european union balance of payments/ international investment

��

��

��

EUROPEAN UNIONBALANCE OF PAYMENTS/

INTERNATIONALINVESTMENT POSITIONSTATISTICAL METHODS

November 2000

© European Central Bank, 2000

Address Kaiserstrasse 29

D-60311 Frankfurt am Main

Germany

Postal address Postfach 16 03 19

D-60066 Frankfurt am Main

Germany

Telephone +49 69 1344 0

Internet http://www.ecb.int

Fax +49 69 1344 6000

Telex 411 144 ecb d

All rights reserved.

Reproduction for educational and non-commercial purposes is permitted provided that the source is acknowledged.

ISSN 1562-5036

ECB EU Balance of payments statistical methods � November 2000 3

Contents

List of abbreviations andacronyms ....................................... 7

1 FOREWORD ........................... 9

2 Compilation of euro areabalance of payments andinternational investmentposition statistics .................. 10

2.1 The legal framework of euro areabalance of payments andinternational investment positionstatistics .......................................... 10

2.2 Shared responsibility betweenthe European Central Bank(Directorate General Statistics)and the European Commission(Eurostat) ........................................ 10

2.3 The ECB�s contribution tothe euro area aggregates ............... 10

2.4 Statistical reporting requirementsfor national compilers ................... 11

2.4.1 ECB data requirementsin balance of paymentsstatistics ......................................... 11

2.4.2 ECB data requirements ininternational investmentposition statistics ......................... 14

2.4.3 ECB data requirements forthe Eurosystem�s internationalreserves position ......................... 15

2.5 Methods of compiling theeuro area aggregates ..................... 15

3 Concepts, definitions andagreed practices of the euroarea balance of payments andinternational investmentposition statistics .................. 16

3.1 General principles of balance ofpayments and internationalinvestment position statistics ...... 17

3.1.1 Balance of paymentsstatistics ......................................... 17

3.1.2 International investmentposition statistics ......................... 17

3.1.3 Accounting principles fortransactions and stocks ............. 18

3.1.4 Euro area residency ................... 193.1.5 Classification principles for

balance of payments andinternational investmentposition statements ..................... 20

3.1.6 Sectorisation ................................. 21

3.2 Goods .............................................. 24

3.3 Services ........................................... 24

3.4 Income ............................................. 25

3.4.1 Definition and coverageof income ...................................... 25

3.4.2 Definition of compensationof employees ................................ 25

3.4.3 Definition of investmentincome ........................................... 25

3.4.4 Main types of investmentincome ........................................... 25

3.4.5 Specific issues relatedto direct investmentincome ........................................... 26

3.4.6 Specific issues relatedto portfolio investmentincome ........................................... 27

3.4.7 Specific issues relatedto other investmentincome ........................................... 31

3.5 Current transfers ........................... 32

4 ECB EU Balance of payments statistical methods � November 2000

3.6 Capital account .............................. 33

3.6.1 Capital transfers andsub-components .......................... 33

3.6.2 Acquisition/disposal ofnon-produced non-financialassets .............................................. 35

3.7 Direct investment .......................... 35

3.7.1 Definition and coverage ............ 353.7.2 Recording direct

investment ona directional basis ....................... 36

3.7.3 Special issues relatedto stocks ........................................ 37

3.8 Portfolio investment ...................... 37

3.8.1 Definition and coverage ............ 373.8.2 Geographical allocation principle

for change of ownership ............ 383.8.3 Specific types of debt

securities ....................................... 393.8.4 Borderline cases .......................... 393.8.5 Special issues related

to stocks ........................................ 40

3.9 Financial derivatives ...................... 41

3.9.1 Definition and coverage ............ 413.9.2 Futures ........................................... 423.9.3 Options .......................................... 443.9.4 Swaps, forwards and forward

rate agreements ........................... 46

3.10Other investment ........................... 48

3.10.1 Definition and coverage ............ 483.10.2 Repurchase agreements,

bond lending and otherrelated instruments ..................... 48

3.10.3 Balances from TARGEToperations ..................................... 50

3.10.4 Recording of MFIs�transactions in loansand deposits ................................. 50

3.10.5 Special issues relatedto stocks ........................................ 50

3.11Reserve assets ................................ 51

3.11.1 Definition of the Eurosystem�sreserve assets .............................. 51

3.11.2 Concept of gross reserves ........ 523.11.3 Valuation principles .................... 523.11.4 Specific issues related

to gold ............................................ 523.11.5 Specific issues related to

the positions vis-à-vis the IMF(including SDRs) .......................... 53

3.11.6 Specific issues related tosecurities ....................................... 53

3.11.7 Specific issues relatedto currency and deposits .......... 53

3.11.8 Specific issues related tofinancial derivatives .................... 54

4 Country-specific details ........ 57

4.1 Belgium/Luxembourg .................... 57

4.1.1 Organisation chart(s) ................. 584.1.2 Institutional aspects .................... 604.1.3 Statistical system.......................... 624.1.4 Monthly key items ....................... 664.1.5 Investment income ...................... 674.1.6 Capital account ........................... 694.1.7 Direct investment ....................... 694.1.8 Portfolio investment ................... 714.1.9 Financial derivatives ................... 724.1.10 Other investment ........................ 734.1.11 Reserve assets .............................. 744.1.12 International investment

position .......................................... 744.1.13 Administration ............................. 76

4.2 Denmark .......................................... 77

4.2.1 Organisation chart(s) ................. 784.2.2 Institutional aspects .................... 804.2.3 Statistical system.......................... 814.2.4 Implementation ............................ 854.2.5 Investment income ...................... 864.2.6 Capital account ........................... 884.2.7 Direct investment ....................... 894.2.8 Portfolio investment ................... 894.2.9 Financial derivatives ................... 904.2.10 Other investment ........................ 914.2.11 Reserve assets .............................. 924.2.12 International investment

position .......................................... 924.2.13 Administration ............................. 93


4.3 Germany .......................................... 95

4.3.1 Organisation chart(s) ................. 964.3.2 Institutional aspects .................... 974.3.3 Statistical system.......................... 984.3.4 Monthly key items .................... 1024.3.5 Investment income ................... 1024.3.6 Capital account ........................ 1034.3.7 Direct investment .................... 1044.3.8 Portfolio investment ................ 1044.3.9 Financial derivatives ................ 1054.3.10 Other investment ..................... 1064.3.11 Reserve assets ........................... 1064.3.12 International investment

position ....................................... 1064.3.13 Administration .......................... 109

4.4 Greece ........................................... 111

4.4.1 Organisation chart(s) .............. 1124.4.2 Institutional aspects ................. 1134.4.3 Statistical system....................... 1144.4.4 Implementation ......................... 1164.4.5 Investment income ................... 1184.4.6 Capital account ........................ 1194.4.7 Direct investment .................... 1204.4.8 Portfolio investment ................ 1214.4.9 Financial derivatives ................ 1224.4.10 Other investment ..................... 1234.4.11 Reserve assets ........................... 1234.4.12 International investment


4.5 Spain .............................................. 127

4.5.1 Organisation chart(s) .............. 1284.5.2 Institutional aspects ................. 1294.5.3 Statistical system....................... 1304.5.4 Monthly key items .................... 1334.5.5 Investment income ................... 1344.5.6 Capital account ........................ 1364.5.7 Direct investment .................... 1364.5.8 Portfolio investment ................ 1374.5.9 Financial derivatives ................ 1384.5.10 Other investment ..................... 1394.5.11 Reserve assets ........................... 1404.5.12 International investment


4.6 France ............................................ 145

4.6.1 Organisation chart(s) .............. 146

4.6.2 Institutional aspects ................. 1474.6.3 Statistical system....................... 1474.6.4 Monthly key items .................... 1524.6.5 Investment income ................... 1554.6.6 Capital account ........................ 1574.6.7 Direct investment .................... 1584.6.8 Portfolio investment ................ 1594.6.9 Financial derivatives ................ 1614.6.10 Other investment ..................... 1614.6.11 Reserve assets ........................... 1624.6.12 International investment


4.7 Ireland............................................ 165



4.8 Italy ............................................... 189



4.9 The Netherlands .......................... 205

4.9.1 Organisation chart(s) .............. 2064.9.2 Institutional aspects ................. 2074.9.3 Statistical system....................... 2084.9.4 Monthly key items .................... 210


4.9.5 Investment income ................... 2114.9.6 Capital account ........................ 2114.9.7 Direct investment .................... 2124.9.8 Portfolio investment ................ 2124.9.9 Financial derivatives ................ 2134.9.10 Other investment ..................... 2134.9.11 Reserve assets ........................... 2144.9.12 International investment


4.10Austria ........................................... 217



4.11Portugal ......................................... 239



4.12Finland ........................................... 257

4.12.1 Organisation chart(s) .............. 2584.12.2 Institutional aspects ................. 2594.12.3 Statistical system....................... 2594.12.4 Monthly key items .................... 264

4.12.5 Investment income ................... 2654.12.6 Capital account ........................ 2684.12.7 Direct investment .................... 2684.12.8 Portfolio investment ................ 2704.12.9 Financial derivatives ................ 2724.12.10 Other investment ..................... 2744.12.11 Reserve assets ........................... 2754.12.12 International investment


4.13Sweden .......................................... 277



4.14The United Kingdom ................... 295



5 Annex ................................... 321

5.1 Glossary ........................................ 321

5.2 Contributors ................................. 325


List of abbreviations and acronyms

ARIMA Auto-Regressive IntegratedMoving Average

b.o.p. Balance of paymentsBAFI Database on French financial

agentsBcL Banque centrale du LuxembourgBIS Bank for International SettlementsBLEI Belgian-Luxembourg Exchange

InstituteBLEU Belgian-Luxembourg Economic

UnionBOPFS Balance of Payments and

Financial SectorBOPSTA A sub-set of the EDIFACT

message �GESMES/ECOSER� forb.o.p. statistics

BPM5 IMF Balance of Payments Manual(5th edition)

BSG Business Statistics Group (UnitedKingdom)

c.i.f. Cost, insurance and freight atthe importer�s border

CBS Central Bureau of Statistics(Netherlands)

CCIRS Cross-currency interest rate swapsCII Collective investment institutionCNMV Comisión Nacional del Mercado

de Valores (Spanish nationalstock market Commission � Spain)

COE External Transaction Report(registers � Portugal)

COS Chamber of Shipping (UnitedKingdom)

CPB Central Planning Bureau(Netherlands)

CPE External Position Report(registers � Portugal)

CPI Consumer price indexCPIS IMF Co-ordinated Portfolio

Investment SurveyCREST Settlement system for UK shares

and other corporate securitiesCRP Compte-rendu de paiement

(standard record of payment -France)

CSDB ECB Centralised SecuritiesDatabase (in project)

CSO Central Statistical Office (Ireland)CVS Comunicazione valutaria

statistica (statistical reportingform - Italy)

DDG Déclarant direct général (generaldirect reporting company -France)

DRC Direct reporting company (France)EAGGF European Agricultural Guidance

and Guarantee FundEBRD European Bank for Reconstruction

and DevelopmentECB European Central BankECGD Export Credit Guarantee

DepartmentECOSER A sub-set of GESMESEDI Electronic Data InterchangeEDIFACT EDI for Administration,

Commerce and TransportationEMI European Monetary InstituteEMU European Economic and

Monetary UnionERDF European Regional Development

FundESAF Enhanced Structural Adjustment

FacilityESA European System of AccountsESA 95 European System of National

and Regional Accounts (ECRegulation No. 2223/96 dated25 June 1996)

ESCB European System of Central BanksEU European UnionEurostat Statistical Office of the European

Communities (Commission - DGESTAT)

Extrastat System for the collection andcompilation of statistics relatingto trade in goods betweenMember States and non-EUcountries

f.o.b. free on board at the exporter�sborder

FATS Foreign Affiliated Trade StatisticsFDI Foreign direct investmentFININFO A securities data vendor

(France)


FRA Forward rate agreementsFSA Financial Services Authority

(United Kingdom)FSO Federal Statistical Office

(Germany)GAB General Arrangements to

Borrow (under the umbrella ofthe IMF)

GDR General direct respondentGESMES Generic Statistical Message

based on EDIFACT SyntaxGNP Gross national producti.i.p. International investment positionIBRD International Bank for

Reconstruction andDevelopment (World Bank)

IFSC International Financial ServicesCentre (Ireland)

IMF International Monetary FundINE Instituto Nacional de Estatística

(National Institute of Statistics -Portugal)

INSEE French national institute forstatistics and economic research

Intrastat Intra-Community Trade StatisticalSystem

IPS International Passenger Survey(United Kingdom)

ISIN International SecuritiesIdentification Number

Istat Istituto nazionale di statistica(National Statistical Institute -Italy)

