6 where necessary for securities-specific issues.
- Conceptual foundations: consistent with the System of National Accounts 2008 (2008 SNA) and the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6).
- Structure: combines three previously published parts:
  - Part 1: debt securities issues (published May 2009)
  - Part 2: debt securities holdings (published September 2010)
  - Part 3: equity securities statistics (published November 2012)
- Presentation framework: provides Type A (Residence of Issuer), Type B (Residence of Holder), and Type C (“From-Whom-to-Whom”) presentation tables and global aggregates.

### Policy relevance and intended users
- Intended outcomes:
  - Facilitate production of timely, relevant, coherent, and internationally comparable securities statistics.
  - Assist policymakers and analysts in monetary and fiscal policy formulation and financial stability analysis.
  - Assist national agencies compiling securities statistics within existing presentation frameworks.
- Policy uses emphasized:
  - Monetary policy: changes in wealth and asset prices, holdings by resident sectors (e.g., households) and nonresidents.
  - Fiscal policy: breakdowns by residence and sector for general government debt securities holders.
  - Financial stability: issuer-by-issuer data, holdings by currency, maturity, interest-rate type, and investor subsector (money-issuing corporations, insurance corporations, pension funds, non‑MMF investment funds).

### Main conceptual topics and institutional classification
- Definitions and negotiability:
  - Securities are negotiable financial instruments (2008 SNA, paragraph 11.33; BPM6, paragraph 5.15); negotiability criteria listed (legal transferability; standardization/ISIN; no recourse against previous holders).
  - Securities include debt securities, equity securities, and, to some extent, investment fund shares or units.
- Institutional units and sectors:
  - Institutional units defined by residence and economic activity; five resident sectors: nonfinancial corporations; financial corporations; general government; households; nonprofit institutions serving households (NPISHs).
  - Financial corporations subdivided into subsectors including Central bank (S121), Deposit-taking corporations except the central bank (S122), Money market funds (S123), Non-MMF investment funds (S124), Securitization corporations, Insurance corporations, Pension funds, Other financial intermediaries, Financial auxiliaries, Captive financial institutions and money lenders.
- Positions and flows:
  - Quadruple-entry accounting required; positions, transactions, revaluations, and other changes in volume satisfy Position_t – Position_t−1 = Transactions_t + Revaluations_t + Other changes_t.
  - Recording on an accrual basis when claims and obligations arise, are transformed or are cancelled.

### Classification schemes and presentation tables
- Core classification dimensions for debt securities:
  - Issuer (sector/subsector), currency, maturity (original/remaining), interest-rate type (fixed, variable, mixed), and market (domestic/international; “location of issue” vs “residence of issuer” approaches).
- Equity classifications:
  - Listed shares (F511) and unlisted shares (F512); ordinary and preferred shares; distinction between equity (F51) and other equity (F519).
- Presentation tables:
  - Type A: Residence of issuer (issuance statistics) — e.g., Table 1.2, Table 1.3.
  - Type B: Residence of holder (holdings statistics) — e.g., Table 1.4.
  - Type C: From-Whom-to-Whom matrix linking issuers and holders, including resident sectors and rest of the world — e.g., Table 1.5.
- Recommended debt securities issue tables (selected):
  - Table 9.1: Debt Securities Issues by Issuer, Currency, Maturity, Interest Rate, and Market.
  - Table 9.3: Debt Securities Issues by Issuer and Currency.
  - Table 9.4: Debt Securities Issues by Issuer and Maturity (short-term ≤ one year; long-term > one year and subgroups).
  - Table 9.5: Debt Securities Issues by Issuer and Interest Rate (Fixed; Variable: Inflation-linked, Interest rate-linked, Asset price-linked).
  - Table 9.6: Debt Securities Issues by Issuer: Positions and Flows (Position at end previous period; Net issues; Gross issues; Redemptions; Revaluations; Other changes; Position at end current period).

### “From‑Whom‑to‑Whom” framework and recording principles
- Purpose: detailed analysis of financing and investment relationships by issuer residence/sector and holder residence/sector; three‑dimensional tables security × issuer × holder.
- Two recording principles for secondary-market transactions:
  - Transactor principle: records transaction between transactors exchanging ownership; issuer accounts record holder reclassifications as "other changes in the volume of assets."
  - Issuer/holder (debtor/creditor) principle: records issuance and redemption-like entries to reflect change of holder in issuer’s liabilities; requires imputation when only positions are available.
- Implementation requirements for issuer/holder imputation:
  - An SBS database identifying each issue and initial creditor.
  - Link between SBS and holdings statistics by ISIN and holder identifiers.

### Positions, valuations, accrued interest, and price conventions
- Valuation principle: market value preferred for positions and transactions; liability positions also expressed in nominal value for additional information.
- Dirty vs clean price:
  - Dirty price includes accrued interest; clean price excludes accrued interest.
  - Accrued interest is calculated using debtor approach (Handbook recommendation) and day count conventions (paragraphs 5.47–5.58).
- Interest accrual approaches and implications:
  - Debtor approach (recommended): interest accrues on issuer’s liability continuously; revaluations recorded residually.
  - Creditor approach: interest accrues at current market yield; changes in market yield show up immediately in revaluations.
- Examples and illustrative tables:
  - Box 5.1 five-year fixed-rate bond example with selected data points (Dirty and Clean Prices table excerpts):
    - Beginning of quarter 1: Market value (dirty price) 1,000.0; Accrued Interest 0.0; Clean price 1,000.0.
    - End of quarter 1: Market value 1,024.1; Accrued Interest 24.1; Clean price 1,000.0.
    - End of quarter 2: Market value 1,048.8; Accrued Interest 48.8; Clean price 1,000.0.
    - End of quarter 4 = Beginning of quarter 5: Market value 969.0; Accrued Interest 0.0; Clean price 969.0.
    - End of quarter 20: Market value 1,100.0; Accrued Interest 100.0; Clean price 1,000.0.
    - End or quarter 20: Market value 1,000.00; Accrued Interest 0.0; Clean price 1,000.0.
  - Annex stock-flow examples (Table A.1.1 — fixed-interest bond issued at par):
    - Issue price: 1,000; annual coupon 100; original maturity: 5 years; sample market values and cumulative revaluations shown across years (market values: 1,000.0, 969.0, 1,025.3, 1,054.2, 982.1, 1,000.0; cumulative revaluations: -31.0, 25.3, 54.2, -17.9, 0.0).

### Specific instruments and borderline cases
- Debt securities examples: bills, bonds, notes, negotiable certificates of deposit, commercial paper, debentures, asset-backed securities (ABS), covered bonds, credit-linked notes (CLN), structured debt securities, zero-coupon bonds, STRIPS.
- Equity instruments and variants:
  - Ordinary shares, listed (F511) and unlisted (F512); preferred shares with subtypes (cumulative, noncumulative, participating, nonparticipating, convertible, redeemable, retractable, straight perpetual, rate reset, floating rate, structured preferred).
  - Scrip dividends, bonus shares, stock splits, reverse splits, share buybacks (two recording approaches: national accounts treat buybacks as redemption; securities statistics may not net out).
  - Depository receipts (ADR, GDR, EDR, IDR): treated as direct ownership of underlying security; guidance to allocate receipts to residence of issuer of underlying security.
- Securitization:
  - Types: Type 1 (on‑balance‑sheet), Type 2 (true sale with securitization corporation), Type 3 (synthetic securitization).
  - Instruments: ABS (typically original term > one year), ABCP (original term ≤ one year), CDO, CLN.
  - Statistical classification: securitization debt securities are debt securities if holders lack residual claims on underlying assets.
- Reverse transactions, repos, securities lending, and short-selling:
  - Repos and securities lending with cash collateral treated as collateralized loans; securities remain economically owned by provider.
  - Securities lending without cash collateral: legal title passes but economic ownership treated as unchanged; no transaction in the underlying securities recorded.
  - Short-selling: record negative holding for the short-seller; accrued interest effects treated as negative income for the short-seller.
- Structured and Islamic securities:
  - Structured debt securities classification based on separability and primary characteristics (degree of principal at risk; type of return; participation; coupon; callable features).
  - Islamic securities (Sukūk): treated based on legal/Sharī’ah structure and whether negotiable; special treatment and criteria listed in Annex 3.

### Data collection, security-by-security (SBS) databases, and metadata
- SBS databases:
  - Micro-databases storing ISIN, issuer name/residence/sector/subsector, issue/redemption dates/prices, outstanding amount/market capitalization, coupons and dates, market values and events.
  - Three-stage production: data input; quality management; storage and output.
  - Benefits:
    - Enables flexible aggregates, position-flow reconciliation, detailed revaluations, issuer-by-issuer and holder-sector breakdowns.
    - Facilitates “from‑whom‑to‑whom” linkages and supports CPIS/CDIS coordination.
  - Costs and limitations:
    - Significant human, financial, and IT resources; high subscription costs for commercial data; legal and confidentiality constraints; manual reconciliation needs.
- Metadata recommendations (Annex A.5):
  - Three groups: specific securities metadata (regulatory environment, market arrangements), statistical metadata shared by financial statistics (classification, valuation, recording basis), and general statistical metadata (title, unit, frequency, start date, coverage, data source, methodology, timeliness, revision procedure).
  - Example metadata fields include Issuer sector, Issue currency, Issue market, Maturity (original/remaining), Interest rate type, Valuation (nominal/market), Recording basis (accrual), Grossing/netting, and Accounting system (quadruple-entry bookkeeping).

### Coordinated international surveys and global aggregates
- Coordinated Portfolio Investment Survey (CPIS):
  - Provides cross-border holdings of portfolio investment securities by economy of issuer; participants apply BPM5 definitions; participation voluntary (74 economies participated as of end-2013); annual data available from 2001; semi-annual collections encouraged with reduced dissemination lag.
- Coordinated Direct Investment Survey (CDIS):
  - Annual data on direct investment positions by immediate counterpart economy; covers equity and debt positions; initial results start for end-2009 with preliminary data nine months after reference period and revised data with total lag of 18 months.
- Global aggregates:
  - Tables proposed to present world and area aggregates for debt and equity securities (Tables 9.28–9.32) by country/group, residence, resident sector, currency, maturity, interest rate, and type of equity security; aggregation requires reconciled national “from-whom-to-whom” data.

### Recommended presentation, reconciliation, and disclosure practices
- Recommended reporting conventions:
  - Positions and transactions in market value; issues and holdings can be also presented in nominal value (liabilities).
  - Transactions presented net (net issues or net acquisitions) with gross details optional (gross issues, redemptions, gross acquisitions, disposals).
  - Present revaluations and other changes in volume alongside transactions to satisfy identity: Position_end = Position_begin + Transactions + Revaluations + Other changes.
- Reconciliations and identities (selected):
  - All issuers = resident sectors + nonresidents.
  - All markets = Domestic market + International markets.
  - All currencies = Domestic currency + Foreign currencies.
  - All maturities = Short-term at original maturity + Long-term at original maturity (with long-term further disaggregations).
  - All interest rates = Fixed interest rate + Variable interest rate (Variable = Inflation-linked + Asset price-linked + Interest rate-linked).
  - All shares = Listed shares + Unlisted shares = Ordinary shares + Preferred shares.
  - Position at end of current period = Position at end of previous period + Transactions during current period + Revaluations during current period + Other changes in the volume during current period.

*Handbook on Securities Statistics — Bank for International Settlements; European Central Bank; International Monetary Fund*

### 1. Securities – Statistics – Handbooks, manuals, etc.  2. Securities – Information services.

### Handbook on Securities Statistics

### Foreword and purpose
- Emphasizes the importance of relevant, coherent, and internationally comparable securities statistics for analyzing financial intermediation domestically and internationally.
- Notes the G-20 Data Gaps Initiative and the Financial Stability Board/IMF work that endorsed development of improved securities statistics.
- Identifies the Handbook as the first publication focused exclusively on the conceptual framework for securities statistics, prepared jointly by the Bank for International Settlements (BIS), the European Central Bank (ECB), and the International Monetary Fund (IMF).

### Scope, objective, and structure
- Objective of the Handbook: to clarify concepts and provide guidance on harmonized presentation of securities data to enable better collection and international comparability.
- Scope: treatment of debt securities, equity securities, and investment fund shares or units; includes special and borderline cases and specific operations (mergers, restructuring, securitization, privatization, nationalization, debt-for-equity swaps).
- Conceptual foundations: consistent with the System of National Accounts 2008 (2008 SNA) and the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6); extends guidance beyond those standards where necessary for securities-specific issues.
- Structure: the Handbook combines three previously published parts into one volume covering:
  - Part 1: debt securities issues (published May 2009)
  - Part 2: debt securities holdings (published September 2010)
  - Part 3: equity securities statistics (published November 2012)
- Presentation framework: provides Type A (Residence of Issuer), Type B (Residence of Holder), and Type C (“From-Whom-to-Whom”) presentation tables and global aggregates for securities.

### Main conceptual topics and classifications
- Main features of securities:
  - Debt securities: characteristics and classifications by interest rate, maturity, currency, market, and default risk.
  - Equity securities: types of shares and share features.
- Financial instruments classified as securities and borderline cases: detailed guidance on what constitutes debt and equity securities and instruments not classified as securities.
- Institutional units and sectors:
  - Definitions of an institutional unit and residence.
  - Allocation of units to sectors and subsectors in accordance with the 2008 SNA.
- Positions, flows, and accounting rules:
  - Quadruple-entry accounting and time of recording.
  - Relationship between positions and flows, gross and net transactions, revaluations, and other changes in volume.
  - Valuation principles and guidance on aggregation, consolidation, and netting.

### Specific operations and measurement issues
- Securitization: conceptual treatment and process steps.
- Reverse transactions, short-selling, stripped securities, nominee accounts.
- Shareholders’ rights and subscription rights; bonus shares; stock splits and reverse splits; share buybacks.
- Mergers and acquisitions, privatization and nationalization, debt-for-equity swaps.
- Annexes addressing structured debt securities, Islamic securities, security-by-security (SBS) databases, valuation of unlisted shares, and metadata.

### Classification and breakdowns for statistics
- Classification schemes:
  - Issuance and holding by sector and subsector.
  - Classification by interest rate (fixed, variable), maturity, currency, market (domestic/foreign, institutional markets), and default risk.
- “From-Whom-to-Whom” framework:
  - Rationale and mechanics for recording securities issuance and holdings in a counterparty matrix.
  - Comparisons of the transactor principle versus the issuer/holder principle and implications for recording.
- Presentation tables and recommended breakdowns:
  - Type A, Type B, and Type C presentation tables with detailed tables for debt and equity issues and holdings by issuer, holder, residence, sector, currency, maturity, interest rate, and type of share.
  - Reconciliation tables across classifications and presentation of global aggregates.
  - Annexes and tables include examples and templates for debt securities issues and holdings, equity securities issues and holdings, and “From-Whom-to-Whom” matrices.

### Data collection, metadata, and databases
- Security-by-security (SBS) databases:
  - Attributes and stages in development for SBS databases.
  - Guidance on metadata structure definitions to facilitate compilation and dissemination of securities statistics.
- Coordination with international surveys:
  - Encourages use of the Handbook in the context of the IMF’s Coordinated Portfolio Investment Survey (CPIS) and Coordinated Direct Investment Survey (CDIS).

### Governance, authorship, and contributors
- Jointly prepared by BIS, ECB, and IMF under the Working Group on Securities Databases (WGSD), chaired by the ECB.
- Major contributors and WGSD members from BIS, ECB, and IMF listed; broad consultation with experts from many national central banks, statistical agencies, and international organizations.
- Sponsors and lead officials include: Claudio Borio (BIS), Aurel Schubert (ECB), and Louis Marc Ducharme (IMF).

*Handbook on Securities Statistics — Bank for International Settlements; European Central Bank; International Monetary Fund*

### Introduction

### Introduction

### Objective of the Handbook
- The Handbook on Securities Statistics (the Handbook) is the first publication exclusively dealing with the presentation of securities statistics.
- Objective: to improve information on securities markets by developing a conceptual framework for presenting statistics on different types of securities.
- Methodology: based on the System of National Accounts 2008 (2008 SNA) and the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6).
- Intended outcomes:
  - Facilitate the production of timely, relevant, coherent, and internationally comparable securities statistics.
  - Assist policymakers and analysts in monetary and fiscal policy formulation and financial stability analysis.
  - Assist national agencies preparing securities statistics within their existing presentation frameworks.

### Scope of the Handbook
- Covers the conceptual framework for position and flow statistics on securities, summarized with stylized presentation tables showing aggregate statistics on securities issues and holdings.
- Addresses broad conceptual issues related to the presentation of statistics on debt and equity securities to ensure continued relevance amid financial innovation and enable comparability across economies to develop meaningful global aggregates.
- Provides additional information on borderline cases, clarifying where debt securities are distinguished from equity securities and other financial instruments.
- Extends groupings used in international statistical standards and outlines new classifications (for example, distinguishing issues and holdings by money-issuing corporations, institutional investors, and securitization corporations, and showing debt securities by type of interest rate).

### Securities as Negotiable Financial Instruments
- Definition: Securities are negotiable financial instruments (2008 SNA, paragraph 11.33 and BPM6, paragraph 5.15).
- Negotiability: legal ownership is readily capable of transfer by delivery or endorsement; securities are designed to be traded on an organized exchange or “over the counter” (OTC). Evidence of actual trading is not required.
- OTC market: parties negotiate directly rather than on a public exchange.
- Scope: Securities include debt securities, equity securities, and, to some extent, investment fund shares or units.

### Debt Securities, Equity Securities, and Investment Fund Shares or Units
- Debt securities:
  - Are negotiable financial instruments serving as evidence of a debt (2008 SNA, paragraph 11.64).
  - Classified under financial instrument category “debt securities” (F3) in the 2008 SNA.
- Equity securities:
  - Negotiable financial instruments entitling holders to a share of distributed profits and the residual value of the corporation (2008 SNA).
  - Part of financial assets and liabilities category “equity and investment fund shares or units” (F5), subcategory “equity” (F51).
  - Subdivisions: listed shares (F511) and unlisted shares (F512).
  - Participation in quasi-corporations is “other equity” (F519) and is not included in equity securities (2008 SNA, paragraph 11.88).
- Investment funds:
  - Collective investment schemes issuing investment fund shares or units (F52) to acquire financial or nonfinancial assets.
  - Open-ended investment fund shares or units are not usually negotiable and therefore are not classified as equity securities.
  - Closed-ended investment fund shares or units are typically negotiable and are covered in the Handbook.

### Use of Securities Statistics for Policy Analysis
- Rationale: Because securities carry obligations to make future payments, they can render an economy or sectors vulnerable to solvency and liquidity problems, with implications for financial stability and monetary and fiscal policy.
- Monitoring and measurement: Securities markets need to be monitored and measured to inform policy and stability analysis.

### Statistics on Debt Securities
- Purpose: Required for monetary and fiscal policy and financial stability analysis.
- Perspectives covered: issuer’s side (issuance statistics) and holder’s side (statistics on holdings) using a “from-whom-to-whom” approach linking issuance and holdings.
- Monetary policy relevance:
  - Interest in changes in wealth conditions and asset prices related to debt securities held by resident sectors (e.g., households) and nonresidents.
  - Data broken down by residence and sector on holders of debt securities issued by general government are required for fiscal policy analysis.
- Financial stability relevance:
  - Requires detailed breakdowns: holdings classified by individual issuer, currency, maturity, type of interest rate, or type of debt security (e.g., asset-backed securities (ABS)).
  - Issuer-by-issuer data may be required for systemically relevant investors (e.g., large and complex financial groups).
  - Breakdown of investors by financial corporation subsector is useful (money-issuing corporations, insurance corporations, pension funds, and non-MMF investment funds).
- Security-by-security (SBS) databases: can complement holdings statistics and address borderline cases and related operations; guidance on debt securities statistics provided by issuer, currency, maturity, type of interest rate, and country.

### Statistics on Equity Securities
- Perspectives covered: issuer’s side (issuance statistics) and holder’s side (statistics on holdings) using a “from-whom-to-whom” approach.
- Presentation: Issues and holdings of equity securities are presented in an unconsolidated form (recommended for monetary policy analysis and consistent with the 2008 SNA).
  - All gross positions, transactions, revaluations and other changes in the volume of assets and liabilities in equity securities of institutional units are summed.
  - Transactions and positions of institutional units in a sector or subsector are shown vis-à-vis all institutional units in all sectors of an economy and in other economies, including those in the same sector or subsector.
- Monetary policy relevance:
  - Information on equity securities held by resident sectors (corporations, households, general government) and by nonresidents enhances analysis of investment in financial assets and cross-border corporate finance.
- Financial stability relevance:
  - Requires more detailed breakdowns: issues and holdings broken down by individual issuer (or consolidated for each corporate group) and by type of equity security (e.g., listed and unlisted shares).
  - Breakdown by type of investor is useful, particularly for equity securities held by subsectors of the financial corporations.

### Coordinated Surveys (CPIS and CDIS)
- CPIS (Coordinated Portfolio Investment Survey):
  - Provides information for each contributing country on cross-border holdings of portfolio investment securities, aggregated by type of security (equity and debt securities valued at market prices) and by country of issuer.
  - Participants apply definitions and classifications set out in the Balance of Payments Manual, fifth edition (BPM5).
- CDIS (Coordinated Direct Investment Survey):
  - Provides annual data on direct investment positions by immediate counterpart economy, broken down between equity and debt for inward direct investment and, where relevant, for outward direct investment as of end of year.
- Reference: see Annex 6.

### The Conceptual Framework
- Heterogeneity of securities markets: Development of securities markets has been determined by national regulations for listing, trading, and settlement; markets differ considerably across countries and statistical presentations vary.
- Objective: Develop a standard conceptual framework consistent with international statistical standards (2008 SNA and BPM6).
- Definitions: Used to identify, classify, value, and record positions and flows of securities are in line with the 2008 SNA and BPM6.
- Benefits of consistent application:
  - Enables comparisons within an economy and across countries.
  - Promotes efficiency in data preparation, facilitates understanding, and improves analytical power.
  - Complements standards by improving the quality of monetary, financial, government finance, balance of payments and international investment position statistics, financial accounts, and financial balance sheets.
  - Useful to estimate accrued interest and revaluations due to changes in interest rates and exchange rates.
- References to other manuals and guides: MFSM and MFSCG, GFSM 2014, Coordinated Portfolio Investment Survey Guide, second edition, Coordinated Direct Investment Survey Guide, External Debt Statistics Guide, Public Sector Debt Statistics Guide (as noted in the Handbook).

### Presentation Tables and Approaches
- Three sets of presentation tables provided:
  - Type A presentation table (e.g., Tables 1.2 and 1.3): “residence of issuer” approach, grouping resident institutional units that issue debt and equity securities in line with international statistical standards.
  - Type B presentation table (e.g., Table 1.4): “residence of holder” approach, grouping resident institutional units that hold debt and equity securities.
  - Type C presentation table (e.g., Table 1.5): “from-whom-to-whom” approach showing issuance and holdings of securities.
- Table design: May show, for a given period, initial positions at the beginning of the period, transactions and other flows (revaluations and other changes in the volume of assets and liabilities) during the period, and closing positions at the end of the period for securities issued by resident and nonresident institutional units.
- Resident sectors: Resident institutional units issuing or holding securities are grouped into five resident sectors: nonfinancial corporations, financial corporations, general government, households, and nonprofit institutions serving households (NPISHs).
- “Residence of Issuer” approach (Type A):
  - Table 1.2 summarizes securities issuance by aggregating resident institutional units issuing debt or equity securities into main institutional sectors.
  - Table 1.2 includes a breakdown of holders by place of residence (residents and nonresidents) and shows securities issued by nonresidents and held by residents in a specified cell.
  - Securities issued by nonresidents and held by nonresidents are not covered from a national economy’s perspective.
- “Residence of Holder” approach (Type B):
  - Table 1.4 shows securities holdings of resident and nonresident institutional units with the same sectoring as Table 1.2.
  - Table 1.4 includes a breakdown of issuers by place of residence; securities held by nonresidents and issued by residents are identified in a specified cell.

*Handbook on Securities Statistics, Introduction section, IMF.*

### 1.40 Holdings of nonresidents of securities issued by

### 1.40 Holdings of nonresidents of securities issued by

### Coverage and presentation (From-Whom-to-Whom approach)
- Holdings of nonresidents of securities issued by nonresidents are not covered for a national economy’s perspective; these holdings are shown in the cell at row 2, column 6, and shaded black.
- Table 1.5 presents issuance and holdings of securities on a “from-whom-to-whom” basis, showing relationships between resident sectors as holders and residents and nonresidents as issuers, and between nonresidents as holders and residents as issuers.
- For a national economy, securities held by residents are shown grouped into resident sectors (as in Table 1.2 and Table 1.4) and by nonresidents vis-à-vis institutional units as issuers, broken down by residence and by institutional sector.
- For residents, the presentation of unconsolidated data on securities holdings is recommended to enable intra-sectoral positions, transactions, revaluations, and other changes in the volume of assets to be shown (cells with medium gray shading).
- Holdings of securities by nonresidents (vis-à-vis resident sectors as issuers) and holdings of securities by residents (vis-à-vis nonresident sectors as issuers) are shown:
  - as positions in the rest of the world balance sheet (the international investment position);
  - as financial transactions in the rest of the world financial account (part of the balance of payments);
  - as revaluations or other changes in the volume of assets in the rest of the world accumulation accounts (cells shaded dark gray in the nonresidents’ row and column of Table 1.5).
- Additional breakdowns may include resident holders by financial corporation subsector and by general government subsector, and nonresident issuers by country and/or sector.

### Debt securities classification and market perspectives
- Debt securities issuance may be split according to five criteria: issuer, currency, maturity, interest rate, and market; these criteria are consistent with international statistical standards.
- The “location of issue” approach (Table 1.3) presents debt securities by the geographic or jurisdictional location of debt securities markets, with data on debt securities issued in the domestic market by residents and nonresidents, and in the international markets by residents.
- When collected across many markets, debt securities statistics—with breakdowns by currency, maturity, and interest rate—help assess:
  - the relative importance of financial centers;
  - the attractiveness of the domestic market to foreign investors; and
  - possible liquidity risk.

