## 1phlea2019002 ## Source details **Canonical URL:** [1phlea2019002](https://www.imf.org/-/media/files/publications/cr/2019/1phlea2019002.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2019/1phlea2019002.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2019/1phlea2019002.pdf.json) --- ### Summary of mission outcomes and objectives - IMF Statistics Department (STA) mission visited Manila during April 29–May 10, 2019. - Main objectives: - Expand coverage of the monetary and financial statistics (MFS) by including other financial corporations (OFCs). - Assist authorities in compilation of the balance sheet approach (BSA) framework using existing sectoral data (MFS, international investment position, and fiscal statistics). - Provide hands-on training to Bangko Sentral ng Pilipinas (BSP) staff on the BSA framework and securities statistics in the context of SDDS Plus and the G-20 data gaps initiative (DGI). - Review progress implementing past mission recommendations. - Mission activities: - Assisted BSP staff finalizing OFC coverage (insurance companies, financial trusts, holding companies, government financial institutions, non-money market investment funds (NMMFs), other financial intermediaries and auxiliaries). - Provided extensive training to MFS, external sector, and flow of funds (FOF) compilers. - Discussed central bank and other depository corporations (ODCs) surveys. ### Key findings and impacts - Inclusion of OFCs: - OFC assets: "more than 7.6 trillion pesos in total assets, a preliminary estimate", representing "around 25 percent of the total assets in the financial system". - Inclusion will improve the integrated monetary database (IMD) and support national publications and data releases to IMF APD and STA. - BSP agreed to start disseminating the new OFC data on a quarterly basis starting in September 2019, with historical series available since the first quarter of 2017. - IMD and SRFs: - IMD built on standardized report forms (SRFs): 1SR (central bank), 2SR (ODCs), 4SR (OFCs). - After constructing 1SR, 2SR, and 4SR, consolidation into a financial corporations (FC) survey provides a comprehensive framework for monetary statistics. - Money market UITFs: - Recommendation to include money market unit investment trust funds (UITFs) in the ODC survey to better measure broad money and other monetary aggregates. - Money market UITFs represent "around six percent of total bank assets". - BSP to include UITFs with historical series; mission suggested updating the historical series for the past five years to avoid further delays. - SEC data provision: - During April 2018 mission, Securities and Exchange Commission (SEC) agreed to provide list of companies by activity (top 1000) with contact information and total assets; SEC did not provide a complete list of financial intermediaries by total assets. - Recommendation: SEC to provide complete list of financial intermediaries by total assets; OFC compilers to collect identified financial intermediaries data from the latest top 1000 publication to increase sample coverage. - BSA capability: - With OFC compilation, the Philippines can produce intersectoral BSA matrices using MFS with full coverage, quarterly IIP, and public debt statistics. - Mission recommended BSP’s FOF team compile the BSA matrix on a quarterly basis and share results with IMF’s Asia Pacific Department at least annually for Article IV consultations. - Training topics delivered: - (1) BSA framework; (2) Handbook on Securities Statistics (HSS); (3) SDDS Plus; (4) G-20 DGI; (5) recording of financial derivatives; (6) treatment of crypto-assets. - Sessions on securities statistics, G-20 data gaps, and SDDS Plus were attended by debt securities data providing agencies (e.g., SEC, Bureau of the Treasury, Philippine Dealing System Holdings Corporation). ### Priority recommendations and target dates (selected) - September 2019: ODC data compilers to include the money market UITFs in the institutional coverage of ODCs going back to five years of monthly data. — Responsible: BSP - September 2019: OFC data compilers to start disseminating the new OFC survey, including submission of the 4SR to STA on a quarterly basis, with a time-lag of no more than four months after the reference quarter. — Responsible: BSP - October 2019: The FOF team to compile the BSA matrix on a quarterly basis, sharing the results with the IMF’s Asia Pacific Department at least annually, as input for the yearly Article IV consultation report. — Responsible: BSP ### Background and context - Follow-up to April 2018 mission that focused on OFC survey compilation, SRF mapping (4SR), timeliness of central bank survey, and incorporation of money market UITFs into ODC survey. - Most 2018 mission recommendations were implemented over the past 12 months; Appendix II contains implementation status of 2018 recommendations. - BSP objectives (as requested in official letter from BSP Governor to STA Director), supported by APD: - Complete OFC survey compilation. - Receive BSA framework training and assistance compiling BSA matrices. - Receive securities statistics training for G-20 DGI and SDDS Plus adherence, for BSP staff and data providing agencies. ### Philippines’ financial system (MFS perspective) — end-2018 figures (preliminary) - Total assets: "30.2 trillion pesos" (about "185 percent of GDP") distributed as: - BSP: "4.85 trillion" (16 percent of total assets). - ODCs: "17.8 trillion" (59 percent of total assets). - OFCs: "7.6 trillion" (25 percent of total assets). ### Detailed technical assessment and recommendations — Central Bank and ODCs - Central bank sectoral balance sheet (1SR): - Issue: 1SR contained intra-sector accounts that should be eliminated (assets of the BSP to itself and matching liabilities), for example deposits to a branch/unit that should be eliminated in consolidated BSP balance sheet. - These intra-sector positions arise from funds set aside to monitor activities between BSP headquarters and BSP departments/regional branches (asset account "due from administrator of fund account" and liability "deposit liability for a specific fund account"). - Recommendation: Central Bank (CB) data compilers to eliminate intra-sector positions in the 1SR. - Incorporation of money market UITFs into ODC survey: - MFSMCG recommends inclusion of money market UITFs in ODC institutional coverage; money market UITFs are a type of money market fund (MMF). - Status: BSP compilers have incorporated money market UITFs into compilation system, but updated 2SR including historical series is still pending. - Mission suggestion: revise last five years as a short-term objective and update 2SR promptly. - Recommendation: ODC data compilers to include the money market UITFs in the institutional coverage of ODCs going back to at least five years of monthly data. - Compilation issues in 2SR: - Financial reporting package is the source for 2SR; FOF compilers identified classification issues when compiling BSA by instrument. - Recommendation: ODC data compilers to implement recommended classifications in the 2SR, using Appendix III of the report. ### Detailed technical assessment and recommendations — Other Financial Corporations (OFC) survey - OFC significance: - OFC assets: "7.6 trillion pesos in December 2018", representing "around 43 percent of total ODC sector (17.8 trillion