ITL Italian liraITRS International transactions

reporting systemLIFFE London International Financial

Futures ExchangeMESAG Macro-Economic Statistics and

Analysis GroupMFI Monetary Financial InstitutionMFSD Monetary and Financial Statistics

Division (United Kingdom)MMIs Money market instrumentsMUMS (European Economic and)

Monetary Union Member State(s)NBB/BNB Nationale Bank van België/

Banque Nationale de Belgique

NAB New Arrangements to Borrow(see GAB)

NCB National central bankNSSG National Statistical Service of

GreeceNTMA National Treasury Management

Agency (Ireland)OECD Organisation for Economic Co-

operation and DevelopmentOeNB Oesterreichische Nationalbank

(Austrian central bank)ONS Office for National Statistics

(United Kingdom)OTC Over-the-counterPGRF Poverty Reduction and Growth

FacilityPRDC Partial direct reporting companyRISC Computer system used by the

Bank of GreeceROW Rest of the WorldSAS Statistical Analysis Software

(trade mark)SDDS IMF Special Data Dissemination

StandardSDRs Special drawing rightsSFI Special financial institutionSIREN Identification code number of

French firmsSMEs Small and medium-sized

enterprisesSNA 93 System of National Accounts of

the United NationsSRS Share Register Survey (United

Kingdom)STATEC Service Central de la Statistique

et des Etudes économiques(Luxembourg)

STC ESCB Statistics CommitteeUIC Ufficio italiano dei cambi (Italian

Foreign Exchange Office)UK United KingdomWG BP ESCB Working Group on &ER Balance of Payments and

External Reserve StatisticsWTO World Trade Organization


1 Foreword

With this publication, which is commonlyreferred to as the �B.o.p. Book�, the EuropeanCentral Bank (ECB) aims to provide partiesinterested in balance of payments (b.o.p.)and international investment position (i.i.p.)statistics as users or compilers with informationrelating to all EU countries on (i) the contentand structure of statistical data and (ii) thecollection methods used. It also gives anoverview of the compilation of the euro areaaggregate figures by explaining the compilationprocedures and underlying methodologicalconcepts agreed by the EU Member States.

In accordance with the division of responsibilitiesin the field of b.o.p./i.i.p. statistics betweenthe European Commission (Eurostat) andthe ECB (Directorate General Statistics), the�B.o.p. Book� focuses mainly on the conceptsand definitions related to the b.o.p. financialaccount and related income and i.i.p. statistics.Nevertheless, it also contains a number ofreferences to items falling under theresponsibility of the European Commission(Eurostat) (i.e. goods, services, compensation ofemployees, the current account as a whole andthe capital account) since the ECB compilesmonthly key items for the entire balance ofpayments.

The initiative was taken in April 1993 that theEuropean Monetary Institute (EMI), the forerunnerof the ECB, would compile a description ofb.o.p. statistical data and collection methods.The Guideline of the European Central BankNo. ECB/1998/17 (1 December 1998) and itsupdated version No. ECB/2000/4 of May 2000state that the ECB �will monitor the compilationmethods used for the reporting of b.o.p. andi.i.p. statistics, as well as the concepts and

definitions applied on a regular basis by theMember States participating in the euro area�and, therefore, provides for a regular update ofthe B.o.p. Book.

The �B.o.p. Book� was first issued in January1998; updates were released in August 1998and in November 1999. The present update ofautumn 2000 provides, in particular, anextension of the Chapter 3 �euro area b.o.p./i.i.p. statistics: concepts, definitions and agreedpractices� in the form of a comprehensivesummary of the methodological concepts andprocedures applied by the ECB in compilingb.o.p. and i.i.p. statistics of the euro area.

The methodological concepts follow internationalstandards (i.e. the IMF Balance of PaymentsManual, 5th edition, the �BPM5�); in addition,further harmonisation proposals in special fieldshave been developed and agreed within theEuropean System of Central Banks (ESCB), inconsultation with the European Commission(Eurostat). EU Member States not initiallyparticipating in the euro area were alsoinvolved in the development of the concepts,definitions and agreed practices as described inChapter 3.

The �B.o.p. Book� is revised every year underthe responsibility of the ECB�s Balance ofPayments Statistics and External ReservesDivision and published on the ECB website(http://www.ecb.int/). It is also available inhardcopy on request from the ECB�s PressDivision. Specific enquiries relating to individualcountries may be addressed to the countriesconcerned, whose contributions are gratefullyacknowledged. A glossary is provided in theAnnex (see list in Chapter 5.1).


2 Compilation of euro area balance of payments and internationalinvestment position statistics

2.1 The legal framework of the euroarea balance of payments andinternational investment positionstatistics

The statistical requirements of the EuropeanCentral Bank (ECB) with respect to the euroarea national central banks (NCBs) and othercompetent national authorities are based onthe Guideline on the �Statistical reportingrequirements of the ECB in the field of balanceof payments, international reserves templateand international investment position statistics(ECB/2000/4)� of May 2000 which replaced theGuideline of 1 December 1998 (ECB/1998/17).This Guideline formalises the requirementsspecified in the �implementation package�(Statistical requirements for Stage Three of EMU,July 1996). It also addresses relevant needsspecified in other documents formally adoptedby the Governing Council of the ECB. Currentinternational standards, such as the IMF Balanceof Payments Manual (5th edition), released inOctober 1993 (BPM5), the UN System ofNational Accounts (SNA 93) and the EuropeanSystem of National and Regional Accounts(ESA 95), have been used as reference informulating these concepts and definitions.

2.2 Shared responsibility betweenthe European Central Bank(Directorate General Statistics)and the European Commission(Eurostat)

The European Commission (Eurostat) and theECB�s Directorate General Statistics (DG-ST)have laid down the framework for the jointdefinition and compilation of balance ofpayments (b.o.p.) and international investmentposition (i.i.p.) statistics at the European level.

The statistical competence of the twoorganisations is defined with respect to(i) conceptual issues and (ii) the compilationand publication of b.o.p./i.i.p. statistics at the

European level. With respect to (i) conceptualissues, the Commission (Eurostat) is responsiblefor the concepts and definitions related to theb.o.p. current and capital accounts, except forinvestment income, which is closely linked tothe financial account.

The ECB�s DG-ST is responsible for theconcepts and definitions related to the b.o.p.financial and investment income accounts andfor the i.i.p. statistics. Within the b.o.p. financialaccount and the i.i.p., the direct investmentaccount is of special interest to the Commission.For the same reason, Eurostat has a specialinterest in direct investment income.Additional iinformation on the items forwhich the European Commission (Eurostat)is responsible is made available on its website(http://europa.eu.int/en/comm/eurostat/serven/home.htm).

The allocation of data compilation tasks leads,in principle, to the following compilationresponsibility with respect to EU 15 and euroarea aggregates for b.o.p. and i.i.p. statistics:� the European Commission (Eurostat):

EU 15 b.o.p. and direct investment statistics;and

� the ECB (DG-ST): euro area b.o.p./i.i.p.statistics and international reserves.

Following this scheme, euro area monthly keyb.o.p. items are defined and compiled only bythe ECB.

2.3 The ECB�s contribution to theeuro area aggregates

The ECB�s own flows and positions vis-à-visnon-euro area counterparties must also bereflected in the external statistics of the euroarea. In other words, the data resulting from thecompilation of the ECB�s own external statisticshave to be added to the contributions of theeuro area Member States so as to compile the


total figures of the euro area aggregates (seeSection 2.5 �Methods of compiling the euroarea aggregates�).

In practice, the ECB�s �external� activities areconfined to the following items:� reserve assets: reserve assets of the ECB are

those assets vis-à-vis non residents which arepooled in accordance with Article 30 of theStatute of the ESCB and are, thus, consideredto be under the direct and effective control ofthe ECB. As long as no further transfer ofownership takes place, external assetsretained by the NCBs in accordance withArticle 30.4 are under their direct andeffective control and are treated as reserveassets of each individual NCB;

� other investment: this item encompassesthe flows of the ECB to and from theNCBs of Member States not participatingin the euro area that are related to theoperation of the TARGET system;

� portfolio investment: this item encompassesdebt securities (mainly bonds and notes)issued by other euro area residents(�intra-euro area� assets) and thoseissued in euro by non-euro area residents.(The ECB�s claims from debt securities inforeign currency which were issued bynon-euro area residents are includedunder the ECB�s reserve assets.) In thecase of portfolio investment, the �intra-euro area� assets are needed for thecompilation of the total euro areaaggregate figures of portfolio investmentliabilities (see Section 2.5 �Methods ofcompiling the euro area aggregates�).Since the ECB has not itself issued anydebt securities, it does not record anyliabilities in the field of portfolio liabilities;

� income on portfolio investment: income receivedfrom the above-mentioned portfolioinvestment assets which are held by the ECB.As in the case of the financial account, thesedata are needed for the compilation of thetotal euro area aggregate debits of portfolioinvestment income (see Section 2.5 �Methodsof compiling the euro area aggregates�);

� income on other investment: income

received from the management of theECB�s international reserves and fromTARGET operations.

Information on reserve assets is supported bymeans of a �bridging table� which links thestatistical concepts for reserve assets and theheader accounts of the ECB�s balance sheet ona very highly aggregated basis.

2.4 Statistical reporting requirementsfor national compilers

2.4.1 ECB data requirements in balance ofpayments statistics

Data on the b.o.p. for the euro area as a whole arerequired; the ECB does not use or require data oncross-border transactions within the euro area,with the important exception of portfolioinvestment and portfolio investment incomeaccounts (see Section 2.5 �Methods of compilingthe euro area aggregates�). B.o.p. statistics arerequired and published at three differentfrequencies: monthly, quarterly and annually. Thescope and breakdown are different for monthlydata, on the one hand, and for quarterly/annualdata, on the other. While the monthly b.o.p. for theeuro area aims at showing the main items affectingmonetary conditions and exchange markets, thequarterly/annual b.o.p. should permit furtheranalysis of external transactions.

The statistical requirements for the national b.o.p.compilers with respect to the aforementionedfrequencies of submission are outlined below:

2.4.1.1 Monthly requirements

On a monthly basis, the ECB�s b.o.p. datarequirements for the euro area are confined tobroad categories of transactions which areknown as key items and which have to betransmitted by the Member States six weeks(30 working days) after the end of the referencemonth in a highly aggregated form. More detailis required in the financial account, where largeand variable flows affect monetary conditions inthe euro area. The collection of data fromreporting agents is organised by the national


authorities with this deadline in mind. Owing tothis short period, it is permitted, to some extent,to depart from the international guidelines setout in the BPM5 (which was released inOctober 1993). Permitted are, inter alia, therecording of income on a cash basis, instead ofon an accruals basis, and the provision ofestimates. Furthermore, no sectoral breakdownis provided for portfolio investment andfinancial derivatives.

The aim of these monthly key items is toprovide a good picture of developments in themost important and variable items quicklyenough to be of use for the analysis of flowsaffecting the monetary and foreign exchangeconditions of the euro area.

These key items have been required since mid-March 1999 (January 1999 data), showingcredits/debits for the current and capitalaccount and assets/liabilities for the financialaccount, excluding financial derivatives. Datarelating to periods prior to January 1999 areprovided for the years 1997 (partially) and 1998.

Table: Monthly key items for the euroarea balance of payments

I. Current account (credits and debits)GoodsServicesIncome

Compensation of employeesInvestment income

Direct investmentPortfolio investmentOther investment

Current transfers

II. Capital account (credits and debits)

III. Financial accountDirect investment (abroad and in thereporting economy)

Equity capitalReinvested earningsOther capital

Portfolio investment (net assets and net

liabilities)Equity securitiesDebt securities

Bonds and notesMoney market instruments

Financial derivatives (net)Other investment (net assets and netliabilities)

Monetary authoritiesGeneral governmentMFIs (excluding central banks)

Long-termShort-term

Other sectorsReserve assets (only assets)

IV. Errors and omissions

2.4.1.2 Quarterly/annual requirements

The required breakdown of the quarterly/annual b.o.p. statistics adheres, as far aspossible, to the standards set out in the BPM5,which is consistent with the System of NationalAccounts 1993 (SNA 93) and with theEuropean System of Accounts 1995 (ESA 95).Exceptions from the application of BPM5standards mainly relate to:� income on direct investment, for which the

ECB does not require the breakdown ofincome on equity into distributed andundistributed profits (i.e. dividends andreinvested earnings);

� the capital account, for which the ECBcompiles only a lump-sum capital account,without requiring any breakdown;

� the other investment account, which issomewhat simplified by (i) not requiringany distinction between loans and depositson each side of the b.o.p. and (ii) notrequiring any maturity breakdown. Thereis also a change in the presentation of thebreakdown (i.e. sectors as first priority)which is compatible, but not identical,with the BPM5 where instruments havepriority.