### Main features of securities (definitions and negotiability)
- Securities include debt securities, equity securities, and, to some extent, investment fund shares or units.
- A financial instrument is negotiable if:
  1. legal ownership can be transferred to another institutional unit (or offset for financial derivatives);
  2. it is standardized (often fungible) and has an eligible International Securities Identification Number (ISIN);
  3. there is no right of recourse against previous holders of the asset.
- Typical non-negotiable instruments: currency and deposits, loans, MMF shares or units, open-ended investment fund shares or units, other equity, other accounts receivable or payable, insurance, pension, or standardized guarantee schemes.
- Negotiable financial instruments include: securities, financial derivatives, monetary gold, and special drawing rights (SDR).
- Debt securities are negotiable instruments serving as evidence of a debt (2008 SNA, paragraph 11.64). Equity securities acknowledge claims on the residual value of a corporation after creditors have been met (2008 SNA, paragraph 11.83). Investment fund shares or units are issued by collective investment undertakings (2008 SNA, paragraph 11.94).

### Quantitative features of debt securities
- Debt securities should display most of the following characteristics:
  1. an issue date;
  2. an issue price;
  3. a redemption price (or face value);
  4. a maturity (or redemption date);
  5. the coupon rate;
  6. the coupon dates;
  7. the currency of denomination and settlement.
- Issue date: the point in time at which the debt security is issued.
- Issue price: the price at which investors buy the debt securities when first issued; can be at par, above par, or below par.
- Redemption price: amount to be paid by the issuer to the holder at maturity.
- Maturity concepts:
  - Short-term maturity: payable on demand or in one year or less.
  - Long-term maturity: payable in more than one year or has no stated maturity (BPM6, paragraph 5.103).
  - Original maturity: period from issue date until final contractually scheduled payment (BPM6, paragraph 5.104 (a)); original maturity of one year or less is classified as short-term.
  - Remaining (residual) maturity: period from the reference date until final contractually scheduled payment (BPM6, paragraph 5.104 (b)); short-term remaining maturity contains securities maturing within one year.
- Debt securities with early redemption options are classified by original maturity, but information on payments based on the earliest repayment date should be provided. Securities with sinking fund provisions are classified by the earliest date the security can be completely repaid. Perpetual securities and some preferred shares (no stated maturity) are classified as long-term.

### Coupon, currency, and qualitative features of debt securities
- Debt securities generate property income as interest receivable; interest payable and receivable are determined by:
  1. the coupon (fixed, varying with inflation/interest rates/asset prices, or mixed); and
  2. the coupon dates.
- Debt securities may be fixed interest rate, variable interest rate, or mixed interest rate.
- Issue price, redemption price, and coupon may be denominated or settled in domestic currency or foreign currencies.
- Domestic currency: legal tender in an economy issued by the monetary authority of that economy or, in a currency union, of the common currency area (BPM6, paragraph 3.95). All other currencies are foreign currencies.
- Debt securities with principal and coupon linked to a foreign currency are classified as denominated in that foreign currency (BPM6, paragraph 11.50 (b)).
- Qualitative features include:
  - Contract documents specifying rights (indentures or covenants); contract terms generally require majority holder approval to change.
  - Default risk assessed by credit rating agencies.
  - Some debt securities: zero-coupon bonds (no coupon during life, full return at maturity) and structured debt securities that may pay no coupon (see Annex 2).

### Equity securities: features and classifications
- From an assets perspective, equity securities are a form of financial investment and can be distinguished by investor type:
  1. Portfolio investment — widely held, mostly listed equity securities.
  2. Intercompany equity securities — ownership links between related units, associated with direct investment (mix of listed and unlisted).
  3. Equity securities of privately owned corporations — owned by a single shareholder or small group (typically households), not generally listed.
- From a liabilities perspective, equity securities are external corporate finance; they do not generally give owners the right to a predetermined amount and are a measure of the corporation’s value and net worth.
- Main features of equity securities:
  1. Claims by shareholders on the net worth of the issuing corporation;
  2. Listed or unlisted;
  3. Issued on a specific issue date with a specific issue price;
  4. Do not usually have a stated maturity;
  5. Usually issued in the domestic currency;
  6. Generate income in the form of dividends.
- Residual claim: holders have a claim on the residual value of the corporation after creditors’ claims have been met.
- Corporate governance and market microstructure notes:
  - Dual-listed corporations have specific governance requirements guaranteeing equal rights in voting and dividends.
  - Dark pools: platforms for large transactions not visible to other market participants, conducted outside stock exchanges.
  - Delisting: removal of a corporation’s shares from a stock exchange due to business failure, bankruptcy, not meeting listing requirements, or going private (e.g., via private equity); the corporation may remain incorporated.
- Equity securities issue date: date a corporation issues equity securities to the public; issuance is usually recorded when payment is made.

*Handbook on Securities Statistics, International Monetary Fund*

### 2.37 If this is the first such offering, it is called an “ini-

### If this is the first such offering, it is called an “initial public offering” (IPO)

### IPOs, follow-on offerings, and underwriting (paragraphs 2.37–2.39, 2.41)
- An initial public offering (IPO) is the first offering; subsequent offerings are “follow-on offering.” (2.37)
- Where unlisted shares are issued, the issue date corresponds to the date when the corresponding capital is paid up. (2.38)
- In an IPO, an underwriting entity may:
  - Help decide the type of equity security to issue, the best offering price, and timing. (2.39)
  - Help place the offering with individual and institutional investors. (2.39)
- The “greenshoe” (or “over-allotment”) option allows an issuer to sell additional shares if demand exceeds the original offering; it supports liquidity and price stabilization after the IPO. (2.41)

### Allotment certificates and conversion (paragraph 2.40)
- IPOs are often facilitated by issuance of allotment certificates representing the corporation’s shares. (2.40)
- Allotment certificates:
  - Are traded on the stock exchange. (2.40)
  - Expire and are converted into shares on a one-to-one basis without any additional payment when the underlying share issue is registered. (2.40)
  - May be issued in the event of secondary listings. (2.40)

### Issue price and market behavior (paragraphs 2.42–2.44)
- Issue price (or “public offering price”) is the price at which an equity security is taken to market at the time of issue. (2.42)
- For IPOs, the underwriter sets a price per share; subsequent offerings are also introduced at a specific price. (2.43)
- The issue price is based on:
  - The amount of capital to be raised. (2.44)
  - The number of shares to be issued. (2.44)
- The issue price is set close to the expected market price or prevailing market price for secondary offerings; market price may subsequently be higher or lower than the issue price once trading begins. (2.44)

### No stated maturity and corporate dissolution (paragraph 2.45)
- Equity securities do not usually have specific maturity dates. (2.45)
- Corporations and therefore equity securities have no set lifespan but can be dissolved by statutory operation, court order, or voluntary shareholder action. (2.45)
- Note: “Genußscheine” (or “Genußrechte”) are participation certificates mainly in Germany, Austria, and Switzerland that sometimes have a stated maturity. (footnote to 2.45)

### Marketplace, listing, and delisting (paragraphs 2.28–2.32)
- Listed (or “quoted”) equity securities are listed on a stock exchange or other organized secondary market. (2.28)
- Inclusion in the official share register is a prerequisite for trading on a stock exchange; initial listing requirements usually include:
  - Recent years’ financial statements. (2.29)
  - Placement among the general public of a sufficient amount of stocks, both in absolute terms and as a percentage of total outstanding stocks. (2.29)
  - An approved prospectus (usually taking account of the views of independent assessors). (2.29)
- Corporations may have multiple listings:
  - Secondary listings or dual-listing procedures enable listing in more than one marketplace. (2.30)
  - One listing is commonly a primary listing and others secondary listings; multiple listings give access to a wider pool of investors. (2.31)
  - Secondary listings may be direct listings of equity securities or listings of depository receipts. (2.31)
  - A dual listing creates two equal listings in different marketplaces, often via two holding companies each listed in a different marketplace; motivations include mergers, access to larger capital markets, or trading restrictions. (2.32)

### Currency of denomination and cross-border listings (paragraphs 2.46–2.48)
- Equity prices are usually expressed in the domestic currency, the currency of issue. (2.46)
- Some corporations choose to be listed in a country other than their country of residence for strategic or tax reasons while continuing to be listed on their national exchange with prices expressed in the domestic currency. (2.47)
- A resident corporation may be listed on another country’s national stock exchange while shares are traded via depository receipts on the country of origin’s exchange. (2.47)
- Financial investors may hold share portfolios denominated in both domestic and foreign currencies. (2.48)
- Corporations can issue equity securities on foreign stock exchanges (e.g., American depository shares), but such securities are indexed to the domestic currency of the issuing corporation; therefore they are not treated as “foreign currency” for balance of payments purposes. (2.48, referenced BPM6, paragraph 11.50)
- In some cases, shares are issued in a currency other than the domestic currency (e.g., in euro in non-euro area EU Member States). (2.48)

### Financial instruments classified as securities — overview (Chapter 3 opening, paragraphs 3.1–3.7)
- Chapter 3 describes instruments classified as debt and equity securities, borderline cases, and instruments not classified as securities. (3.1)
- Common debt securities include bills, bonds, notes, negotiable certificates of deposit, commercial paper, debentures, asset-backed securities, and similar market-traded instruments. (3.2)
- Debt securities may be structured on various bases:
  - Coupon basis (periodic interest/coupon payments and principal repaid at maturity). (3.3)
  - Amortized basis (installment interest and principal payments). (3.3)
  - Discount or zero coupon basis (issued below face value; interest and principal paid at maturity). (3.3)
  - Deep discount basis (issued below face value; principal and substantial part of interest paid at maturity). (3.3)
  - Indexed basis (interest and/or principal tied to a reference index or commodity price). (3.3)
- Bills: short-term debt securities giving unconditional right to receive fixed sums on a specified date, generally issued at discounts and usually traded in organized markets; examples include treasury bills, negotiable certificates of deposit, promissory notes, bankers’ acceptances, and commercial paper. (3.4)
- Bonds and debentures: long-term debt securities giving unconditional rights to fixed or contractually determined variable payments; holders have unconditional claims independent of debtor earnings. (3.5)
- Asset-backed securities (ABSs): created through securitization of loans; income and principal repayment derive from and are collateralized by a specified pool of underlying assets; classified as debt securities because issuers have payment obligations while holders lack residual claims on underlying assets. (3.6)

### Equity securities: shares, classification, and types (paragraphs 3.7, 3.8, 3.11–3.13, 3.14–3.25)
- Equity securities (shares or “stocks”) are claims on the residual value of a corporation after creditors’ claims are met. Shares may be listed (F511) or unlisted (F512), and may be ordinary or preferred. (3.7)
- Listed shares:
  - Are listed or registered on a stock exchange or organized secondary market; presence of quoted prices generally means current market prices are readily available. (3.8)
  - May be traded infrequently or not at all (e.g., closely held corporations). (3.9)
  - Stock exchanges often have market segments where trading frequency and price availability vary. (3.9)
  - Corporations pay listing fees and must meet requirements such as minimum asset base and periodic financial disclosures. (3.10)
- Unlisted shares:
  - Are not listed on a stock exchange; also termed “unquoted shares” or “private equity.” Venture capital commonly takes this form. (3.11)
  - Lack stock-exchange protections and can be difficult to trade; prices may not be observable, requiring other valuation methods. (3.11)
  - Unlisted shares issued by limited liability companies include:
    - Capital shares: confer joint ownership and entitle holders to a share in distributed profits and in net assets on liquidation. (3.13)
    - Redeemed shares: capital repaid but retained by holders who remain joint owners and entitled to profits after dividends on remaining registered capital and to surplus on liquidation. (3.13)
    - Dividend shares (or “founders’ shares”/“profit shares”): not part of registered capital, do not grant joint-owner status or voting rights, but entitle holders to a share of profits remaining after dividends on registered capital and to a share of surplus on liquidation. (3.13)
    - Participating preferred shares: give right to participate in residual value on dissolution and to additional dividends above a fixed percentage, with rights in liquidation to a share of surplus plus return of paid amount. (3.13)
- Ordinary (common) shares usually give holders the right to participate in general policymaking and to attend, speak, and vote (for voting shares) at general meetings, to vote on corporate objectives, stock splits, and to elect the board of directors. (3.14)
- Differences between ordinary and preferred shares:
  - Preferred shares typically rank higher than ordinary shares, may carry superior voting rights (sometimes up to two votes per share) or no voting rights. (3.21)
  - Preferred shares without voting rights are usually offset by higher dividends or larger shares in residual value on dissolution. (3.22)
  - Preferred shares may entitle holders to preferential dividends, convertibility into ordinary shares, and preferential liquidation rights; they often pay a fixed dividend but remain subordinated to debt securities. (3.23–3.24)
- Preferred share subtypes and characteristics (overview in Table 3.1 referenced):
  - Cumulative vs noncumulative preferred shares (dividend accumulation). (3.25)
  - Participating vs nonparticipating preferred shares (right to share in residual value on dissolution); participating preferred shares are treated as equity securities regardless of income being fixed or formula-based, while nonparticipating preferred shares are classified as debt securities. (3.25)
  - Convertible or exchangeable preferred shares (convertible into specified ordinary shares or bonds). (3.25)
  - Holders usually have preferential subscription rights in capital increases; ordinary shareholders may have preemptive rights (rights issue) to retain proportional ownership. (3.25)
  - Ordinary shareholders generally have right to a share in profits but no fixed dividends; returns depend on earnings, corporate reinvestment, and market valuation/liquidity. (3.25)

*Handbook on Securities Statistics, IMF*

### 3.20 In  the  event  of  bankruptcy,  holders  of  ordinary

### 3.20 In  the  event  of  bankruptcy,  holders  of  ordinary

### Preferred shares — types and classification
- Cumulative preferred shares
  - Holders are entitled to receive a fixed dividend ahead of ordinary shares and retain the right to any accumulated preferred dividends that may have built up.
  - Classification: Equity securities
- Noncumulative preferred shares
  - Holders are not entitled to accumulate preferred dividends.
  - Classification: Equity securities
- Participating preferred shares
  - Holders are entitled to participate in the profits of a corporation over and above fixed dividends by means of an additional fluctuating dividend. They also participate in the distribution of the residual value of a corporation on dissolution.
  - Classification: Equity securities (regardless of whether income is fixed or determined according to a formula)
- Participating convertible preferred shares
  - Holders are entitled to receive the dividends that holders of preferred shares are eligible to receive. Holders are also allowed to convert preferred shares into ordinary shares in order to claim excess earnings.
  - Classification: Equity securities
- Nonparticipating preferred shares
  - Holders are entitled to receive a fixed dividend, but do not participate in the distribution of the residual value of a corporation on dissolution.
  - Classification: Debt securities (with income from nonparticipating preferred shares treated as interest income, rather than dividends)
- Redeemable preferred shares
  - Can be redeemed at the request of either the corporation or the shareholder (at a fixed price on a specified date or during a specified period of time). Strict conditions apply to the issuance of redeemable shares and their redemption. Instead of cancelling shares on redemption, a corporation may continue to hold such shares as treasury shares, but no voting rights may be exercised and no dividends are payable.
  - Classification: Equity securities
- Retractable preferred shares
  - Include features that allow holders to demand that the corporation redeem the share on a specific date.
  - Classification: Equity securities
- Straight perpetual preferred shares
  - Have no maturity date and pay fixed dividends for as long as they remain outstanding.
  - Classification: Equity securities
- Rate reset or fixed floating rate preferred shares
  - Pay fixed dividends until the reset date, which is typically also the call date.
  - Classification: Equity securities
- Floating rate preferred shares
  - Pay dividends on a quarterly (or in some cases monthly) basis. Dividends fluctuate in relation to a reference rate, usually a prime rate, although some may have a “floor,” or minimum dividend.
  - Classification: Equity securities
- Structured preferred shares
  - Synthetic preferred shares based on an underlying portfolio of ordinary shares or a portfolio created from diverse or complex financial instruments, including financial derivatives.
  - Classification: Equity securities or financial derivatives
- Additional enumerated forms:
  - Redeemable or retractable preferred shares redeemed/retracted at a fixed price on a specified date or period at request of corporation or holder.
  - Straight perpetual preferred shares, rate reset preferred shares, fixed floating rate preferred shares, and floating rate preferred shares with different dividend payment patterns.
  - Split and structured preferred shares based on an underlying portfolio of ordinary shares or other financial instruments.

### Depository receipts — nature, types, and recording guidance
- Definition and treatment
  - Depository receipts represent ownership of securities issued in other economies. Ownership of the receipts is treated as direct ownership of the underlying financial instrument backing them (i.e., the relevant debt or equity security).
  - A resident deposit-taking corporation will purchase the underlying securities and then issue receipts in a currency more acceptable to the investor.
- Purpose and investor preferences
  - Allow a nonresident institutional unit to introduce its debt or equity securities on another market in a form more readily acceptable to investors in that market.
  - Depository issues receipts listed on one exchange representing ownership of securities listed on another exchange.
- Types and features
  - American depository receipts (ADR): liabilities of the non-U.S. institutional units whose securities underlie the ADR, not of the U.S. financial institutions issuing the ADR.
  - Global depository receipts (GDR), European depository receipts (EDR), international depository receipts (IDR) — spread beyond ADRs.
  - GDR: available in one or more markets outside the corporation’s country of residence; represent one or more shares (or a fraction of a share); depository bank in the country of residence holds the shares; GDR investors have same rights as holders of ordinary shares but do not typically have voting rights; commonly listed on European stock exchanges; usually denominated in U.S. dollars (but can be denominated in other currencies, such as the euro).
- Sponsored vs unsponsored programs and levels
  - Unsponsored depository receipts: issued without a formal agreement with the corporation; considered obsolete and do not tend to be issued owing to the corporation’s lack of control and hidden costs.
  - Sponsored depository receipts: depository appointed by the corporation under a deposit agreement or service contract; offer the corporation control, flexibility to list on other exchanges, and ability to raise capital.
  - Sponsored level I depository receipt program: simplest way to access capital markets; traded in the U.S. over-the-counter (OTC) market and on some exchanges outside the United States; corporation does not have to comply with U.S. GAAP or full SEC disclosure.
  - Sponsored level II or III depository receipts: used to list on a U.S. exchange or raise capital, respectively; different SEC registration and reporting requirements for each level; adherence to U.S. GAAP and exchange listing requirements required; higher levels generally increase visibility and attractiveness.
  - Private placement of sponsored depository receipts: allows access to U.S. and other markets by placing depository receipts with large institutional investors in the U.S., avoiding SEC registration.
- Recording/avoiding double counting
  - Where possible, record depository receipts to “look through” the depository issuing the receipts so the holder is considered to have a claim on the issuer of the underlying securities.
  - Allocate depository receipts to the country of residence of the issuer of the underlying security, not the country of residence of the depository issuing the receipts.
  - To avoid double counting, financial intermediaries should not report holdings of securities issued by nonresidents against which depository receipts have been issued and sold. If a depository receipt has been issued before the arranging financial corporation has acquired the underlying securities, that financial corporation should report negative holdings of the underlying securities.

### Structured debt securities, convertible bonds, and negotiability
- Structured debt securities
  - Typically combine a debt security, or a basket of debt securities, with a financial derivative, or a basket of financial derivatives.
  - If debt and derivative components are separable, classify them accordingly. If inseparable, value and classify according to primary characteristics (BPM6, paragraph 5.83 (d)) as either a debt security or a financial derivative.
- Islamic debt securities
  - Governed by Islamic rules and principles (Sharī’ah); backed by returns from a nonfinancial asset and earn a variable rate of return tied to asset performance or returns shared on a pre-agreed ratio.
  - Distinguished from equity securities by two categories of criteria: (1) criteria used to differentiate conventional debt securities from equity securities; (2) additional criteria to distinguish Islamic debt securities from equity securities. (Details in Annex 3.)
- Convertible bonds
  - Debt securities that can be converted into equity securities (although some are included in capital under the Basel III definition).
  - From the time they are converted, they are classified as equity securities.
  - When conversion is exercised, two entries must be made: redemption of the bonds and issuance/acquisition of the shares.
- Negotiable loans
  - Loans that have become negotiable de facto may be included as debt securities only if there is evidence of secondary market trading, including the existence of market makers and frequent quotations (2008 SNA, paragraph 11.65).
  - Conversion of a loan into a debt security should be recorded as two flows: a decrease in the loan and an increase in debt securities arising from the statistical reclassification of the loan.
- Private placements
  - Debt securities may be issued as private placements: sold directly to a small number of investors; creditworthiness usually not assessed by rating agencies; secondary market shallow.
  - If private placements can be traded among investors and ownership is readily transferable, the negotiability criterion for securities is met.

### Securities repurchase agreements and related arrangements
- Securities repurchase agreement (repo)
  - Arrangement involving provision of securities in exchange for cash with a commitment to repurchase the same or similar securities at a fixed price on a specified future date or with an “open” maturity.
  - Securities lending with cash collateral and sell/buybacks have the same economic effect.
  - Economic ownership of securities provided as collateral is considered not transferred because the cash recipient (seller of securities) remains subject to all market risks and continues to receive benefits.
  - Transactions involving repos and securities lending do not entail new issuance of debt securities; they are the incurrence of collateralized loans and are therefore excluded from debt securities statistics.

### Equity-linked instruments and related equity forms
- Equity-linked notes (ELN)
  - Debt securities whose coupons or redemption values are based on the return for a single share, a basket of shares, or an equity index (the “underlying equity”).
  - Generally designed to return the principal at maturity but have coupons determined by changes in the value of the underlying equity; principal is usually protected.
  - Can be constructed by packaging a call option and a zero-coupon bond: call option provides exposure to the underlying equity; zero-coupon bond provides principal protection by moving from its discount value to its par value over a specified period.
- Dividend reinvestment plans/programs (DRIPs) and direct investment plans
  - Enable shareholders to reinvest variable amounts in a corporation by purchasing additional shares or fractions of shares from the corporation on the dividend payment date.
- Participation certificates
  - Grant holders participation rights that may take various forms for both equity and debt securities.
  - Considered equity securities if:
    - The holder’s claims are subordinated.
    - The holder’s remuneration is performance related.
    - Capital is provided for an unlimited period, or at least on a long-term basis.
  - Most participation certificates are considered equity securities in light of these criteria.
  - “Genußscheine” (or “Genußrechte”) are a type of participation certificate issued mainly in Germany, Austria, and Switzerland; sometimes have a stated maturity.
- Equity certificates (primary capital certificates)
  - Shares issued by savings banks and other financial institutions that are not limited liability companies or public limited companies; can be listed (mainly equity certificates issued by savings banks) or unlisted.
- Private equity
  - Corporate equity (such as venture capital) not traded publicly on a stock exchange.
  - Classified as either unlisted shares (F512) or other equity (F519).
- Development capital certificates (“certificados de capital de desarrollo” or “CCDs”)
  - Securities issued by trusts to channel investment resources to [text ends].

### Depositor/member instruments and other non-securities
- Shares in credit unions
  - Members of a credit union can hold savings in either deposit or share accounts.
  - As a rule, shares in credit unions should be treated as deposits, or as “other equity” if they are not redeemable immediately or on short notice.
- Investment fund shares or units (F52)
  - Collective investment undertakings where investors pool funds to acquire financial or nonfinancial assets.
  - Open-ended investment fund shares or units
    - Can issue and redeem shares on a continuous basis or at certain predefined (short-term) intervals.
    - Popular types include index funds and money market funds (MMFs).
    - An open-ended investment fund is divided equally into shares or units, which vary in price in direct proportion to variation in the fund’s net asset value (NAV).
  - Closed-ended investment fund shares or units
    - Issue a limited number of shares or units; sometimes have a specified maturity, such as five to seven years.
    - New shares or units are rarely issued after launch and shares or units are not usually redeemable until liquidation.

*Handbook on Securities Statistics*

### 3.59 Open-ended investment fund shares or units are

### 3.59 Open-ended investment fund shares or units are

### Open-ended and closed-ended investment fund shares or units
- 3.59: Open-ended investment fund shares or units are not usually negotiable and are not, therefore, equity securities.
- 3.59: Closed-ended investment fund shares or units are typically negotiable and therefore constitute equity securities.
- 3.59: Open-ended investment fund shares or units are not covered in the Handbook.
- Exchange-traded funds are a subset of index funds that can be traded on an exchange during the day, just like common stocks.
- The classification of financial instruments (CFI) standard defines open-ended funds as those that “permanently sell new units to the public and redeem outstanding units on demand, resulting in an increase or decrease of outstanding capital.”

### Collective capital devices (CCDs) and related instruments
- 3.50: CCDs have a defined settlement period. Once the deadline has been reached, the issuing trust administrator must liquidate all of the assets and distribute the proceeds among investors.
- 3.51: CCDs give their holders the right to collect dividends and participate in capital reductions and share redemptions, as well as the right to sell or otherwise dispose of shares.
- 3.52: CCDs are similar to financial instruments issued by special-purpose acquisition companies (SPAC) in the United States, income trusts in Canada, and infrastructure funds in Australia.

### Shares in cooperative entities and credit unions
- 3.53: Shares in cooperative entities are usually non-negotiable financial instruments and should be classified as “other equity.” Credit unions may issue equity certificates, which are classified as listed or unlisted shares.
- 3.54: If the holder of shares in a cooperative entity has the right to request redemption without restrictions, the shares should be classified as equity securities. They should be classified as “other equity” if:
  - The entity has an unconditional right to refuse redemption.
  - Local legislation, regulations, or the entity’s statute limits redemption.
- 3.55: Credit unions are cooperative financial institutions owned and operated by their customer-owners; each customer-owner has one vote at the annual general meeting. A voluntary board of directors is nominated and elected by the shareholders.
- 3.56: Ownership is usually open to any resident organization or corporation and is based on a common share account. Shares are refundable on cancellation of ownership and carry the right to dividends, which may be based on the credit union’s earnings and are determined by the board of directors.

### Other equity (F519)
- 3.60: Other equity (F519) is equity that is not in the form of securities.
- 3.60: Other equity includes equity in quasi-corporations (such as branches, trusts, and partnerships), as well as notional units representing ownership of real estate.
- 3.61: Equity of partners with unlimited liability in incorporated partnerships is classified as other equity.
- 3.62: Participation in many international organizations is not in the form of shares and therefore is classified as other equity. Equity in the Bank for International Settlements (BIS) does take the form of (unlisted) shares (BPM6, paragraph 5.26).
- 3.63: Typical instruments and cases classified as other equity include:
  - All equity in corporations that is not in the form of shares: equity in incorporated partnerships subscribed by unlimited partners; equity in limited liability companies whose owners are partners and not shareholders; capital invested in ordinary or limited partnerships recognized as independent legal entities; capital invested in cooperative societies recognized as independent legal entities.
  - Investment by general government in the capital of public corporations whose capital is not divided into shares and that are recognized as independent legal entities under special legislation.
  - Investment by general government and nongovernment units in the capital of the central bank.
  - Investment by general government and central banks in the capital of international and supranational organizations (with the exception of the IMF), even if these are legally constituted financial resources of a currency union central bank (CUCB) contributed by national central banks.
- Note: With security-by-security (SBS) databases, instruments reported using ISIN codes for other equity (F519) should be classified as unlisted shares (F512).
- Convention: From a legal perspective, central banks may resemble corporations issuing shares, but central bank equity is treated as other equity (AF519) by convention.