pesos)". - OFC compilation will significantly aid macroeconomic and financial stability analysis and support SDDS Plus adherence. - 4SR compilation status: - Compilation of OFC data using 4SR completed during mission; sectoral balance sheet of OFC sector is ready to generate OFC survey and FC survey (consolidating CB, ODCs, and OFCs). - 4SR availability: - Quarterly data starting Q1 2017. - Annual data starting in 2012 available but of less quality; improvements concentrated in 2017 and 2018. - Recommendation: use annual data starting 2012 only for internal aggregated analysis and flag breaks due to different data sources and reduced coverage; annual data for 2012–16 not reliable for dissemination outside BSP. - Methodological guidance and classification issues reviewed (selected): - Classification of certain financial intermediaries as financial auxiliaries — affects sub-category breakdowns to be analyzed and disseminated separately. - Treatment of insurance, pension and standardized guarantee schemes per MFSMCG subcategories. - Prepayment of insurance premiums should not be included in trade credit (per MFSMCG paragraph 4.192). - Instrument classification of promissory notes: instrument under review issued by households are not promissory notes as defined in MFSMCG. - Security funds placed with the Insurance Commission should be reclassified from trade credit to other deposits with OFCs (similar treatment as bank deposits under deposit insurance regulation). - Deposits for stock subscription should be reclassified from other accounts payable to equity. - Remaining coverage issues: - 4SR ready except for "two pending coverage issues" referenced in paragraphs 29–38 (text beyond provided excerpt). ### Mapping, reporting, and immediate recommendation - Mission mapped the new 4SR (based on the MFSMCG) into the 4SR currently used for reporting to STA to enable reporting of the new OFC data and to convert 4SR data to the old format used for CB (1SR) and ODCs (2SR). - A conversion file was left with the authorities for 4SR data transmission to STA. - Recommendation: OFC data compilers to start disseminating the new OFC data, including submission of the 4SR to STA on a quarterly basis, with a time-lag of no more than four months after the reference quarter. - Note: Before the agreed September 2019 deadline for the reporting of the 4SR to STA, a sample 4SR metadata will be provided to the OFC team for reference. ### Coverage issues for the OFC survey: holding and investment companies - Holding and investment companies constitute over 19 percent of OFC assets in the Philippines and are supervised by the SEC. - The SEC collects data on the top 1000 corporations, out of more than 16,000 SEC-supervised corporations, which include OFCs. - BSP receives annual and quarterly data from holding and investment companies via the standard structured template designed by the OFCS Team. - BSP compilers have difficulty identifying the largest holding and investment companies among the top 1000 because the SEC shared total revenue but the preferred MFS metric is total financial assets, or total assets if financial assets are not available. - During the 2018 mission the SEC agreed to provide, out of the top 1000, the list of companies by activity, contact information and total assets; following this agreement the SEC provided: - the list of financial intermediaries included in the 2015 and 2016 top 1000 corporations, with total assets and contact information; and - a supplemental listing of selected corporations consisting of 12 investment houses, 12 underwriters, 20 brokers/dealers, 10 government securities eligible dealers, 10 mutual fund distributors, and 11 investment company advisers. - Most of the supplemental listed entities are subsidiaries/affiliates of banks and are already covered by nonbanks with quasi banking functions. - The SEC was not able to provide a complete list of holding companies by total assets. - BSP compilers were questioned by some corporations about the authority of the BSP to request data; in February 2019, the BSP Charter was amended via Republic Act 11211 (An Act Amending Republic Act Number 7653, otherwise known as “The New Central Bank Act”) to provide the BSP with authority to obtain information for statistical and policy development purposes from any person or entity, including individuals and private corporations. - The new BSP authority has yet to be used to improve data reporting by SEC-supervised corporations. Recommendations (Holding and Investment Companies) - (1) SEC to provide a complete list of holding companies by total assets. - (2) OFC data compilers to focus on identifying and compiling data from the latest publication of the top 1000 corporations supervised by the SEC to increase the sample survey. - The SEC provided info based on 2015 and 2016 Top 1000 corporations. The SEC should furnish the same listing based on a more recent year reference. - (3) BSP to use the new authority to collect data from any person or entity to improve data reporting by SEC supervised corporations. ### Coverage issues for the OFC survey: private pension funds - Private pension funds are not regulated in the Philippines and may be organized as special purpose trust funds, but no regulator is currently collecting data on them. - The new BSP authority to collect data from any person or entity could be used to collect data directly from the biggest private pension funds. - These funds may hold significant amounts of domestic public sector debt; government debt statistics on domestic securities show total outstanding debt securities significantly higher than holdings of debt securities reported by the financial sector, leaving the possibility of significant holdings by households, NFCs, or private pension funds. - The mission considers that private pension funds may be the largest holders of government debt securities among these residual sectors. - Recommendation: BSP to identify a regulatory agency or unit within the institution to make an inventory of private pension funds and start collecting data (on the largest ones, at least) relevant for the compilation of the 4SR. - Short-term option noted by the authorities: BSP may conduct a survey of large corporations to identify existing private pension funds, either in-house or subsidiary, using its authority to collect data from private companies. Long-term: raise the issue at the proper forum to identify an appropriate regulatory body to supervise and regulate private pension funds. - The alternative organization of pension funds: when pension funds are kept in the balance sheet of the employer, there may be no identifiable institutional unit (i.e., no financial intermediary in the form of a pension fund to be included in the coverage of the OFC survey). ### Integrated Monetary Database (IMD) and analysis of OFCs - Since June 2010, the BSP, STA, and APD have shared an IMD that meets publication and operational needs; the current IMD contains the SRFs for the central bank and ODCs and corresponding surveys, with data for December 2001 onward for the central bank and ODCs. - The IMD was upgraded during the mission to include newly available OFC data; with inclusion of the 4SR starting in the first quarter of 2017, the IMD is now complete and contains data from three financial subsectors: CB, ODCs, and