The ECB requires quarterly details within threemonths of the end of the quarter to which the


data relate. The detailed quarterly breakdownwas required as of June 1999 (for first quarter1999 data). There is no difference in thebreakdown required for annual data (requestedas from March 2000 for 1999 data). Annualb.o.p. data differs from the quarterly data onlyin that revisions which took place during theyear are incorporated.

Table: Quarterly and annual balance ofpayments for the euro area

I. Current account (credits and debits)GoodsServicesIncome

Compensation of employeesInvestment income

Direct investmentIncome on equityIncome on debt (interest)

Portfolio investmentIncome on equity(dividend)Income on debt (interest)


Other investmentCurrent transfers

II. Capital account (credits and debits)

III. Financial accountDirect investment (abroad and in thereporting economy)

Equity capitalReinvested earningsOther capital

Portfolio investmentEquity securities

Net assetsMonetary authoritiesGeneral governmentMFIs (excluding centralbanks)Other sectors

Net liabilitiesMFIs (excluding central

banks)Other sectors

Debt securities (net assets and netliabilities)

Bonds and notesMonetary authoritiesGeneral governmentMFIs (excluding centralbanks)Other sectors

Money market instrumentsMonetary authoritiesGeneral governmentMFIs (excluding centralbanks)Other sectors

Financial derivatives (net)Monetary authoritiesGeneral governmentMFIs (excluding central banks)Other sectors

Other investment (net assets and netliabilities)

Monetary authoritiesLoans/currency and depositsOther assets

General governmentTrade creditsLoans/currency and depositsOther assets

MFIs (excluding central banks)Loans/currency and depositsOther assets

Other sectorsTrade creditsLoans/currency and depositsOther assets

Reserve assets (assets only)Monetary goldSpecial drawing rightsReserve position in the InternationalMonetary FundForeign exchange

Currency and depositswith monetary authoritieswith MFIs (excludingcentral banks)

SecuritiesEquity



Financial derivativesOther claims

IV. Errors and omissions

2.4.2 ECB data requirements forinternational investment positionstatistics

The compilation of the euro area i.i.p. aims atproviding an annual statement of the externalassets and liabilities of the euro area as a whole,for the purposes of monetary, financial andexchange market analysis, and at assisting in thecompilation of b.o.p. flows. The ECB requiresannual data on the i.i.p. within nine months ofthe end of the year to which the data relate. Therequired breakdown is based (i) on the IMFstandard components of the i.i.p., as presentedin the BPM5; and (ii) on the breakdown for thequarterly/annual b.o.p.

Table: Annual international investmentposition for the euro area

I. Direct investment (abroad and intothe reporting economy)Equity capital and reinvested earningsOther capital

II. Portfolio investmentEquity securities

AssetsMonetary authoritiesGeneral governmentMFIs (excluding central banks)Other sectors

LiabilitiesMFIs (excluding central banks)Other sectors

Debt securities (assets and liabilities)Bonds and notes

Monetary authoritiesGeneral governmentMFIs (excluding central banks)Other sectors

Money market instruments

Monetary authoritiesGeneral governmentMFIs (excluding central banks)Other sectors

III. Financial derivatives (assets andliabilities)Monetary authoritiesGeneral governmentMFIs (excluding central banks)Other sectors

IV. Other investment (assets andliabilities)Monetary authorities

Loans/currency and depositsOther assets

General governmentTrade creditsLoans/currency and depositsOther assets

MFIs (excluding central banks)Loans/currency and depositsOther assets

Other sectorsTrade creditsLoans/currency and depositsOther assets

V. Reserve assets (only assets)Monetary goldSpecial drawing rightsReserve position in the InternationalMonetary FundForeign exchange

Currency and depositswith monetary authoritieswith MFIs (excluding centralbanks)

SecuritiesEquitiesBonds and notesMoney market instruments

Financial derivativesOther claims


2.4.3 ECB data requirements for theEurosystem�s international reservesposition

Since April 1999, the ECB has required andpublished monthly data on the stock ofinternational reserves held by the Eurosystem(the ECB and the 11 participating NCBs). Thedefinition of Eurosystem�s reserve assets, whichwas approved by the ECB Governing Council inMarch 1999, is in conformity with the guidelinesoutlined in the BPM5 (see Section 3.11).Moreover, foreign currency-denominated claims(i.e. claims denominated in any currency otherthan the euro) on euro area residents held bythe Eurosystem are shown as a memorandumitem in the ECB Monthly Bulletin. This approachsupports an analysis for monetary purposes andpermits a reconciliation of the Eurosystem�sinternational reserves and its foreign currencyliquidity position. As from the April 2000release of the ECB Monthly Bulletin, the samebreakdown has been presented for the ECB�sreserves (and related assets) which are pooledin accordance with Article 30 of the Statute ofthe ESCB. In addition to the informationprovided in the ECB Monthly Bulletin, the ECBpublishes Eurosystem and ECB data in line withthe template entitled �International Reservesand Foreign Currency Liquidity�, which was setout in early 2000 in the IMF�s Special DataDissemination Standard (SDDS), on its website.This information covers not only data onreserve assets, but also data on the reserve-related liabilities of the Eurosystem, and differsin some respects from the data on internationalreserves included in the euro area b.o.p.

2.5 Methods of compiling the euroarea aggregates

From 1997 onwards, each broad category oftransaction is broken down into credits anddebits for the current and capital account, andinto assets and liabilities for direct investmentand, from 1998 onwards, also for portfolioinvestment and other investment. The ECBcompiles the figures for the euro area byaggregating the euro area Member States�transactions vis-à-vis non-residents of the euro

area for the current and capital account and forthe financial account, excluding the portfolioinvestment account and the financial derivativesaccount.

The compilation methods for portfolioinvestment and financial derivatives are basedon a different approach, owing to the difficultiesin identifying the residency of the holders ofsecurities issued by domestic residents. Thisdifficulty occurs regarding both portfolioinvestment flows and portfolio investmentincome flows. Therefore, the same approach isused to compile both items.

International standards require portfolioinvestment flows vis-à-vis non-residents of theeuro area to be classified as extra-euro areaflows and allocated according to the residencyof the ultimate investor (in case of liabilities ofthe euro area) and the non-resident debtor (incase of assets of the euro area), respectively.When euro area residents purchase securitiesissued by non-residents of the euro area, therelated flows can be measured directly, with aquarterly sectoral breakdown of the euro arearesidents undertaking the transactions.

However, when non-residents of the euro areapurchase securities issued by euro arearesidents, the correct classification of therelated flows is difficult because thesetransactions are often made through centralsecurities depositories or other intermediarieswhich may be located in the euro area (e.g.Euroclear and Clearstream, formerly Cedel). Atfirst sight, such a purchase appears to be anintra-euro area transaction (as the first knowncounterpart is a euro area resident) to thecountry of the seller, even though it is an extra-euro area flow (as the purchaser/holder of thesecurities is a non-resident of the euro area).Consequently, transactions/holdings related tosecurities issued by residents and traded/heldby non-residents of the euro area would bemisclassified since the national compilers maynot be able to identify the flows/positionscorrectly (i.e. as extra-euro area flows/positions).


In order to correctly compile the total amountof those extra-euro area transactions which arerelating to securities issued by euro arearesidents, the �liabilities� side of portfolioinvestment is calculated as transactions in totalsecurities issued by euro area residents minusthe recorded acquisitions of such securities byresidents of the euro area.

Analogously, euro area residents� income onsecurities issued by non-euro area residents(�extra� credits of the euro area, since thedebtors are non-euro area residents) can becorrectly identified as extra-euro area flows.However, income relating to securities issuedby euro area residents and held by non-residents is often paid to these non-residentsthrough central securities depositories or otherintermediaries and is therefore not identifiablefor the national compiler as extra-euro areaflows. Therefore, the amount of the total euroarea payments to non-euro area residents iscalculated as total payments made by euro arearesidents to recipients outside their homecountry minus the receipts from residents ofother euro area countries.

The net figures for euro area transactions infinancial derivatives are compiled by aggregatingthe national net transactions of the participatingMember States. A sectoral breakdown of thisaccount at the euro area level has not beencompiled so far.

As regards the Eurosystem�s internationalreserves position, the agreed definition ofreserve assets is applied consistently bothacross the Eurosystem and at the national level.Hence, the reserve assets held by theEurosystem are compiled by summing up thereserve asset holdings of the participating NCBsand of the ECB.

In contrast to most b.o.p. items, the euro areai.i.p. is compiled on a net basis (i.e. withoutseparate assets and liabilities), relying onaggregated national data (i.e. including the euroarea Member States� net positions vis-à-visother Member States), on the assumption thatcross-border positions within the euro areacancel out. It is planned that the ECB willrequire data in a form permitting the externalassets and liabilities of the euro area as a wholeto be compiled separately.

3 Concepts, definitions and agreed practices of the euro areabalance of payments and international investment positionstatistics

The main purpose of this chapter is:(i) to provide a comprehensive summary on

the methodological standards (such as theBPM5, the SNA 93 or the ESA 95) withwhich all participating Member States ofthe euro area and also within theEuropean Union in principle comply;

(ii) to serve as a benchmark to identify anyindividual country deviations, as currentlydescribed in the chapter �Country-specificdetails�; and

(iii) to supplement the �methodological notes�which are currently on the ECB Web siteto summarise the compilation standardsin place at present.

Most of these methodological standards havealready been implemented in line with ECBGuideline No. ECB/1998/17 of 1 December1998. Further progress is expected and theNCBs or other competent national authoritieswill, where necessary, steadily improve


in a b.o.p. context may not involve the transferof money, and some are not paid for in anysense. The inclusion of these transactions, inaddition to those matched by actual payments,constitutes a principal difference between ab.o.p. statement and a record of foreign payments.

3.1.2 International investment positionstatistics

Closely related to the flow-oriented b.o.p.framework is the stock-oriented i.i.p. Compiledat a specified date, the i.i.p. is a statisticalstatement of (i) the value and composition ofthe stock of an economy�s financial assets, or theeconomy�s claims on the rest of the world, and(ii) the value and composition of the stock of aneconomy�s liabilities to the rest of the world.Cross-border positions of the euro area comprisethe participating Member States� stocks offinancial claims and financial liabilities vis-à-visresidents of EU Member States not participatingin the euro area or residents of third countries.Also encompassed are land, other real propertyand other immovable assets which are:� physically located outside the economic

territory of the participating Member Statesand owned by residents of participatingMember States (considered as assets, fromthe euro area perspective); or

� physically located inside the economicterritory of the participating MemberStates and owned by residents of non-participating Member States or residentsof third countries (considered as liabilities,from the euro area perspective).

In addition, monetary gold and special drawingrights (SDRs) owned by residents ofparticipating Member States are included.

In some instances, it may be of analytical interestto compute the difference between the twosides of the balance sheet. The calculationwould provide a measure of the net position,and the measure would be equivalent to thatportion of the euro area�s net worth attributableto, or derived from, its relationship with the restof the world. A change in stocks during any

compliance with those recommendations byusing available information or, alternatively, bymaking estimates in consultation with the ECB.

This chapter concerns primarily thosemethodological concepts and definitions whichwere developed under the responsibility of theECB. Definitions on items under the responsibilityof the European Commission (Eurostat) are limited,in this release, to brief and general explanationsonly. The European Commission (Eurostat) mayprovide background material to these sectionsat a later stage.

3.1 General principles of balance ofpayments and internationalinvestment position statistics

3.1.1 Balance of payments statistics

The b.o.p. is a statistical statement that systematicallysummarises, for a specific time period, theeconomic transactions of an economy with therest of the world. A transaction itself is defined asan economic flow that reflects the creation,transformation, exchange, transfer, or extinctionof economic value and involves changes inownership of goods and/or financial assets orliabilities, the provision of services or theprovision of labour and capital. Cross-bordertransactions of the euro area are transactionsbetween residents of participating MemberStates, seen as one economic territory, andresidents of EU Member States not participatingin the euro area or residents of third countries.

Despite its name, which refers to standardsapplicable in the past following recommendationsof the IMF Manuals up to the 4th edition, theb.o.p. is now less concerned with payments, asthat term is generally understood, than withtransactions. This development from a financialtowards an economic approach was felt moreefficient in order (i) to foster a sound economicinterpretation of the figures, and (ii) to makethe b.o.p. concepts compliant with the nationalaccounts (the b.o.p. is also the �rest of theworld� account). Therefore, a number ofinternational transactions which are of interest


defined period can be attributable totransactions (i.e. b.o.p. flows), to revaluationsreflecting changes in exchange rates, prices, etc.or to other adjustments (e. g., reclassifications,corrections, uncompensated seizures).

Since the i.i.p. and the financial account of theb.o.p. share many sources and methods ofcompilation, these two accounts are dealt withtogether in the following sections so as to stresstheir close relationship.