### Equity securities offered for sale and loan stocks
- 3.64: Equity securities offered for sale, but not taken up on issue, are not recorded.
- 3.65: Loan stocks are classified as loans. Loan stocks are loans secured using ordinary or preferred shares as collateral. The loan will earn a fixed rate of interest, much like a standard loan.
- 3.66: Secured loan stocks are called “convertible loan stocks” if they can be converted directly into shares, subject to specific conditions being met, with a predetermined conversion rate, as with irredeemable convertible secured loan stocks.

### Warrants and equity-linked instruments
- 3.67: Warrants are options and should be classified as financial derivatives.
- 3.67: Warrants are tradable financial instruments giving the holder the right to buy or sell, subject to specific conditions and for a specified period of time, a certain number of shares or debt securities from or to the issuer of the warrant (usually a corporation; 2008 SNA, paragraph 11.119).
- Instruments classified as warrants include:
  - Call or put warrants issued on the basis of an underlying financial instrument or an index.
  - Basket warrants issued as call or put warrants based on a basket of two or more underlying shares.
  - Bull equity-linked instruments give investors the right to buy the underlying shares at a discounted rate vis-à-vis the underlying share price at the time of issuance. If the underlying share price exceeds the exercise price, investors are entitled to a cash settlement on expiration of the warrant (i.e., the par value of the instrument plus interest).
  - Bear equity-linked instruments function in the opposite way to bull instruments: if the prevailing price of the underlying share (the closing price) is below the exercise price, investors receive the par value of the instrument plus interest as a cash settlement.
  - Range equity-linked securities give the investor the par value plus interest where the prevailing price of the underlying share is within a range demarcated by two exercise prices.
  - Callable bull or bear certificates track the performance of an underlying stock without requiring investors to pay the full price required in order to own the actual stock.
- Footnote: Listed financial derivatives, such as warrants, are sometimes considered to be securities (BPM6, paragraph 5.15).

### Stock options and employee stock options
- 3.68: A stock option (or “share option”) represents a contract sold by one party to another that entitles (but does not oblige) the buyer to buy (call) or sell (put) a stock at an agreed price within a certain period or on a specific date. Stock options are financial derivatives and are not, therefore, classified as securities.
- 3.69: Employee stock options are agreements under which employees have the right to purchase a given number of shares in their employer’s firm at a stated price, either on a specified date (the “vesting” date) or within a specific period of time immediately following the vesting date.

### Institutional units, residence, and sector classification
- 4.1: Chapter 4 outlines concepts of institutional unit and residence, allocation of institutional units to sectors and subsectors, presentation of securities statistics by sector and subsector, and some borderline cases.
- 4.2: Institutional units are economic entities capable of owning goods and assets, incurring liabilities, and engaging in economic activities and transactions with other units in their own right. Two main types qualify as institutional units: persons or groups of persons (households), and legal or social entities.
- 4.3: The residence of each institutional unit is the economic territory with which it has the strongest connection, expressed as the “center of predominant economic interest” (BPM6, paragraph 4.113). As a general principle, an enterprise is resident in an economic territory when that enterprise engages in the production of a significant amount of goods and/or services from a location in that territory. In the absence of any significant physical dimension, residence is determined by the economic territory under whose laws the enterprise is incorporated or registered (2008 SNA, paragraphs 4.10 to 4.15).
- 4.4: The center of predominant economic interest is the economic territory where the unit engages and intends to continue engaging in economic activities and transactions on a significant scale for one year or more (BPM6, paragraph 4.114). The most commonly used concept of economic territory is the area under the effective economic control of a single government; an economic territory may be larger or smaller, as in a currency or economic union or part of a country or the world (2008 SNA, paragraph 4.10).
- 4.5: An institutional unit is a resident of one economic territory only, determined by its center of predominant economic interest (BPM6, paragraph 4.113). Corporations are considered resident where they are legally constituted and registered; special cases are addressed in BPM6 (paragraphs 4.131-4.137).
- 4.6: International and regional organizations are not considered resident of the territories in which they are located or conduct their affairs (BPM6, paragraph 4.105). International organizations, such as international financial institutions, should be classified as nonresident in all national statistics. Regional organizations covering a group of economies are classified as resident of the region formed by member national economies, not resident of any member national economy (BPM6, paragraph 4.142).
- 4.7: Offshore institutional units are residents of the economy where they are incorporated or registered; offshore banks serve nonresidents and/or conduct financial intermediation between residents and nonresidents (MFSCG, paragraph 3.90).
- 4.8–4.9: For multiterritory enterprises (single enterprises running seamless operations over more than one economic territory), BPM6 recommends identifying separate institutional units for each economy; if infeasible, prorate total operations between territories using factors such as equity holdings, equal splits, operational factors (e.g., tonnages or wages), or taxation proration formulas (BPM6, paragraphs 4.41 and 4.43).
- 4.10: Institutional units are grouped into five mutually exclusive institutional sectors: (1) nonfinancial corporations; (2) financial corporations; (3) general government; (4) households; and (5) nonprofit institutions serving households (NPISHs). Together they make up the total (national) economy.
- 4.11: The rest of the world sector covers transactions, other flows, and positions between resident sectors and nonresident institutional units.
- 4.12–4.13: Nonfinancial corporations comprise resident corporations and nonprofit institutions whose principal activity is production of market goods and nonfinancial services; subdivided into public nonfinancial corporations, national private nonfinancial corporations, and foreign-controlled nonfinancial corporations (2008 SNA, paragraphs 4.94–4.96).
- 4.14–4.16: The financial corporations sector includes resident corporations principally engaged in providing financial services, and can be divided into nine subsectors according to activity and liability liquidity. The central bank subsector comprises the national central bank, currency boards, independent currency authorities that issue domestic currency fully backed by foreign exchange reserves, and central monetary agencies of essentially public origin that keep a complete set of accounts but are not classified as part of central government (2008 SNA, paragraph 4.104). A currency union may be centralized or decentralized; examples and models are discussed (BPM6, paragraph A3.9).
- Table 4.1: Institutional sectors and subsectors are listed according to the 2008 SNA codes, including nonfinancial corporations (S11), financial corporations (S12) with subsectors such as Central bank (S121), Deposit-taking corporations except the central bank (S122), Money market funds (S123), Non-MMF investment funds (S124), Other financial intermediaries except insurance corporations and pension funds (S125), Financial auxiliaries (S126), Captive financial institutions and money lenders (S127), Insurance corporations (S128), Pension funds (S129), General government (S13) with components S1311–S1314, Households (S14), Nonprofit institutions serving households (S15), and Rest of the world (S2).
- Note: MMFs may or may not be classified as money-issuing institutions, depending on the definition of broad money in a given country or economic area.

*Handbook on Securities Statistics*

### 4.18 Deposit-taking  corporations,  except  the  central

### Deposit-taking corporations, except the central bank

### Deposit-taking corporations: scope and principal activity
- Deposit-taking corporations, except the central bank, have financial intermediation as their principal activity (2008 SNA, paragraph 4.105).
- The subsector generally comprises: commercial banks, universal banks, all-purpose banks, savings banks (including trustee savings banks and savings and loan associations), post office giro institutions, post banks, giro banks, rural credit banks, agricultural credit banks, cooperative credit banks, credit unions, and specialized banks or other financial corporations if they take deposits or issue liabilities included in the national definition of broad money (2008 SNA, paragraph 4.106).

### Money market funds (MMF)
- Money market funds (MMF) are collective investment schemes that raise funds by issuing shares or units to the public (2008 SNA, paragraph 4.107).
- Proceeds are invested mainly in:
  - money market instruments,
  - other MMF shares or units,
  - transferable debt instruments with a residual maturity of not more than one year,
  - bank deposits,
  - instruments that provide a rate of return close to the interest rates of money market instruments.
- MMF shares or units are often transferable by check or other means of direct third-party payment.
- Because of the nature of the instruments in which they invest, their shares or units may be regarded as close substitutes for deposits (2008 SNA, paragraph 4.107).

### Non-MMF investment funds
- Non-MMF investment funds are collective investment schemes that raise funds by issuing shares or units to the public (2008 SNA, paragraph 4.108).
- Proceeds are invested primarily in financial assets other than short-term assets, or in non-financial assets such as real estate (or both).
- Non-MMF investment fund shares or units are generally not close substitutes for deposits (2008 SNA, paragraph 4.108).

### Other financial intermediaries except insurance corporations and pension funds
- Consist of financial corporations engaged in providing financial services by incurring liabilities in forms other than currency, deposits or close substitutes of deposits, on their own account for the purpose of acquiring financial assets by engaging in financial transactions on the market (2008 SNA, paragraph 4.109).
- Units classified in this subsector include financial corporations that specialize in the securitization of assets (referred to as securitization corporations in Chapter 6).
- Also included are:
  - security and derivative dealers (operating on their own account),
  - financial corporations engaged in lending (including separately incorporated finance subsidiaries or associates of retailers) that may undertake financial leasing and personal or commercial finance,
  - central clearing counterparties,
  - specialized financial corporations listed in the 2008 SNA, paragraph 4.110 (e).

### Financial auxiliaries
- Financial auxiliaries are financial corporations principally engaged in activities closely related to financial intermediation but that do not act as intermediaries (2008 SNA, paragraph 4.111).
- Units in this subsector do not raise funds or extend credit on their own account.
- Common types include: insurance brokers and agents; loan and securities brokers; investment advisers; flotation corporations; corporations that arrange derivative and hedging instruments without issuing them; corporations providing infrastructure for financial markets; managers of pension funds and mutual funds; stock and insurance exchanges; foreign exchange bureaus; nonprofit institutions serving financial corporations; head offices of financial corporations principally engaged in controlling financial corporations; and central supervisory authorities of financial intermediaries and financial markets when they are separate institutional units (2008 SNA, paragraph 4.112).

### Captive financial institutions and money lenders
- Consist of institutional units providing financial services where most of either their assets or liabilities are not transacted on open financial markets (2008 SNA, paragraph 4.113).
- Includes units that are legal entities such as trusts or brass plate companies; holding corporations that hold only the assets of a group of subsidiary corporations and whose principal activity is owning the group without any other service to the enterprises in which the equity is held; special purpose entities (SPEs) or conduits; money lenders, pawnshops, etc. (2008 SNA, paragraph 4.114).
- Resident captive financial institutions (trusts, brass plate companies, holding companies, SPEs, conduits) that are passive holders of assets and liabilities and always related to another corporation are treated as integral parts of the parent corporation and not as separate institutional units (2008 SNA, paragraphs 4.53 to 4.66).
- Captive financial institutions set up outside the country where the parent corporation resides are treated as separate units and are resident of the economic territory where they are incorporated or registered (BPM6, paragraph 4.52).
- SPEs set up by general government with characteristics and functions similar to captive financial institutions are treated as an integral part of general government if resident, but as separate institutional units if nonresident.

### Insurance corporations
- Insurance corporations consist of incorporated, mutual, and other entities whose principal function is to provide life, accident, sickness, fire, or other forms of insurance to individual institutional units or groups of units, or reinsurance services to other insurance corporations (2008 SNA, paragraph 4.115).
- Captive insurance (an insurance corporation that serves only its owners) is included in this subsector.
- Also included are deposit insurers, issuers of deposit guarantees, and other issuers of standardized guarantees (2008 SNA, paragraph 4.115).

### Pension funds
- Pension funds are set up to provide retirement benefits for specific groups of employees and self-employed persons (2008 SNA, paragraph 4.116).
- The pension fund subsector consists only of those social insurance pension schemes that are institutional units separate from the units that create them.
- Excluded are nonautonomous pension schemes managed by employers, government-sponsored pension schemes funded through wage taxes (pay-as-you-go schemes), and arrangements organized by nongovernment employers where the fund reserves are simply included in the employer’s own reserves or invested in securities issued by the employer (BPM6, paragraph 4.90).

### General government: delineation and subsectors
- Government units are legal entities established by political processes that exercise legislative, judicial, or executive authority over other institutional units within a given area (2008 SNA, paragraph 4.117).
- Two methods to delineate subsectors of general government:
  - Divide into central government, state government, local government, and social security funds (2008 SNA, paragraph 4.129); or
  - Allocate social security funds to central, state, and local government according to the level at which they operate (2008 SNA, paragraph 4.130).
- Choice depends on the size and importance of social security funds within a country and on how they are managed (2008 SNA, paragraph 4.132).

### Central, state, and local government roles
- Central government:
  - Political authority extends over the entire territory; authority to impose taxes on all resident and nonresident units engaged in economic activities within the country;
  - Responsible for collective services and may provide services primarily for individual households (e.g., education, health) and make transfers to other institutional units (2008 SNA, paragraph 4.135).
  - May include units that engage in financial transactions otherwise performed by central banks or other deposit-taking corporations if financially integrated and under direct control and supervision; such monetary authority functions are recorded as part of central government (2008 SNA, paragraph 4.139).
- State government:
  - Largest geographical subdivision (state, province, or region); usually has fiscal authority to levy taxes in its area; must have ability to appoint officers independently and spending autonomy; otherwise may be treated as a central government agency (2008 SNA, paragraph 4.142).
- Local government:
  - Fiscal, legislative, and executive authority over the smallest geographical areas for administrative and political purposes; same rules apply as for state governments regarding independence from higher levels (2008 SNA, paragraph 4.145).

### Social security funds
- Social security funds operate social insurance schemes imposed and controlled by government units, covering benefits in cash or in kind for old age, invalidity or death, survivors, sickness and maternity, work injury, unemployment, family allowance, health care, among others (2008 SNA, paragraph 4.124).
- The social security funds subsector consists of the social security funds operating at all levels of government (2008 SNA, paragraph 4.147).

### Households and NPISHs
- Households are groups sharing living accommodation, pooling some or all income and wealth, and consuming certain goods and services collectively, mainly housing and food (2008 SNA, paragraph 4.149).
- An unincorporated enterprise can be treated as a corporation only if it is possible to separate all assets belonging to the household as consumer from those belonging to the household as producer (2008 SNA, paragraph 4.157).
- Nonprofit institutions serving households (NPISHs) provide goods and services to households free of charge or at prices that are not economically significant (2008 SNA, paragraphs 4.166 and 4.167).
- NPISHs consist mainly of associations such as trade unions; professional or learned societies; consumers’ associations; political parties (except in single-party states where the political party is included in general government); churches and religious societies (including those financed by government); social, cultural, and recreational sports clubs; and organizations that provide goods and services for philanthropic purposes rather than for the units that control them.

### Public-private partnerships (PPPs) and public sector
- PPPs are arrangements used by governments in partnership with the private sector to finance construction and operation of fixed assets (roads, bridges, tunnels, etc.) and can take numerous forms such as private finance initiatives (PFIs), build-operate-transfer (BOT) schemes, and build-own-operate-transfer (BOOT) schemes (2008 SNA, paragraphs 22.157 to 22.163).
- Under a BOT scheme, a private corporation finances, designs, constructs, and operates a facility for a specified period of time; at the end of the contract, ownership of the asset is transferred to the government (2008 SNA, paragraphs 22.157 to 22.163).
- Because contracts may involve complex sharing of risks and returns, the economic owner of fixed assets may be unclear; sectoral allocation of securities issued by PPPs should be decided by careful analysis of the economic relationship between government and the private corporation, considering who bears most of construction, availability, demand, and obsolescence risks, and the degree of government control over project design and services provided (2008 SNA, paragraph 22.159).
- Public sector consists of all institutional units of the general government sector plus all public corporations (public nonfinancial corporations, public financial corporations other than the central bank, and the central bank) (2008 SNA, paragraph 22.41).
- To be classified as a public corporation, a unit must be controlled by a government unit, another public corporation, or a combination, and sell most of its output at economically significant prices; government control may be via majority share ownership, control of voting power, special legislation, or appointment of directors (2008 SNA, paragraphs 22.27, 22.28, and 4.80).

### Rest of the world sector
- The rest of the world sector is an accounting grouping comprising all nonresident institutional units; flows and positions between institutional units in the rest of the world are not presented (2008 SNA, paragraph 4.44).
- The rest of the world sector may be broken down by country or into groups of countries to show positions and flows between nonresidents and residents; nonresidents may also be broken down by institutional sector or, for financial corporations, by subsector (2008 SNA, paragraphs 4.45–4.46).

### Positions, flows, and accounting rules (quadruple-entry accounting)
- Presentation tables cover positions and flows; Chapter 5 provides the methodological framework in terms of accounting rules and valuation principles, including treatment of accrued interest for debt securities (see also Annex 1).
- Securities transactions must be recorded on the basis of the quadruple-entry principle to ensure consistency across accounts and sectors (2008 SNA, paragraph 2.52).
- One implication is that securities transactions and other flows are recorded at the same point in time or period in the various accounts for both units involved (2008 SNA, paragraph 2.54).
- Acquisition, disposal, issuance, and redemption of a security should result in recording four entries—two for each institutional unit involved (either the holder and the issuer, or the two holders—the “new” holder receiving the securities and the “old” holder delivering them) (2008 SNA, paragraph 2.54).

*Handbook on Securities Statistics (selected excerpts).*

### 5.5 For  example,  an  equity  security  is  issued  by  a

### Positions, Flows, and Accounting Rules

### Quadruple-entry accounting and recording of transactions
- Example of issuance and acquisition (paragraph 5.5):
  - An equity security is issued by a nonfinancial corporation (the issuer) and acquired by a household (the holder) in exchange for currency or transferable deposits.
  - Nonfinancial corporation financial account: increase in liabilities (equity securities) and increase in assets (currency or transferable deposits).
  - Household financial account: increase in one financial asset (equity securities) offset by a decrease in another financial asset (currency or transferable deposits); no change in liabilities recorded.
- Example of sale of a debt security from household to financial corporation (paragraph 5.6):
  - Household financial account: increase in assets (currency or transferable deposits) and decrease in assets (debt securities).
  - Financial corporation financial account: increase in one financial asset (debt securities) offset by a decrease in another (currency or transferable deposits), or by an increase in liabilities (the financial corporation’s account vis-à-vis the household).
- The quadruple-entry accounting rule (paragraph 5.7):
  - The balancing items net lending (+) / net borrowing (-) derived from the capital account and from the financial account of institutional sectors should be identical.
- Recording principle (paragraph 5.8):
  - Transactions between institutional units should be recorded when claims and obligations arise, are transformed or are cancelled, that is, on an accrual basis (2008 SNA, paragraph 2.55).
- Accrual vs cash timing (paragraph 5.9):
  - National accounts usually record actual transactions on an accrual basis (2008 SNA, paragraph 2.56); delays between transaction and payment can lead to different recording times under the two approaches.

### Relationship between positions and flows
- Definitions (paragraphs 5.10–5.12):
  - Positions: levels of assets and liabilities at any point in time (BPM6, paragraph 3.2).
  - Flows: economic actions and effects of events within an accounting period; economic flows described as transactions when they record interactions between institutional units by mutual agreement and involving exchange of value (2008 SNA, paragraphs 3.51 and 3.53).
  - Other flows: revaluations and other changes in volume.
- Core accounting identity for positions and flows (paragraphs 5.13–5.14):
  - Position_t – position_t−1 = flows_t.
  - Flows_t = transactions_t + revaluations_t + other changes in volume_t.
- Transactions as net issuance or net acquisitions (paragraphs 5.15–5.16):
  - Transactions_t refers to net issuance (issuance minus redemptions) or net acquisitions (gross acquisitions minus disposals) during accounting period t.
  - Transactions_t = net issuance_t = gross issuance_t – redemptions_t OR net acquisitions_t = gross acquisitions_t – disposals_t.
- Accrued interest coverage (paragraph 5.17):
  - For debt securities, gross issuance and gross acquisitions cover accrued interest.

### Gross and net transactions; issuance, redemptions, acquisitions, disposals
- Gross versus net recording (paragraphs 5.21–5.24):
  - Gross recording: incurrence and repayment of liabilities shown separately as gross issuance and gross redemptions.
  - Net recording: issuance shown net of redemptions.
  - Issuance: issuer sells newly created debt or equity securities; considered issued when transferred to a holder, usually in exchange for currency or transferable deposits (paragraph 5.22).
  - Redemptions: include all repurchases of the security, recorded as financial transactions that decrease issuer’s liabilities and financial assets; usually include debt securities reaching maturity date and early redemptions (paragraph 5.23).
  - Net issuance = issuance − redemptions; Transactions_t indicates net issuance during accounting period t (paragraph 5.24).
- Acquisitions and disposals (paragraphs 5.25–5.28):
  - Gross acquisitions and disposals are financial transactions used to analyze market activity and income generation.
  - Acquisitions: purchases of newly issued securities from issuer or existing securities from another holder; considered acquired when claims and obligations arise, usually in exchange for currency or transferable deposits (paragraph 5.26).
  - Disposals: sale to issuers or to new holders on secondary market; considered disposed of when obligation ceases due to redemption or claim transferred by sale, usually in exchange for currency or transferable deposits (paragraph 5.27).
  - Net acquisitions = gross acquisitions − disposals; Transactions_t refers to net acquisitions during accounting period t (paragraph 5.28).
- Note on equity maturities (footnote, paragraph 5.23):
  - There is no stated maturity for equity securities.

### Revaluations and holding gains/losses
- Concept and drivers (paragraphs 5.29–5.31):
  - Revaluations reflect changes in the price of securities; include price changes and changes in exchange rates (revaluations for securities denominated in foreign currencies).
  - Price increases for holders mean positive revaluations or holding gains; price decreases mean negative revaluations or holding losses.
  - Revaluations are recorded as they accrue, whether realized or not (paragraph 5.31).
- Interest rate effects on debt securities (paragraph 5.30):
  - When market interest rates change, market value of fixed rate debt securities varies inversely with interest rate movements; impact lessens as security approaches maturity.
- Four situations for calculating revaluations (paragraph 5.32, 2008 SNA, paragraph 12.81):
  - Held throughout period: revaluation = closing balance sheet value − opening balance sheet value − other changes in volume (unrealized).
  - Held at beginning and sold during period: revaluation = value at disposal − opening balance sheet value − other changes in volume prior to sale (realized).
  - Acquired during period and held at end: revaluation = closing balance sheet value − value at acquisition − other changes in volume following acquisition (unrealized).
  - Acquired and disposed within period: revaluation = value at disposal − value at acquisition − other changes in volume between acquisition and disposal (realized).
- Data requirements (paragraph 5.33):
  - Calculation in the last case requires collection of actual transaction data; in the second and third cases revaluations can only be calculated approximately using derived transaction data.

### Other changes in volume of assets and liabilities
- Nature of other changes in volume (paragraph 5.34):
  - Comprise changes in quantity not due to transactions, and changes in classification.
- Changes in quantity or physical characteristics (paragraphs 5.35–5.35 footnotes):
  - Causes include accidental destruction owing to natural catastrophes or political events, destruction of evidence of ownership, losses from fire/damage/theft, uncompensated seizures (government taking possession without full compensation), and write-offs or unilateral debt repudiation in debt securities.
  - Write-offs and unilateral repudiation are not financial transactions and are recorded as other changes in the volume of assets (paragraph 5.35).
  - Rare for securities to be lost or accidentally destroyed given electronic registration (footnote).
  - Changes in financial claims from write-downs reflecting actual market values of tradable financial claims should be accounted for in the revaluation account (footnote).
- Changes in sectoral classification and structure (paragraphs 5.36–5.37):
  - Reclassification of institutional units across sectors, changes in legal status, mergers (absorption), and legal splits can cause reallocations of assets recorded as other changes in volume.
  - Conversion of debt securities into shares is recorded as two financial transactions; debt cancellation or debt forgiveness by mutual agreement is recorded as transactions between creditor and debtor (paragraph 5.37).

### Valuation principles for securities
- Market value recording principle (paragraphs 5.38–5.39):
  - Issuance and holdings of securities should be recorded at market value, that is, at the midpoint between buying and selling price where securities are quoted on markets with a buy-sell spread (BPM6, paragraph 3.90).
  - Positions are valued at the price at which the financial instrument could be bought in the market at the time the balance sheet is drawn up; values observed in markets or estimated from observed market values should be used.
  - Positions, transactions, and other flows of securities should be recorded using the same valuation principles for all institutional units involved.
  - Use of security-by-security (SBS) micro-data can help address measurement issues for debt securities and listed shares.
  - Presentation at market value may be based on balance sheet data but usually requires detailed information at the level of individual securities as contained in SBS databases.

### Valuation of debt securities and the effect of coupon payments
- Market and nominal values for debt securities (paragraphs 5.40–5.42):
  - Debt securities should be presented at market value and liability positions also expressed in nominal value (handbook recommendation referencing 2008 SNA, paragraph 2.59).
  - Debt securities issues should be recorded at both market and nominal value; holdings should be recorded at market value.
  - Both values provide useful information for monetary policy, fiscal policy, and financial stability analysis.
- Transactions and positions valuation specifics (paragraphs 5.43–5.44):
  - Transactions in debt securities are valued at the actual price agreed by the institutional units involved (2008 SNA, paragraph 2.59); market value normally excludes commissions, fees, and taxes, but includes accrued interest (2008 SNA, paragraph 3.122).
  - Market value of debt securities for positions includes accrued interest; ideally use observed market values or estimates from observed market values (2008 SNA, paragraph 2.60).
- Dirty and clean prices; coupon effects (paragraphs 5.45–5.46):
  - Dirty price: market price including accrued interest due to coupon.
  - Clean price: market price excluding accrued interest due to coupon.
  - Dirty price will decrease when coupons are paid, producing a sawtooth pattern in value because one less future cash flow exists at the payment point.

*Handbook on Securities Statistics, International Monetary Fund*

### 5.47 To  separate  out  the  effect  of  the  coupon  pay-

### Dirty and Clean Prices of Debt Securities

### Accrued interest and clean vs dirty prices
- Accrued interest between coupon dates is subtracted from the dirty price to arrive at the clean price; the calculation of accrued interest is based on the day count convention, the coupon, and the number of days since the preceding coupon payment date (the debtor approach) (paragraph 5.47).
- Changes in the clean price reflect changes in issuer risk and market interest rates more closely and follow a smoother pattern than changes in the dirty price (paragraph 5.48).
- Market practice is to quote debt securities on a clean-price basis; when traded or redeemed, accrued interest is added to the clean price to reflect the dirty price (paragraph 5.49).
- For analytical purposes many users prefer clean prices, but in a system of institutional sector accounts and balance sheets the inclusion of accrued interest is appropriate for detailed debtor/creditor relationships (paragraph 5.50).