OFCs. - From these data the IMD generates surveys for: CB (1SG), ODCs (2SG), depository corporations (3SG), OFCs (4SG), and financial corporations (FCs) (5SG). The FCs survey consolidates all financial subsectors into one single survey. - The OFC sector is diverse; the mission encouraged OFC compilers to analyze OFCs by type of institution in national publications and to disseminate separate data on main types of OFCs (e.g., trusts, insurance companies, NMMFs). - Key statistics cited: - OFC assets of 7.6 trillion represent around 42 percent of banks assets of 12 trillion in 2018. - 37 percent of the OFCs are financial trusts funded by owners’ own funds. - Implication: adding OFC assets into an FC survey covering all financial intermediaries will be very significant and the capital structure of the consolidated FC survey will differ substantially from the ODCs due to trusts and owner-funded entities. - Recommendation: The BSP prepare new tables for internal analysis comparing the ODC and OFC sub-sectors, consolidating all financial sectors into an FC survey, and disseminating separate data on the main types of OFCs. ### Balance Sheet Approach (BSA): data, compilation, and recommendations - Full coverage of MFS and availability of quarterly IIP enable BSA analysis on a from-whom-to-whom basis; quarterly BSA matrices can shed light on financing and investment behaviors of nonfinancial sectors and help assess vulnerabilities (maturity, currency, and capital structure mismatches). - The FOF unit compiles comprehensive annual FOF data with a time lag of 12 to 15 months after the end of the reference year (e.g., the FOF data for 2018 will be available around February 2020). - The 2018 mission considered the FOF unit best suited to compile a simplified quarterly BSA matrix, acknowledging limited reconciliation with the annual FOF and potential gaps in maturity, currency, and equity/debt breakdowns. - Seminar key messages and outcomes: - (1) international interest since the 1990s in intersectoral positions data in addition to flow-of-funds data; - (2) need for more frequent (quarterly vs annual) and timely data for macro-financial stability analysis; - (3) focus on a from-whom-to-whom approach to identify creditor and debtor sectors and financial dependence. - More than 25 BSP staff attended the seminar, improving cross-team discussion among FOF, MFS, and ESS compilers and helping resolve inconsistencies among datasets. - Instrument-by-instrument approach: - Compiling a BSA matrix for each financial instrument ensures horizontal consistency: for each instrument, assets by all holding sectors equal liabilities by issuing sectors. - Prioritization of source data in the BSA compiled by STA is generally: (1) 1SR; (2) 2SR; (3) 4SR; (4) IIP; and (5) general government statistics (GFS). - FOF compilers identified cases where prioritization was changed, for example prioritizing IIP over 2SR or 4SR for particular instruments when IIP counterparty information is better (e.g., for debt security liabilities where 2SR records all offshore issuances as held by non-residents but IIP adjusts to remove offshore issuances held by residents). - Such instances should be transitory; 2SR should be corrected using improved ODC data because adjustments using quarterly IIP are impractical. - Methodological consistency: - FOF compilers addressed inconsistencies between MFSMCG and BPM6 methodologies (e.g., treatment of IMF accounts denominated in domestic currency and definitions of ODCs/deposit-taking corporations). - In such cases, FOF compilers used BPM6 methodology for consistency with SNA 2008 and the BSP’s FOF system; exclusion of MMFs from the 2SR and inclusion of offshore banks are needed for BSA compilation. Data on MMFs and offshore banks should be separately identified. - Use of fiscal data: - Available fiscal reports referenced for BSA work include: (1) Quarterly Outstanding General Government Debt (no breakdown per instrument); (2) Monthly National Government Outstanding Debt; (3) Quarterly Outstanding Public Sector Debt (no instrument breakdown and last available data is as of September 2015); (4) Annual balance sheets of the national government, local government units and social security funds from the Commission on Audit. - The 2012-17 annual Statement of Government Operations (SGGO) was published by the DOF on 24 May 2019; the FOF team will request the detailed SGGO for potential use in the BSA. - Recommendation: The FOF team to compile the BSA matrix on a quarterly basis, sharing the results with the IMF’s Asian Pacific Department at least annually, as input for the yearly Article IV consultation report. ### Seminar on securities statistics, G-20 DGI, and SDDS Plus; financial derivatives and crypto-assets - Seminar structure: - Three lectures delivered at BSP request. - Attendees included BSP staff and representatives from other agencies: the SEC, the Bureau of Treasury, and the Philippine Dealing System Holdings Corporations. - Lecture 1 — Securities statistics: - Based on the HSS of 2015; mission suggestion: use the HSS as reference for compiling securities statistics. - Lecture 2 — G-20 Data Gaps Initiative (DGI): - Overview focusing on recommendation 7; discussed the DGI-2 reporting templates and highlighted Table 3.1 as the reporting template selected to meet SDDS Plus requirements. - Lecture 3 — IMF data dissemination standards including SDDS Plus: - Presented overview of SDDS, GDDS, SDDS Plus and E-GDDS. - As of April 2019, only 18 countries have adhered to SDDS Plus. - Mission view: after disseminating the new 4SR and corresponding OFC survey, and developing a work plan to improve securities statistics, the Philippines is a strong candidate to adhere to SDDS Plus. - Financial derivatives: - Core guidance: flow data (transactions and other flows, in particular revaluations) cannot be estimated as the difference between stock positions; doing so greatly underestimates the volume of transactions and holding gains and losses. - Mission provided guidelines to improve recording of these transactions in ESS and FOF. - Crypto-assets: - Mission delivered a lecture based on the latest methodology released by STA. - Context: The Philippines may become an important market for crypto-assets; the BSP recently authorized operations for three more virtual currency exchanges (VCE), bringing the total number of approved VCE to 10. - Mission encouragement: BSP to start exploring the possibility of collecting data on these exchanges for macroeconomic analysis, in particular international financial flows using crypto-assets. - Mission suggestion for data collection: - Request aggregated data, on a quarterly basis, on gross transactions, indicating the country of origin and destination of the funds transacted. - Break down the parties involved in the transactions between individuals, financial corporations, and nonfinancial corporations. ### Action plan — prioritized milestones (selected) - Outcome Indicator: The financial instruments classification, sectorization, and coverage of monetary statistics fully complies with the MFSMCG methodology. - H: CB data compilers to eliminate intra-sector positions in the 1SR. - Verifiable indicator: Intra-sector positions are eliminated in the 1SR. - Target Completion Date: June 2019. - H: ODC data compilers to include the money market UITFs