3.1.3 Accounting Principles fortransactions and stocks

3.1.3.1 Double-entry system

The basic convention applied in constructing aeuro area b.o.p. statement is that everyrecorded transaction is represented by twoentries with equal values. One of these entries isdesignated a credit; the other is designated adebit. In principle, the sum of all credit entries isidentical to the sum of all debit entries, and thenet balance of all entries in the statement iszero. In practice, however, the accountsfrequently do not balance. Data for b.o.p.estimates are often derived independently fromdifferent sources and may be incomplete.Moreover, timing and valuation effects alongwith a variety of other factors tend to causeimbalances in the information recorded. As aresult individual b.o.p. accounts tend toaggregate to a summary net credit or net debit.A separate entry, equal to that amount with thesign reversed and labelled �net errors andomissions�, is then included to balance theoverall b.o.p. account.

3.1.3.2 Time of recording the transactions

In line with the BPM5, the ECB principallyrequires recording on a transactions basis(�accruals principle�), meaning that transactionshave to be recorded when economic value iscreated, transformed, exchanged, transferred orextinguished. Claims and liabilities arise whenthere is a change in ownership. The change maybe legal or economic. In practice, when a

change in ownership is not obvious, the changemay be assessed at the time that parties to atransaction record it in their books or accounts.

However, for the reporting of the monthly keyitems, recording on a full accruals ortransactions basis is not mandatory, owing tothe short deadline and the highly aggregatednature of the provision of monthly data. Inagreement with the ECB, the NCBs and othernational compilers may provide data on thecurrent and financial account in the monthlyb.o.p. statistics which is based on full/partialaccruals or on settlements (i.e. cash).

3.1.3.3 Valuation of transactions and stocks

In principle, market prices should be used as thebasis of valuation for both transactions andstocks. Thus, transactions are generally valuedat the actual prices agreed upon by transactors,and stocks of assets and liabilities are valued atthe market prices in effect at the times to whichthe balance sheet relates. Market valuationprovides the most meaningful measure of theeconomic value of the resources available to aneconomy. From a methodological point of view,alternatives to valuation at market price shouldonly be used if absolutely necessary.

In practice, however, some deviations from themarket principle may occur. Book values fromthe reporting agents� balance sheets may, insome cases, be the only readily available sourcefor the valuation of assets and liabilities. In thiscase, owing to the accounting principlesestablished by the appropriate authority and/ordifferent investment policies, those book valuesmay differ from the market value. Moreover,equity and debt securities are not alwaysrecorded on a security-by-security basis.Suitable means (e.g., indices) then have to bechosen by either the data provider or thecompiler to approach the market value. The i.i.p.is valued at current market prices, with theexception of direct investment stocks wherebook values are used to a large extent.


3.1.3.4 Reconciliation of stocks and flows

The reconciliation of changes in stocks andb.o.p. flow data allows sets of data to bevalidated when they are collected independentlyand gives possible explanations for the changesin positions at the beginning and end of a givenperiod owing to different factors. These factorsare:(i) the transactions that have taken place

during the period;(ii) price changes;(iii) exchange rate changes; and(iv) other adjustments reflecting changes

in stocks which are not due to theaforementioned factors.

The greater the level of detail of the basicinformation on both stocks and flows, the moreprecise the reconciliation is. In particular, thefollowing information is necessary:(i) a currency breakdown to capture the

exchange rate effect;(ii) a breakdown of applicable market prices,

especially for portfolio investment instruments,to isolate the market value effect;

(iii) the timing of transactions to select theappropriate price and exchange rate.

Reconciliation is particularly important whenstocks are derived from accumulated flows.

3.1.4 Euro area residency

In general, the terms �resident� and �residing�mean having a centre of economic interest inthe economic territory of a country, asdescribed in Annex A of the Council Regulation(EC) No. 2533/1998. In the case of the euroarea, the economic territory comprises (i) the economic territory of the EU MemberStates participating in Stage Three of Economicand Monetary Union (EMU) and (ii) the ECB,which is regarded as a resident unit of the euroarea.

The rest of the world (RoW) comprises theterritories outside the euro area, i.e. EU MemberStates not participating in EMU, all thirdcountries and non-European supranational and

international organisations, including thosephysically located within the euro area. All EUinstitutions except the ECB are consideredunits that are residents of the rest of the world,i.e. non-euro area residents. Consequently, alltransactions of participating Member States vis-à-vis EU Institutions are recorded and classifiedas non-euro area transactions in the euro areab.o.p./i.i.p. statistics. A list of supranational andinternational institutions is given in Eurostat�sBalance of Payments Vademecum booklet.

The following are examples of borderline casesin the determination of residence:(i) individuals from embassies and military

bases are to be classified as residents oftheir country of origin, thereby ensuringthat a distinction is made between staffemployed from among host countryresidents and those from the country whichthe embassy or military base represents;

(ii) when undertaking cross-bordertransactions in land and/or buildings(e.g. holiday homes), the owner is treatedas if he has transferred his ownership to anotional institutional unit that is actuallyresident in the country where theproperty is located. The notional unit is tobe treated as being owned and controlledby the non-resident owner;

(iii) where an institutional unit operates in anoffshore financial centre, it should betreated as a resident of the territory inwhich the centre is located.

Some territories belonging to, or countriesassociated with, EU Member States might giverise to difficulties in the statistical classification.These can be divided into the following groups:

Territories forming part of the euro area� Islas Canarias, Ceuta and Melilla: Spain;� Monaco, French Overseas Departments

(Guyana, Guadeloupe, Martinique andRéunion), Saint Pierre and Miquelon,Mayotte: France;

� Madeira, the Azores: Portugal;� The Åland Islands: Finland.


Territories associated with euro area MemberStates to be included in the RoW� Buesingen (not Germany);� Andorra (neither Spain nor France);� The Netherlands Antilles and Aruba (not

the Netherlands);� French Overseas Territories (French

Polynesia, New Caledonia and the Wallisand Futuna Islands) (not France);

� San Marino and the Vatican City (not Italy).

Territories associated with EU Member Statesnot participating in the euro area to be includedin the RoW� The Faroes, Greenland (not Denmark);� Guernsey, Jersey, the Isle of Man, Anguilla,

Montserrat, the British Virgin Islands, theTurks and Caicos Islands and the CaymanIslands (not the United Kingdom).

3.1.5 Classification principles for balanceof payments and internationalinvestment position statements

3.1.5.1 Standard components of balance of

payments and international investment

position statements

According to the BPM5, the two majorclassifications of transactions in the b.o.p. statementare the current account and the capitaland financial account. In brief, the currentaccount shows transactions in the realeconomy and relates to goods, services, incomeand current transfers; the capital and financialaccount shows the transactions in the financialeconomy.

The major classifications within the currentaccount are:� Goods;� Services;� Income; and� current transfers.

The capital account records an economy�scapital transfers and its transactions in non-produced, non-financial assets (such as patentsand copyrights). The financial account records

an economy�s transactions in external financialassets and liabilities.

The financial account of the euro area b.o.p.and the euro area i.i.p. are structured aroundfive accounts, differentiated by the type offinancial assets/liabilities involved in thetransaction:� direct investment;� portfolio investment;� financial derivatives;� other investment; and� reserve assets.

In addition, transactions within the euro areaportfolio investment, financial derivativesand other investment accounts are classifiedby sector, according to the institutional sectorto which the euro area resident undertakingthe transaction belongs (see Section 3.1.6Sectorisation). This sectoral analysis also appliesto the corresponding stock data requested forthe i.i.p.

3.1.5.2 Classification of financial flows by

credits/change in assets and debits/

change in liabilities

Economic transactions of the euro area b.o.p.are recorded (i) as credits or debits in the caseof all items of the current and capital accounts,and (ii) as changes in assets or liabilities in thecase of all items of the financial account. Creditsand debits are shown as gross figures, i.e.inflows from non-euro area residents willincrease the amount of credits, while outflowsto non-euro area residents mean an increase ofdebits. By contrast, changes in assets andliabilities are shown as net figures: increases(decreases) in assets indicate that a net outflow(inflow) has occurred, since the payments byeuro area residents in respect of theiracquisitions of assets issued by euro area non-residents are larger (smaller) than the receiptsderived from their sale or redemption. Increases(decreases) in liabilities indicate a net inflow(outflow), since the receipts from non-euro arearesidents in respect of their acquisitions ofassets issued by euro area residents are larger


(smaller) than the payments generated by theirsale or redemption.

3.1.5.3 Geographical allocation principle for

change of ownership in the case of

financial transactions and positions

For financial transactions/positions, there aretwo possible means of classification consideredto be in accord with the change-of-ownershipprinciple, the debtor/creditor principle and thetransactor principle. In order to achieve a moreprecise geographical allocation, the ECBrequires, in principle, the application of thedebtor/creditor principle, according to whichtransactions/positions in a country�s externalliabilities are classified by the country of theowner of the claim (the creditor) andtransactions/positions in a country�s financialassets are classified by the country that incursthe liability (the debtor). The transactor principle,on the other hand, means that transactions/positions are classified by the country of thenon-resident counterparty to the transaction.The latter principle can, in practice, be appliedin two different ways, i.e. classification either bycountry of first-known counterpart or bycountry of settlement, both of which may not inall cases reflect the residency of the actualowner of the asset/liability acquired/incurred.

3.1.6 Sectorisation

3.1.6.1 Institutional sectors

Four sectors are identified separately for euroarea b.o.p./i.i.p. statistics:(i) monetary authorities;(ii) general government;(iii) Monetary Financial Institutions (MFIs);(iv) other sectors.

Monetary authoritiesThe �monetary authorities� sector of the euroarea b.o.p./i.i.p. and international reservestatistics consists of the Eurosystem, i.e., theECB and the NCBs from participating MemberStates.

General governmentThe �general government� sector is consistentwith the sector of the same name in the ESA 95and consists of the following units:� central government: all administrative

departments, agencies, foundations,institutes and similar state bodies, thecompetence of which covers the entireeconomic territory of one country (withthe exception of the administration ofsocial security funds � see below);

� state/regional government: institutionalunits exercising some of the functions ofgovernment at a level below that ofcentral government and above that oflocal government (with the exception ofthe administration of social security funds� see below);

� local government: those types ofadministrative departments, agencies, etc.of Member States, the competence ofwhich covers only a restricted part of theeconomic territory of a country(excluding the local agencies for socialsecurity funds � see below); and

� social security funds: schemes managed bya central, state/regional or localgovernment, the principal objective ofwhich is to provide social benefits to thepopulation of the country. Certainpopulation groups are obliged to paycontributions to these schemes.

Public non-financial corporations and quasi-corporations which are market producersprincipally engaged in the production of goodsand non-financial services should be classifiedas �other sectors�. This also applies to publicproducers involved in the aforementionedactivities and recognised as independent legalentities by virtue of special legislation. Publicsector credit institutions should be included inthe �MFI sector� according to both the MFIdefinition and the ESA 95 definition, and notunder �general government�. Therefore, the fullconsistency of that sector with the SNA 93definition should be noted.


MFI sectorApart from the aforementioned institutionsincluded in the �monetary authorities� sector,the �MFI sector� identified in the euro areab.o.p./i.i.p. presentation coincides with the MFIsector for money and banking statistics. Hence,it comprises (i) euro area resident creditinstitutions, as defined in Community Law, i.e.institutions whose business is to receivedeposits or other repayable funds from thepublic (including the proceeds arising from thesales of bank bonds to the public) and to grantcredit for its own account, and (ii) all otherresident financial institutions located in the euroarea whose business is both to receive depositsand/or close substitutes for deposits fromentities other than MFIs, and, on their ownaccount (at least in economic terms), to grantcredits and/or to make investments in securities(e. g. money market funds). MFIs located in EUMember States that do not participate in theeuro area and banks outside the EU comprise:(i) MFIs located in EU Member States not

participating in the euro area, includingthose subsidiaries and branches, theparent institution of which is an MFIlocated in the euro area;

(ii) banks located outside the EU area,including those subsidiaries and branches,the parent institution of which is an MFIlocated in the euro area.

Subsidiaries are separate institutional units, withindependent legal status, either wholly ownedor with majority ownership held by anotherentity (the parent institution). Branches areentities without independent legal status (theyare wholly owned by the parent). However,when branches are located in another countrythan that in which the company controllingthem is located, they are deemed to be separateinstitutional units.

Other sectorsThe �other sectors� category is composed of:(a) other financial institutions not covered by

the MFI definition: this sector shouldinclude the following institutions:(i) collective investment institutions

(CIIs) not considered as moneymarket funds (MMFs) and, therefore,not included in the MFIs List;

(ii) real estate investment institutions;(iii) securities-dealer companies and

agencies;(iv) mortgage credit securitisation funds;(v) insurance companies;(vi) pension funds; and(vii) financial auxiliaries;

(b) non-financial institutions:(i) non-financial enterprises (public and

private);(ii) non-profit-making institutions serving

households; and(iii) households.