### Illustrative five-year fixed-rate bond example (Box 5.1)
- Instrument characteristics:
  - Five-year fixed interest rate bond, face value 1,000, repayable at maturity, issued at par with annual fixed coupons of 100 corresponding to market interest rate 10 percent.
  - Coupon paid at end of each year, accruing interest on a compound quarterly basis; market interest rate changes assumed at beginning of each year.
- Key dynamics:
  - In year 1, with no market rate change, the dirty price equals nominal value (face value plus interest accrued) and the clean price equals face value (paragraph after Box 5.1 introduction).
  - With subsequent market rate changes, market price reflects accrued coupon plus valuation changes from discounted cash flows.
- Selected data points from Table 5.1.1 (Dirty and Clean Prices of a Five-year Fixed Interest Rate Bond):
  - Beginning of quarter 1: Market value (dirty price) 1,000.0; Accrued Interest 0.0; Clean price 1,000.0.
  - End of quarter 1: Market value 1,024.1; Accrued Interest 24.1; Clean price 1,000.0.
  - End of quarter 2: Market value 1,048.8; Accrued Interest 48.8; Clean price 1,000.0.
  - Up to end of quarter 4: Market value 1,100.0; Accrued Interest 100.0; Clean price 1,000.0.
  - End of quarter 4 = Beginning of quarter 5: Market value 969.0; Accrued Interest 0.0; Clean price 969.0.
  - Up to end of quarter 8: Market value 1,075.6; Accrued Interest 100.0; Clean price 975.6.
  - End of quarter 20: Market value 1,100.0; Accrued Interest 100.0; Clean price 1,000.0.
  - End or quarter 20: Market value 1,000.00; Accrued Interest 0.0; Clean price 1,000.0.
- Visual pattern: dirty price exhibits a sawtooth pattern while clean price traces a smoother path (Figure 5.1.1).

### Valuation conventions: nominal, face, and market value
- Nominal value: outstanding amount the debtor owes to the creditor; reflects sum of funds originally advanced (issue price), plus subsequent advances, plus any accrued interest, less repayments (paragraph 5.51).
- Face value: amount of principal to be repaid; equivalent to redemption price excluding accrued interest; the Handbook does not recommend presentation at face value (paragraph 5.53).
- Positions in debt securities designated as held-to-maturity may be valued at nominal value, but the Handbook recommends recording debt securities as financial assets at market value and expressing liability positions also in nominal value (paragraph 5.52 and 5.53).

### Foreign exchange revaluations and aggregation
- Foreign exchange revaluations reflect changes in value of securities denominated in foreign currencies attributable to exchange rate movements and are recorded as revaluations separately from other market price changes (paragraph 5.54).
- For aggregating securities denominated in various currencies into a common currency the Handbook recommends converting positions in each currency into the common currency first and then deriving changes in positions (Box 5.2). The example in Table 5.2.1 shows that the two methods yield different change-in-position figures (total change −46.33 when converting positions first; −27.95 when converting changes first), and the Handbook recommends the first method.

### Interest accrued: definitions and recording approaches
- Interest accrued on debt securities: amount issuers become liable to pay over a period without reducing principal outstanding; interest accrued is income and a financial transaction to the extent it is accrued but not yet paid (paragraph 5.55).
- Two approaches to defining interest:
  - Debtor approach: defines interest from issuer perspective; international statistical standards and the Handbook apply the debtor approach when recording accrued interest (paragraphs 5.56–5.58).
  - Creditor approach: defines interest from holder perspective; uses prevailing market rate (paragraphs 5.56–5.57).
- Practical effects and example for a zero-coupon bond (Box 5.3):
  - Zero-coupon bond issued at issuance value 75.13, redemption value 100.
  - Discount (interest) rate at issuance 10 percent; market rate rises to 15 percent at beginning of year 2.
  - Market price changes: from 82.64 (=100/1.10^2) to 75.61 (=100/1.15^2).
  - Under the debtor approach interest accrues continuously: year 1 interest 7.51; year 2 interest 8.26; year 3 interest 9.09; revaluations recorded residually (e.g., revaluations +3.08 in year 2 and +3.95 in year 3 as residuals to match stock-flow identity in the example).
  - Under the creditor approach the rate change is reflected immediately in revaluation: revaluation −7.03 in year 2 with interest accrual of 11.34 in year 2 (=75.61 × 0.15) and no revaluation in year 3 while interest accrues 13.04 in year 3 (Box 5.3 summary table).
- Accounting practice distinctions:
  - International statistical standards and the Handbook recommend the debtor approach for recording accrued interest (paragraph 5.58).
  - Book value financial accounting and reporting typically has debtors report interest due and accrued on outstanding debt, while asset holders may use a net yield concept (paragraph 5.59).
  - Under the creditor approach interest accrued reflects current market conditions and expectations and is determined using the current yield to maturity (paragraph 5.60).

### Interest payable by type of debt security
- Bills and similar debt securities: interest measured by the discount on the bill (difference between sum paid at maturity and amount received at issue) (paragraph 5.61).
- Bonds and debentures: for bonds issued at a discount or premium, the difference between redemption price and issue price constitutes interest that accrues period-by-period (paragraph 5.62).
- Zero-coupon bonds: sold below redemption value; difference between redemption value and issue price represents interest accruing continuously over the life of the security (paragraph 5.63).
- Index-linked debt securities: classify all index-linked debt securities (except those linked to a foreign currency) as variable interest rate debt securities; a security is variable rate if indexation applies to principal, coupons, or both (paragraph 5.64).

*Handbook on Securities Statistics*

### 5.68 Scrip  dividend  shares  are  shares  valued  at  the

### 5.68 Scrip dividend shares are shares valued at the price implied by the issuer’s dividend proposal and distributed in lieu of cash dividends.

### Definitions and valuation of listed and scrip shares
- 5.68 Scrip dividend shares are shares valued at the price implied by the issuer’s dividend proposal and distributed in lieu of cash dividends.
- 5.71 Listed shares are valued at market value; the same value is adopted for both the assets side and the liabilities side.
- 5.72 Listed shares are valued at a representative mid-market price observed on a stock exchange or other organized financial market.
  - Two approaches for multiple listings: (1) the price on the stock exchange deemed to be most representative; or (2) the average of the market prices available on the various stock exchanges.
- 5.89 A scrip (or stock) dividend is a pro-rata dividend payment made to shareholders in the form of additional shares; it is treated as income (in the primary income account), which is then immediately reinvested (in the financial account).
- 5.90 Additional shares distributed to shareholders may be:
  - Newly issued shares financed using the corporation’s own funds.
  - Treasury shares (i.e., reacquired stock bought back by the issuing corporation).
- 5.91 As with any scrip issue, the shares issued in order to pay a scrip dividend need to come from the capitalization of reserves.
- 5.92 Distinction between DRIP and scrip dividends:
  - A DRIP does not keep cash within the corporation.
  - There are (low) dealing costs.
  - Number of shares a shareholder receives under a DRIP depends on the price on the day the DRIP operator purchases the shares.
- 5.93 Advantages of scrip dividend vs DRIP:
  - No dealing costs.
  - Number of shares received is known in advance.

### Valuation of unlisted shares
- 5.73 Fair values for unlisted shares (not traded on organized markets) should be estimated with reference to market equivalents.
- 5.74 The 2008 SNA and BPM6 establish six different methods for the valuation of unlisted shares. These methods are based on the use of:
  - Recent transaction prices.
  - Net asset values, based on accounting data.
  - Present values or price-to-earnings (P/E) ratios, by discounting forecasted future profits.
  - Market capitalization or price-to-book-value (P/B) ratios.
  - Own funds at book value (OFBV).
  - The apportioning of global values.
- 5.75 These methods may take into account differences between listed and unlisted shares (notably liquidity) and consider net worth accumulated over the life of a corporation and its line of business. Differences in estimates may also result from different valuation methods, with no conceptual interpretation possible.
- 5.76 Annex 8 contains a more detailed description of the valuation methods for unlisted shares.

### Income attributed to holders of equity securities and dividends
- 5.77 Income attributed to holders of equity securities is part of property income; property income accrues when owners of financial assets place them at the disposal of other institutional units.
- 5.78 Owners of equity securities receive a share of distributed earnings; equity securities income includes dividends (2008 SNA, code D421) as part of the distribution of corporations’ income (2008 SNA, code D42).
- 5.79 Distribution of corporations’ income as withdrawals from the income of quasi-corporations (2008 SNA, code D422) is not part of income attributed to holders of equity securities.
- 5.80 Dividends are a form of property income and cover all distributions of profits by corporations to their shareholders or owners; dividends are recorded gross of any withholding taxes deemed to be payable by recipients of such income.
- 5.81 Dividends also include:
  - Shares issued to shareholders as a dividend payment for the financial year (although bonus shares are not included).
  - Income paid to general government by public enterprises that are recognized as independent legal entities and do not constitute corporate enterprises.
  - Income generated by activities and transferred to the owners of corporations participating in these activities for their own private use.
- 5.82 There are usually three different types of dividend payment:
  - Dividends paid in cash.
  - Interim dividends.
  - Scrip (or stock) dividends.
- Dividends paid in cash
  - 5.83 Cash dividends are the most common form of dividend payment.
  - 5.84 Under legislation on public limited companies and limited liability companies, a corporation may only distribute as dividends its annual profits (based on its final income statement for the last year and other equity), following certain deductions.
  - 5.85 Distribution of dividends may include any transfer of value which directly or indirectly benefits shareholders; it is assumed that most dividends are paid in cash.
- Interim dividends
  - 5.86 Interim dividends are usually paid to shareholders if the preliminary income statement indicates a profit.
  - 5.87 Interim dividends are recorded as property income to the extent that they are related to the accrued income of the corporation. Two conditions must be fulfilled:
    - The corporation making the payment must make short-period accounts available to the public and the payment must be based on at least two quarters.
    - The interim payment should be based on the same proportion of profits as the dividends paid in previous years; consistent with the usual rate of return for shareholders; and in line with trend growth for the corporation.
  - 5.88 If these conditions are not met, the interim payment is recorded as an advance payment until final annual figures are available.
- Time of recording of dividends
  - 5.94 Dividends are recorded at the point when the share price begins to be quoted on an ex-dividend basis, rather than at a price that includes the dividend (2008 SNA, paragraph 7.130). Dividends are recorded after they have been declared but before they are actually payable.
- Transactions not defined as dividends (5.95)
  - Bonus shares (new shares issued to all stockholders in proportion to existing holdings) are not considered dividends and are not treated as transactions.
  - Liquidation dividends (partial or total) arising mainly at termination are treated as the withdrawal of investment and shown in the financial account.
  - Funds withdrawn via sale or disposal of a quasi-corporation’s assets are recorded as withdrawal of equity in the financial account.
  - Exceptional payments by corporations funded using accumulated reserves or sale of assets are treated as withdrawal of equity and recorded in the financial account; these are sometimes called “super dividends.”

### Super dividends
- Box 5.5 Super Dividends:
  - Super dividends are dividends that are large relative to recent dividends and earnings (2008 SNA, paragraph 7.131).
  - Distributable income = entrepreneurial income + all current transfers receivable − all current transfers payable − adjustment for the change in pension entitlements.
  - The ratio of dividends to distributable income over the recent past assesses plausibility; dividends greatly in excess of recent levels are treated as financial transactions and termed “super dividends,” recorded as the withdrawal of owners’ equity.
  - For publicly traded corporations, super dividends exceeding entrepreneurial income for the relevant accounting period are recorded as the withdrawal of equity to that extent.

### Transactions and positions recording guidance
- 5.69 Issuance of bonus shares is not recorded; where issuance involves changes in the total market value of a corporation’s shares, those changes are recorded in the revaluation account.
- 5.70 Data on transactions may be derived from relevant position data; transaction prices will usually have to be estimated, for example, by taking unweighted average prices at the beginning and end of the reporting period.
- 5.95 Bonus shares are not treated as transactions because there has been no effective change in terms of the underlying instrument.

### Aggregation, consolidation, and netting
- 5.96 Aggregation is the summation of positions, transactions, revaluations or other changes in the volume of assets and liabilities for institutional units belonging to a specific sector or subsector.
- 5.97 Consolidation involves the elimination of positions, transactions, revaluations and other changes in the volume of assets and liabilities between institutional units belonging to the same group.
- 5.98 Institutional units can be grouped or consolidated at subsector, sector, national level, or at the level of corporate groups; consolidation at group level eliminates securities held/issued by institutional units within the same group.
- 5.99 Consolidated presentations reduce statistical information but may be analytically useful (examples given for debt securities of money-issuing corporations and general government).

*Handbook on Securities Statistics (excerpted paragraphs 5.68–5.99).*

### 5.100 Consolidation  at  the  corporate  group  level  is

### 5.100 Consolidation at the corporate group level

### Consolidation at the corporate group level
- Consolidation on the basis of control relationships groups related institutional units into a single corporate group (for example, domestic and foreign subsidiaries of domestic banks with their parent bank).
- All intra-group positions and flows are eliminated from the information reported:
  - All positions and flows between the various subsidiaries and between those subsidiaries and the parent corporation are eliminated.
- This consolidation approach is useful for financial stability analysis (see Annex 7).
- The Handbook focuses on the unconsolidated presentation of securities issues and holdings for monetary and macroeconomic analysis:
  - Unconsolidated presentation sums gross positions, transactions, revaluations, and other changes in the volume of assets and liabilities of institutional units belonging to a sector or subsector vis-à-vis all institutional units belonging to the same sector or subsector, to other sectors of the economy, and to other economies.

### Netting
- Definitions of “net”:
  1. Net recording — summing all debits and credits for a financial asset or liability category or subcategory.
  2. Netting of an asset against a liability.
- Net recording always refers to aggregations for which all debit entries of a particular asset or liability are netted against all credit entries in the same asset or liability type (e.g., bond issues are netted against bond redemptions).
- When “net” is used with a category of financial instrument (net financial instrument), netting of a financial asset against the same type of liability is understood (BPM6, paragraph 3.114).

### Specific operations related to securities — overview (Chapter 6)
- Chapter 6 addresses specific operations related to securities with an initial focus on debt securities issued under securitization schemes:
  - General description of securitization, principal features, main institutional units involved, and a streamlined classification for various financial instruments within debt securities statistics.
  - Remaining parts of the chapter deal with other specific operations related to securities holdings.

### Securitization — definition and motivations
- Securitization results in debt securities for which the coupon or principal payments (or both) are backed by specified financial or nonfinancial assets or future income streams.
- Assets or future income streams that may be securitized include: residential and commercial mortgage loans, consumer loans, corporate loans, government loans, credit derivatives, and future revenue.
- In the EU, the definition of securitization is narrower than in the Handbook; Regulation (EU) No. 1075/2013 (ECB/2013/40) is similar to Type 2 and Type 3 definitions; Type 1 securitization schemes (on-balance-sheet securitization) are outside the scope of that Regulation.
- Motivations:
  - For corporations: cheaper funding costs than banking facilities; reduction in regulatory capital requirements; transfer of risk; diversification of funding sources.
  - For governments: reduce the average cost of budget financing relative to conventional government debt securities issues.

### The securitization process — three broad types
- Securitization schemes can be grouped into three broad types:
  - Type 1: Original asset owner creates new debt securities; no securitization corporation involved and no transfer of assets (on-balance-sheet securitization).
  - Type 2: Involves a securitization corporation and a transfer of assets from the original asset owner (true sale securitization).
  - Type 3: Transfer of credit risk only, but not the transfer of assets, either through a securitization corporation or through direct issue by the original asset owner (synthetic securitization).
- Type 1 details:
  - Assets remain on the balance sheet of the debt securities issuer (the original asset owner), typically as a separate portfolio; issuing debt securities provides funds to the original asset owner.
- Type 2 details:
  - True sale securitization: securitization corporation issues debt securities after purchasing transferred assets; proceeds from selling debt securities fund the purchase of assets; income stream from the asset pool finances coupon and principal payments.
- Type 3 details:
  - Synthetic securitization: transfer of credit risk without transfer of assets using credit default swaps (CDS).
  - Proceeds from debt securities are placed on deposit; interest on the deposit plus CDS premium finances coupon payments.
  - In a default, protection buyer (original asset owner) is compensated by protection seller; holders of the debt securities suffer losses for the same value.
  - Synthetic securitization without a securitization corporation: original asset owner issues credit-linked notes (CLN) backed by reference assets with embedded CDS; repayment is conditional on asset pool performance.

### Statistical classification of securitization debt securities
- Debt securities issued in securitization schemes may include: asset-backed securities (ABS), asset-backed commercial paper (ABCP), covered bonds, credit-linked notes (CLN), and structured credit securities including collateralized debt obligations (CDO).
- ABS:
  - Typically have an original term to maturity of more than one year; usually backed by long-term mortgages (e.g., residential mortgage-backed securities (RMBS)).
- ABCP:
  - Similar to ABS but with an original term to maturity of one year or less; may be backed by residential mortgages or short-term assets such as trade receivables, leases, or margin loans.
- Classification principle:
  - ABS and ABCP are classified as debt securities because issuers are required to make payments and holders do not have a residual claim on underlying assets; if holders had a residual claim, classification would be equity securities or investment fund shares or units (BPM6, paragraph 5.47).
- Covered bonds:
  - Created through securitization and issued by the original asset holder; backed by assets remaining on the holder’s balance sheet but identified as belonging to a cover pool.
  - Cover pool mainly consists of mortgages with a high credit rating or loans to the public at large.
  - In the MFSCG, covered bonds are referred to as mortgage-backed bonds (MFSCG, paragraph 4.24).
- CLN classification:
  - Criteria based on whether they are backed by payments on specified assets or income streams, rather than whether they are issued by a securitization corporation.
- CDO:
  - Backed by a relatively small pool of heterogeneous debt instruments (bonds and loans); liabilities are ranked to protect investors against different levels of credit risk.
  - Similar instruments: collateralized mortgage obligations (CMO), collateralized loan obligations (CLO), collateralized bond obligations (CBO).

### Institutional classification and residency issues
- Issuing institutional unit varies by type:
  - Type 1 and some Type 3: issuing unit may be a corporation or a general government unit.
  - Type 2 and some Type 3: issuing unit is a securitization corporation classified in the financial corporations subsector “other financial intermediaries except insurance corporations and pension funds.”
- Distinction between securitization corporations and passive holding units:
  - If a corporation is legal owner of the portfolio, issues debt securities representing interest in the portfolio, has a full set of accounts, and bears market and credit risks, it is a securitization corporation and classified in “other financial intermediaries except insurance corporations and pension funds.”
  - Units created solely to hold specific portfolios that do not bear market or credit risks are combined with their parent corporation if resident in the same economy.
  - If such a unit is set up outside the parent’s economic territory, it is resident where incorporated and treated as a separate institutional unit in the financial corporations subsector “captive financial institutions and money lenders” of the host economy.

### General government involvement in securitization
- Two classification cases for general government units:
  - If a general government unit is the original asset owner and transfers assets (such as government loans) to a separate securitization corporation, distinction between securitization debt securities and conventional government debt securities is based on the involvement of the securitization corporation that issues debt securities backed by the loans.
  - If a general government unit issues debt securities backed by specific, earmarked future revenue rather than loans or financial assets on its balance sheet, the distinction between securitization debt securities and conventional government debt securities is not straightforward.
  - Note: The ability to raise taxes or other government revenue is not classified as an asset in the 2008 SNA; earmarking of future revenue (e.g., road toll receipts) to service debt may resemble securitization and gives holders higher protection or preferred status. In the EU, methodological criteria have been developed for securitization undertaken by general government.

### Reverse transactions — main features and recording
- Definition and common characteristics:
  - Reverse transactions involve the sale (change of legal ownership) of securities with a commitment to repurchase the same or similar securities on a specified date or with open maturity at a pre-agreed price.
  - Two common characteristics:
    1. Commitment to reverse the transaction on a specified future date (or on demand).
    2. Although legal ownership is transferred to the purchaser, all risks and benefits of ownership remain with the original owner.
  - Reverse transactions include securities repurchase agreements (repos); securities lending; and sell/buy-back transactions (2008 SNA, paragraph A4.46).
- Economic ownership and income flows:
  - Commitment to reverse at a fixed price means original owner retains risks and benefits of price changes.
  - Lender receives income yielded by the security (coupon payments and dividends are passed on as a “manufactured dividend”).
  - Economic ownership of securities provided under reverse transactions does not change.
- Data collection and recording challenges:
  - Legal title and economic ownership are distinct; security-provider, security-receiver, or other sources (custodians’ records or securities registers) may record positions inconsistently.
  - A security subject to a reverse transaction could potentially be recorded as being owned by both parties (BPM6, paragraph 7.58).
- Cash and loans in reverse transactions:
  - Reverse transactions may or may not involve the supply of cash.
  - If cash is supplied (as in repos and securities lending with cash collateral), one party supplies securities and receives cash; securities remain on original holder’s balance sheet, so the counterpart to the cash exchange is recorded as a loan received.
  - The exchange of funds under reverse transactions does not involve issuance of new securities; no transaction is recorded in the underlying securities.
  - Unless transfer of securities is accompanied by an exchange of cash, no loan or deposit is created and neither the 2008 SNA nor the BPM6 require any transaction to be recorded.

*Handbook on Securities Statistics*

### 6.23 Table 6.1 provides an overview of the main features

### Specific Operations Related to Securities

### Reverse transactions — general features
- Securities lending involves the temporary transfer of securities by the lender (the seller of the securities or cash receiver) to the borrower and may require the securities borrower to provide assets as collateral in the form of cash or securities.
- Legal title passes on both sides of securities lending so that the borrowed securities and collateral can be sold or on-lent; however, no transaction in the securities exchanged is recorded.
- Repos and sell/buyback transactions are also used for the temporary transfer of securities against cash.
- Securities lending is more likely motivated by the wish to borrow specific securities, whereas repos and buy/sell-back transactions are more likely motivated by the wish to lend or borrow cash.
- From a legal perspective:
  - A repurchase transaction (purchase and repurchase) is usually considered to be one transaction.
  - A sell/buyback transaction is considered to constitute two transactions—a separate purchase and sale—although no transaction in the securities exchanged is recorded.
- The main difference between repurchase and sell/buyback transactions is the treatment of the coupon payment:
  - In a repurchase transaction the coupon is paid by the buyer to the original owner on the coupon payment date.
  - In a sell/buyback transaction the coupon payment is included as part of the price in the second leg of the trade.
- Where collateral other than cash is provided, fees are negotiated and quoted as an annualized percentage of the value of the securities lent; fees for securities lending (shares and debt securities) are treated as interest (BPM6, paragraph 11.66).
- If collateral is cash, a return (fee) may be quoted as a “rebate”: the lender earns all of the interest that accrues on the cash collateral, and “rebates” an agreed rate of interest to the borrower.

### Reverse transactions with cash collateral (repos and repo-type agreements)
- A repo is a type of reverse transaction involving the provision of securities in exchange for cash with a commitment to repurchase the same or similar securities at a fixed price, either on a specified future date or with an “open” maturity.
- Repos, securities lending with cash collateral and sell/buybacks all involve the provision of securities as collateral for a loan or a deposit (2008 SNA and BPM6).
- Buy/sell-backs and sell/buy-backs are repo-type agreements consisting of a combination of a spot transaction and a forward transaction.
- The securities provided under a repo are regarded as still being economically owned by the security-providing party (BPM6, paragraphs 5.52 to 5.54).
- A repo is viewed from the perspective of the securities provider (the cash borrower); the agreement is called a reverse repo when viewed from the perspective of the securities receiver (the cash provider).
- The supply and receipt of funds under a repo is treated as a loan or as a deposit:
  - It is generally a loan.
  - It constitutes a deposit if the cash borrower (the securities’ provider) is a deposit-taking corporation and the cash provider is not a deposit-taking corporation; in that case the resulting liability may be included in national measures of broad money.

### Reverse transactions without cash collateral (securities lending without cash collateral)
- Securities lending without cash collateral consists of the delivery of securities for a given time period.
- If a reverse transaction does not involve the supply of cash, there is no loan or deposit transaction; although legal ownership has changed, the economic ownership of the securities provided as collateral is treated as not having changed and therefore no transaction should be recorded.
- The securities lent remain the assets of the delivering unit, and the securities received as collateral continue to be recorded as financial assets of the institutional unit lodging the collateral, because the original owner is still subject to the risks and benefits of any change in the price of the security.
- Borrowers (e.g., brokers) may subsequently on-sell the securities outright to other clients; the ability to on-sell reflects that legal ownership has been transferred to the borrower while economic risks and benefits remain with the original owner. In return, the “lender” receives a fee from the “borrower” for the use of the security.

### Short-selling
- Short-selling (also known as “shorting” or “going short”) is the practice of selling assets, usually securities, that have been borrowed from a third party with the intention of buying identical assets back at a later date to return to the lender.
- Short-sellers hope to gain from a decline in the value of the assets; conversely, they make a loss if the price rises.
- Short-selling may be facilitated by brokers who, for a fee, arrange the lending of a security owned by one customer (the “lender”) to another (the short-seller); the short-seller then sells the security in the market (to the “purchaser”).
- The “lender” does not retain legal ownership but retains economic ownership and may request the security at any time from the broker; the broker will then deliver an identical security, usually obtainable from the large pool of securities held by his customers.
- When debt securities are sold short:
  - Legal title passes to the purchaser while the lender retains economic ownership.
  - To avoid double counting, a negative holding of the debt security should be recorded for the position of the short-seller.
  - Transaction accounts should reflect a sale from the short-seller to the purchaser, which is the counterpart entry to the cash flow from the purchaser to the short-seller.
  - In the distribution of income account, accrued interest payable by the short-seller to the lender is to be treated as negative income receivable by the short-seller, while the purchaser and the lender record the corresponding accrued interest payments.

### Stripped securities (STRIPS)
- STRIPS are securities that have been transformed from a principal amount and periodic coupons into a series of zero-coupon bonds, with maturities matching the coupon payment dates and the redemption date of the principal amount.
- STRIPS can be created in two ways:
  - The owner can ask the settlement or clearinghouse to create STRIPS from the original security, in which case the STRIPS replace the original security and remain the direct obligation of the issuer of the original security.
  - The owner can issue STRIPS in its own name, backed by the original security, in which case the STRIPS represent new liabilities of the owner of the original security and are not the liability of the issuer of the original security.
- Double counting does not arise when the entity issuing the STRIPS is creating new liabilities.
- The potential for double counting arises when the STRIPS have replaced the original security even though the latter has not been redeemed; the original security may be “dormant” in the settlement or clearinghouse until reconstituted or redeemed.
- STRIPS with an original maturity of less than one year are short-term debt securities; if identifiable, they should be reported as such.