in the institutional coverage of ODCs going back for at least five years of monthly data. - Verifiable indicator: Money market UITFs are included in the coverage of the 2SR. - Target Completion Date: September 2019. - H (Benchmark): ODC and OFC data compilers to implement the recommended classifications in the 2SR and 4SR using Appendix III of this report. - Verifiable indicator: 2SR and 4SR are updated with the new classifications. - Target Completion Date: September 2019. - H (Benchmark): OFC data compilers to start disseminating the new data, including submission of the 4SR to STA on a quarterly basis, with a time-lag of no more than four months after the reference quarter. - Verifiable indicator: OFC survey data published in International Financial Statistics. - Target Completion Date: September 2019. - H (1) SEC to provide a complete list of holding companies by total assets; (2) OFC data compilers to focus on identifying and compiling data from the latest publication12 of the top 1000 corporations supervised by the SEC to increase the sample survey; (3) BSP to use the new authority to collect data from any person or entity to improve data reporting by SEC supervised corporations. - Verifiable indicator: A complete list of holding companies by total assets is provided by SEC. - Target Completion Date: December 2019. - M: BSP to identify a regulatory agency or unit within the institution to make an inventory of private pension funds and start collecting data (on the largest ones, at least) useful for the compilation of the 4SR. - Verifiable indicator: A regulatory agency or unit for private pension funds is identified. - Target Completion Date: August 2019. - M: The BSP prepare new tables for internal analysis comparing the ODC and OFC sector, consolidating all financial sectors into an FC survey, and disseminating separate data on the main types of OFCs. - Verifiable indicator: New tables on OFCs are prepared. - Target Completion Date: December 2019. - Outcome Indicator: New standardized report form for the other financial corporations (4SR) has been used to generate the BSA matrix. - H: The FOF team to compile the BSA matrix on a quarterly basis, sharing the results with the IMF’s Asian Pacific Department at least annually, as input for the yearly Article IV consultation report. - Verifiable indicator: BSA matrix shared with APD quarterly, with five months timeliness. - Target Completion Date: October 2019. - Outcome Indicator: Training securities statistics, G-20 data gap, and SDDS Plus provided. - M: FOF team to continue discussing reporting requirements with the data providing agencies, using the G-20 templates and the SDDS Plus from-whom-to-whom table as reference, and agree on a work plan to improve securities statistics. - Verifiable indicator: A work plan agreed with data providing agencies is defined. - Target Completion Date: December 2019. ### Implementation status highlights (as of April 2019) - Outcome 1: Coverage and scope per latest manual/guide (DQAF 2.2) - H: BSP includes the money market UITFs in the institutional coverage of ODCs. - Verifiable indicator: Money market UITFs are included in the 2SR. - Implementation status (April 2019): SRF for MMF partially completed. - H (trusts): (1) Compile and disseminate data on trusts quarterly, with no more than three-months’ time lag; (2) Classify non-money market UITFs as NMMFs and institutional and individual accounts trusts as captive financial institutions under the OFCs subsector; and (3) Ensure consistent classification across macroeconomic compilers. - Verifiable indicator: Quarterly data on trust based on the updated structured templates included in the 4SR. - Implementation status (April 2019): Completed. - H (insurance): BSP compiles data on insurance companies quarterly and includes them in the OFC survey. - Verifiable indicator: Quarterly data on insurance companies based on the updated structured templates included in the 4SR. - Implementation status (April 2019): Completed. - M (SEC top 1000): BSP compilers focus on identifying OFCs from the top 1000 corporations supervised by the SEC and collecting data before increasing the sample. - Verifiable indicator: Data on SEC-supervised largest companies based on the updated structured templates included in the 4SR. - Implementation status (April 2019): Partially Completed. Size of corporations still based on total revenues rather than total assets. - H: Continue compiling quarterly data on the Home Development Mutual Fund to be included in the OFC survey and include timely-reported Government Commission for Government-Owned or Controlled Corporations supervised institutions. - Verifiable indicator: Quarterly data on the Home Development Mutual Fund based on the updated structured templates included in the 4SR. - Implementation status (April 2019): Completed. - Outcome 2: Improved timeliness (DQAF 4.1.2) - H: BSP reduces significant lag in availability of the SRF for the central bank (1SR) to one month after the reference period for August to November releases, and two months for January to July releases; end-year preliminary data released in February of the following year. - Verifiable indicator: Data on the central bank (1SR) submitted to STA within one month after the reference period for August to November data and within two months for January to July data. - Implementation status (Benchmark, April 2019): - Aug 2018-Dec 2018 data: – Completed (submitted within one month after reference period). - Jan to Feb 2019 data was completed as of 30 April 2019 and the March to April 2019 data was completed as of 30 May 2019. - Outcome 3: Staff capacity increased through training (DQAF 0.2) - H: FOF team to take the lead in compilation of a summarized BSA matrix on a quarterly basis; a test could use year end 2016 data. - Verifiable indicator: The summarized BSA matrix is produced and used internally. - Implementation status (April 2019): On-going annual compilation based on 2015-2017 data. Reconciliation issues to be raised in the TA on 29 April – 3 May 2019. - M: BSP prepares new analytical tables for internal analysis comparing ODC and OFC sector, consolidating financial sectors into an FC survey, and disseminating separate data on main types of OFCs. - Verifiable indicator: New tables on OFCs are available for internal BSP use. - Implementation status (April 2019): Completed. *Source: https://www.imf.org/-/media/files/publications/cr/2019/1phlea2019002.pdf* ### 1. Priority Recommendations _______________________________________________________________________6 ### 1. Priority Recommendations ### Summary of mission outcomes and objectives - IMF Statistics Department (STA) mission visited Manila during April 29–May 10, 2019. - Main objectives: - Expand coverage of the monetary and financial statistics (MFS) by including other financial corporations (OFCs). - Assist authorities in compilation of the balance sheet approach (BSA) framework using existing sectoral data (MFS, international investment position, and fiscal statistics). - Provide hands-on training to Bangko Sentral ng Pilipinas (BSP) staff on the BSA framework and securities statistics in the context of SDDS Plus and the G-20 data gaps initiative (DGI). - Review progress implementing past mission recommendations. - Mission activities: - Assisted BSP staff finalizing OFC