For analytical purposes and with regard to thepossible use of the euro area i.i.p. for thecompilation of other euro area statistics, such asthe euro area financial accounts, informationabout the different sub-sectors is useful.However, in general, it is difficult for MemberStates to split �other sectors� into households,non-financial enterprises and other (non-MFI)financial institutions.

In the field of reserve assets, claims on the Bankfor International Settlements (BIS) and theInternational Monetary Fund (IMF) have to beclassified as claims on other monetaryauthorities.

3.1.6.2 Sectorisation criteria for flows and

stocks

In principle, the sector attribution rules forfinancial flows and stocks seem to be easy toapply. Transactions and holdings in externalfinancial assets have to be assigned to theinstitutional sector to which the residentcurrent creditor (owner of the asset) belongs.Transactions in and holdings of externalfinancial liabilities have to be included in theinstitutional sector to which the resident issuerof the liability belongs.

Securities issued by euro area residents andowned by non-euro area residents are euro


area liabilities; those issued by non-euro arearesidents and owned by euro area residents areeuro area assets. Sectorisation should becarried out according to the above-mentionedprinciples.

With regard to other investment flows andstocks, it should be added that:(i) government-guaranteed and/or bank-insured

trade credits should be treated as privateoperations rather than as government orbank lending and should, therefore, beincluded under �other sectors�. Thereason for this is that in these cases thedebtors have incurred liabilities, but havenot as yet failed to discharge them;accordingly, liability for such loans wouldnot be transferred to the government orbank that guaranteed them until the loanrecipient defaulted in payment. Indeed,guarantees and financial intermediation inwhich the intermediary is not in fact thelegal creditor or debtor should not betaken into account. In addition, in someMember States it is not always clearwhether these loans are insured by thegovernment or by a public insurancecompany;

(ii) loans and deposits connected to repo-typeagreements have to be classified under theinstitutional sector to which the residentthat extends or receives the financingbelongs, regardless of the nature of theissuer of the securities acting as collateral.The residency of the borrower and lenderis the criterion that will attribute thecharacter of asset or liability to theoperations, not the residency of the issuerof the collateral.

3.1.6.3 Practical sectorisation problems

The following practical problems related tosectorisation issues could cause difficultiesregarding the compilation of a meaningful euroarea b.o.p. and i.i.p.

Transactions between resident sectorsOn the assets side � i.e. securities issued by

non-euro area residents and acquired by euroarea residents � flows are assigned to theinstitutional sector to which the residentsubscriber or buyer of the securities belongs. Asa result, the securities issued by non-residents,which are initially subscribed by creditinstitutions and subsequently sold to otherresidents, appear, at first place, in the �MFIsector� of the b.o.p. representing an increasein cross-border assets. If the subsequent salesby the resident MFI sector to the residentnon-banks are not recorded in the b.o.p., thesetransactions between euro area residentswould cause a discrepancy in the reconciliationexercise between b.o.p. and i.i.p. data. Thiswould be the case, in particular, if theoutstanding stocks are directly covered bypure stock data collection sources. As arecommendation, the compiler could derivethese transactions from balance sheet statisticswhere MFIs� sales of foreign securities to non-MFIs may be reflected. These types oftransactions between euro area residents couldbe particularly frequent and sizeable in the caseof non-euro area resident issues on domesticmarkets and debt securities denominated in thedomestic currency (bulldog bonds, Samuraibonds, etc.).

Assignment of an institution in a different residentsectorInstitutions subject to changes in their legalstatus (institutional changes) or changes inthe definition of the requirements to beconsidered for their inclusion in the differentsectors (functional changes) may require specialtreatment in order to avoid discrepancies inthe reconciliation exercise. A reasonablerecommendation is to proceed as follows:(i) in the flows statistics, transactions involving

an institution whose sector has changedshould be allocated to the appropriatenew sector from the date of the change;

(ii) in the stocks statistics, the reclassificationof the stocks attributed to the institutionin question should be made from theformer sector to the new sector by meansof an entry in the �other adjustments�column of the reconciliation statement.


Although the MFI definition could imply theinclusion in the �MFI sector� of certain CIIs thatwould normally have been included under�other sectors�, the reclassification of sectors isnot very common and should, therefore, notcause any particular difficulties with regard tothe compilation of the euro area i.i.p.

3.2 Goods

The goods item of the euro area b.o.p. statisticscovers general merchandise, goods forprocessing, repairs on goods, goods procuredin ports by carriers and non-monetary gold. Inaccordance with general b.o.p. principles,change of ownership is the principledetermining the coverage and time of recordingof international transactions in goods.

Exports and imports of goods are recordedon a f.o.b./f.o.b. basis, i.e. at market value atthe customs frontiers of exporting economies,including charges for insurance and transportservices up to the frontier of the exportingcountry. Moreover, in line with the guidelinesset out in the BPM5, the geographical allocationfor exports should be based on the country offinal destination and that of imports shouldbe based on the country of origin. However,there is some departure from these principlesas regards in transactions goods from or tonon-euro area countries which are channelledthrough one or more other euro areaMember States. In order to avoid double-counting or omissions in the euro area b.o.p.statistics, transactions in exports and importsare recorded as extra-euro area transactionsonly by the euro area Member State in whichthe goods cross the border of the euro area.By contrast, the euro area Member Statefrom which the goods were originally sentor from which the goods are finallyreceived apply the "country-of-consignment"principle and record this transaction asintra-euro area trade in goods going to orcoming from another euro area MemberState.

Incidentally, it should be mentioned that the"consignment principle" applies to tradebetween all EU Member States. However, thefocus of this Chapter is on the euro area andthe agreed treatment of these transactions inthe euro area b.o.p.

3.3 Services

The services account of the euro area b.o.p.statistics consists of the following items, whichare to be recorded according to their actual delivery:� Transportation covers all transportation

services (sea, air, and other - includingland, inland waterway, rail, space andpipeline) that are performed by euro arearesidents for non-euro area residents, orvice versa, and that involve the carriage ofpassengers, the movement of goods(freight), rentals (charters) of carriers withcrew and related supporting and auxiliaryservices. Excluded are passenger servicesprovided to non-euro area residents byeuro area carriers within the euro areaeconomies, or vice versa (these areincluded under travel).

� Travel includes primarily the goods andservices which euro area travellersacquire from non-euro area residents orwhich euro area residents provide tonon-euro area travellers during visits ofless than one year, net of any purchasesmade with money earned or providedlocally. Unlike other services, travel isnot a specific type of service, butan assortment of goods and servicesconsumed by travellers. Personal transport(only international transportation) inconnection with travel is not included inthis item but under transportation.

� Other services comprise those servicetransactions with non-euro area residentswhich are not covered under transportationand travel, such as communication services,construction services, insurance orfinancial services.


3.4 Income

3.4.1 Definition and coverage of income

Income covers two types of transactionsbetween residents and non-residents:(i) those involving compensation of employees,

which is paid to non-resident workers orreceived from non-resident employersand

(ii) those involving investment income receiptsand payments on external financial assets1

and liabilities. Income derived from theuse of tangible produced assets isexcluded from income and classified asappropriate under leasing or rentals,under other business services or undertransportation. Income from tangible non-produced assets is, however, classified asincome under "other investment income".

3.4.2 Definition of compensation ofemployees

Compensation of employees comprises wages,salaries, and other benefits (in cash or in kind)earned by individuals in economies other thanthe euro area in which they are resident, forwork performed for and paid by residents ofthose economies (and conversely). Included arethe contributions paid by employers, on behalfof employees, to social security schemes or toprivate insurance or pension funds to securebenefits for employees.

3.4.3 Definition of investment income

Investment income (property income in theSNA 93 and the ESA 95) is income derivedfrom ownership of external financial assets andpayable by residents of one economy toresidents of another economy. It includesinterest, dividends, remittances of branchprofits, and direct investor's shares of theretained earnings of direct investmententerprises. Where separately identifiable,

holding (capital) gains and losses are notclassified as income on investments but aschanges in the value of the investments due tomarket price developments. (For practicalreasons, this requirement concerning holdinggains and losses is often very difficult to fulfil.)Settlement flows in respect of interest rateswaps and forward rate agreements (FRAs) arenot regarded as interest income, but arerecorded as transactions in "financialderivatives" in the financial account.

In line with the related financial accounts, theeuro area investment income account isclassified by direct investment, portfolioinvestment and other investment components(income on reserve assets is included in otherinvestment income). Income on directinvestment and on portfolio investment arebroken down further into income on equity andincome on debt. In the case of portfolioinvestment, income on debt is subdivided intoincome on bonds and notes and income onmoney market instruments.

3.4.4 Main types of investment income

The most common types of investment incomeare dividends in the case of equity and interestin the case of debt.

3.4.4.1 Dividends

Dividends represent income that is payablewithout a binding agreement between thecreditor and the debtor. Dividends may be paidout of normal operating profits or out ofrealised or unrealised capital gains. In principle,redistributed capital gains should be classifiedas other capital transfers. In order to be able toestimate the share of dividends paid out ofcapital gains, separate information on the netoperational profits and capital gains should beavailable. In practice, however, it appears to bevery difficult to separate the dividends payablefrom operating profits and the dividendspayable from capital gains. Therefore, wherevera compiler is unable to distinguish between thetwo, it is recommended for the compilation of

1 Tangible assets cover produced and non-produced assets.Tangible non-produced assets consist of assets that occurin nature and over which ownership may be enforced andtransferred, such as land and water resources.


the euro area b.o.p. that both the dividendspaid out of normal operating profits and thedividends paid out of realised or unrealisedcapital gains are included under investmentincome.

The following borderline cases deserveattention: stock dividends, bonus shares andliquidating dividends. It is stated thatdistribution of earnings, in form of stockdividends, is construed as a capitalisation ofcurrent earnings and an alternative todistributing cash dividends. Distributions ofsuch earnings are recorded in the euro areab.o.p. in the same manner as reinvestedearnings (i.e. as investment income in thecurrent account and as offsetting equityinvestments in the financial account).

General bonus shares, by contrast, represent thesubstitution of one type of equity (paid-upcapital or capital stock) for another (reinvestedearnings) and should thus not be recorded inthe euro area b.o.p. Bonus shares reflect thetransformation of reserves (which usuallyconsist of accumulated, unremitted earnings)into voting power.

Liquidating dividends refer to the distribution ofassets in the form of a dividend from acorporation that is going out of business.Payment of liquidating dividends may take placewhen a firm goes bankrupt or whenmanagement decides to sell off a company'sassets and pass the proceeds on toshareholders. As liquidating dividends representa return of capital contributions rather than aremittance of earnings, they should be recordedas withdrawals of capital in the financialaccount and should, consequently, be excludedfrom investment income.

Dividends are recorded as of the date on whichthey become due for payment.

3.4.4.2 Interest

Interest is payable in accordance with a bindingagreement between the creditor and the debtor.

Interest is the amount that the debtor becomesliable, under the terms of the financialinstrument agreed between them, to pay to thecreditor over a given period of time withoutreducing the amount of principal outstanding.Interest income should be recorded on anaccruals basis, except for the requirements forthe monthly key items. (Also see Sections3.4.6.1 and 3.4.6.2 on the concept of recordingon accruals basis and the practical issuesrelated to the compilation of accrued interestfor portfolio investment income.)

3.4.5 Specific issues related to directinvestment income

3.4.5.1 Reinvested earnings

Reinvested earnings appear in the context ofincome on equity and are defined as the directinvestor's share of the total consolidated profitsearned by the direct investment enterprise inthe reference period covered (after allowing fortax, interest and depreciation) less dividendsdue for payment in the relevant period, even ifthese dividends relate to profits earned inearlier periods.

Reinvested earnings are to be recorded in theperiod in which they are earned and included inthe (monthly) euro area b.o.p. statistics both (i)in the current account as imputed flows ofundistributed income to the direct investor(credit) and (ii) in the financial account asadditional equity capital to the directinvestment enterprise (debit), the flows beingequal and of opposite sign.

The calculation of reinvested earnings shouldbe based on:� the net operational profit which may itself

be subject to various estimation methodsin case of (i) delays in obtaining thedefinitive data or (ii) the total absence of arecording procedure to collect them;

� interpolation procedures to adjust thedata to the required monthly frequency;

� the inclusion of any uncovered losses bythe direct investor as negative reinvested


earnings (and decrease in the claims ofthe affiliate for the offsetting entry in thefinancial account).

As to the methods of estimating the netoperational profit in the event of delaysoccurring in obtaining the definitive data fromany direct collection procedure, such as a directinvestment survey or balance sheet reports, thefigures related to the results of enterprises forthe previous (two) year(s), adjusted by acorrection factor to better reflect developmentsin the global economy and to capture itsturning points, may be used as a proxy for theresults of the current year. The correction factorshould preferably refer to forecasts (i) ongeneral developments in the results of enterprises,such as those provided by certain privateassociations and public institutions, or (ii) onthe evolution of a variable which is representativeof the global trend of the economy, such as GDP.