### Nominee accounts
- A nominee account is a legal device for holding assets, used for reasons of confidentiality or convenience.
- Assets held in nominee accounts should be attributed to the economic (beneficial) owner, not the nominee.
- The correct approach is to “look through” nominees—treat holdings as if the nominee account had not been used and report the beneficial owner as the holder.
- Identifying the beneficial owner may be difficult for issuers, especially when nonresident nominee accounts and custodians are used; custodians in an intermediary country may not be aware of the ultimate owner (example: resident of country A holds securities issued by resident of country B using a nominee account in country C, with custody in country C).

### Shareholders’ rights
- Shareholders are granted rights depending on the class of shares; they have the right to:
  - Vote on matters such as elections to the board of directors
  - Share in the distribution of the corporation’s income
  - Purchase new shares issued by the corporation (subscription rights)
  - Lay claim to the corporation’s assets in the event of its liquidation
- Shareholders’ rights to a corporation’s assets in liquidation are subordinated to the rights of the corporation’s creditors.
- Voting rights may be weighted but more commonly are proportionate to the number of ordinary shares held or their nominal value; unless the corporation’s statute provides otherwise, every member has one vote per ordinary share held.
- Specific rights may be conferred on a particular shareholder or class of shares by the corporation’s statute or by a share issue or shareholders’ agreement; capital may be divided into separate classes with specific rights attached.
- A corporation may issue nonvoting shares; provided it issues some voting shares, there is no limit to the percentage of capital that may be represented by nonvoting shares.

### Subscription rights
- Subscription rights traded separately are often given their own separate International Securities Identification Number (ISIN).
- Subscription rights are classified as shares, not as financial derivatives, since they represent a claim on the residual value of a corporation.
- Issuers use subscription rights to allow existing shareholders to participate in new issues, enabling them to retain their proportional ownership; rights may allow existing shareholders to buy new shares at less than the market price.
- New shares may be offered to holders of subscription rights that have obtained a certain amount by a certain date; these rights may be traded separately on the exchange during a specific period and are sometimes called “nil-paid letters.”
- Only holders of subscription rights are allowed to purchase new shares; shareholders without subscription rights might not have the right to buy new shares.

### Bonus shares
- Bonus shares are new shares issued to all shareholders in proportion to their existing holdings by converting a corporation’s reserves into share capital (equity securities); this is the capitalization of reserves.
- Holders receive new shares and the number of shares increases, but relative claims of shareholders remain unchanged.
- The issuance of bonus shares does not constitute a financial transaction between shareholders and the corporation, as there is no change in the total amount of the underlying financial asset; shareholders’ claims remain unchanged (see also paragraph 5.95).
- Bonus shares are designed to improve liquidity of shares on the market; the total market value of shares issued may rise and any such change is recorded as a holding gain.
- Bonus shares are a way for corporations to reward shareholders without triggering a tax event, which generally happens when cash dividends are paid.

### Stock splits and reverse splits
- Stock splits split existing shares, reduce the share price and increase the number of shares available in the market to increase liquidity and affordability.
- Example: In a two-for-one split, every shareholder with one stock is given an additional share; if a corporation has 10 million outstanding shares with a value of one currency unit each before the split, it will have 20 million outstanding shares with a value of 0.5 currency unit each after the split.
- A stock split reduces the price of a share because the number of outstanding shares increases; market capitalization remains constant (example: two-for-one split halves the share price).
- Corporations usually carry out a stock split when share price has increased to levels that are too high or exceed those of similar corporations to make shares more affordable to small investors.
- Reverse split increases share price by decreasing number of shares (example: in a reverse five-for-one split, 10 million outstanding shares with a value of 0.5 currency unit each become two million outstanding shares with a value of 2.5 currency units each; in both cases the company is worth five million currency units).
- Stock splits and reverse splits do not constitute transactions.

### Share buybacks
- Corporations may buy back their own equity in a share repurchase (also “stock repurchase” or “share buyback”).
- Two recording approaches:
  - National accounts: a share buyback is recorded as the redemption of equity securities, recorded as financial transactions with cash provided to existing shareholders in exchange for a reduction in the number of outstanding shares; the liability is deemed extinguished even if shares are not cancelled (corporation retires shares or keeps them as “treasury stocks”).
  - Securities statistics: share buybacks are not netted out because listed corporations may purchase and sell their own shares continuously; many listed corporations hold varying amounts of their own shares for purposes such as increasing market liquidity.
- A reduction in outstanding amounts can only be recorded once the bought-back shares are formally extinguished or cancelled (e.g., by reducing nominal or issued capital in the balance sheet and/or reducing market capitalization on the stock exchange).
- Differences between a corporation’s outstanding shares and its (paid-up) registered capital might be difficult to distinguish.
- The two recording approaches lead to discrepancies between securities statistics and national accounts.

### Mergers and acquisitions
- Mergers arise when two or more corporations agree to combine to form a single entity.
- Acquisitions involve the purchase of one corporation or a group of corporations by another (the purchaser may not acquire all shares).
- Corporate restructuring via mergers and acquisitions causes the appearance and disappearance of financial assets and liabilities.
- When a corporation ceases to be an independent legal entity because other corporation(s) absorb(s) it, all of its financial assets and liabilities (including shares and other equity) vis-à-vis the absorbing corporation(s) disappear from the national accounts; this is recorded as changes in sectoral classification and structure in “other changes in the volume of assets and liabilities.”

*Handbook on Securities Statistics (IMF).*

### 6.62 However, the purchase of a corporation’s shares

### 6.62 However, the purchase of a corporation’s shares

### Mergers and acquisitions — recording equity transactions
- The purchase of a corporation’s shares and other equity as part of a merger is recorded as a financial transaction between the purchasing corporation and the previous owner (6.62).
- Replacement of existing shares with shares in the new corporation is recorded as the redemption of shares accompanied by the issuance of new shares (6.63).
- The absorbed corporation’s financial assets and liabilities vis-à-vis third parties remain unchanged and pass to the absorbing corporation(s) (6.63).
- Where necessary (e.g., where the absorber and the absorbed corporation belong to different sectors), the passing on of assets and liabilities is also recorded as “other changes in the volume of assets and liabilities” (6.63).

### Temporary or intermediary shares in restructurings
- “Squeeze-outs” and other restructuring operations often create temporary or intermediary shares for technical reasons (6.64).
- Intermediary shares usually exist only for a few months (or less) and are used to manage complex exchange and conversion of shares (6.64).

### Splits and sectoral reclassification
- When a corporation is split from a legal perspective into two or more institutional units, new financial assets and liabilities are recorded as changes in sectoral classification and structure (6.65).

### Privatization — recording and institutional arrangements
- Privatization is the transfer to nongovernment owners, by a government unit, of the controlling equity of a public corporation or quasi-corporation (6.66).
- The proceeds of privatization are not government revenue; payment is considered a financial transaction with no impact on the government’s deficit or surplus, as the event has no impact on net worth and represents a change in the composition of assets (F5 as opposed to F2) in the government’s balance sheet (6.66).
- Proceeds of privatization are to be recorded gross in the financial accounts (6.66).
- Privatization may occur via a public holding company or another government-controlled public corporation, with all or part of the proceeds passed on to the government (6.67).
- Payment to government of proceeds from such asset sales is to be recorded as a financial transaction irrespective of presentation in government or subsidiary accounts, with a simultaneous decrease in shares and other equity corresponding to the partial liquidation of the holding company’s assets (6.68).
- Any proceeds of privatization retained by the holding company represent government revenue ploughed back in by means of a capital injection (6.68).
- A public holding company acting as a “restructuring agency” may retain sale proceeds to inject capital into other enterprises; if it acts as a direct agent of government, it is usually classified as general government (6.69–6.70).
- When a holding company controls subsidiaries but does not perform management and only a small percentage of activities channel funds for public policy, the holding company is allocated to the financial corporations sector and treated as a captive financial institution even if subsidiaries are nonfinancial corporations (6.71).

### Nationalization — acquisition, valuation, and uncompensated seizure
- Nationalization is the acquisition from nongovernment owners, by a government unit, of the controlling equity of a corporation or quasi-corporation (6.72).
- Nationalization usually takes the form of the purchase of shares in exchange for currency or deposits, or is financed by a debt instrument; government buys shares at the market price—or at a price sufficiently close to that level considering standard market valuation practices (6.72).
- The transaction is by mutual consent though initial owners may have limited scope to refuse or negotiate; the purchase of shares is recorded in the financial account as a financial transaction (6.73).
- Exceptionally, government may appropriate or confiscate ownership without mutual-consent payment; where payment does not fairly reflect asset value, the difference between market value acquired and any compensation provided is recorded as an uncompensated seizure in “other changes in the volume of assets” (6.74).

### Debt-for-equity swaps — recording and valuation rules
- Debt-for-equity swaps exchange (usually at a discount) debt instruments relating to an economy for investors’ equity investment in the economy (6.75).
- Such swaps generally extinguish (debit item) a fixed payment liability, debt security, or loan (usually denominated in foreign currency) and create (credit item) an equity liability (denominated in domestic currency) vis-à-vis the investor, to be recorded under direct or portfolio investment as appropriate (6.75).
- Bank loans or corporate liabilities can be exchanged for equity, or the central bank may redeem outstanding debt at a discount in local currency (credit item), with the recipient typically reinvesting the proceeds as equity (6.76).
- If the direct investor directly holds equity that entitles it to 10 percent or more of the voting rights in the enterprise, credit entries should be made under direct investment/equity capital; otherwise, the equity claim should be recorded under portfolio investment/equity securities (6.77).
- Transactions should be recorded using the value of the equity acquired, with offsetting debit entries under the appropriate debt instrument for the reduction in liabilities (6.77).
- For indirect swaps where debt is exchanged for a local currency claim (deposit) which is then exchanged for equity, transactions are recorded for both the initial exchange and the exchange of deposits for equity; equity liabilities increase and debt liabilities decrease by the value of the instrument extinguished (6.78).
- All transactions should be valued using the market price of the new claim received; differences in value between old and new claims are recorded as a valuation adjustment in the revaluation account rather than as a transaction—except where nonmarketable debt owed to official creditors is involved, in which case any reduction in the value of the old debt is recorded as debt forgiveness (capital transfer) (6.79).

### Classification of securities — overview and analytical uses (start of Chapter 7)
- Securities statistics can be presented according to classifications: issuing sector and subsector, currency, maturity, interest rate, and market; classification by default risk is discussed but no specific scheme is recommended for Chapter 9 detailed tables pending further work (7.1).
- These classifications aid analysis for monetary policy formulation and monitoring, financial integration, financial market regulation, and financial stability (7.1).
- Chapter 9 tables can present statistics on securities issues and holdings with different classifications; tables capture a wide range of securities characteristics though only a subset of cells may be relevant for a particular economy (7.2).

### Issuance and holding of debt securities — issuers and holders
- Primary issuers of debt securities: nonfinancial corporations, financial corporations, and general government; households and NPISHs may be legally entitled to issue debt securities (7.3).
- The financial corporations sector can be broken down into issuers: central bank; other money-issuing corporations comprising the subsectors “deposit-taking corporations except the central bank” and some money-market funds (MMFs); securitization corporations; other financial corporations (7.5).
- The general government sector issuer subsectors: central government; state government; local government; social security funds (7.6).
- The public sector aggregates debt securities issued by general government and public corporations, including the central bank (7.7).
- “Debt securities holdings” denotes ownership of debt securities (financial assets) by an institutional unit; changes in holdings arise from financial transactions, revaluations, or other changes in the volume of assets (7.8–7.9).
- It is important to know, for resident-issued debt securities, the relative size of holdings by residents and nonresidents and the amounts held by sector and subsector for monetary and economic policy and financial stability analysis (7.10).
- Debt securities holdings of the financial corporations sector may be broken down into holdings of: the central bank; other money-issuing corporations (deposit-taking corporations except the central bank and MMFs); non-MMF investment funds; securitization corporations; insurance corporations; pension funds; other financial corporations (7.12).
- Institutional investors of interest for monetary policy and financial stability comprise: investment funds (MMFs and non-MMFs); insurance corporations; pension funds (7.13).
- Nonresidents as holders may be broken down by country or group of countries or by institutional sector or subsector of financial corporations; confidentiality and identification challenges may arise (7.14–7.16).
- Detailed data on collateral, credit ratings, or interest rate fixation periods of debt securities held by institutional units may be useful (7.17).

### Issuance and holdings of equity securities — issuers and holders
- Analysis of issuance and holdings of equity securities by sector and subsector, and holdings by nonresidents, is important for monetary and fiscal policy and for financial stability analysis (7.18).
- Equity securities are issued by resident and nonresident corporations and can be held by any resident institutional sector or subsector or by nonresidents; nonfinancial corporations, financial corporations, households and general government can hold equity securities (7.19).
- Issuers of equity securities include: resident financial and nonfinancial corporations; nonresident financial and nonfinancial corporations; general government in exceptional cases where public corporations are classified as part of general government (7.20).
- Public corporations operate under the control of general government; assessment of activities and resources determines classification as corporations sectors or as general government—market producers are expected to cover at least 50 percent of costs by means of sales over a sustained multiyear period (7.21 and footnote) .
- Types of financial corporations that issue shares include: the central bank (some central banks issue equity securities); deposit-taking corporations except the central bank; insurance corporations; pension funds (only a few countries allow pension funds to issue shares); other financial corporations (7.22).
- Equity securities holdings of the financial corporations sector can be broken down into holdings of: the central bank; other money-issuing corporations comprising deposit-taking corporations except the central bank and MMFs; non-MMF investment funds; insurance corporations; pension funds; other financial corporations (7.25).
- Institutional investors relevant for equity holdings are: non-MMF investment funds; insurance corporations; pension funds (7.26).
- Households are important holders of equity securities and investment fund shares or units (7.27).

*Source: Handbook on Securities Statistics, International Monetary Fund.*

### 7.28 NPISHs  generally  hold  fairly  small  amounts  of

### Classification of Securities

### NPISHs, households, and equity holdings
- NPISHs generally hold fairly small amounts of equity securities (7.28).
- In some countries, trusts or foundations classified as NPISHs are organized so households transfer a large percentage of their equity securities to those institutions for tax reasons; households often receive the proceeds depending on the statutes, but do not own them and cease to have a claim on the “donated” assets once transferred (7.29).

### Government and public sector equity holdings
- Equity securities held by general government may include equity injections in public corporations, portfolio investment, and proceeds of privatization or super dividends (7.30).
- Government units such as social security funds conduct portfolio investment mainly by purchasing listed shares; many countries have created sovereign wealth funds to save and invest excess revenue (often from primary product exports) and these funds may invest in foreign financial assets including portfolio investment in equity securities (7.31).
- Public corporations’ distributions of surpluses in excess of operational profits (excluding holding gains or losses) are recorded as financial transactions representing withdrawal of equity akin to partial liquidation of the enterprise, rather than government revenue (7.32).

### Nonresident holdings and sector breakdowns
- Nonresidents as holders of equity securities may be broken down by institutional sector or, for financial corporations, subsector; they can also be broken down by country or into groups of countries (7.33).
- Identifying nonresident holdings at the level of institutional sectors is challenging (see Annex 6 on the Coordinated Portfolio Investment Survey [CPIS]) (7.34).
- Data on holdings of equity securities may also be broken down by country and/or area for financial statistics (7.35).

### Classification by interest rate — overview
- Only debt securities can be classified by interest rate; equity securities do not accrue interest but pay dividends (7.36).
- Institutional units issuing a large share of debt securities with a variable interest rate may be exposed to more financial stress during financial shocks; the mix of fixed and variable rate debt securities can influence monetary policy transmission (7.36).

### Fixed interest rate debt securities — features and types
- For fixed interest rate debt securities, contractual nominal coupon payments are fixed in the currency of denomination for the life of the security or for a certain number of years; issuer and holder know timing and value of coupon payments and principal at issue (7.37).
- Fixed interest rate debt securities include (7.38–7.39):
  - Plain debt securities issued and redeemed at face value (face value also known as par value) (7.38, note 8).
  - Debt securities issued at a discount to face value (except zero-coupon bonds), e.g., Treasury bills, commercial paper, promissory notes, bill acceptances, bill endorsements (7.38).
  - Deep discounted bonds (small coupon payments, issued at discount) (7.38).
  - Zero-coupon bonds: single-payment securities sold at a discount, principal repaid at maturity; may be created by stripping coupons (7.38).
  - STRIPS (Separate Trading of Registered Interest and Principal of Securities): transformed into series of zero-coupon bonds matching coupon and redemption dates (7.38).
  - Perpetual with fixed interest rate, callable and puttable securities, and securities with sinking fund provisions (7.38).
  - Convertible bonds (may be converted into equity and then classified as equity) (7.38).
  - Exchangeable bonds (exchanged for equity in a corporation other than the issuer) (7.38).
  - Debt securities paying interest linked to the credit rating of another borrower should be classified as fixed interest rate debt securities (BPM6, paragraph 5.111) (7.38).
- Borderline instruments and related instruments (7.39):
  - Equity warrant bonds (debt securities incorporating warrants to purchase equity in issuer or another company); warrant may be detachable and treated as a derivative while the bond remains debt (7.39, footnote 9).
  - Subordinated bonds (lower priority on liquidation; typically lower credit rating) (7.39).
  - Stapled instruments (two or more different financial instruments coupled together) are usually treated separately as debt and equity securities or classified according to the predominant component if components cannot be separately identified (7.39).

- Table 7.1 lists fixed interest rate debt securities with features such as Issue date, Issue price, Redemption date, Redemption price, Coupon payments, Coupon payment dates, Interest included in principal/coupon payments, and Change into equity securities (7.39–7.39 table reference).

### Variable and mixed interest rate debt securities
- Variable interest rate debt securities have coupon or principal payments (or both) linked to a general price index (e.g., CPI), interest rate (e.g., LIBOR or a bond yield), or asset price; the reference value fluctuates with market conditions (7.40).
- Variable interest rate debt securities include inflation-linked bonds and asset price-linked bonds; asset price-linked bonds may be linked to commodity prices (7.41).
- For interest rate-linked debt securities, contractual nominal coupon payments are variable and revised periodically according to the reference interest rate; issuer and holder cannot be certain at issue of timing and value of coupon payments (7.42).
- Variable rate notes (VRNs): spread over reference index varies over time with perceived credit risk; VRNs generally have a put option enabling holders to sell back to the lead manager at face value on interest payment dates (7.43).
- Mixed interest rate debt securities have both a fixed and variable coupon over their life and are classified as variable interest rate debt securities; they include:
  - Fixed coupon and variable coupon at the same time
  - Fixed (or variable) coupon until a reference point, then variable (or fixed) coupon thereafter
  - Stepped debt securities with prefixed but non-constant coupon payments (7.44).

- Table 7.2 presents features of different types of variable interest rate debt securities with a breakdown into inflation-linked, interest rate-linked, and asset price-linked categories (7.40–7.44 table reference).

### Classification by maturity
- Short-term vs long-term maturity definitions:
  - Short-term maturity: payable on demand or in one year or less (7.45).
  - Long-term maturity: payable in more than one year or has no stated maturity (7.45).
- Long-term debt securities can be broken down into:
  - More than one year and up to and including two years
  - More than two years and up to and including five years
  - More than five years and up to and including ten years
  - More than ten years (7.46).
- Duration and maturity concepts:
  - Duration is the weighted average term to maturity and measures impact on value from a one percentage point change in interest rates; it accounts for interest payments throughout the life of the security (7.47).
  - Original maturity concept helps understand issuance activity; most countries present debt securities statistics based on original maturity (7.48).
  - Remaining maturity data are preferred for analysis of debt positions and debt servicing capacity and are closely related to duration; they are helpful for liquidity analysis (7.49).
- Handbook recommendations on maturity recording:
  - Record long-term debt securities with a remaining maturity of one year or less on a remaining maturity basis; all other data should be presented on an original maturity basis (7.50).
  - Statistics can combine original and remaining maturity measures using this split (7.51):
    - Short-term on an original maturity basis
    - Long-term on an original maturity basis that will mature in one year or less
    - Long-term on an original maturity basis that will mature in more than one year
  - Combinations:
    - First two items combined give debt securities due within one year (short-term on a remaining maturity basis).
    - Second and third items combined give long-term debt securities on an original maturity basis (7.52).

### Classification by currency
- Issue price, redemption price, and coupon may be denominated or settled in domestic or foreign currencies; data can be classified by domestic versus foreign currency denomination and aggregated to all currencies (7.53).
- Currency of denomination is determined by the currency in which the value of positions and flows are fixed as specified in the contract; all cash flows are determined in the currency of denomination and converted into domestic currency for settlement if necessary (7.54).
- Debt securities can be denominated in domestic currency or foreign currencies; further breakdown of foreign currencies may be appropriate depending on their relative importance (7.55).
- Debt securities with both principal and coupon linked to a foreign currency are classified as denominated in that foreign currency (BPM6, paragraph 11.50 (b)) (7.56).
- Currency of settlement may differ from currency of denomination; currency of settlement is the currency into which values are converted each time settlement occurs (BPM6, paragraph 3.99) (7.57).

### Classification by market
- Debt securities issues can be classified by market to understand relative importance of issues by resident sectors and nonresidents across markets and to analyze domestic versus international attractiveness and structural changes (7.58).
- Statistics can classify issues according to markets where securities are issued—domestic or international (or both)—helpful for emerging market economies where access to international markets varies; liberalization attracts foreign investors, reduces borrowing costs, and promotes growth; nonresident units may issue in emerging markets if permitted (7.59).

*Handbook on Securities Statistics, paragraphs 7.28–7.59.*

### 7.60 As financial markets become more open to for-

### hss - 7.60 As financial markets become more open to foreign issuers and investors

### Market classification of debt securities issues
- Two alternative approaches for classifying issues by market are described (based on External Debt Statistics Guide, paragraph 6.21):
  - “Residence of issuer” approach:
    - Debt securities issued by a resident of the same economy in which the security is issued are classified as domestically issued, regardless of the currency of issue.
    - All other issues are classified as internationally issued.
  - “Location of issue” approach:
    - All debt securities issued in that economy either by residents or nonresidents are classified as domestic market issues, regardless of the currency of issue.
    - In this approach, debt securities issued in international markets are excluded by definition.

### Criteria to determine market of issue (used when uncertainty exists)
- Use the following three criteria in descending order of preference (External Debt Statistics Guide, paragraph 6.21):
  - The debt security is listed on a recognized exchange in the domestic economy (domestic issue) or in a foreign economy (international security).
  - The debt security has an International Securities Identification Number (ISIN) with a country code the same as the legal domicile of the issuer, and/or is allocated a domestic security code by the domestic national numbering agency (domestic security). Alternatively, the debt security has an ISIN with a country code different from the one for the country where the issuer is legally domiciled and/or has an international security code issued by a foreign national numbering agency (international security).
  - The security is issued in the domestic currency (domestic issue) or in a foreign currency (international issue).

### Classification by default risk — overview and limitations
- Default risk is a qualitative feature of debt securities important for monetary policy and financial stability analysis.
- The Handbook outlines methods and important points but does not provide a finalized classification scheme for debt securities by default risk; further work is needed.

### Debt securities ratings provided by credit rating agencies
- External ratings assess the creditworthiness of an issuer with regard to its financial obligations and provide an indication of the issuer’s capacity and willingness to make scheduled coupon payments and principal repayments on a specific issue.
- Ratings are determined by specialized national and international agencies using agency-developed risk analyses and ratings tools.
- Agencies use an alphabetical, ordinal structure (some use alphanumeric) with credit quality designations ranging from high, through medium, to low — corresponding respectively to a low, medium, and high probability of default.
- Aggregate data on debt securities issues with credit ratings are valuable because they:
  - Help identify sectors/subsectors issuing the riskiest debt securities.
  - Help identify riskiest types of debt security by further breakdowns, essential for spotting contagion effects and assessing market liquidity and solvency.
  - Support financial investment decisions by increasing transparency and promoting efficient operation of debt securities markets.
  - Provide a measure of the development of domestic and international securities markets in accommodating issuers with different credit standings.
- Security-by-security (SBS) databases can help analyze discrepancies across ratings agencies and track changes, but challenges exist in reconciling differences and developing aggregate data (e.g., determining appropriate weights).
- Future regulatory changes may affect governance of existing credit rating agencies and development of new credit ratings.

### Reference yield curves as an alternative comparator for default risk
- Reference yield curves can be used to derive information on the default risk structure of debt securities at remaining maturity.
- Within homogeneous classes (currency, maturity, etc.), debt securities with the lowest yield are considered higher credit quality.
- Central government debt securities typically provide a benchmark for non-general government debt securities, reflected in yield spreads.
- Yield spreads may indicate relative creditworthiness of individual issues and could be used to develop a statistical classification scheme by default risk (for example, defining high credit quality as the lowest decile, or a lowest first percentile).
- SBS databases could facilitate development of yield curves and decile-based classifications.

### Classification — remaining issues and needed work
- Debt securities ranking based on reference yield curves could be compared or combined with credit ratings from rating agencies.
- Unlike other classification criteria (residence, sector, subsector, maturity, currency, interest rate, market), the Handbook does not provide a classification scheme for default risk.
- Further work is needed to determine whether a conceptually sound classification scheme for debt securities based on default risk can be developed.

### “From-Whom-to-Whom” framework — purpose and structure
- A “from-whom-to-whom” framework presents financing and financial investment via securities (debt and equity) in detail, allowing analysis of relationships:
  - Between institutional sectors and subsectors within an economy.
  - Between resident sectors/subsectors and nonresidents (which can be broken down by country or sector).
- Benefits include identifying sectoral composition of assets and liabilities, portfolio strengths and vulnerabilities, interconnectedness, and potential spillovers.
- For each security type (positions or flows), two dimensions are required:
  - Residence, sector, or subsector of the issuer.
  - Residence, sector, or subsector of the holder.
- The framework requires three-dimensional tables (security × issuer sector/residence × holder sector/residence) showing positions, transactions, revaluations, and other changes. The time-series aspect can be viewed as a fourth dimension.
- Given the potential complexity, selection by debt security subcategory, sector, or subsector is essential.