coverage (insurance companies, financial trusts, holding companies, government financial institutions, non-money market investment funds (NMMFs), other financial intermediaries and auxiliaries). - Provided extensive training to MFS, external sector, and flow of funds (FOF) compilers. - Discussed central bank and other depository corporations (ODCs) surveys. ### Key findings and impacts - Inclusion of OFCs: - OFC assets: "more than 7.6 trillion pesos in total assets, a preliminary estimate", representing "around 25 percent of the total assets in the financial system". - Inclusion will improve the integrated monetary database (IMD) and support national publications and data releases to IMF APD and STA. - BSP agreed to start disseminating the new OFC data on a quarterly basis starting in September 2019, with historical series available since the first quarter of 2017. - IMD and SRFs: - IMD built on standardized report forms (SRFs): 1SR (central bank), 2SR (ODCs), 4SR (OFCs). - After constructing 1SR, 2SR, and 4SR, consolidation into a financial corporations (FC) survey provides a comprehensive framework for monetary statistics. - Money market UITFs: - Recommendation to include money market unit investment trust funds (UITFs) in the ODC survey to better measure broad money and other monetary aggregates. - Money market UITFs represent "around six percent of total bank assets". - BSP to include UITFs with historical series; mission suggested updating the historical series for the past five years to avoid further delays. - SEC data provision: - During April 2018 mission, Securities and Exchange Commission (SEC) agreed to provide list of companies by activity (top 1000) with contact information and total assets; SEC did not provide a complete list of financial intermediaries by total assets. - Recommendation: SEC to provide complete list of financial intermediaries by total assets; OFC compilers to collect identified financial intermediaries data from the latest top 1000 publication to increase sample coverage. - BSA capability: - With OFC compilation, the Philippines can produce intersectoral BSA matrices using MFS with full coverage, quarterly IIP, and public debt statistics. - Mission recommended BSP’s FOF team compile the BSA matrix on a quarterly basis and share results with IMF’s Asia Pacific Department at least annually for Article IV consultations. - Training topics delivered: - (1) BSA framework; (2) Handbook on Securities Statistics (HSS); (3) SDDS Plus; (4) G-20 DGI; (5) recording of financial derivatives; (6) treatment of crypto-assets. - Sessions on securities statistics, G-20 data gaps, and SDDS Plus were attended by debt securities data providing agencies (e.g., SEC, Bureau of the Treasury, Philippine Dealing System Holdings Corporation). ### Priority recommendations and target dates (Table 1 summary) - September 2019: ODC data compilers to include the money market UITFs in the institutional coverage of ODCs going back to five years of monthly data. — Responsible: BSP - September 2019: OFC data compilers to start disseminating the new OFC survey, including submission of the 4SR to STA on a quarterly basis, with a time-lag of no more than four months after the reference quarter. — Responsible: BSP - October 2019: The FOF team to compile the BSA matrix on a quarterly basis, sharing the results with the IMF’s Asia Pacific Department at least annually, as input for the yearly Article IV consultation report. — Responsible: BSP *Further details on priority recommendations and related actions/milestones are in the action plan under Detailed Technical Assessment and Recommendations.* ### Background and context - Follow-up to April 2018 mission that focused on OFC survey compilation, SRF mapping (4SR), timeliness of central bank survey, and incorporation of money market UITFs into ODC survey. - Most 2018 mission recommendations were implemented over the past 12 months; Appendix II contains implementation status of 2018 recommendations. - BSP objectives (as requested in official letter from BSP Governor to STA Director), supported by APD: - Complete OFC survey compilation. - Receive BSA framework training and assistance compiling BSA matrices. - Receive securities statistics training for G-20 DGI and SDDS Plus adherence, for BSP staff and data providing agencies. ### Philippines’ financial system (MFS perspective) — end-2018 figures (preliminary) - Total assets: "30.2 trillion pesos" (about "185 percent of GDP") distributed as: - BSP: "4.85 trillion" (16 percent of total assets). - ODCs: "17.8 trillion" (59 percent of total assets). - OFCs: "7.6 trillion" (25 percent of total assets). ### Detailed technical assessment and recommendations — Central Bank and ODCs - Central bank sectoral balance sheet (1SR): - Issue: 1SR contained intra-sector accounts that should be eliminated (assets of the BSP to itself and matching liabilities), for example deposits to a branch/unit that should be eliminated in consolidated BSP balance sheet. - These intra-sector positions arise from funds set aside to monitor activities between BSP headquarters and BSP departments/regional branches (asset account "due from administrator of fund account" and liability "deposit liability for a specific fund account"). - Recommendation: Central Bank (CB) data compilers to eliminate intra-sector positions in the 1SR. - Incorporation of money market UITFs into ODC survey: - MFSMCG recommends inclusion of money market UITFs in ODC institutional coverage; money market UITFs are a type of money market fund (MMF). - Status: BSP compilers have incorporated money market UITFs into compilation system, but updated 2SR including historical series is still pending. - Mission suggestion: revise last five years as a short-term objective and update 2SR promptly. - Recommendation: ODC data compilers to include the money market UITFs in the institutional coverage of ODCs going back to at least five years of monthly data. - Compilation issues in 2SR: - Financial reporting package is the source for 2SR; FOF compilers identified classification issues when compiling BSA by instrument. - Recommendation: ODC data compilers to implement recommended classifications in the 2SR, using Appendix III of the report. ### Detailed technical assessment and recommendations — Other Financial Corporations (OFC) survey - OFC significance: - OFC assets: "7.6 trillion pesos in December 2018", representing "around 43 percent of total ODC sector (17.8 trillion pesos)". - OFC compilation will significantly aid macroeconomic and financial stability analysis and support SDDS Plus adherence. - 4SR compilation status: - Compilation of OFC data using 4SR completed during mission; sectoral balance sheet of OFC sector is ready to generate OFC survey and FC survey (consolidating CB, ODCs, and OFCs). - 4SR availability: - Quarterly data starting Q1 2017. - Annual data starting in 2012 available but of less quality; improvements concentrated in 2017 and 2018. - Recommendation: use annual data starting 2012 only for internal aggregated analysis and flag breaks due to different data sources and reduced coverage; annual data for 2012–16 not reliable for dissemination outside BSP. - Methodological issues reviewed and guidance provided: - Classification of certain financial intermediaries as financial auxiliaries — affects sub-category