In the case of a total absence of a recordingprocedure to directly collect data on the netoperational profit, estimates may be derived byapplying a rate of return on the directinvestment equity stock data, provided that dataon the stock of direct investment equity areavailable. Direct investment could beconsidered from the same angle as securities,namely from purely an investment perspective.The estimated yield should be determinedaccording to the direct investment enterprises'future expected income. If other relevantinformation is lacking, compilers might use thecurrent yield of long-term securities as a proxyand correct it by excluding capital gains andlosses from the estimated profits so as to takeaccount (i) of the greater risk and the lowerliquidity of direct investments and (ii) ofpossible enterprises' losses.

This method can also provide a geographicalbreakdown based on the geographicaldistribution of the stock of direct investmentequity stemming from direct sources, such asforeign direct investment surveys, or from theaccumulation of flows, if a basic benchmarkstock is well known.

3.4.5.2 Income on debt

Direct investment income on debt consists ofinterest payable on inter-company loansgranted to or by direct investors from or toassociated enterprises outside the euro area.Income on non-participating preference sharesis treated as interest, rather than as dividendincome, and is also recorded under the euroarea direct investment income on debt account.

3.4.6 Specific issues related to portfolioinvestment income

3.4.6.1 The concept of recording interest on an

accruals basis

In line with the System of National Accountsand the BPM5, interest should be recorded onan accruals basis so as to ensure that the cost ofcapital continually matches the provision ofcapital. At the time interest accrues, the amountof the claim associated with the non-paymenthas to be recorded (i) under investment incomein the current account, either as a credit or as adebit, and (ii) under portfolio investment, debtsecurities - bonds and notes or money marketinstruments - according to the underlyinginstrument (offsetting entry), in the financialaccount. When the actual coupon paymentoccurs, this payment does not have to berecorded under investment income, but shouldinstead be recorded in the financial account asa debit or credit entry, representing a reductionin the liabilities/assets.

For the b.o.p. compiler, accruing interest meansthat interest has to be recorded as earnedcontinuously from the date of purchase/acquisition of an instrument to the date of itssale or redemption, with the appropriateamounts being attributed to each b.o.p.compilation reference period. Any estimationmethods used to calculate accrued interestshould be based (i) on the market value forstocks and (ii) on the prevailing interest rate inthe market at the time of compiling the accruedinterest ("market principle"). The prevailinginterest rate at the time of issuance ("debtorprinciple") may be used as a pragmatic


approach in the case of bonds at fixed interestrate (i.e. government bonds), if data inaccordance with the market principle aredifficult to obtain.

Apart from applying more global estimationmethods, it is also possible to calculate accruedinterest on a security-by-security basis, usinginformation from a securities database. By wayof example, this can be done by using nominalvalues and actual interest rates in combinationwith actual quotations, actual issue prices andvalues at maturity for each individual security.

3.4.6.2 Compilation of accrued interest on debt

securities

If stocks of the outstanding amounts of domesticdebt instruments held by euro area non-residents and of debt instruments issued bynon-residents and held by residents are notavailable on a monthly basis, the monthly stocksshould be built up using annual or, whenavailable, quarterly stock data (such as thosefrom the i.i.p.) and the monthly flows collectedfor b.o.p. purposes. The stock amount to beused when applying the method is the averageof the stock at the beginning and that at the endof the month. To avoid the recording of the likelycapital gains/losses, the stocks should berevalued by applying the market principle to theinterest rates for the period under calculation.Any difference between the stock data at theend of the period and the stock data calculatedshould be regarded, as mentioned previously, asvaluation changes. Valuation changes cancomprise exchange rate and price adjustmentsas well as other adjustment due toreclassifications.

Furthermore, the results of the estimates shouldbe improved by introducing a maturitybreakdown for the stocks held by non-residents,thus enabling the compiler to apply abenchmark interest rate to each maturity. Ifsuch a breakdown is not available, it could beassumed that non-residents held debtinstruments in proportion to the share of eachmaturity in the total outstanding amount of

debt instruments. This would mean applying thesame maturity distribution as in the totaloutstanding amount of debt instruments to theholdings of these financial instruments by non-residents.

As far as foreign debt instruments held byresidents are concerned, the stock data shouldalso be broken-down by the currency of thenominal value. Consequently, for each currencyand for each maturity, the market principleshould be taken as the benchmark. Thecalculation of the accrued income should bemade in the currency in which the instrument isdenominated.

Special attention will be given in the followingsections to specific types of bonds, such as zerocoupon bonds and other bonds with a morecomplicated structure, and to money marketinstruments.

Zero-coupon bondsIn the case of zero-coupon bonds and otherdeep-discounted bonds, the substantialdifference between the issue price and the valueat maturity is treated as interest. In order tofilter out possible capital gains/losses, thecalculation is done to identify the accruinginterest, which is treated as a reinvestment inthe parent instrument.

If zero-coupon bonds are traded in thesecondary market, the transaction price mayinclude a realised holding gain or loss, inaddition to accrued interest. That change isincluded in the entries into the financialaccount for the purchase and sale of the bondat market prices (the market price of thesebonds includes accrued interest).

Based on the market prices, the accrued interestcan be calculated separately. The discount ofthese bonds should be split and distributedover the compilation periods. Although thetreatment of likely capital gains or losses asaccrued interest could be seen as a pragmaticapproach, it is recommended that account betaken of the important role of the revaluation of


stocks in reconciling flows and stocks in thecontext of the i.i.p. and not to record thevaluation changes as part of the income.

Other bondsBonds with more complicated structures aredivided into four categories: index-linked bonds,junk bonds, floating-rate notes and convertiblebonds. The most difficult issue here is todetermine an adequate "benchmark" whichcould be used as the prevailing interest rate inthe market to estimate the accrued interest,following a global approach. As a consequence,it may be necessary in some cases to useinformation on a security-by-security basis,rather than global data. Moreover, it may berather difficult to record the investment incomeon these types of bonds on an accruals basis.

Index-linked bondsWith respect to the interest income on index-linked bonds, the accrued income derived fromthe indexation of the principal value cannot bemeasured on a cash basis. Calculations of thetwo parts, indexed coupon and indexation ofthe principal value, of the accrued incomeshould be made by using the index to which thecoupon and the principal value are linked. Dueto the variety of indices, problems can appearwhen a global approach is followed, inparticular in determining a benchmark indexwhich is sufficiently representative; it is feasibleto estimate the accrued income properly onlyby using information on a security-by-securitybasis.

As regards index-linked bonds and risklessindex notes, the following requirements are setout. Index-linked securities are instruments withcoupon and/or principal payments that arelinked to commodity prices, interest rates, stockexchange or other price indices. The benefits tothe issuer include a reduction in interest costs ifthe deal is targeted at a particular group ofinvestors' requirements and/or an ability tohedge an exposed position in a particularmarket. The benefit to investors lies in the abilityto gain exposure to a wide range of markets(e.g. foreign exchange or property markets)

without the same degree of risk that may beinvolved in investing directly in the markets.

Interest on index-linked securities should betreated as interest income. If the value of theprincipal is index-linked, the issue price shouldbe recorded as principal, and any subsequentchange in value due to indexation should betreated as interest income. The change in valuerelated to indexation should be estimated andrecorded as interest income over the life of thesecurity, and the offsetting entry should berecorded under debt securities in the portfolioinvestment account.2

Riskless index notes are debt instruments thatprovide a return which is linked directly to anindex over a set period of time. Different stockexchange indices are those most commonlyused. If, for example, the index doubles overthe bond's life, the investment would double.However, if the index falls below the originallevel as at the time of issue, the investor isguaranteed to receive back his original stake,and this is the basis for the term "riskless". Theissuer pays no coupon interest. In effect, theinvestor is buying what amounts to a call optionon an index, with the cost of the call being theincome that the investor would have had if hehad invested elsewhere. The issuer receivesinterest free funds for the life of the bond, butbears the upside exposure risk of the index. Inthe light of the conceptual framework of theBPM5, the recording of income in the case ofriskless index notes should not be handled likeinterest in the case of other index-linkedsecurities. Arrangements relating to risklessbonds are not deemed to be indexing, becausethe purpose of indexing is to enhance incomeflows to preserve real purchasing power.Swapping risk exposures is not a form ofindexing, but an embedded derivative. In this

2 Eurostat has decided that, in the case of index-linkedbonds, two distinct treatments should be applied,depending on whether the bond is linked to a consumerprice index or to a financial asset such as foreign currencyor gold. In the former case, the capital uplift due to themovement of the index is to be regarded as interest. Inthe latter case, the capital uplift should not be regarded asinterest, but as a capital gain/loss.


connection, the instrument should be valuedand classified according to its primary function,such as a security, and no transactions inderivatives are to be recorded.

Junk bondsAs regards high-yield or junk bonds, the fact thatthese bonds are differentiated from other bondssolely on account of their high yield seems tomake it unnecessary, in principle, to apply anyspecial b.o.p. treatment. However, problems mayarise in the following cases: first, these bondscan be traded with a significant discount on thesecondary market and, second, the probabilityof a default is higher for junk bonds than forother bonds (defaults often take the form ofarrears in interest payments). Hence, thebenchmark interest rate to be used shouldadequately reflect the market perception of therisk of the issuer.

Floating-rate notesWhere standard floating-rate notes (FRNs) areconcerned, there is a large variety of FRNswhich incorporate a coupon calculationdesigned to tailor the product to meet investors'interest rate expectations, namely so-calledstructured FRNs. The most important problemis to find a market interest rate benchmarkwhich is sufficiently representative. The lack ofthe necessary information about thecharacteristics of the various FRN issues makesit difficult to find a good benchmark, unless asecurity-by-security approach is taken. In somecases, however, a more global approach whichdistinguishes between broad categories of FRNscan also produce good results. As for indexedbonds, there are derivatives embedded in thebond.

Convertible bondsAs the market value of a convertible bond notonly reflects changes in interest rates, but alsochanges in the value of the embeddedconversion option, a method based on themarket value of the stocks and a market interestrate will not produce good results for accruedincome. It is therefore proposed that calculationsbe made on the basis of the nominal value of the

bond and the interest rate prevailing at the timeof issuance. It would seem that either aninstrument-by-instrument or a global approachcould be taken.

With regard to the benchmark, the interest rateof the convertible bond would seem to be themost relevant. However, it could also be arguedthat the interest rate of a comparable bondwithout a conversion option should be used inorder to calculate the (notional) investmentincome and that the result of this calculationshould partially be offset under the underlyingfinancial instrument by the difference betweenthe notional interest income and the incomeactually paid or received. The entry under theunderlying financial instrument would thenrepresent the implicit payment of a premium forthe conversion option. In the latter case, thesame interest rate could be used as benchmarkas for normal bonds, whereas the first approachwould require a specific benchmark forconvertible bonds.

Money market instrumentsThe following method for applying the accrualsprinciple refer to those short-term debtsecurities which are issued (i) at discount and(ii) with an original maturity of up to one year.As no coupon payments occur, it is necessary tointroduce an estimation method for theinvestment income earned on money marketinstruments. The difference between the amountpaid at the time of acquisition - either the issueor the transaction price - and the amountreceived when the security is redeemed or soldon the secondary market represents the incomeand is to be recorded in the current accountand financial account on an accruals basis.

3.4.6.3 Compilation of accrued interest with

collective investment institutions

Collective investment institutions (CIIs) refer toincorporated (investment companies or investmenttrusts) and unincorporated undertakings (mutualfunds or unit trusts) that collect funds frominvestors by issuing shares/units). The CIIs investthese funds in financial assets (mainly marketable


securities and bank deposits) and in real estate.These institutions permit small investors tospread the risks of their investments throughaccess to a wider variety of markets andfinancial instruments.

While the treatment of the income of the CII assuch (asset side) is covered by the BPM5 andthe recommendations about the recording ofmoney market instruments, bonds, zero-couponbonds and other bonds on an accruals basis,the treatment of the investors' income in theCIIs (liability side) needs some clarification dueto the different distribution policies of theseinstitutions.

Following a pragmatic approach, all incomeraised on the asset side as result of theinvestments made by the CII (either fromequities or debt securities) is to be attributed tothe holders of the units over the period underreview. In other words, it is the amount and thetime of recording of the income on the assetside that determine the amount and the time ofrecording of the income on the liability side.Application of this method means that allincome is assigned to the investors, regardlessof whether it is distributed or not. Theundistributed earnings must, of course, also berecorded in the financial account.