### Illustrative “From-Whom-to-Whom” transaction figures (unconsolidated)
- Example figures from the Handbook’s illustrative tables:
  - Households and NPISHs acquired (net of disposals) debt securities for 275; this acquisition reflects increases in their claims on:
    - Nonfinancial corporations: 65
    - Financial corporations: 43
    - General government: 124
    - Rest of the world: 43
  - Nonfinancial corporations issued (net of redemptions) debt securities for 147; their liabilities increased to:
    - Other nonfinancial corporations: 30
    - Financial corporations: 23
    - General government: 5
    - Households and NPISHs: 65
    - Rest of the world: 24
  - Households and NPISHs issued no debt securities (zero).
  - Totals and cross-checks in the debt securities transactions example:
    - Transactions in debt securities held by residents (vis-à-vis resident and nonresident issuers): 531
    - Transactions in debt securities held by nonresidents (vis-à-vis resident issuers): 106
    - Transactions in debt securities issued by residents (vis-à-vis resident and nonresident holders): 529
    - Transactions in debt securities issued by nonresidents (vis-à-vis resident holders): 108
    - The total amount across the example transactions: 637
- Comparable example figures are presented for equity securities:
  - Households and NPISHs acquired (net of disposals) 151 units of equity securities; increases in their claims on:
    - Nonfinancial corporations: 65
    - Financial corporations: 43
    - Rest of the world: 43
  - Nonfinancial corporations issued (net of redemptions) 147 units of equity securities; liabilities increased to:
    - Other nonfinancial corporations: 30
    - Financial corporations: 23
    - General government: 5
    - Households and NPISHs: 65
    - Rest of the world: 24
  - Households and NPISHs issued no equity securities (zero).
  - Totals in the equity transactions example:
    - All issuers: 292 (in one table presentation), 531 and 529 analogues appear in debt tables; tables present consistent cross-checking across issuers and holders.

*Handbook on Securities Statistics, sections 7.60–8.15.*

### 8.17 Table  8.3  also  presents  intra  sectoral  transac-

### Issuance and Holdings of Securities in a “From-Whom-to-Whom” Framework

### Intra‑sectoral and resident/nonresident equity transactions
- Table 8.3 presents intra sectoral transactions in equity securities holdings for resident sectors (the diagonal cells with borders); for instance, nonfinancial corporations issued 30 of equity securities that are being held by other institutional units in the same sector.
- Transactions in equity securities held by residents and issued by nonresidents are reflected in the “nonresidents” row (91).
- Transactions in equity securities held by nonresidents and issued by residents are shown in the “nonresidents” column (52).
- Transactions in equity securities held by nonresidents and issued by nonresidents are not covered (black cell).
- By definition, the sum of transactions in equity securities held by residents (and issued by residents and nonresidents) (292) and by nonresidents (and issued by residents) (52) equals the sum of transactions in equity securities issued by residents (and held by residents and nonresidents) (253) and by nonresidents (and held by residents) (91); in both cases, the total amount is 344.
- Table 8.4 presents Table 8.3 in a time series format.
- Similar tables can be compiled for positions, revaluations, and other changes in the volume of assets and liabilities.

### Complexity and design choices for “from‑whom‑to‑whom” tables
- Complexity is determined by breakdowns chosen for:
  - financial instruments (category, position, or subposition), and
  - issuers and holders (residence, sector, or subsector).
- Combining these breakdowns produces a substantial number of “from‑whom‑to‑whom” relationships, especially when showing both positions and flows.
- Selection by equity security category, position, or subposition is essential.

### Two recording principles for secondary‑market transactions
- Two distinct recording approaches:
  - Transactor principle (focuses on the contract between the holders).
  - Issuer/holder (debtor/creditor) principle (focuses on the contract between issuer and holder).
- Secondary‑market transactions involve three institutional units (the two holders exchanging the security and the issuer); this must be reflected in “from‑whom‑to‑whom” recording because positions between issuer and the seller and between issuer and the buyer change.

### The Transactor Principle
- Captures change in ownership of a financial asset in the accounts of the transactors involved, but not in the accounts of the debtor (or of the creditor where one unit takes on the liability of another).
- Example: when a household buys, from a financial corporation, a share issued by a nonfinancial corporation, the transaction is recorded as a single transaction between the financial corporation and the household (Table 8.5), without reflecting the change in ownership in the accounts of the issuing nonfinancial corporation.
- To reflect holder reclassification in the issuer’s accounts, the issuer records the reclassification in “other changes in the volume of assets”; numerous secondary‑market transactions necessitate many such reclassifications.
- Applying the transactor principle requires data on individual transactions, including:
  - transactors (holders A and B),
  - type and value of the security concerned,
  - issuer.
- Collection of individual transaction data is data‑intensive because of frequent trading; custodians or stock exchanges may have information on both transactors. If no transaction data are available, only positions can be identified and statistical systems typically rely on position data.

### The Issuer/Holder (Debtor/Creditor) Principle
- Captures a transaction between two institutional units in the accounts of those two units and allows the change of holder to be recorded in the financial account of the issuer.
- When ownership changes, the issuer/holder principle records two stages as financial transactions (e.g., issuance to new holder and repayment to the previous holder). Table 8.6 illustrates recording when a financial corporation sells a security issued by a nonfinancial corporation to a household.
- The sale of a security on secondary markets meets the 2008 SNA’s definition of a transaction and should not be construed as a reclassification from buyer’s or seller’s viewpoint.
- Symmetry between holders of assets and issuers of liabilities would require the issuer to treat the event as a redemption and simultaneous issuance (netting to zero net issuance).
- Justification for the issuer/holder approach includes issuer obligations to record owners in liability registers; owners inform the issuer of ownership changes and the issuer records the event.

### Practical implementation and imputation of transactions (Box 8.1)
- Position data are usually available for the holder (Creditor B) and debtor at a point in time, but not for the transactor (Creditor A).
- Transactions may be derived residually as:
  - Transactions_t = position_t – position_t–1 – revaluations_t – other changes in volume_t
- Example illustration: Creditor B’s positions vis‑à‑vis Debtor 1 change from 10 to 12 (net acquisition +2) and vis‑à‑vis Debtor 2 change from 20 to 10 (net acquisition −10). With no revaluations or other changes in volume, the debtor/creditor principle records the net acquisition vis‑à‑vis Debtor 1 (+2) as acquisitions of newly issued debt from Debtor 1 and symmetrically records Debtor 1 as having redeemed 2 of debt securities held by Creditor A. The net acquisition of −10 is recorded as a disposal and redemption by Debtor 2, with a corresponding new issue of 10 by Debtor 2 deemed to have been bought by Creditor A.
- The effect of this imputation replaces actual secondary‑market transactions by four imputed transactions (one between each debtor and each of the two creditors) to preserve the link between transaction data and changes in “from‑whom‑to‑whom” positions.
- Required information to apply the debtor/creditor principle:
  1. an SBS database enabling each issuance of a debt security to be identified (information on the debtor and the initial creditor);
  2. a link between the SBS database and the securities holdings statistics that keeps track of changes in creditors’ debt securities positions and identifies individual debtors.

### Detailed presentation tables and the “residence of issuer” approach (Type A)
- Stylized detailed presentation tables referenced:
  - Type A presentation tables (Tables 1.2 and 1.3) follow the “residence of issuer” approach.
  - Type B presentation tables (Table 1.4) follow the “residence of holder” approach.
  - Type C presentation tables (Table 1.5) follow the “from‑whom‑to‑whom” approach.
  - Presentation tables with global aggregates for securities.
- Presentation of debt securities issues can be classified by issuer, currency, maturity, interest rate, and market (Table 9.1).
- The “residence of issuer” approach allocates the institutional unit issuing debt securities to an economic sector; debt securities outstanding and transactions are part of that sector’s balance sheet and financial account, consistent with the 2008 SNA and the BPM6.
- The “location of issue” approach presents statistics on debt securities issued by residents and nonresidents in the domestic market and may be used in combination with the residence of issuer approach to show domestic and international markets for resident issuers.
- Tables combining issuer and market show debt securities issues broken down by issuer into resident sectors and subsectors and by market into domestic market and international markets (Table 9.2); the third row represents debt securities issued by all issuers in all markets.
- Two‑dimensional embedded tables (Tables 9.3 to 9.6) combine issuers with currency, maturity, interest rate, and with positions/transactions/revaluations/other changes in volume, following the residence of issuer approach; entries may also be used to present statistics following the location of issue approach by showing issues in the domestic market by residents and nonresidents.

*Handbook on Securities Statistics*

### 9.12 The Handbook  recommends  presenting  statis-

### 9.12–9.40 Presentation of Securities Statistics (Handbook on Securities Statistics)

### Debt securities issues: recommended presentations and tables
- The Handbook recommends presenting statistics on positions and transactions in Tables 9.3 to 9.5 and Table 9.6 for positions and flows.
- Table 9.1: Debt Securities Issues by Issuer, Currency, Maturity, Interest Rate, and Market — breakdowns by:
  - Issuer (NFCs, FCs, GG, HHs and NPISHs)
  - Market: 1. Domestic market; 2. International markets; 3. All markets
  - For each market: 1.1 Currency / 1.2 Maturity / 1.3 Interest rate / 1.4 Memo item: securitization debt securities
- Table 9.2: Debt Securities Issues by Issuer and Market — residents, nonresidents, and memo items (public sector, CB, other money-issuing corps., securitization corporations, OFCs, CG, other GG).
- Table 9.3: Debt Securities Issues by Issuer and Currency — rows for 1. Domestic currency; 2. Foreign currencies; 3. All currencies.
- Table 9.4: Debt Securities Issues by Issuer and Maturity — maturity classification:
  - 1. Short-term at original maturity
  - 2. Long-term at original maturity
    - 2.1 More than 1 year and up to and including 2 years
    - 2.2 More than 2 years and up to and including 5 years
    - 2.3 More than 5 years and up to and including 10 years
    - 2.4 More than ten years
  - 3. All maturities
  - 4. Memo item: long-term at original maturity, with a remaining maturity up to and including 1 year
- Table 9.5: Debt Securities Issues by Issuer and Interest Rate — interest rate classification:
  - 1. Fixed interest rate
  - 2. Variable interest rate
    - 2.1 Inflation-linked
    - 2.2 Interest rate-linked
    - 2.3 Asset price-linked
  - 3. All interest rates
- Table 9.6: Debt Securities Issues by Issuer: Positions and Flows — positions and transactions presented in market value, covering:
  - 1. Position at end of previous period
  - 2. Issues during current period
    - 2.1 Net issues (gross issues net of redemptions)
    - 2.2 Gross issues
    - 2.3 Redemptions
  - 3. Revaluations during current period
  - 4. Other changes in volume during current period
  - 5. Position at end of current period
- Recommended measurement: issues expressed in market value; positions also recommended to be expressed in nominal value.

### Financial stability and analytical implications (currency, maturity, interest rate)
- Currency composition:
  - 9.13: Data on currency composition of debt securities are important for financial stability analysis; potential currency mismatches can emerge when debt is denominated in foreign currencies and exchange rates depreciate.
  - 9.15: The Handbook recommends presenting debt securities issues on a “currency of denomination” basis, while keeping the distinction between “currency of denomination” and “currency of settlement” in mind.
- Maturity composition:
  - 9.16: Breakdown by short-term and long-term original maturity and subcategories of long-term maturity supports analysis; memorandum item for long-term original maturity with remaining maturity up to and including 1 year is recommended.
- Interest-rate composition:
  - 9.17–9.18: Large proportions of variable interest rate debt expose issuers to financial stress during shocks and influence monetary policy transmission; degree of variable vs fixed coupons affects potency of policy rate changes.
  - 9.18–9.19: Transactions should be presented both gross (gross issues and redemptions) and net (gross issues net of redemptions).

### Equity securities issuance: residence-of-issuer approach and presentations
- 9.21–9.23: Type A (residence of issuer) presentation allocates each issuing institutional unit to an economic sector; equity securities issued are part of that sector’s balance sheet and financial account; portfolio and direct investment are presented in the balance of payments and international investment position.
- Presentation options (9.23): three possible ways to present equity securities issuance under the residence-of-issuer approach:
  - By type of financial instrument
  - By issuing sector and subsector
  - On the basis of positions and flows
- Tables for equity:
  - Table 9.7: Equity Securities Issues by Issuer: Positions and Flows — listed and unlisted shares.
  - Table 9.8: Equity Securities Issues by Issuer and Type of Share — breakdown by resident sector, resident financial corporation subsector (money-issuing corporations, insurance corporations, pension funds, other financial corporations), and residence; distinguishes ordinary shares from other listed shares.
  - Table 9.9: Equity Securities Issues by Issuer: Positions and Flows — positions, net issuance, revaluations, other changes, and positions at end of period for residents, nonresidents, and all holders.
- Transactions presentation (9.29): Transactions may be shown on both net basis and gross basis (with issuance and redemptions detailed).

### Type B presentation (residence of holder) and debt securities holdings
- 9.30–9.34: Type B presentation tables are based on the “residence of holder” approach; holdings are allocated to holder sectors and form part of the sectoral balance sheet and financial account. Four basic classification criteria for holdings:
  - Holder (individual or sector, residence or ultimate beneficial owner)
  - Currency
  - Maturity
  - Type of interest rate
- Table 9.10: Debt Securities by Holder, Currency, Maturity, and Type of Interest Rate — reflects the residence-of-holder approach and aligns with international statistical standards (market criterion relevant only to debt securities issues).
- Holdings breakdowns recommended:
  - By residence of issuer and currency denomination: Table 9.11 — split into domestic currency and foreign currencies; recommended for financial stability analysis (9.35–9.36). Note: currency analysis should account for currency derivatives used for hedging purposes.
  - By maturity: Table 9.12 — split into short-term original maturity and long-term original maturity; memo item for long-term original maturity with remaining maturity up to and including 1 year (9.37).
  - By interest rate: Table 9.13 (referenced) — split into fixed and variable interest rates, with variable potentially broken into inflation-linked, asset price-linked, and interest rate-linked instruments; complex interest-rate structures may be excluded from the split (9.38–9.40).

*Handbook on Securities Statistics (Handbook).*

### 9.41 Table  9.14  shows  the  positions,  transactions,

### hss - 9.41 Table  9.14  shows  the  positions,  transactions,

### Scope and measurement of Table 9.14
- Publication: Handbook on Securities Statistics (section 9.41–9.46).
- Table 9.14 presents debt securities by residence, resident sector and resident financial subsector of holder, and by residence of issuer.
- Statistics are expressed in terms of market value.
- The statistics cover:
  - Positions in debt securities at the end of the previous period.
  - Net acquisitions, revaluations, and other changes in the volume of assets in debt securities during the latest period.
  - Positions in debt securities at the end of the latest period.
- Transactions are presented net (acquisitions minus disposals); optionally they may be presented gross (with details of both gross acquisitions and disposals).

### Recommended breakdowns and classifications for debt securities
- Holder classifications:
  - Residents and Nonresidents.
  - Resident sectors: Nonfinancial corporations; Financial corporations (with subsectors); General government; Households and NPISHs.
  - Memo item: public sector.
  - Financial corporation subsectors explicitly listed include: Central bank; Other money-issuing corporations; Non-MMF investment funds; Securitization corporations; Insurance corporations; Pension funds; Other financial corporations.
- Issuer classifications:
  - By residence (Residents, Nonresidents, All issuers).
  - By type of interest rate: Fixed interest rate; Variable interest rate; All interest rates.
- Presentation items for each holder–issuer cell:
  - Position at end of previous period.
  - Net acquisitions during the current period.
  - Revaluations during the current period.
  - Other changes in the volume of assets during current period.
  - Position at end of the current period.

### Equity securities presentation (related tables and guidance)
- Type B presentation and “residence of holder” approach (sections 9.42–9.49):
  - Tables (e.g., Table 9.15, Table 9.17) show equity securities holdings by holder (resident sectors, resident financial subsectors, and nonresidents) with breakdowns by issuer residence and type of equity security (listed shares, ordinary shares, unlisted shares).
  - Under the “residence of holder” approach, equity holdings of resident sectors are shown without breakdown by issuer’s residence or economic sector; equity securities issued by residents and held by nonresidents are also shown.
  - Transactions for equity securities are presented net (acquisitions minus disposals); gross presentation is optional.
- Currency breakdown recommendation (section 9.46):
  - Holdings of equity securities are recommended to be broken down into domestic currency and foreign currencies (Table 9.16).

### “From-whom-to-whom” (Type C) framework and three-dimensional tables
- Type C presentation (sections 9.50–9.56, 9.57–9.61, 9.63):
  - Based on the “from-whom-to-whom” approach (Table 1.5 in Chapter 1 referenced).
  - Tables (e.g., Table 9.18–9.24) show positions, transactions, revaluations, and other changes for debt and equity securities held by resident sectors and nonresidents, with breakdowns by institutional sector for resident issuers.
  - Coverage specifics:
    - Nonresidents’ holdings of debt/equity securities issued by residents are shown (penultimate column).
    - Debt/equity securities issued by nonresidents and held by resident sectors are shown (penultimate row, dark gray).
    - Nonresidents’ holdings of securities issued by nonresidents are not covered (black cells).
  - Recommended three-dimensional breakdowns:
    - By holder, issuer, and currency of denomination (Table 9.19).
    - By holder, issuer, and original maturity (Table 9.20). Memo item: long-term at original maturity, with a remaining maturity up to and including 1 year.
    - By holder, issuer, and type of interest rate (Table 9.21): Fixed interest rate; Variable interest rate; All interest rates.
  - For residents, unconsolidated data covering intra-sectoral positions and flows (diagonal cells) are recommended.
  - Three-dimensional tables may combine breakdowns by subcategory (currency, maturity, and interest rate).

### Detailed subsector and issuer-level considerations
- Financial corporation subsector breakdowns (sections 9.45, 9.61, 9.62):
  - Breakdown by subsector enables analysis of money-issuing corporations and institutional investors (non-MMF investment funds, insurance corporations, pension funds).
  - Table 9.23 presents a sector/subsector breakdown of holders in a “from-whom-to-whom” framework by (original) maturity and by residence and resident sector of the issuer.
  - For financial stability purposes, more detailed breakdowns by individual issuers are required:
    - First step: issuer-specific investor breakdowns by financial corporations subsector (e.g., money-issuing corporations, insurance corporations, pension funds, non-MMF investment funds).
    - Thereafter: issuer-by-issuer data for systematically relevant investors (large and complex financial and nonfinancial groups consolidated on a group basis).

### Position–flow relationship and disclosure of revaluations and other changes
- Position and flow relationship (section 9.57):
  - Table 9.22 shows the position and flow relationship for debt securities held by resident sectors and by nonresidents vis-à-vis resident sectors and nonresidents as issuers, covering positions at the end of the previous period, transactions, revaluations, other changes in the volume of assets during the current period, and positions at the end of the current period.
  - Transactions are presented net (acquisitions minus disposals).
- Revaluations and other changes (section 9.58):
  - Revaluations (holding gains or losses) and other changes in volume may be presented in three-dimensional tables with breakdowns by residence and resident institutional sector of the holder and issuer.
  - Such detailed statistical information could be provided by security-by-security (SBS) databases.

*Handbook on Securities Statistics*

### 9.64 For  residents,  the  presentation  of  unconsoli-

### 9.64–9.96 Presentation and Detailed Tables for Equity and Debt Securities

### Unconsolidated presentation for residents (9.64)
- For residents, the presentation of unconsolidated data on equity securities holdings and issuance—that is, including intrasectoral positions and flows (diagonal cells with borders in Table 9.24)—is recommended.

### Three-dimensional “from-whom-to-whom” tables (9.65–9.71)
- Three-dimensional tables in a “from-whom-to-whom” framework include, in addition to the two standard dimensions, a breakdown (or combination of breakdowns) of equity securities by subcategory. (9.65)
- Table 9.25 shows equity securities held by resident sectors and nonresidents, broken down on the basis of the residence and resident sector of the issuer, and provides a currency breakdown with a split into securities denominated in domestic currency and in foreign currencies. (9.66)
- Table 9.26 shows positions and flows for equity securities held and issued by resident sectors and nonresidents; expressed in terms of market value, these statistics cover:
  - positions at the end of the previous period;
  - transactions, revaluations and other changes in the volume of assets during the current period;
  - positions at the end of the current period.
  - Transactions are presented on a net basis (acquisitions minus disposals). (9.67)
- Revaluations (holding gains or losses) and other changes in volume can be presented in a three-dimensional table with breakdowns by place of residence and resident institutional sector for both holder and issuer; such detailed information could be provided by SBS databases. (9.68)
- Presentations using three-dimensional tables can be designed for specific subsectors or groups of financial corporations (such as money-issuing corporations or institutional investors) to show the role of financial intermediaries in providing financial resources to other sectors. Positions and flows of money-issuing corporations, insurance corporations, pension funds, and other financial corporations are likely to be of specific interest. (9.69)
- Expanded presentations may reveal changing roles for other types of financial intermediary and financial institution, shedding light on counterparties and types of equity security held or traded. (9.70)
- Table 9.27 presents a breakdown of holders of equity securities by sector and subsector in a “from-whom-to-whom” framework, showing holdings of the five main components of the financial corporations sector with breakdowns by issuer’s place of residence and resident sector. (9.71)

### Detailed issuer- and investor-level breakdowns for financial stability (9.72)
- For financial stability purposes, a more detailed breakdown of equity securities holdings is required, with data for individual issuers. (9.72)
- A first step: breakdown of investors in the equity securities of individual issuers by financial corporations subsector (e.g., money-issuing corporations, insurance corporations, pension funds, and non-MMF investment funds). (9.72)
- Thereafter, issuer-by-issuer data may be required for systemically relevant investors such as large and complex financial and nonfinancial groups, consolidated on a group basis. (9.72)

### Presentation tables with global aggregates for debt securities (9.73–9.81)
- Global aggregates for debt securities are essential in light of recent financial crises and their cross-border spread. (9.73)
- The BIS, the IMF, the OECD, the World Bank, the United Nations, Eurostat, and the ECB have experience presenting area and some global aggregates; the methodology is established and well-documented. (9.74)
- This subsection addresses presentation of debt securities aggregates for the world and for different areas/countries, primarily for international or supranational organizations. (9.75)
- Table 9.28 shows global debt securities holdings according to six classifications: by country (or by group of countries), residence, resident sector, currency, maturity, and interest rate; the table includes holdings of residents, which are not covered by the Coordinated Portfolio Investment Survey (CPIS). (9.76)
- Holding sectors: nonfinancial corporations, financial corporations, general government, and households including NPISHs; these are broken down by currency, maturity, and interest rate. (9.77)
- Table 9.29 is a “from-whom-to-whom” table for debt securities holdings and issues with a breakdown of holders and issuers by country and aggregated country groups; such global aggregates require national “from-whom-to-whom” data aggregated and reconciled. (9.78–9.79)
- Other breakdowns could show debt securities holdings of financial corporations or deposit-taking corporations that represent claims on specific groups of countries (for example emerging economies and developing countries). (9.80)
- Debt securities holdings may also be presented by major currency denomination (Table 9.30), with currencies represented including U.S. dollar, euro, Japanese yen, pound sterling, and all other currencies. (9.81)

### Presentation tables with global aggregates for equity securities (9.82–9.88)
- Global aggregates for equity securities are necessary to interpret how imbalances in equity markets could spread through economies and other financial markets. (9.82)
- This subsection deals with presentation of equity securities aggregates for the world and different areas/countries. (9.83)
- Table 9.31 shows equity securities holdings broken down by:
  1) country (or country group);
  2) place of residence;
  3) resident sector;
  4) currency;
  5) type of equity security. (9.84)
- Resident sectors are nonfinancial corporations, financial corporations, general government, and households and NPISHs; these are broken down further by type of equity security. (9.85)
- Table 9.32 is a “from-whom-to-whom” table for equity securities holdings and issuance, with holders and issuers broken down by country and aggregated country groups; such a table requires national “from-whom-to-whom” data aggregated and reconciled. (9.86–9.87)
- Other breakdowns could show equity securities holdings of the financial corporations sector as a whole or of deposit-taking corporations that represent claims on specific groups of countries (for example emerging economies and developing countries). (9.88)

### Reconciliation rules and required identities (9.89–9.96)
- Securities statistics should be reconcilable according to classifications developed in the Handbook—issuer, market, currency, maturity, interest rate, and type of share—as well as the relationship between positions and flows. (9.89)
- For debt and equity securities statistics classified by issuer, the following reconciliations should hold: (9.90)
  - All issuers = resident sectors + nonresidents
  - Resident sectors = Nonfinancial corporations + Financial corporations + General government + Households and NPISHs
  - Financial corporations = Central bank + Other money-issuing corporations + Securitization corporations + Other financial corporations
  - General government = Central government + Other general government
- For debt securities statistics classified by market, the reconciliation: (9.91)
  - All markets = Domestic market + International markets
- For securities statistics classified by currency, the reconciliation: (9.92)
  - All currencies = Domestic currency + Foreign currencies
- For debt securities statistics classified by maturity, the reconciliations: (9.93)
  - All maturities = Short-term at original maturity + Long-term at original maturity
  - Long-term at original maturity = More than one year and up to and including two years + More than two years and up to and including five years + More than five years and up to and including ten years + More than ten years
  - Short-term at remaining maturity = Short-term at original maturity + Long-term at original maturity with a remaining maturity up to and including one year
- For debt securities statistics classified by interest rate, the reconciliations: (9.94)
  - All interest rates = Fixed interest rate + Variable interest rate
  - Variable interest rate = Inflation-linked + Asset price linked + Interest rate-linked
- For equity securities statistics classified by type of share, the reconciliations: (9.95)
  - All shares = Listed shares + Unlisted shares
  - All shares = Ordinary shares + Preferred shares
- For position and flow securities statistics expressed in terms of market value, the reconciliations: (9.96)
  - Net issues during current period = Gross issues during current period - Redemptions during current period
  - Net acquisitions during current period = Gross acquisitions during current period – Disposals during current period
  - Position at end of current period = Position at end of previous period + Transactions during current period + Revaluations during current period + Other changes in volume during current period

*Handbook on Securities Statistics (sections 9.64–9.96).*

### 9.97 The  presentation  tables  of  types  A,  B,  and  C

### hss - 9.97 The  presentation  tables  of  types  A,  B,  and  C

### Purpose and scope of the presentation tables
- The presentation tables of types A, B, and C facilitate comparability and consistency with international statistical standards.
- They contain information that countries may eventually wish to include in their national presentation of statistics on securities issues and holdings.
- Ensuring consistency between the various presentation tables and describing the statistics with metadata (see Annex 5) will be challenging.
- The advantages and disadvantages of developing SBS databases to facilitate the preparation of data as indicated in this part of the Handbook are of particular interest to compilers; these are briefly reviewed in Annex 4.