breakdowns to be analyzed and disseminated separately. - Treatment of insurance, pension and standardized guarantee schemes per MFSMCG subcategories. - Prepayment of insurance premiums should not be included in trade credit (per MFSMCG paragraph 4.192). - Instrument classification of promissory notes: instrument under review issued by households are not promissory notes as defined in MFSMCG. - Security funds placed with the Insurance Commission should be reclassified from trade credit to other deposits with OFCs (similar treatment as bank deposits under deposit insurance regulation). - Deposits for stock subscription should be reclassified from other accounts payable to equity. - Remaining coverage issues: - 4SR ready except for "two pending coverage issues" referenced in paragraphs 29–38 (text beyond provided excerpt). *Source: https://www.imf.org/-/media/files/publications/cr/2019/1phlea2019002.pdf* ### 27. The mission mapped the new 4SR (based on the MFSMCG) into the 4SR currently ### 1phlea2019002 - 27. The mission mapped the new 4SR (based on the MFSMCG) into the 4SR currently ### Mapping, reporting, and immediate recommendation - The mission mapped the new 4SR (based on the MFSMCG) into the 4SR currently used for reporting to STA to enable reporting of the new OFC data and to convert 4SR data to the old format used for CB (1SR) and ODCs (2SR). - A conversion file was left with the authorities for 4SR data transmission to STA. - Recommendation: OFC data compilers to start disseminating the new OFC data, including submission of the 4SR to STA on a quarterly basis, with a time-lag of no more than four months after the reference quarter. - Note: Before the agreed September 2019 deadline for the reporting of the 4SR to STA, a sample 4SR metadata will be provided to the OFC team for reference. ### Coverage issues for the OFC survey: holding and investment companies - Holding and investment companies constitute over 19 percent of OFC assets in the Philippines and are supervised by the SEC. - The SEC collects data on the top 1000 corporations, out of more than 16,000 SEC-supervised corporations, which include OFCs. - BSP receives annual and quarterly data from holding and investment companies via the standard structured template designed by the OFCS Team. - BSP compilers have difficulty identifying the largest holding and investment companies among the top 1000 because the SEC shared total revenue but the preferred MFS metric is total financial assets, or total assets if financial assets are not available. - During the 2018 mission the SEC agreed to provide, out of the top 1000, the list of companies by activity, contact information and total assets; following this agreement the SEC provided: - the list of financial intermediaries included in the 2015 and 2016 top 1000 corporations, with total assets and contact information; and - a supplemental listing of selected corporations consisting of 12 investment houses, 12 underwriters, 20 brokers/dealers, 10 government securities eligible dealers, 10 mutual fund distributors, and 11 investment company advisers. - Most of the supplemental listed entities are subsidiaries/affiliates of banks and are already covered by nonbanks with quasi banking functions. - The SEC was not able to provide a complete list of holding companies by total assets. - BSP compilers were questioned by some corporations about the authority of the BSP to request data; in February 2019, the BSP Charter was amended via Republic Act 11211 (An Act Amending Republic Act Number 7653, otherwise known as “The New Central Bank Act”) to provide the BSP with authority to obtain information for statistical and policy development purposes from any person or entity, including individuals and private corporations. - The new BSP authority has yet to be used to improve data reporting by SEC-supervised corporations. Recommendations (Holding and Investment Companies) - (1) SEC to provide a complete list of holding companies by total assets. - (2) OFC data compilers to focus on identifying and compiling data from the latest publication of the top 1000 corporations supervised by the SEC to increase the sample survey. - The SEC provided info based on 2015 and 2016 Top 1000 corporations. The SEC should furnish the same listing based on a more recent year reference. - (3) BSP to use the new authority to collect data from any person or entity to improve data reporting by SEC supervised corporations. ### Coverage issues for the OFC survey: private pension funds - Private pension funds are not regulated in the Philippines and may be organized as special purpose trust funds, but no regulator is currently collecting data on them. - The new BSP authority to collect data from any person or entity could be used to collect data directly from the biggest private pension funds. - These funds may hold significant amounts of domestic public sector debt; government debt statistics on domestic securities show total outstanding debt securities significantly higher than holdings of debt securities reported by the financial sector, leaving the possibility of significant holdings by households, NFCs, or private pension funds. - The mission considers that private pension funds may be the largest holders of government debt securities among these residual sectors. - Recommendation: BSP to identify a regulatory agency or unit within the institution to make an inventory of private pension funds and start collecting data (on the largest ones, at least) relevant for the compilation of the 4SR. - Short-term option noted by the authorities: BSP may conduct a survey of large corporations to identify existing private pension funds, either in-house or subsidiary, using its authority to collect data from private companies. Long-term: raise the issue at the proper forum to identify an appropriate regulatory body to supervise and regulate private pension funds. - The alternative organization of pension funds: when pension funds are kept in the balance sheet of the employer, there may be no identifiable institutional unit (i.e., no financial intermediary in the form of a pension fund to be included in the coverage of the OFC survey). ### Integrated Monetary Database (IMD) and analysis of OFCs - Since June 2010, the BSP, STA, and APD have shared an IMD that meets publication and operational needs; the current IMD contains the SRFs for the central bank and ODCs and corresponding surveys, with data for December 2001 onward for the central bank and ODCs. - The IMD was upgraded during the mission to include newly available OFC data; with inclusion of the 4SR starting in the first quarter of 2017, the IMD is now complete and contains data from three financial subsectors: CB, ODCs, and OFCs. - From these data the IMD generates surveys for: CB (1SG), ODCs (2SG), depository corporations (3SG), OFCs (4SG), and financial corporations (FCs) (5SG). The FCs survey consolidates all financial subsectors into one single survey. - The OFC sector is diverse; the mission encouraged OFC compilers to analyze OFCs by type of institution in national publications and to disseminate separate data on main types of OFCs (e.g., trusts, insurance companies, NMMFs). - Key statistics cited: - OFC assets of 7.6 trillion represent around 42 percent of banks assets of 12 trillion in 2018. - 37 percent of the OFCs are financial