The recording of the income attributed toinvestors is as follows in the actual b.o.p.: aresident CII records, as a first step, (i) the entireincome flow (which is attributable or owed tonon-resident investors of the CII) as a debitentry under investment income (i.e. under"portfolio investment/equities"), with an offsettingcredit entry, representing the reinvestment ofthe capitalised income in the CII, in the portfolioinvestment account. Second, (ii) when the CIIpays out a dividend to the non-resident investors,this payment is not recorded under investmentincome, but rather as a debit entry, representinga reduction in the CII liabilities, in the financialaccount.

Stock data can provide the necessary informationconcerning (i) both the holdings of resident CII

shares by non-residents and those of foreign CIIshares by resident investors and (ii) theappropriate rate of return reflecting theinvestment income earned by the CIIs or theirassets, provided that a breakdown by instrumenton the CIIs assets side is available. Nationalcompilers should make a distinction betweenthe following broad categories of assets tomatch the stocks with the relevant rates ofreturn: bonds and notes, money marketinstruments and equities.

The rates of return should be based on themarket rates prevailing at the time ofcompilation (market principle) and shouldexclude any capital or exchange gain or loss.For debt securities, the interest rate of thebenchmark that is representative for eachcategory of instruments shall be used, whereasthe dividend yields of the benchmarks are to beused in the case of equity securities.

Although the application of the accrualsprinciple is required for quarterly and annualdata, this estimation method should be appliedwith a higher frequency, ideally on a daily basis.The use of monthly stock data and rates ofreturn is recommended.

A clear distinction has to be made between theinvestment income earned by the investor andthe management fee charged by the CII. Thelatter should already be recorded separately asa credit entry under the services account, financialservices, in the first step. With regard to theestimation of this fee, an average of the percentageapplicable to the shareholders' investment canbe estimated and must be applied to theestimated stocks of the period under review, inorder to estimate the management fee.

3.4.7 Specific issues related to otherinvestment income

3.4.7.1 Components of other investment

income

Other investment income refers to incomerelated (i) to the "other investment" account


and (ii) to "reserve assets" within the financialaccount. This treatment is in line with therecording of investment income as a functionalcategory in the same manner as in the financialaccount of the b.o.p. and in the i.i.p. As there isno separate category for income on reserveassets, it falls under other investment income.

A breakdown by instrument should allow theestimation of accrued interest for otherinvestment income on the basis of the stocks.However, owing to the variety of instrumentsunderlying this income component, recordingon a due-for-payment basis is accepted as aproxy for the accruals principle.

3.4.7.2 Specific issues related to income on

reserve assets

Income on reserve assets, including interestincome on reserve holdings of bonds and notesand money market instruments, which shouldbe compiled on an accruals basis at least on aquarterly basis, has to be recordedindistinguishably under the "other investment"item of the investment income account.

The major practical problems regarding thecompilation of income on portfolio investmentwithin the reserve assets on an accruals basismay derive from the discrepancies between theconcept of income in the b.o.p./i.i.p. standardsand those in the accounting rules since in manycases national compilers collect information onreserve assets from the accounting departmentsof their respective NCBs.

Within the ESCB, the accounting rules implythat accrued income, apart from the interestbought/sold and not yet paid (not recorded asincome), encompasses the two followingelements when NCBs buy or issue securities:(i) accrued interest: cumulated proportion of

the whole nominal value of the couponminus interest bought/sold from the dateof the purchase/issuance of the security todate;

(ii) amortisation of premium or discount: whensecurities are bought (asset side of the

balance sheet) or issued and sold (liabilityside) above or below par value (withouttaking into account interest sold orbought), the difference between the priceof the deal and the nominal value ofsecurities has to be amortised untilredemption, and is thus considered asincome. This premium/discount isupdated quarterly according to themarket price of securities. At end-year, incase of unrealised losses (book valueunder market value), such losses would bewritten down by means of recordings inthe price of the security and in the profitand loss account respectively.

The combination of these two articles,especially as far as the recognition of unrealisedlosses is concerned, determines that unrealisedlosses would be recognised in the profit andloss account only if the market price of asecurity had moved down at the end of the year.Thus, this accounting practice diverges fromthe "market principle" (see Section 3.4.6.1"The concept of recording interest on anaccruals basis") in view of the fact that it entailsan asymmetric treatment: only unrealisedlosses are incorporated to the price of theinstrument and are thus taken into accountin the calculation of the accrued interest forsubsequent periods. Unrealised profits, how-ever, are not considered until the moment theyare realised (either at maturity or whensecurities in the portfolio of an NCB are sold).As a consequence of obtaining information onaccrued interest following accounting rules, theoverall amount of income on reserve assetscould be systematically underestimated. It istherefore recommended also to use informationfrom other available sources (i.e. the operationsdepartments) in order to come closer to avaluation of the underlying financial instrumentson a marked-to-market basis.

3.5 Current transfers

Transfers are offset items required to balanceunilateral transactions in which one economicentity provides a real resource, such as goods


or services, or a financial item to another entitywithout receiving any real resource or financialitem in exchange.

Current transfers of the euro area consist oftransfers that are not transfers of capital andthat directly affect the level of disposableincome of the euro area donor or recipient.They include those of general government, e.g.transfers relating to current internationalco-operation between different governments,payment of current taxes on income andwealth, etc., and other transfers, e.g. workers'remittances, insurance premiums - less servicecharges - and claims on non-life insurance.

3.6 Capital account

The capital account covers (i) capital transfersand (ii) the acquisition/disposal of non-produced, non-financial assets.

3.6.1 Capital transfers andsub-components

3.6.1.1 Distinction of capital transfers from

current transfers

The separation of capital and current transferswithin the b.o.p. has been introduced for thepurpose of achieving compatibility withNational Account statistics. For b.o.p. statistics,the sum of the current account balance and thebalance on capital account corresponds to thenet lending/net borrowing of the total economy.However, the current account balance as suchis viewed as an important economic indicatorand the classification of transfers as current orcapital has an impact on the resulting surplus ordeficit on the current account. It is, therefore,vital that transfers are recorded appropriatelyin the b.o.p. current or capital account.

For the definition of transfers and currenttransfers see Section 3.5.

Capital transfers consist of:(i) transfers involving transfers of ownership

of fixed assets;

(ii) transfers of funds linked to, or conditionalupon, the acquisition or disposal of fixedassets; or

(iii) the cancellation, without any counterpartsbeing received in return, of liabilities bycreditors and may be in cash or in kind.

Capital transfers in cash are linked to, orconditional upon, the acquisition or disposal ofa fixed asset by one or both parties to thetransaction and have to be recorded when thepayment is due to be made.

Capital transfers in kind are (i) transfers ofownership of a fixed asset or (ii) the forgiveness,by mutual agreement between creditor anddebtor, of the debtor's financial liability when nocounterpart is received in return by the creditor.

Capital transfers involve the disposal/acquisitionof assets resulting in a change in the stocks ofassets of one or both parties to the transaction.They are usually large and occur infrequently,even though there are exceptions, as in the caseof some public development aid transactions,for instance.

In practice, the distinction between current andcapital transfers is to be found in the use of thetransfer by the recipient country. B.o.p. compilersoften encounter classification problems in thecase of debits (the recipient is a non-resident)when the use of the transfer is difficult toidentify. Some examples are listed below:(i) public development aid/government aid

to developing countries often takes theform of global funding for a public budgetwithout any separation according to thereal use of the funds: operating expenditureor investment (public equipment orsubsidiaries of private firms);

(ii) inheritance tax may be regarded in twodifferent ways: as a transfer of capital bythe taxpayer or as a current receipt by thegovernment;

(iii) small instalments;(iv) the treatment of set-aside payments/

subsidies in agriculture for mandatoryproduction cut-backs.


In the case of serious doubts about a cashtransfer, it should be classified as a currenttransfer and should hence appear in thecurrent account. Of course, reverting to thisclassification has implications, so that each casemust be considered carefully by b.o.p.compilers.

Besides the general problem of correctlyidentifying the use of transfers on the debit side,there is a special difficulty relating to transfersbetween EU institutions and Member States,which can involve large amounts. Since the useof funds received through transfers of EUinstitutions (grants, subsidies, etc.) is sometimesdifficult to determine, the EU institutions makingthe payment may record the transactions ascurrent transfers and the recipients may recordthem as capital transfers, and vice versa. In thisrespect, the European Commission (Eurostat)may in future provide the Member States with atentative split of each EU fund into current andcapital transfers.

3.6.1.2 The sub-component of debt

forgiveness

When a creditor in a euro area Member Stateformally agrees - via a contractual arrangement- with a debtor in another country to forgive(extinguish) all, or part, of the debtor'sobligations, the amount forgiven is treated as acapital transfer from the creditor to the debtor.In effect, the b.o.p. statistics reflect a reductionof the liability offset by the transfer. Thus, onlycancellations based on mutual agreementsrepresenting capital transfers should berecorded in the euro area b.o.p., while thewriting-off of debts reflects a capital loss whichshould not be recorded as a transfer.

Data on general government debt forgivenessshould be available from official sources ormight be made available to the central bankdirectly by the general government/Treasury.Data on debt forgiveness by banks aresometimes more difficult to capture, although insome Member States they are available directlyfrom the euro area resident banks.

3.6.1.3 The sub-component of investment

grants

Investment grants consist of capital transfers, incash or in kind, made by governments to unitswhich are not residents of the euro area, or viceversa, to finance all or part of the costs ofacquiring fixed assets. The recipients are obligedto use investment grants received in cash forpurposes of gross fixed capital formation, andthe grants are often tied to specific investmentprojects, such as large construction projects. Ifthese projects continue over a long period oftime, investment grants (in cash) may be paid ininstalments. Payments in instalments have to beclassified as capital transfers, even in caseswhere they are recorded successively indifferent accounting periods. Hence, if a largecountry makes investment grants to a numberof smaller countries, these investment grantsshould be recorded (i) as capital transfers, eventhough the large country may regard theseinvestment grants as current transfers, and (ii)by both parties, even though these investmentgrants involve the acquisition/disposal of anasset/assets by only one of the parties.

In principle, official records should provide dataon investment grants. However, these recordsare often held by different official bodies andare, in some cases, not easy to translate intob.o.p. items.

3.6.1.4 The sub-component of migrants'

transfers

Migrants are individuals other than students,medical patients and diplomatic, military andsimilar personnel who move their home fromone country to another and who stay in the newcountry for at least one year. Migrants' transfersrefer to the household and personal effects,together with the financial claims and liabilitiesthat migrants transfer at the time they movefrom one country to another.

The value of the household and personal effectsof migrants, together with the movable capitalgoods that they actually transfer, should berecorded as transactions in goods, with


offsetting entries under migrants' transfers inthe capital account. The distinction betweenmigrants' transfers and workers' remittances isdifficult to make when transfers are made incash, and the amounts involved seem to besignificant. Other migrants' transfers can also beproblematical.

Migrants' transfers are difficult to capturestatistically because the offsetting entry in theb.o.p. is not always an account at a bank. B.o.p.compilers use various data sources to obtainthe data or rely on surveys.

3.6.2 Acquisition/disposal of non-producednon-financial assets

Acquisitions/disposals of non-produced, non-financial assets cover the acquisition/disposal ofnon-produced, tangible assets (land and sub-soil assets) and the acquisition/disposal of non-produced, intangible assets, such as patents,copyrights, trademarks, franchises, etc., andleases or other transferable contracts. Only thepurchase/sale, but not the use of such assets, isto be recorded in this category of the euro areacapital account. Concerning transactions inland, an acquisition/disposal is deemed to occurbetween resident units, and the non-residentacquires a financial claim on a notional residentunit. Therefore, changes of ownership in landusually have to be classified as financialtransactions under direct investment (also seeSection 3.7.1 "Direct investment/definition andcoverage").

3.7 Direct investment

3.7.1 Definition and coverage

Direct investment is a category of internationalinvestment that reflects the objective of aresident entity in one economy to obtain alasting interest in an enterprise resident inanother economy. In line with internationalstandards (IMF/OECD), what is known as the�10% ownership criterion� is applied in orderto infer the existence of a lasting interest in thecase of the euro area b.o.p and i.i.p. Based on

this criterion, a direct investment relationshipcan exist between a number of relatedenterprises, regardless of whether the linkageinvolves a single chain or a number of chains. Itcan extend to a direct investment enterprise�ssubsidiaries, sub-subsidiaries and associates.Thus, ownership by euro area residents of theequity of an enterprise resident outside theeuro area (or vice-versa) which qualifies asdirect investment constitutes a directinvestment relationship for the euro area. Oncethe direct investment has been established, allsubsequent financial flows between the relatedentities are recorded as direct investmenttransactions, regardless of the financialinstrument used, except in the case oftransactions between affiliated banks (MFIs) andother financial intermediaries where directinvestment transactions are confined to those ofa permanent capital nature.