### Market valuation versus nominal valuation (debt securities)
- Market valuation is the key principle adopted by the 2008 SNA for valuing transactions and positions in debt securities.
- Market value definition: the price at which debt securities are acquired or disposed of, between willing parties, on the basis of commercial considerations only, excluding commissions, fees, and taxes; trading parties take account of accrued interest when determining market value.
- Nominal valuation definition: the sum of funds originally advanced, plus any subsequent advances, less any repayments, plus any accrued interest.
- Revaluations: At any specific point in time, the market value of a debt security may deviate from its nominal value owing to revaluations arising from market price changes.
  - Market price movements arise from general market conditions, such as changes in the market interest rate, or specific circumstances, such as changes in the perceived creditworthiness of the issuer.
  - For examples in the annex, all valuation changes are assumed to be due to changes in the market interest rate, or in the prices of the underlying assets to which the bonds are linked.
- Fundamental equation (preserved exactly):
  - Market value = Nominal value + Cumulative revaluations arising from market price changes.

### Illustration: fixed interest rate bond issued at par
- Security characteristics and lifecycle assumptions:
  - Issued at par: 1,000 at the beginning of the first year.
  - Maturity: repayable at maturity in five years.
  - Coupon: pays fixed coupons of 100 at the end of each year of its life.
- Accrual and nominal value treatment:
  - Interest accrues on the bond throughout the year and is recorded as being reinvested in the bond, increasing its nominal value from 1,000 to 1,100 at the end of the year, before the coupon is paid.
  - Coupon payments on the existing fixed interest rate bond will not change, although the current market interest rate may change.
- At issue:
  - Nominal value = Market value = 1,000, implying the market yield to be 10 percent.
- End-of-year flows:
  - At the end of each year, interest of 100 has accrued and is paid by the bond issuer to the bondholder.
  - The coupon payment of 100 by the debtor at the end of the year is treated as (partial) redemption of the bond, reducing its nominal value from 1,100 to 1,000.
- Tabular presentation:
  - Table A.1.1 presents the annual stocks and flows during the life of the bond (referenced for illustration of the relationship between market value and nominal value and the recording of the flows associated with each of them).

### Additional examples (listed)
- The annex illustrates the relationship between market value and nominal value and the recording of the accrual and payment of interest for different types of debt security, namely:
  - (1) a fixed interest rate bond issued at par;
  - (2) a fixed interest rate bond issued at a discount;
  - (3) a zero-coupon bond; and
  - (4) two types of index-linked bond.
- The text begins the second example: a five-year fixed interest rate bond repayable at maturity is issued at a discount (below par, at 900) and pays annual fixed coupons of [text continues in source].

*International Monetary Fund*

### 73.6  during  its  life,  which,  because  of  the  discount,

### ANNEX — Handbook on Securities Statistics

### Fixed-interest, discount, zero-coupon, and index-linked bond examples
- Table A.1.1 — A Fixed Interest Rate Bond Issued at Par
  - Issue price: 1,000; annual coupon payments: 100; original maturity: 5 years; redemption price: 1,000.
  - Nominal values (year-ends before coupon payment / after coupon payment): 1,000.0 / 1,100.0 (year 1), 1,000.0 / 1,100.0 (year 2), 1,000.0 / 1,100.0 (year 3), 1,000.0 / 1,100.0 (year 4), 1,000.0 (end year 5).
  - Accrued interest each year: 100.0.
  - Coupon payments each year: -100.0.
  - Market values: 1,000.0 (start), 969.0 (end year 1), 1,025.3 (end year 2), 1,054.2 (end year 3), 982.1 (end year 4), 1,000.0 (end year 5).
  - Interest rates (per annum): 10.0, 11.0, 9.0, 7.0, 12.0, 8.0 (per row ordering).
  - Cumulative revaluations arising from market price changes: -31.0, 25.3, 54.2, -17.9, 0.0 (progression across years as shown).
- Table A.1.2 — A Fixed Interest Rate Bond Issued at Discount
  - Issue price: 900; annual coupon payments: 73.6; discount payment at redemption; original maturity: 5 years; redemption price: 1,000.
  - Nominal values (before/after coupon payment): 900.0 / 990.0 (year 1), 916.4 / 1,008.0 (year 2), 934.4 / 1,027.8 (year 3), 954.2 / 1,049.6 (year 4), 976.0 / 1,073.6 (end year 5 before redemption), redemption 1,000.0.
  - Accrued interest: due to coupon and due to discount each year — 90.0 = 73.6 + 16.4 (end year 1), 91.6 = 73.6 + 34.4 (end year 2), 93.4 = 73.6 + 54.2 (end year 3), 95.4 = 73.6 + 76.0 (end year 4), 97.6 = 73.6 + 100.0 (end year 5).
  - Coupon payment each year: -73.6.
  - Market values: 900.0 (start), 887.1 (end year 1), 958.5 (end year 2), 1,006.5 (end year 3), 958.6 (end year 4), 1,000.0 (end year 5).
  - Interest rates (per annum): 10.0, 11.0, 9.0, 7.0, 12.0, 8.0.
  - Cumulative revaluations arising from market price changes: -29.2, 24.1, 52.3, -17.4, 0.0.
  - Notable point in text: "Part of the accrued interest (73.6) is paid to the bondholders as coupon at the end of each year, with the difference increasing the nominal value of the bond. At the end of the fifth year, the accrued interest due to the discount will add up to 100 and will be paid as part of the redemption price."
- Table A.1.3 — A Zero-coupon Bond
  - Issue price: 620.9; implicit rate of return: 10 percent per annum; original maturity: 5 years; redemption price: 1,000.
  - Nominal values (year-ends): 620.9 (start), 683.0 (end year 1), 751.3 (end year 2), 826.4 (end year 3), 909.1 (end year 4), 1,000.0 (end year 5).
  - Accrued interest due to discount each year: 62.1 (end year 1), 130.4 (end year 2), 205.5 (end year 3), 289.2 (end year 4), 379.1 (end year 5).
  - Market values: 620.9 (start), 658.7, 772.2, 873.4, 892.9, 1,000.0 (end year 5).
  - Interest rates (per annum): 10.0, 11.0, 9.0, 7.0, 12.0, 8.0.
  - Cumulative revaluations arising from market price changes: -24.3, 20.9, 47.0, –16.2, 0.0.
  - Transaction at maturity: repayment recorded as 1,000, corresponding to repayment of 620.9 of principal and payment of 379.1 of accrued interest.
- Table A.1.4 — A Bond Indexed to the Consumer Price Index (CPI)
  - Issue price: 1,000; annual coupon payments: 50; original maturity: 5 years; redemption price: 1,000; indexed to the CPI.
  - Nominal values (before/after coupon payment): 1,000.0 / 1,120.0 (year 1), 1,070.0 / 1,184.2 (year 2), 1,134.2 / 1,240.9 (year 3), 1,190.9 / 1,294.5 (year 4), 1,244.5 / 1,344.3 (year 5).
  - Accrued interest due to coupon and due to indexation each year: year 1 total 120.0 = 50.0 + 70.0; year 2 total 184.2 = 50.0 + 134.2; year 3 total 240.9 = 50.0 + 190.9; year 4 total 294.5 = 50.0 + 244.5; year 5 total 344.3 = 50.0 + 294.3.
  - Coupon payments: 50 each year.
  - Market values: 1,000.0 (start), 1,079.1, 1,169.7, 1,237.3, 1,205.8, 1,294.3 (end year 5).
  - Interest rates (per annum): 10.0, 11.0, 9.0, 7.0, 12.0, 8.0.
  - CPI (12-month changes, percentages): 5.5, 7.0, 6.0, 5.0, 4.5, 4.0 (presented with year 1 as base).
  - CPI index (year 1 = base): 100.0, 107.0, 113.4, 119.1, 124.5, 129.4.
  - Cumulative revaluations arising from market price changes: 9.1, 35.5, 46.3, -38.7, 0.0.
  - Accounting treatment highlighted: when linked to a broad index (CPI), changes attributable to indexation are recorded as accrued interest (transactions), while market value changes are revaluations.
- Table A.1.5 — A Bond Indexed to the Gold Price
  - Issue price: 1,000; annual coupon payments: 100; original maturity: 5 years; redemption price: 1,000, indexed to the gold price.
  - Nominal values (before/after coupon payment): 1,000.0 / 900.0 (year 1), 800.0 / 1,050.0 (year 2), 950.0 / 1,100.0 (year 3), 1,000.0 / 1,150.0 (year 4), 1,050.0 / 1,200.0 (year 5), 1,100.0 (end year 5 shown).
  - Accrued interest each year: 100.0.
  - Coupon payments each year: -100.0.
  - Market values: 1,000.0 (start), 837.3 (end year 1), 986.7 (end year 2), 1,054.2 (end year 3), 1,026.8 (end year 4), 1,100.0 (end year 5).
  - Interest rates (per annum): 10.0, 11.0, 9.0, 7.0, 12.0, 8.0.
  - Gold price (domestic currency per troy ounce): 1,000.0 (start), 800.0, 950.0, 1,000.0, 1,050.0, 1,100.0 (year progression).
  - Cumulative revaluations arising from gold price changes: -200.0, -50.0, 0.0, 50.0, 100.0.
  - Cumulative revaluations arising from market price changes: 37.2, 36.7, 54.2, -23.2, 0.0.
  - Accounting treatment highlighted: when linked to a narrow index (gold), changes attributable to the index are recorded as revaluations (not transactions).

### Structured debt securities — definitions, classification criteria, and types
- Definition and composition
  - Structured securities: securities derived from or based on a single security or financial derivative, a basket, an index, a commodity, or a foreign currency.
  - Structured debt securities: subset of structured securities combining a debt security or basket of debt securities with embedded financial derivatives that are inseparable from the debt security.
  - If debt and derivative components are separable, classify as separate instruments.
- Five criteria for classifying structured securities (A2.4)
  - Degree of principal at risk: (1) protected and returned at maturity; (2) exposed to losses limited to less than full principal; (3) fully at risk subject to a level of initial loss protection; (4) fully at risk.
  - Variation in investment returns — six types: (1) “synthetic convertible”; (2) “reverse convertible”; (3) “dynamic allocation”; (4) “periodic capped”; (5) “target return”; (6) “synthetic exposure.”
  - Participation: (1) based on initial and final levels with participation rate fixed on pricing date (no averaging over more than 10 percent of term); (2) periodic averaging for more than 10 percent of term with participation rate fixed on pricing date; (3) participation rate not fixed on pricing date and dependent on changes in underlying; (4) based on change in underlying with ratio greater than one.
  - Type of coupon: (1) variable depending on underlying; (2) fixed and set on pricing date; (3) minimum return in excess of principal set on pricing date.
  - Investment callable characteristics: (1) callable at issuer’s option; (2) auto-callable if predetermined movement in underlying occurs.
- Classification rule (A2.5–A2.8)
  - Determine degree of principal at risk plus one secondary criterion (type of return, participation, coupon, or call).
  - Debt securities with embedded derivatives are classified as debt securities when components cannot be separated and the debt security is the primary characteristic (BPM6, paragraph 5.83 (d)).
- Examples (A2.8)
  - Credit-linked note (CLN): combines a credit derivative and a conventional bond.
  - Structured variable rate note (VRN): coupon periodically reset by reference to an independent interest rate index (e.g., LIBOR) and may include collars, bands, or put options.
- Four identified types of structured debt securities (A2.9)
  - Principal-protected products: capital initially invested guaranteed from investor perspective; combine debt security with options; classify as debt securities.
  - Yield-enhanced products: principal partially protected or fully at risk with buffer; combine debt security and put or call option; classify as debt securities.
  - Participation products: derive value from various securities; classification depends on underlying (debt, equity, or investment fund shares/units).
  - Leveraged products: combine underlying security with future or option, large risk relative to initial investment; classify as debt securities.

### Islamic securities — Sukūk, classification, and market structures
- Islamic finance principles (A3.2–A3.5)
  - Governed by Sharī’ah: prohibits Riba (usury) and investments in Haraam activities; encourages trading and profit-and-loss sharing.
  - Islamic instruments either: (1) backed by returns from a real asset with variable return tied to asset performance; or (2) offer returns unspecified before investment and shared on a pre-agreed ratio of actual earnings.
  - MFSM suggests Islamic debt securities include negotiable investment participation certificates recorded as liabilities of the issuer.
- Sukūk definition and distinguishing features (A3.6–A3.9)
  - Sukūk: certificates representing proportional undivided ownership rights in tangible assets or a business venture; issuance and use of funds must avoid Riba, Gharar, and Haraam activities; typically require Sharī’ah Board supervision.
  - Key differences from conventional bonds:
    - Funds must be applied to specified assets, not general purposes.
    - Income must relate to use of the underlying assets.
    - Sukūk represent ownership rights transferred for a fixed period ending at maturity.
  - Tradability depends on structure; Sharī’ah generally prohibits sale of debt at a discount; Ijārah lease structures can allow variable lease rentals enabling tradability.
- Criteria distinguishing Islamic debt securities and equity securities (A3.9–A3.10)
  - Conventional criteria: debt represents indebtedness and priority in liquidation; equity represents ownership and no maturity; debt offers fixed/variable return and is usually rated; equity usually traded on exchanges.
  - Islamic-specific criteria:
    - Not all Sukūk are negotiable (e.g., Murābahah typically not transferable except at face value).
    - Credit rating of Sukūk backed by a guarantee must ensure guarantor is not related to issuer for third-party guarantees under Mudārabah or Mushārakah principles.
    - Sharī’ah-compliant equity must meet qualitative and quantitative screening.
- Sukūk securitization and structures (A3.11–A3.16)
  - Sukūk securitization: payment of principal and income derived from cash flows of securitized assets; ownership transferred to investors (via SPE) rather than collateral rights.
  - Legal enforceability requires valid sale transaction and SPE that is bankruptcy remote.
  - Underlying assets must comply with Sharī’ah (commonly lease-generating properties; may include Ijārah, Murābahah, Salam, Istisnā, Wakalah, Mushārakah, Mudārabah).
  - Three structural situations (IFSB): asset-backed (holders bear asset risk), asset-based with repurchase undertaking (originator repurchase risk), and pass-through asset-based (issuing entity packages assets with recourse to originator).
- Classification implications and market considerations (A3.16–A3.20)
  - Sector and subsector classification for Sukūk align with 2008 SNA sectors: general government, financial corporations, nonfinancial corporations.
  - Classification by interest rate is challenging because Sharī’ah forbids predetermined returns; pricing difficulties arise for Mushārakah and Mudārabah structures; need for benchmark indicators for Sukūk pricing.
  - Sharī’ah screening to identify compliant equities uses qualitative (sector) and quantitative (financial ratio) screens; common ratios include debt ratio, interest ratio, cash and liquidity compliance ratio, and nonpermissible income ratio.

### Islamic collective investment schemes, Islamic indices, and market benchmarks
- Islamic Collective Investment Scheme (ICIS) definition and forms (A3.21–A3.24)
  - ICIS defined by IFSB: pooled capital subscribed to units/shares representing undivided fund ownership; established and managed per Sharī’ah; separately financially accountable.
  - Forms: open-ended redeemable funds; closed-end tradable or untradeable funds; unit investment trusts (contractual or UCITS model); umbrella funds with sub-funds; profit-sharing investment accounts pooled as CIS.
  - Exclusions from ICIS definition: non-pooled funds, funds established by Islamic insurance operators attached to nonredeemable policies, pension funds, and investment accounts not divided into units or shares.
  - Sharī’ah governance typically covers monitoring compliance, portfolio screening, and purification of tainted income.
- Islamic indexes (A3.26–A3.28)
  - Islamic index constituents are Sharī’ah-compliant equities or Sukūk; base universe often derived from conventional equity universes.
  - Major global Islamic index providers include: Dow Jones Indices (DJI), FTSE, Morgan Stanley Capital International (MSCI), Russell, Standard & Poor’s (S&P), and Thomson Reuters (TR).
  - Islamic indices provide benchmarks for Sharī’ah-compliant investments and rely on Sharī’ah screening processes.

### Security-by-security (SBS) databases — purpose, structure, and benefits/costs
- What an SBS database is (A4.1)
  - Micro-database storing statistics at individual security level with attributes such as ISIN, issuer name/residence/sector/subsector, issue date, redemption date, type of security, currency, issue and redemption prices, outstanding amount or market capitalization, coupon payments and dates, market date/value, and events (type, date, amount).
- Three-stage data production process (A4.2)
  - Data input: individual security statistics collected from central banks, government agencies, commercial data providers, securities exchanges, numbering agencies.
  - Data quality management: merging, completeness/plausibility/consistency checks, corrections.
  - Storage and outputs: classify and store by various criteria; produce micro data aggregates and disseminations.
- Links to securities holdings statistics (A4.3–A4.6)
  - SBS databases can be linked to holdings by resident holders (by sector/subsector) and nonresident holders via ISIN and holder identifiers; supports production of sectoral financial accounts and balance sheets.
  - Typical data providers: custodians and direct reporters; custodians often provide SBS data; direct reporters supply holdings breakdowns by instrument, maturity, issuer residence.
  - Legal obligations in some countries require residents to report securities held in custody abroad.
- Particular challenges for equity SBS databases (A4.8–A4.11)
  - Equity securities lack maturity and predetermined payments, complicating valuation and tracking.
  - Challenges: compiling market prices for multiple listings; linking depository receipts and secondary listings; handling percentage-price formats; integrating corporate events (IPOs, splits, dividends); handling unlisted shares with limited outstanding/share price information.
  - Aggregated time series by sector require time series for each individual security.
- Benefits and costs (A4.12–A4.18)
  - Benefits:
    - Compilers control statistical classification promoting accuracy and consistency with international standards.
    - Flexibility to produce different aggregates without additional data collection.
    - Ability to derive positions, transactions, flows, and detailed revaluation/other changes; detect outliers at detailed level.
    - Reduces respondent burden for detailed breakdowns; facilitates linking holdings to securities-level data.
    - Useful for monetary, financial, balance of payments, international investment position statistics, and for “from-whom-to-whom” analyses.
  - Costs and limitations:
    - Significant human, financial, and IT resources required to set up and maintain SBS databases.
    - High costs for commercial data provider subscriptions and potential incompleteness of purchased information.
    - Manual intervention needed to crosscheck multiple data sources; database storage and processing costs high.
    - Legal obstacles may prevent data exchange among authorities; confidentiality risks when presenting detailed issuer/holder breakdowns.

### Metadata and further guidance
- The Annex notes that Annex 5 presents guidelines on metadata for debt and equity securities statistics that complement the statistics presented in the tables.

*Handbook on Securities Statistics — Annex (selected material).*

### Chapter  9.  While  quantitative  information  is  useful

### Chapter 9. While quantitative information is useful

### Need for metadata to support securities statistics
- Quantitative information alone is not sufficient to support a comprehensive analysis when comparing national data and constructing global aggregates.
- Additional information is required because of:
  - the range of data sources used to construct securities statistics;
  - the various accounting rules under which the data can be produced;
  - the regulations governing debt securities issuance.
- There are no specific international guidelines for metadata on debt and equity securities statistics. The Handbook represents a first attempt to fill this gap.
- The Annex recommends presentation of three groups of statistical metadata:
  - Specific metadata for securities statistics (regulatory/supervisory environment and market arrangements).
  - Statistical metadata items shared by all financial statistics (debt and equity).
  - General statistical metadata items shared by all types of statistics.
- Any type of metadata can be specific to an individual series or attached to a whole group of statistical series.

### Specific statistical metadata items for debt and equity securities statistics
- Regulatory and supervisory environment (example metadata could include):
  - Main domestic and international regulations governing the operation of debt and equity securities markets
  - Names of the regulatory organizations responsible for governing debt and equity securities markets
  - Listing and numbering requirements of issuers of debt and equity securities
  - Disclosure requirements for issuers of debt and equity securities
  - Accounting rules for recording the issuance and trade of debt and equity securities
- Market arrangements metadata could include trading, clearing, and settlement arrangements for debt and equity securities.

### Debt securities — recommended metadata categories
- Classification metadata (aligned with detailed tables in Chapter 9):
  - Issuer sector: all sectors, nonfinancial corporations, financial corporations, general government, households and nonprofit institutions serving households (NPISHs), or nonresidents
  - Issue currency: all currencies, domestic currency, or foreign currencies
  - Issue market: all markets, domestic markets, or international markets
  - Maturity: all maturities, short-term maturities, or long-term maturities
  - Term to maturity: original maturity or remaining maturity
  - Interest rate: all interest rates, fixed interest rates, or variable interest rates
  - Variable interest rates: all variable interest rates, inflation-linked, asset price-linked, or interest rate-linked
- Valuation and accounting rules:
  - Valuation: nominal value or market value
  - Recording basis: accrual basis
  - Grossing/netting: gross or net recording of transactions
  - Measure: position or flows (transactions i.e., gross issues or redemptions; revaluations; other changes in volume)
  - Accounting system: quadruple-entry bookkeeping
- Common statistical features to include:
  - Title
  - Unit of measure
  - Frequency
  - Unit multiplier
  - Decimals
  - Seasonal adjustment
  - Collection reference period
  - Start date
  - Coverage
  - Breaks
  - Data source
  - Methodology
  - Timeliness
  - Revision procedure
  - Contact details

### Example metadata (Table A.5.1) — Selected entries for debt securities issues
- Statistical metadata items shared by all financial statistics (example row values):
  - Issuer sector: General government
  - Issue currency type: All currencies
  - Issue market: All markets
  - Maturity: All maturities
  - Term to maturity: Original
  - Interest rate type: All interest rates
  - Variable interest rate type: Not applicable
  - Debt security type: Nonsecuritization debt securities
  - Valuation: Nominal value
  - Recording basis: Accrual
  - Grossing/netting: Gross
  - Position and flows: Position
  - Accounting system: Quadruple-entry bookkeeping
- General statistical metadata items shared by all types of statistics (example row values):
  - Title: General government, all maturities (original), all markets, all currencies, all interest rates, non-securitization
  - Unit of measure: U.S. dollar
  - Frequency: Quarterly
  - Unit multiplier: Billion
  - Decimals: One
  - Seasonal adjustment: Nonseasonally adjusted
  - Collection reference period: End of period
  - Start date: 1980 Q1
  - Coverage: Excludes savings bonds and budget agency securities
  - Breaks: Before 1985 Q3 data include savings bonds and budget agency securities
  - Data source: Financial Accounts of the United States; Table L.105 Federal Government and Table L.104 State and Local Governments.
  - Methodology: Financial Accounts Guide. See www.federalreserve.gov/apps/fof/
  - Timeliness: One month after reference period
  - Revision procedure: Mainly affecting recent periods when available
  - Contact name and e-mail: Mr. Debt Security; debt.security@frb.gov
- Regulatory and market arrangement examples (selected entries):
  - Main domestic and international regulations governing the operation of debt securities markets: The Securities Act of 1933 and the Securities Exchange Act of 1934
  - Names of the regulatory organizations responsible for governing debt securities markets: U.S. Securities and Exchange Commission and self-regulatory organizations such as the Financial Industry Regulatory Authority and the Municipal Securities Rulemaking Board
  - Listing and numbering requirements: Listing requirements vary by exchange and marketplace; the Committee on Uniform Security Identification Procedures (CUSIP) numbering system is used, although not all debt securities acquire a CUSIP number
  - Accounting rules for recording the issuance and trade of debt securities: National Book-Entry System
  - Trading arrangements for debt securities: The Depository Trust & Clearing Corporation and the National Book-Entry System
  - Clearing arrangements for debt securities: National Securities Clearing Corporation and Fixed Income Clearing Corporation
  - Settlement arrangements for debt securities: National Securities Clearing Corporation and Fixed Income Clearing Corporation

### Equity securities — recommended metadata categories
- Classification and identification metadata:
  - Issuer sector: all sectors, nonfinancial corporations, financial corporations, general government, or nonresidents
  - Trading currency: domestic currency or foreign currencies
  - Country of incorporation: all markets, domestic markets, or international markets
  - Country of operation: all markets, domestic markets, or foreign markets
  - Types of share: listed or unlisted shares, ordinary or preferred shares, depository receipts
- Example metadata items (Table A.5.2 selected entries):
  - Issuer company: Applies to individual equity securities
  - Issuer industry: Financial
  - Issuer sector: Deposit-taking corporation except central bank
  - List date: May be presented in brackets (e.g., before 1Q1990, 1Q1990-4Q1999, after 4Q1990)
  - ISIN: Applies to individual equity securities
  - Ticker symbol: Applies to individual equity securities
  - Country of incorporation: Domestic market
  - Country of operation: Domestic market
  - Trading currency: Domestic currency
  - Listing category: Ordinary shares
  - Authorized capital: Total volume of authorized capital
  - Issued shares: Total number of issued shares
  - Market capitalization: Total value of market capitalization
  - Valuation: Market value
  - Recording basis: Accrual
  - Grossing/netting of transactions: Net
  - Position and flows: Position
  - Accounting system: Quadruple-entry bookkeeping
- Valuation and accounting rules for equity statistics:
  - Valuation: market value, book value, discounted forecast profits
  - Recording basis: accrual basis
  - Grossing/netting: gross or net recording of transactions
  - Measure: position or flows (transactions, i.e., gross issues less redemptions; revaluations; other changes in volume)
  - Accounting system: quadruple-entry bookkeeping
- Other common features to include:
  - Issuing corporation
  - ISIN
  - Ticker symbol
  - Listing category: ordinary shares, preferred shares, depository receipts
  - Industry: sector and subsector
  - Trading currency
  - Unit of measure
  - Market capitalization
  - Issued shares
  - List date
  - Collection reference period
  - Coverage
  - Breaks

### The Coordinated Portfolio Investment Survey (CPIS)
- Overview and participation:
  - The CPIS is conducted on a semi-annual basis under the auspices of the International Monetary Fund (IMF) Statistics Department (STA).
  - Participation is voluntary; 74 economies participated as of end-2013.
  - Annual data are available from 2001.
- Scope and classification:
  - The CPIS provides information on holdings of portfolio investment securities (equity and debt securities) valued at market prices, broken down by the economy in which the issuer is resident.
  - Participants use the definitions and classifications set out in the Balance of Payments and International Investment Position Manual, Sixth Edition (BPM6), and the second edition of the Coordinated Portfolio Investment Survey Guide.
  - Holdings recorded as direct investment are not included in the CPIS results.
- Companion surveys and database:
  - STA collects reserve assets holdings via the survey of Securities Held as Foreign Exchange Reserves (SEFER).
  - Holdings by major international organizations are reported via the survey of Securities Held by International Organizations (SSIO).
  - Together, CPIS, SEFER, and SSIO provide a database on cross-border holdings of securities, broken down by issuer-residence economy and type of security.
- Supplementary information encouraged:
  - Reporting economies are encouraged to provide supplementary information on the currency of denomination and the sector of the resident holder.
  - Participants are encouraged to collect supplementary information on the stock of securities issued by the reporting economy (liabilities), broken down by the economy in which the nonresident holder resides and the type of security.
- Analytical uses and improvements:
  - CPIS core elements allow time series analysis of holdings (assets) and derived liabilities (creditor data), with the derived time series regarded as a lower bound because not all economies participate or cover all residents’ holdings.
  - The CPI S structure provides breakdowns by financial instrument, currency of denomination, and holding sector.
  - In line with the October 2009 “The Financial Crisis and Information Gaps” recommendations, the IMF increased CPIS frequency and timeliness:
    - data collections are at least semi-annual (instead of annual)
    - dissemination lag reduced to less than nine months
  - The IMF encourages reporting of data on institutional sector of the foreign debtor and short/negative positions.