trusts funded by owners’ own funds. - Implication: adding OFC assets into an FC survey covering all financial intermediaries will be very significant and the capital structure of the consolidated FC survey will differ substantially from the ODCs due to trusts and owner-funded entities. - Recommendation: The BSP prepare new tables for internal analysis comparing the ODC and OFC sub-sectors, consolidating all financial sectors into an FC survey, and disseminating separate data on the main types of OFCs. ### Balance Sheet Approach (BSA): data, compilation, and recommendations - The full coverage of MFS and availability of quarterly IIP enable BSA analysis on a from-whom-to-whom basis; quarterly BSA matrices can shed light on financing and investment behaviors of nonfinancial sectors and help assess vulnerabilities (maturity, currency, and capital structure mismatches). - The FOF unit compiles comprehensive annual FOF data with a time lag of 12 to 15 months after the end of the reference year (e.g., the FOF data for 2018 will be available around February 2020). - The 2018 mission considered the FOF unit best suited to compile a simplified quarterly BSA matrix, acknowledging limited reconciliation with the annual FOF and potential gaps in maturity, currency, and equity/debt breakdowns. - BSA seminar and compilation outcomes: - Seminar key messages: (1) international interest since the 1990s in intersectoral positions data in addition to flow-of-funds data; (2) need for more frequent (quarterly vs annual) and timely data for macro-financial stability analysis; (3) focus on a from-whom-to-whom approach to identify creditor and debtor sectors and financial dependence. - More than 25 BSP staff attended the seminar, improving cross-team discussion among FOF, MFS, and ESS compilers and helping resolve inconsistencies among datasets. - Instrument-by-instrument approach: - Compiling a BSA matrix for each financial instrument ensures horizontal consistency: for each instrument, assets by all holding sectors equal liabilities by issuing sectors. - Prioritization of source data in the BSA compiled by STA is generally: (1) 1SR; (2) 2SR; (3) 4SR; (4) IIP; and (5) general government statistics (GFS). - FOF compilers identified cases where prioritization was changed, for example prioritizing IIP over 2SR or 4SR for particular instruments when IIP counterparty information is better (e.g., for debt security liabilities where 2SR records all offshore issuances as held by non-residents but IIP adjusts to remove offshore issuances held by residents). - Such instances should be transitory; 2SR should be corrected using improved ODC data because adjustments using quarterly IIP are impractical. - Methodological consistency: - FOF compilers addressed inconsistencies between MFSMCG and BPM6 methodologies (e.g., treatment of IMF accounts denominated in domestic currency and definitions of ODCs/deposit-taking corporations). - In such cases, FOF compilers used BPM6 methodology for consistency with SNA 2008 and the BSP’s FOF system; exclusion of MMFs from the 2SR and inclusion of offshore banks are needed for BSA compilation. Data on MMFs and offshore banks should be separately identified. - Use of fiscal data: - Available fiscal reports referenced for BSA work include: (1) Quarterly Outstanding General Government Debt (no breakdown per instrument); (2) Monthly National Government Outstanding Debt; (3) Quarterly Outstanding Public Sector Debt (no instrument breakdown and last available data is as of September 2015); (4) Annual balance sheets of the national government, local government units and social security funds from the Commission on Audit. - The 2012-17 annual Statement of Government Operations (SGGO) was published by the DOF on 24 May 2019; the FOF team will request the detailed SGGO for potential use in the BSA. - Recommendation: The FOF team to compile the BSA matrix on a quarterly basis, sharing the results with the IMF’s Asian Pacific Department at least annually, as input for the yearly Article IV consultation report. *Source: 1phlea2019002 — Excerpt provided.* ### 55. At BSP request, the mission delivered a seminar comprising three lectures on ### 1phlea2019002 - 55. At BSP request, the mission delivered a seminar comprising three lectures on ### Seminar on securities statistics, G-20 DGI, and SDDS Plus - Seminar structure: - Three lectures delivered at BSP request. - Attendees included a large group of BSP staff and representatives from other agencies: the SEC, the Bureau of Treasury, and the Philippine Dealing System Holdings Corporations (identified as potential source data for BSP securities statistics compilation). - Lecture 1 — Securities statistics: - Based on the HSS of 2015. - Explained main concepts and definitions of the HSS. - Noted that the HSS was drafted by the IMF, the Bank for International Settlements, and the European Central Bank and is considered an internationally agreed methodological framework for developing securities statistics. - Mission suggestion: use the HSS as reference for compiling securities statistics. - Lecture 2 — G-20 Data Gaps Initiative (DGI): - Provided an overview focusing on recommendation 7. - Discussed the DGI-2 reporting templates as a model for non-G-20 economies to improve securities statistics. - Highlighted Table 3.1 as the reporting template selected to meet SDDS Plus requirements. - Appendix IV of the source presents all G-20 reporting templates, including Table 3.1. - Lecture 3 — IMF data dissemination standards including SDDS Plus: - Presented an overview of original IMF data dissemination standards (SDDS and GDDS) and the new ones (SDDS Plus and E-GDDS). - As of April 2019, only 18 countries have adhered to SDDS Plus. - Mission view: after disseminating the new 4SR and corresponding OFC survey, and developing a work plan to improve securities statistics, the Philippines is a strong candidate to adhere to SDDS Plus. - Recommendation (seminar follow-up): - FOF team to continue discussing reporting requirements with the data providing agencies, using the G-20 templates and the SDDS Plus from-whom-to-whom table as reference, and agree on a work plan to improve securities statistics. ### Financial derivatives and crypto-assets (treatment and data collection) - Financial derivatives: - Mission explained treatment in macroeconomic statistics with emphasis on correct compilation of flow data. - Core guidance: flow data (transactions and other flows, in particular revaluations) cannot be estimated as the difference between stock positions. - Rationale: Estimating flows by difference of stock positions greatly underestimates the volume of transactions and holding gains and losses (recorded in the revaluation account) that financial derivative operations generate. - Mission provided guidelines to improve recording of these transactions in ESS and FOF. - Crypto-assets: - Mission delivered a lecture based on the latest methodology released by STA. - Context: The Philippines may become an important market for crypto-assets; the BSP recently authorized operations for three more virtual currency exchanges (VCE), bringing the total number of approved VCE to 10. - Mission encouragement: BSP to start exploring the possibility of collecting data on these exchanges for macroeconomic analysis, in particular international financial flows