### The Coordinated Direct Investment Survey (CDIS)
- Purpose and timing:
  - The CDIS is a global data collection initiative led by the IMF to improve availability and quality of direct investment data overall and by immediate counterpart economy.
  - The CDIS supports “from-whom-to-whom” cross-border data and complements the CPIS and BIS international banking statistics.
  - The CDIS is conducted on an annual basis; results start with data for end-2009.
  - Preliminary data are requested nine months after the end of the reference period and released in December. Revised and more comprehensive data are released in the middle of the following year (i.e., with a total lag of 18 months).
- Concepts and coverage:
  - The survey’s concepts, coverage, valuation methods, and classification criteria are consistent with BPM6 and the fourth edition of the OECD Benchmark Definition of Foreign Direct Investment.
  - Foreign direct investment (FDI) arises when a unit resident in one economy makes an investment that gives it a significant degree of influence over an enterprise resident in another economy, operationalized where a direct investor owns equity that entitles it to 10 percent or more of the voting power in the DIENT.
  - Once the 10 percent threshold is reached, entities are in a “direct investment relationship”; equity and debt positions between the direct investor and the DIENT, and among enterprises in direct investment relationship (except certain debt positions between selected financial intermediaries), are included in direct investment. Entities with a common direct investor but without 10 percent cross-holdings are “fellow enterprises.”
- Data collected:
  - CDIS collects comprehensive and harmonized year-end direct investment positions based on the residence of the immediate counterpart, with equity reported separately from debt investment.
  - Inward direct investment: participating countries compile outstanding year-end positions broken down by immediate (first) counterpart economy for both equity and debt instruments.
  - Outward direct investment: participating countries provide outstanding year-end positions broken down by immediate (first) counterpart economy for both equity and debt instruments.
  - For inward and outward investment, gross debt liabilities and gross debt assets should be identified separately; note confidentiality constraints may lead some economies to report only total debt positions.
  - Further breakdowns separating positions between fellow enterprises and between direct investors and the DIENT, and showing positions of resident financial intermediaries separately from other direct investment positions, are encouraged.
  - Countries provide metadata as part of their overall reporting to the IMF.
- Mirror data and comparability:
  - CDIS releases show mirror data: inward FDI positions reported by an economy are shown alongside outward positions reported by counterpart economies and vice versa, allowing easy comparison and inconsistency identification.
- Equity coverage:
  - The CDIS covers all financial instruments set out in Chapter 3 (shares listed and unlisted; stocks; participation certificates; depository receipts), as well as equity not in the form of securities.
  - Values on the books of the DIENT should be used for both inward and outward direct investment.

### The 2008 SNA and the Corporate Group Approach
- 2008 SNA:
  - The System of National Accounts 2008 (2008 SNA) defines institutional units by place of residence and principal economic activity, aggregated into sectors and subsectors. Aggregated data are not consolidated, though consolidated presentations are occasionally applied for specific sectors or subsectors (e.g., general government or money-issuing corporations) for analytical or policy purposes.
- Corporate group approach:
  - An alternative approach arranges institutional units in corporate groups on the basis of ownership and control (rather than principal functions, behavior, and objectives). This approach is described in the 2008 SNA but is not recommended for national accounts where strict geographical and sectoral boundaries must be observed.
  - The corporate group approach aggregates controlling and controlled units based on the concept of control; corporate groups may be financial or nonfinancial and can include resident and nonresident units.

*Source: Handbook on Securities Statistics, Annexes A5–A7, International Monetary Fund (IMF).*

### 4.51 et. seq.). Large and complex corporate groups are also known

### The 2008 SNA and the Corporate Group Approach

### Corporate groups and consolidation
- Large and complex corporate groups are also known as “multinational enterprises” (MNE)—operating in a number of different countries in order to maximize production efficiency and minimize their global tax burden.
- Corporate groups are formed when controlling and controlled units are consolidated by eliminating intra-group positions and flows, resulting in the establishment of corporate groups.
- The controlling and controlled units forming a corporate group usually belong (in terms of the 2008 SNA) to different economies and different sectors/subsectors, making it impossible to reconcile aggregated data compiled on the basis of the 2008 SNA with the data underlying the corporate group approach.
- One option is to divide a corporate group into various subgroups comprising units that reside in different places and belong to different resident sectors.
- Other modifications stem from the application of different consolidation concepts based on the international financial reporting standards (IFRSs) and supervisory principles.
- Each individual corporation in a large group remains a separate institutional unit; even wholly owned subsidiaries are separate legal entities required by law and tax regulations to produce full sets of accounts (including balance sheets).

### Financial stability, supervision, and data needs
- For financial stability purposes, it is necessary to have information at the level of corporate groups (particularly for financial groups), so data used for this purpose are usually consolidated at group level.2
- For supervisory purposes, corporate groups may potentially be consolidated only at domestic level (i.e., only domestic subsidiaries are consolidated).3
- When assessing risks and their potential spread across institutions and markets, it is essential to know which unit is bearing the risk, regardless of where the relevant assets are held within the group.
- It is important to identify which other groups are exposed to a failing institution or group (whether directly on-balance sheet or indirectly through contingencies such as guarantees) and are therefore liable to incur losses.4
- Publicly available information may be provided only for the corporate group as a whole (consolidated). In such cases, national accountants need to consult other sources to obtain the necessary unconsolidated data.
- Statistical data used for supervisory and financial stability purposes focus on the activities of the supervised institution as a whole and, for financial groups, are consolidated across national boundaries to include the activities of foreign bank branches.
- Supervisory data may also be consolidated across sectoral boundaries to include the activities of financial subsidiaries that are not banks (or money-issuing corporations). Supervisors are primarily interested in measuring risks such as counterparty, credit, and market risks.
- The Bank for International Settlements (BIS) follows the consolidated group approach for its consolidated international banking statistics.4

### Corporate groups, debt holdings, and ownership structures
- The shareholdings of a corporate group are presented in a consolidated form, consolidated at group level.
- The debt securities holdings of a corporate group are presented in a consolidated form, at the group level. For financial stability purposes, it may be useful to have information on debt securities holdings consolidated at the level of groups of corporations as a whole (2008 SNA, paragraph 4.51), with a breakdown by issuer (e.g., on a sector and residence or ultimate risk basis), currency, maturity, and type of interest rate.
- Ownership structures are determined using observable measures of ownership concentration or the extent of direct/indirect ownership.
- Ownership structures for corporate groups can involve pyramid, ring, and web structures, as well as cross-shareholdings.
- Examples of legally recognized complex corporate group types: German “Konzerne”; “keiretsu” (Japan); “chaebol” (South Korea). Cross-shareholding arrangements are an essential feature of keiretsu and chaebol groups.
- Family ownership: In many economies, family interests dominate ownership structures; it is sometimes suggested that corporations controlled by family interests are subject to better oversight than corporations controlled by institutional investors.
- Institutional investors: Include insurance corporations, pension funds, and investment funds (as well as deposit-taking corporations). Institutional investment pools funds for beneficiaries; the largest pools invest in a very large number of different corporations to diversify risks, which can reduce interest in the governance of individual corporations.

### Corporate shareholder networks and analysis tasks
- Cross-corporation and cross-border shareholding relationships form complex networks and dependencies linking corporations at national and international levels.
- Control enhancing mechanisms (CEMs) are fairly common for listed corporations; for instance, nearly half of all European Union (EU) corporations have one or more CEMs, the main ones being pyramid structures and cross-ownership arrangements.
- Pyramid structures resemble a tree, with the shareholder at the top usually having control. Cross-ownership structures comprise horizontal links established by means of cross-holdings of shares, reinforcing the power of central shareholders.
- Tasks involved in analyzing corporate shareholder networks:
  - Determining the degree of ownership concentration by identifying the largest shareholders (typically the controlling shareholders), as well as pyramid and cross-ownership structures.
  - Exploring the corporate control system and identifying the controlling shareholders.
  - Identifying the ultimate controlling shareholders.
- Measures to ascertain shareholders and holdings: examine a corporation’s direct and indirect shareholdings; display networks as organigrams or ownership matrices (corporations as dots or squares; shareholdings as arrows; colors can distinguish between financial and nonfinancial corporations).

### Illustrative ownership percentages (pyramid structure example)
- Corporation A owns 50 percent of corporation B.
- Corporation A owns 40 percent of corporation C.
- Corporation A owns indirectly 29 percent of corporation D (controls D through control of B).
- Other percentages shown in the pyramid example: 50%, 20%, 10%, 50%, 50%, 10%, 29%, 15%, 6%, 40%, 40% (numbers next to arrows indicate direct share ownership as a percentage of total shares; numbers next to squares E, D, and F indicate indirect ownership as a percentage of total shares).
- In the example, corporation A is the ultimate shareholder, as it is not owned by any other shareholder; corporations B, C, and D are not under the influence of other dominating shareholders.

### Euro Groups Register (EGR) and globalization impacts
- The Euro Groups Register (EGR) is a statistical business register detailing all multinational corporate groups having at least one enterprise in the territory of the EU (including any members of the European Free Trade Association that wish to participate).
- The EGR contains information on the legal entities that make up those groups and their respective countries of residence, and provides statistics on global business activities, such as foreign direct investment (FDI).
- EU statisticians devote considerable effort to analyzing the legal, operational, and accounting structure of corporate groups at the national and international level to support the EGR project.
- The EGR is intended to act as a single point of reference and the primary tool for improving statistics on international transactions and FDI; it facilitates analysis of the degree of international integration of economies and provides information on control relationships between enterprises.

### Nationality approach
- Nationality refers to the ultimate obligor, as opposed to the immediate borrower on a residence basis, and is linked to the consolidation of assets and liabilities for related entities (corporate group approach).
- Information on a nationality basis is useful to analyze potential support that might be available from the parent company and to understand links between borrowers in different countries and sectors (example: parent bank may guarantee the debt of a Cayman Islands subsidiary of a Brazilian bank).
- Consistent with international banking statistics, the BIS bases the nationality of an issuer on the residence of its controlling parent, regardless of any intermediate owners.
- Classifying international issues by nationality instead of residence results in a reallocation of issuance from financial centers to major economies (i.e., where owners of issuers resident in financial centers reside).

### Valuation of unlisted shares (beginning summary)
- If financial instruments are not traded in a market or are traded only infrequently, a value equivalent to the market value should be estimated; this is referred to as a “fair value”: “Fair value is a market-equivalent value. It is defined as the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s-length transaction” (BPM6, paragraph 3.88).
- For unlisted shares (i.e., equity securities not listed on a stock exchange), three different valuation methods are proposed, based respectively on: (1) recent transactions; (2) accounting data for the corporation; (3) the value of a comparable corporation or a group of comparable corporations.
- The 2008 SNA and the BPM6 establish six different methods for the valuation of unlisted shares.

*Handbook on Securities Statistics — Annex: "The 2008 SNA and the Corporate Group Approach"*

### conclusion  of  its  final  report  in  1998  was  that  there  was  no  clear

### Conclusion of its final report in 1998 was that there was no clear

### Background and institutional follow-up
- The final report in 1998 concluded there was no clear recommendation that could be implemented easily.
- Subsequent institutional responses:
  - A Eurostat Working Group on Unquoted Shares was established in 2002.
  - An Organisation for Economic Co-operation and Development (OECD) task force was set up some years later.
  - In 2012, the European System of Central Banks (ESCB) Working Group on External Statistics set up the Task Force on the Valuation of FDI Positions to study valuation methods for unlisted equity and their impact on the net international investment position (IIP).
- Damgaard and Elkjaer (2014) provide an in-depth analysis of the impact of using different valuation methods and estimation techniques.

### Valuation methods for unlisted shares
- Enumerated valuation inputs and approaches:
  - Recent transaction prices (type 1 in the preceding list)
  - Net asset values, based on accounting data (type 2)
  - Present values or price-to-earnings (P/E) ratios, by discounting forecasted future profits (types 2 and 3)
  - Market capitalization or price-to-book value (P/B) ratios (types 2 and 3)
  - Own funds at book value (OFBV) (type 2)
  - Apportioning of global values (type 3)
- A8.4: Three different valuation methods are applied in practice; unlisted shares should be estimated with reference to:
  - The value of listed shares (where appropriate)
  - The value of own funds
  - Discounted forecasted profits, applying an appropriate market P/E ratio to the smoothed recent earnings of the institutional unit
- A8.5: Estimates should take account of differences between listed and unlisted shares, notably liquidity and control premiums, and the corporation’s area of activity.

### Implementation of valuation methods (compilers’ guidance)
- A8.6: No single valuation method is prescribed by international statistical standards; flexibility is encouraged and methods are not ranked. Choice depends on availability of data and market conditions.
- Method usage notes:
  - P/E and P/B ratios are commonly used by valuation practitioners.
  - OFBV method was developed by statisticians to harmonize book value definitions across countries and accounting standards.
- A8.7 (P/B method requirements):
  - Required accounting (balance sheet) data: book value of equity = share capital (common and preferred shares) + contributed surplus + retained earnings.
  - P/B ratios = market value of an enterprise ÷ book value.
  - Preferable to calculate current price of unlisted shares for each economic sector because P/B varies by sector.
- A8.8 (OFBV method definition and caveats):
  - OFBV sets unlisted share value = book value as reflected in annual accounts.
  - Book value defined as paid-up capital + all types of reserves identified as equity + cumulated reinvested earnings + holding gains or losses included in own funds in the accounts (2008 SNA, paragraph 13.71 (e)).
  - Strict OFBV application can produce inconsistent valuation of cross-border assets and liabilities and distort a country’s IIP (example: goodwill recorded only on acquirer’s balance sheet).
- A8.9 (P/E method requirements):
  - Requires accounting data on smoothed recent earnings of listed and unlisted corporations and the P/E ratio of listed corporations.
  - P/E ratio is applied to forecasted future profits of unlisted corporations and should be calculated for each sector.

### Liquidity, control, and negative equity values
- A8.10: Valuation may need modification to account for liquidity, control, and negative equity values:
  - Liquidity: Unlisted shares typically have lower liquidity than listed shares, tending to negatively affect value; this should be considered if impact is significant.
  - Control premium: Unlisted corporations often have few owners; a control premium is frequently paid for controlling stakes. Control premium is normally offered to all shareholders so all shares in a corporation should be valued at the same price.
  - Negative equity values: Methods can generate negative positions inconsistent with limited liability. Examples:
    - P/E method often generates negative market-value estimates because earnings are volatile and frequently negative.
    - BPM6 allows inclusion of negative FDI equity positions in the IIP, but country practices may differ.
    - An alternative is to establish a threshold or limit so that valuation of unlisted shares would never be lower than the share capital.

### Relevant standards, examples, and ancillary statistics
- References to standards and documents cited in the section:
  - BPM6 (Balance of Payments Manual, Sixth Edition) — treatment of negative FDI equity positions.
  - 2008 SNA, paragraph 13.71 (e) — definition of book value components.
- Glossary and related statistics notes (selected exact figures from glossary entries included in the annex):
  - Coordinated Portfolio Investment Survey (CPIS): Participation is voluntary and 74 economies participated as of end-2013; annual data are available from 2001.
  - Closed-ended investment fund shares or units: typical maturity period "five to seven years".
  - Various glossary definitions and paragraph cross-references used to clarify terms relevant to valuation and securities statistics.

*Handbook on Securities Statistics, Annex A8 — International Monetary Fund*

### Appendix 3).

### Appendix 3

### Equity and equity-related instruments
- 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.
- Equity securities: Negotiable financial instruments, comprising listed shares and unlisted shares.
- Shares: Negotiable financial instruments representing claims on the residual value of a corporation after the claims of all creditors have been met. These comprise listed and unlisted shares.
- Equity warrant bond: A debt security that incorporates a warrant, which gives the holder the option to purchase equity in the issuer, its parent company, or another company during a predetermined period or on one particular date at a fixed contract price.
- Warrants: Negotiable financial instruments giving the holder the right to buy, subject to specific conditions and for a specified period of time, a certain number of shares or bonds from the issuer of the warrant (usually a corporation). They are classified as financial derivatives.
- Non-participating preferred share: A type of preferred share in which the payment of a “dividend” (usually at a fixed interest rate) is calculated according to a predetermined formula and not determined by the earnings of the issuer.

### Debt instruments, maturities, and valuation
- Face value: The amount of principal to be repaid (2008 SNA, paragraph 3.154 (d)); also known as “par value,” or simply “par.”
- Nominal value: The nominal value of a debt instrument is the amount that at any moment in time the debtor owes to the creditor; this value is typically established by reference to the terms of a contract between the debtor and creditor. Conceptual calculation: discounting future interest and principal payments at the existing contractual interest rate(s) on the instrument. (External Debt Statistics Guide: Guide for Compilers and Users 2013, Appendix 3).
- Principal (original): The amount borrowed and to be repaid excluding interest due or accrued (MFSCG, paragraph 2.46).
- Principal (outstanding): For debt instruments alone, interest can, and usually does, accrue on the principal amount, increasing its value (External Debt Statistics: Guide for Compilers and Users 2013, Appendix 3).
- Redemption value (redemption price): The amount to be paid by the issuer to the holder at maturity (External Debt Statistics: Guide for Compilers and Users 2013, Appendix 3).
- Original maturity: The period from the date of issue of a debt security until the final contractually scheduled payment (BPM6, paragraph 5.104 (a)).
- Remaining maturity: The period from the reference date of a debt security until the final contractually scheduled payment; also referred to as residual maturity (BPM6, paragraph 5.104 (b)).
- Short-term maturity: A maturity of one year or less or a security payable on demand (BPM6, paragraph 5.103 (a)).
- Long-term maturity: Maturity of more than one year, or no stated maturity (BPM6, paragraph 5.103 (b)).
- Fixed interest rate debt security: A debt security whose coupon payments are set for the life of the security or for a certain number of years.
- Variable interest rate debt security: A debt security with a coupon linked with a fixed spread to a reference index, such as an interbank interest rate, the price of a specific commodity, or the price of a specific financial instrument (BPM6, paragraph 5.110).
- Variable rate note (VRN): A debt security similar to a variable interest rate debt security, but the spread in relation to the reference index varies over time depending on changes in the perceived credit risk of the issuer.
- Zero-coupon bond: A single-payment debt security that has no coupon payments during its life; it is issued at a discount to its face value and the full return is paid at maturity.
- Inflation-linked security: A debt security whose principal amount or coupon (or both) is indexed to inflation, for example to a consumer price index; as the principal amount increases with inflation, the interest rate that is applied to this increased amount raises coupon payments over time.
- Interest-rate-linked security: A debt security linked to a specific interest rate or interest rate index.
- Interest payments: Periodic payments of the interest costs that the borrower incurs and that primarily take the form of coupons.
- Sinking fund provision: A stipulation in the terms of issue of a bond that the borrower retire (set aside) a certain proportion of the debt annually.
- Treasury bill: A common form of sovereign short-term debt security that many governments issue. It gives the holder the unconditional right to receive stated fixed sums on a specified date, and is issued at a discount to face value (BPM6, paragraph 5.44).
- Note issuance facility (NIF): A note issued under a NIF is a short-term debt security issued under a legally binding medium-term facility—a form of revolving credit.
- Private placement: A debt security that is issued by an issuer directly to a small number of investors and which is typically not rated by credit rating agencies.
- Promissory note: An unconditional promise to pay a certain sum on demand on a specified date (see also commercial paper).

### Securities types, market presentation, and databases
- Security: A negotiable financial instrument (BPM6, paragraph 5.15).
- Debt and equity securities aggregates: Global aggregates for the world as a whole and for different areas and countries.
- Foreign-currency-denominated securities: Securities issued and settled in foreign currencies.
- Location of issue: Presentation of statistics based on a geographic breakdown of debt securities markets.
- “Residence of holder” approach: Presentation of statistics based on a breakdown of holders of equity securities by place of residence.
- “Residence of issuer” approach: Presentation of statistics based on a breakdown of issuers of equity securities by place of residence.
- “From-whom-to-whom” framework: Presentation of debt securities holdings broken down by debtor/creditor, identical to the flow-of-funds presentation (2008 SNA, Chapter 27).
- Security-by-security (SBS) database: A micro-level database that stores statistics at the level of individual debt securities.
- Listing: The entry of a corporation in the share register of a given marketplace or stock exchange, allowing its shares to be traded.
- Negotiable: Legal ownership can be readily transferred from one party to another by means of delivery or endorsement (BPM6, paragraph 5.15).

### Institutional sectors, actors, and functional principles
- Financial corporations sector: Sector consisting of all resident corporations that are engaged principally in the provision of financial services (including insurance and pension funding services) to other institutional units (2008 SNA, paragraph 4.98).
- Other financial corporations: Financial corporations other than the central bank, other money-issuing corporations and securitization corporations.
- Other money-issuing corporations: Deposit-taking corporations and money market funds that issue liabilities included in the national definition of broad money.
- Securitization corporation: A financial corporation that specializes in issuing securitization debt securities (BPM6, paragraph 4.77 (a)).
- Public sector: Sector comprising general government and public financial and nonfinancial corporations, including the central bank.
- General government sector: Sector consisting of legal entities established by political processes that exercise legislative, judicial, or executive authority over other institutional units within a given area (2008 SNA, paragraph 4.117).
- Nonfinancial corporations sector: Sector consisting of corporations whose principal activity is the production of market goods or nonfinancial services (2008 SNA, paragraph 4.94).
- Household sector: Sector consisting of groups of persons who share the same accommodation, pool some or all of their income and wealth, and consume certain types of goods and services collectively. This also covers unincorporated enterprises (2008 SNA, paragraph 4.149).
- Nonprofit institutions serving households (NPISHs): Legal entities engaged principally in the provision of nonmarket services for households or the community in general, whose main resources are voluntary contributions (2008 SNA, paragraph 2.17 (e)).
- Institutional investors: Major holders of debt and equity securities. Institutional investors include investment funds (both money market funds (MMFs) and non-MMFs), insurance corporations, and pension funds (Organisation for Economic Co-operation and Development (OECD), Institutional investors’ assets database).
- Investment funds: Collective investment schemes that raise funds by issuing shares or units to the public. The proceeds are invested in financial and nonfinancial assets (usually real estate).
- Investment fund shares or units: These represent a claim on part of the value of an established investment fund.
- Open-ended investment fund shares or units: Issued and redeemed on a continuous basis, or at certain predefined (short-term) intervals. The most popular types of open-ended investment fund are exchange-traded funds (ETF) and money market funds.
- Money market funds (MMFs): Investment funds that invest only or primarily in short-term money market securities, such as treasury bills, certificates of deposit, and commercial paper.
- Money market fund shares or units: These represent a claim on part of the value of an established money market fund.
- Foreign direct investor: An entity or group of related entities that is able to exercise control or a significant degree of influence over another entity that is a resident of a different economy (BPM6, paragraph 6.11).
- Group of corporations: A parent corporation that controls several subsidiaries (some of which may control subsidiaries of their own, and so on).
- Originator: An institutional unit that originates assets as part of its regular business activities.
- Original owner: An institutional unit that is an originator or purchases assets from an originator in the secondary market.
- Protection buyer: An institutional unit in synthetic securitization that makes payments to a protection seller in exchange for credit risk protection for reference assets.
- Protection seller: An institutional unit in synthetic securitization that sells protection against the credit risk on a premium buyer’s reference assets.

### Transactions, holdings, and special arrangements
- Flow: Economic actions and the effects of events within a given accounting period (BPM6, paragraph 3.2).
- Position: The level of assets or liabilities at a particular point in time (BPM6, paragraph 3.2).
- Issuer/holder (debtor/creditor) principle: Captures a transaction between two institutional units in the accounts of the two transactors and allows the change in holder (creditor) to be recorded in the financial account of the issuer (debtor); alternatively allows the change in issuer (debtor) to be recorded in the financial account of the holder (creditor).
- Transactor principle: Captures a change in the ownership of a financial asset in the accounts of the two creditors involved, but not in the account of the debtor; alternatively, where one institutional unit assumes the liability of another, captures the change of debtor in the accounts of those two units, but not that of the creditor.
- Revaluation: Reflects changes in the prices of equity securities holdings. It also includes changes in the value of foreign-currency-denominated equity securities holdings due to changes in exchange rates.
- Other change in the volume of assets: A change in the quantity or physical characteristics of debt or equity securities, or a change in classification.
- Securities lending: Involves the temporary transfer of securities by the lender to the borrower and may require the securities borrower to provide assets as collateral in the form of cash or securities. Legal title passes on both sides of the transaction so that the borrowed securities and collateral can be sold or on-lent. No transaction in the securities exchanged is recorded.
- Repurchase agreement: Arrangement involving the provision of securities in exchange for cash with a commitment to repurchase the same or similar securities at a fixed price, either on a specified future date or with an “open” maturity (BPM6, paragraph 5.52).
- Reverse transactions: Arrangements that involve a sale (and a change of legal ownership) of securities with a commitment to repurchase the same or similar securities, either on a specified date or with open maturity, at a pre-agreed price.
- Short selling: The practice of selling assets, usually securities, that have been borrowed from a third party, with the intention of buying identical assets back at a later date to return to the lender.
- Securitization: The creation and issuance of debt securities for which coupon or principal payments (or both) are backed by specified financial assets or income streams.
- Securitization debt securities: Debt securities created through securitization, such as covered bonds, asset-backed securities (ABS), credit-linked notes (CLN), or collateralized debt obligations (CDO).
- Security transformation (STRIPS): Separate trading of registered interest and principal of securities that have been transformed into a series of zero-coupon bonds matching coupon payment dates and the redemption date of the principal amount.
- Protection and synthetic securitization roles: Protection buyer and protection seller roles in synthetic securitization transactions are defined by the exchange of payments for credit risk protection.
- Nominee account: A legal device for holding assets used for confidentiality or convenience. Assets held in nominee accounts should be attributed to the beneficial owner, not the nominee.

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_Source: https://www.imf.org/-/media/files/data/statistics/wgsd/hss.pdf_