using crypto-assets. - Mission suggestion for data collection: - Request aggregated data, on a quarterly basis, on gross transactions, indicating the country of origin and destination of the funds transacted. - Break down the parties involved in the transactions between individuals, financial corporations, and nonfinancial corporations. ### Action Plan — prioritized recommendations and milestones (selected items) - Outcome Indicator: The financial instruments classification, sectorization, and coverage of monetary statistics fully complies with the MFSMCG methodology. - H: CB data compilers to eliminate intra-sector positions in the 1SR. - Verifiable indicator: Intra-sector positions are eliminated in the 1SR. - Target Completion Date: June 2019. - H: ODC data compilers to include the money market UITFs in the institutional coverage of ODCs going back for at least five years of monthly data. - Verifiable indicator: Money market UITFs are included in the coverage of the 2SR. - Target Completion Date: September 2019. - H (Benchmark): ODC and OFC data compilers to implement the recommended classifications in the 2SR and 4SR using Appendix III of this report. - Verifiable indicator: 2SR and 4SR are updated with the new classifications. - Target Completion Date: September 2019. - H (Benchmark): OFC data compilers to start disseminating the new data, including submission of the 4SR to STA on a quarterly basis, with a time-lag of no more than four months after the reference quarter. - Verifiable indicator: OFC survey data published in International Financial Statistics. - Target Completion Date: September 2019. - H (1) SEC to provide a complete list of holding companies by total assets; (2) OFC data compilers to focus on identifying and compiling data from the latest publication12 of the top 1000 corporations supervised by the SEC to increase the sample survey; (3) BSP to use the new authority to collect data from any person or entity to improve data reporting by SEC supervised corporations. - Verifiable indicator: A complete list of holding companies by total assets is provided by SEC. - Target Completion Date: December 2019. - M: BSP to identify a regulatory agency or unit within the institution to make an inventory of private pension funds and start collecting data (on the largest ones, at least) useful for the compilation of the 4SR. - Verifiable indicator: A regulatory agency or unit for private pension funds is identified. - Target Completion Date: August 2019. - M: The BSP prepare new tables for internal analysis comparing the ODC and OFC sector, consolidating all financial sectors into an FC survey, and disseminating separate data on the main types of OFCs. - Verifiable indicator: New tables on OFCs are prepared. - Target Completion Date: December 2019. - Outcome Indicator: New standardized report form for the other financial corporations (4SR) has been used to generate the BSA matrix. - H: The FOF team to compile the BSA matrix on a quarterly basis, sharing the results with the IMF’s Asian Pacific Department at least annually, as input for the yearly Article IV consultation report. - Verifiable indicator: BSA matrix shared with APD quarterly, with five months timeliness. - Target Completion Date: October 2019. - Outcome Indicator: Training securities statistics, G-20 data gap, and SDDS Plus provided. - M: FOF team to continue discussing reporting requirements with the data providing agencies, using the G-20 templates and the SDDS Plus from-whom-to-whom table as reference, and agree on a work plan to improve securities statistics. - Verifiable indicator: A work plan agreed with data providing agencies is defined. - Target Completion Date: December 2019. ### Implementation status highlights (as of April 2019) - Outcome 1: Coverage and scope per latest manual/guide (DQAF 2.2) - H: BSP includes the money market UITFs in the institutional coverage of ODCs. - Verifiable indicator: Money market UITFs are included in the 2SR. - Implementation status (April 2019): SRF for MMF partially completed. - H (trusts): (1) Compile and disseminate data on trusts quarterly, with no more than three-months’ time lag; (2) Classify non-money market UITFs as NMMFs and institutional and individual accounts trusts as captive financial institutions under the OFCs subsector; and (3) Ensure consistent classification across macroeconomic compilers. - Verifiable indicator: Quarterly data on trust based on the updated structured templates included in the 4SR. - Implementation status (April 2019): Completed. - H (insurance): BSP compiles data on insurance companies quarterly and includes them in the OFC survey. - Verifiable indicator: Quarterly data on insurance companies based on the updated structured templates included in the 4SR. - Implementation status (April 2019): Completed. - M (SEC top 1000): BSP compilers focus on identifying OFCs from the top 1000 corporations supervised by the SEC and collecting data before increasing the sample. - Verifiable indicator: Data on SEC-supervised largest companies based on the updated structured templates included in the 4SR. - Implementation status (April 2019): Partially Completed. Size of corporations still based on total revenues rather than total assets. - H: Continue compiling quarterly data on the Home Development Mutual Fund to be included in the OFC survey and include timely-reported Government Commission for Government-Owned or Controlled Corporations supervised institutions. - Verifiable indicator: Quarterly data on the Home Development Mutual Fund based on the updated structured templates included in the 4SR. - Implementation status (April 2019): Completed. - Outcome 2: Improved timeliness (DQAF 4.1.2) - H: BSP reduces significant lag in availability of the SRF for the central bank (1SR) to one month after the reference period for August to November releases, and two months for January to July releases; end-year preliminary data released in February of the following year. - Verifiable indicator: Data on the central bank (1SR) submitted to STA within one month after the reference period for August to November data and within two months for January to July data. - Implementation status (Benchmark, April 2019): - Aug 2018-Dec 2018 data: – Completed (submitted within one month after reference period). - Jan to Feb 2019 data was completed as of 30 April 2019 and the March to April 2019 data was completed as of 30 May 2019. - Outcome 3: Staff capacity increased through training (DQAF 0.2) - H: FOF team to take the lead in compilation of a summarized BSA matrix on a quarterly basis; a test could use year end 2016 data. - Verifiable indicator: The summarized BSA matrix is produced and used internally. - Implementation status (April 2019): On-going annual compilation based on 2015-2017 data. Reconciliation issues to be raised in the TA on 29 April – 3 May 2019. - M: BSP prepares new analytical tables for internal analysis comparing ODC and OFC sector, consolidating financial sectors into an FC survey, and disseminating separate data on main types of OFCs. - Verifiable indicator: New tables on OFCs are available for internal BSP use. - Implementation status (April 2019): Completed. *Source: IMF technical mission report content (selected sections).* --- _Source: https://www.imf.org/-/media/files/publications/cr/2019/1phlea2019002.pdf_