Special purpose entities (SPEs) are enterprises inthe form of holding companies, base companies,regional headquarters or other types ofsubsidiaries, which are established for thepurpose of managing foreign exchange risks,facilitating the financing of investments orotherwise engaging in financial transactions.They are considered to be regular directinvestors and/or direct investment enterprises.However, for SPEs with the sole purpose ofacting as a financial intermediary (as is the casefor banks and other financial intermediaries,such as brokers), transactions recorded underdirect investment are limited to thoseassociated with permanent debt and equity (seeabove).

The components of direct investmenttransactions are equity capital, reinvestedearnings and other capital associated withvarious inter-company debt transactions. Realestate investment including private, non-business real estate investment should berecorded as well. Private non-business realestate investment relates, in particular, to holidayand other residences owned by non-residents,whether for personal use or leased to others.


Equity capital comprises equity in branches, allshares in subsidiaries and associates (with theexception of non-participating, preferenceshares that are treated as debt securities) andother capital contributions.

Reinvested earnings consist of the offsetting entryto the direct investor�s share of earnings notdistributed as dividends by subsidiaries orassociates and earnings of branches notremitted to the direct investor recorded underinvestment income. (See Section 3.4.5.1�Reinvested earnings�).

Other capital covers all inter-company financialtransactions (borrowing and lending of funds) �including debt securities and suppliers� credits(i.e. trade credits) � between direct investorsand subsidiaries, branches and associates.

3.7.2 Recording direct investment on adirectional basis

Following the recommendations of the IMF andEurostat/OECD guidelines, direct investmentrelationships of the euro area are recordedusing the directional principle, implying that thefinancial transactions between the euro arearesident direct investors and the non-euro areadirect investment enterprises are classified asdirect investment abroad in the euro areab.o.p./i.i.p. Symmetrically, the financialtransactions between resident direct investmententerprises and non-euro area direct investorsare classified as in direct investment in thereporting economy in the euro area b.o.p./i.i.p.

It is therefore essential to determine the statusof the euro area resident enterprise (i.e. eitheras a direct investor or as a direct investmententerprise) in relation to its counterparty ineach individual transaction (likewise forholdings). However, the identities of the partiesinvolved and their positions relative to a grouphierarchy, which may change over time, are notalways directly available from some collectionsystems; thus compliance with the definitionmay cause problems in practice. The applicationof the directional principle is particularly

difficult in the case of the following activities:(i) reverse loans with either zero or less

than 10% cross participation. Owing tothe practical difficulties involved inrecognising them as reverse flows, theseloans are often classified according tothe assets/liabilities principle, with theresult that all assets are recorded as directinvestment abroad and all liabilities asdirect investment in the reportingeconomy, regardless of the status of theresident enterprise involved in thefinancing;

(ii) double status enterprises. Determining theresident status of the enterprise isimpeded where the firm is affiliated (directinvestment enterprise) to a parentcompany resident outside the euro areaand is, at the same time, itself a directinvestor in other affiliates resident outsidethe euro area.

The establishment of comprehensive registersto determine the relationship of the euroarea resident company vis-à-vis each directinvestment-related non-euro area residententerprise constitutes a useful tool. How-ever, since creating and maintaining suchcomprehensive registers so as to work in a fullyautomated way is costly, most compilersidentify the status of companies by using acombination of:(i) an individual selection procedure, which

consists in requesting additionalinformation on the status of the residentcompany vis-à-vis the non-residentcounterparty from the reporting agentsfor all cross-border flows (and similarlyfor stocks) above a certain threshold;and

(ii) information from registers, by carrying outcross-checks as far as possible.

The threshold aims to ensure that the selectionof enterprises is representative. In principle,this threshold is applied to holdings andtransactions according to two main selectioncriteria:(i) the importance of the reporting company:


the identity of the non-residentcounterparty must be provided for allreported cross-border flows/holdings ofthe most significant resident directinvestors/direct investment enterprises;

(ii) the amount of transactions/holdings: in thiscase, the obligation to identify the non-resident counterparty is restricted to allcross-border flows exceeding the amountof the threshold.

This combined approach, using registers andindividual information from reporting agents,allows a correct classification of flows (andstocks) exceeding the threshold according tothe directional principle and can be applied bymost euro area countries. It produces reliableresults in accordance with the approvedmethodology, thereby increasing the coherenceand compatibility of the euro area b.o.p./i.i.p.statistics.

However, asymmetries at the euro area level canstill appear owing to the impossibility of defininga common threshold in terms of an absolutevalue. In this respect, information on directinvestment relationships obtained via themethod described above may be used todevelop less costly comprehensive registers,which could progressively be used to improveclassification.

3.7.3 Special issues related to stocks

3.7.3.1 Valuation proposals

With regard to the valuation of direct investmentstocks, the internationally recommendedapproach, e.g. that of the OECD, is to valuedirect investment at market prices. However, thepractical difficulties of applying market values inthe case of direct investment are acknowledgedand estimation methods have been discussedand are acceptable. For the time being, bookvalues are currently used by most compilerswithin the euro area, though leading toinconsistencies for the compilation of the euroarea aggregate and significant gaps with marketvalues. This practice reflects the fact that

company balance sheet values � irrespective ofwhether they are regularly revalued to currentmarket value or whether they are recorded onthe basis of historical cost or whether they arebased on an interim but not current revaluation� represent the only source readily available inmost countries. Efforts will be made toapproach market values for direct investmentstocks so as to foster their consistency withother statistics.

3.7.3.2 Issues related to the accumulation

of flows

In cases, in particular, where the real stocksresulting from surveys are not available within areasonable time horizon, compilers useaccumulated flows to supplement the outcomeof the latest surveys. However, the use ofaccumulated flows for the estimation of directinvestment stocks poses several problems. Evenif reinvested earnings are captured intransactions and the directional principle isapplied to the direct investment flows,significant discrepancies can arise between realstocks data and the estimates obtained bymeans of the accumulation of flows, owing todifferent valuation schemes. Therefore, theunadjusted accumulation of flows is not regardedas a useful method for the estimation of directinvestment stocks data within the euro area.Only in cases where (i) the basic benchmarkstocks data are well-known, (ii) occasionalsurveys are developed and (iii) a reconciliationexercise between stocks and flows is carried outare accumulated flows used to obtain morefrequent and/or initial estimated data.

3.8 Portfolio investment


The euro area portfolio investment accountincludes (i) equity securities and (ii) debtsecurities in the form of bonds and notes andmoney market instruments, except for thosefalling into the category of either directinvestment or reserve assets. Financial derivativesare excluded from portfolio investment and


shown in a separate category of the financialaccount and the i.i.p. (see Section 3.9 �Financialderivatives�), in line with recent IMFrecommendations.

The equity securities item covers all instrumentsrepresenting claims on the residual value ofincorporated enterprises after the claims ofall creditors have been met. Shares, stocks,preferred stock or shares, participation,or similar documents usually denote ownershipof equity. Transactions/holdings of sharesof collective investment institutions, e.g.investment funds, are also included.

Bonds and notes are, in principle, securitiesissued with an initial maturity of more than oneyear which usually give the holder (i) theunconditional right to a fixed monetary incomeor contractually determined variable monetaryincome (payment of interest being independentof the earnings of the debtor) and (ii) theunconditional right to a fixed sum in repaymentof principal on a specified date or dates.Transactions and holdings in securities issuedwith a maturity of more than one year arealways classified as bonds and notes in the euroarea b.o.p./i.i.p., even though their residualmaturity at the time of the investment may beless than one year.

Unlike bonds and notes, money marketinstruments are securities issued with an initialmaturity of less than one year. They generallygive the holder the unconditional right toreceive a stated, fixed sum of money on aspecified date. These instruments are usuallytraded, at a discount, in organised markets; thediscount is dependent upon the interest rateand the time remaining to maturity. Examples ofsuch instruments are Treasury bills, commercialand financial paper and bankers� acceptances.

Collateralised loans and other relevanttransactions/holdings related to repurchaseagreements involving debt securities arerecorded in the euro area other investmentaccount.

The recording of portfolio investmenttransactions in the euro area b.o.p. takes placewhen the euro area creditors or debtors enterthe claim or liability in their books. Transactionsshould be recorded, in principle, at the effectiveprice paid or received, less commissions andexpenses. Thus, in the case of securities withcoupon interest, the interest accrued from thelast payment of interest is included and, forsecurities issued at a discount, the interestaccumulated since issue is included. Offsettingentries for interest accrued are required in thequarterly b.o.p. financial account and in the i.i.p.(see Section 3.4.6 �Specific issues related toportfolio investment income�); in the monthlyb.o.p. key items the same treatment isrecommended (but not required), in line withthe income account.

3.8.2 Geographical allocation principle forchange of ownership

With regard to portfolio investment instruments,whether these are considered to be externaldepends only on the residence of the issuer inthe case of assets and on that of the beneficiary/holder of the securities in the case of liabilities,regardless of the type of instrument, thecurrency of denomination or the location of themarket on which the securities are issued.

Different institutional features of the financialmarkets impinge on the ability of the compilerto allocate the flows/stocks in euro arealiabilities (and in debits to the related incomeaccount) solely according to the creditorprinciple. Given the participation of variousfinancial intermediaries in internationaltransactions and the presence of an activesecondary market for many existing liabilities,the euro area resident issuer (and the b.o.p.compiler) may not be aware of the finaldestination of the outward income flow or ofthe residency of the ultimate beneficiaries/holders of securities issued by euro arearesidents. This is particularly likely when flowsoccur through international financial centres orclearing houses. Therefore, for portfolioinvestment, the recording of liabilities (and the


related income debits) in many cases in practicefollows one variation of the transactor principle,i.e. the first known counterparty. It may bepossible, periodically, to reassess the dispositionof the euro area�s portfolio liabilities by usingcounterparty data from creditor countries. TheIMF�s Co-ordinated Portfolio Investment Surveycould play a valuable role in this respect.

On the assets side (and for related incomecredits), the application of the debtor principleshould prove more straightforward, as theresident holder should know the identity andcountry of residence of the debtor (issuer).

3.8.3 Specific types of debt securities

The following debt instruments have certainspecific characteristics which have a bearing onhow they are recorded.

Note issuance facilitiesA note issued under a note issuance facility(NIF; usually a medium-term arrangement of fiveto seven years) is a short-term instrument (e.g.three to six months) issued by a borrower in hisown name under a contractual commitmentwith a bank or group of banks either tounderwrite the notes and purchase any unsoldnotes at particular borrowing or rollover datesor to provide stand-by credits. The facility is aform of revolving credit, and the paper issued isoften referred to as a Euronote or a promissorynote. If the borrower is a bank, the paper is, ineffect, a certificate of deposit. (At times, a facilityis arranged to issue short-term notes withoutan underwriting commitment, but usually thereis a separate stand-by credit commitment.Notes issued in this way are referred to asEurocommercial paper.)

For the purpose of b.o.p. recording, the creationof NIFs does not require entries in the financialaccount because the NIFs are contingent. Whennotes are issued and sold under an NIF, thetransaction is recorded in such a way that thesale is entered as a liability for the borrower andas an asset for the buyer (the bank or the otherinvestor). Repayments are entered accordingly.

However, any fees associated with the creationand operation of NIFs or bank placements ofnotes with other investors are entered asfinancial services in the current account. Asrecommended for other debt securities,discounts or premiums on the notes purchasedby banks or other investors (apart from the feespaid by the latter to banks) are treated asinterest income or negative interest income,respectively, at the time of purchase.

Perpetual bondsPerpetual bonds are bonds that never mature.This means that such a bond theoreticallyprovides the holder with an infinite stream ofincome payments. In a number of countries,perpetual bonds are classified as second-tierequity in the balance sheets of the issuingenterprises. Nevertheless, as the income payableon these bonds is normally independent of theearnings of the issuing enterprise, perpetualbonds are classified as bonds and notes, ratherthan as equity, in the b.o.p. and i.i.p.

Collateralised mortgage obligationsCollateralised mortgage obligations and otherasset-backed securities are instruments thatrelate specifically to an asset or a group ofassets held by the issuing enterprise. Banks mayissue securities based on mortgage loans theygrant to households. The income that banksearn from lending activities is used to payinterest on the securities and the mortgages areused as collateral for the securities. The holderof the asset-backed security does not own theasset backing the security; the collateralprovided with the security is contingent.Securities based on mortgage obligations arefavoured by lending institutions, as it is possiblewith such securities to match the maturity of anenterprise�s assets (its mortgages) with thematurity of its liabilities (the securities). Thereare other types of asset-backed securities thatenable the issuing enterprise to have access tocash before the related assets mature.

3.8.4 Borderline cases

It is not always easy to distinguish portfolioinvestment from the other categories of the


financial account and the i.i.p. Sinceclassification as portfolio investment is based onthe criterion of tradability, all instruments whichare traded or tradable in organised and otherfinancial markets must, in principle, beconsidered as portfolio investment. Theexceptions relate to those transactions orpositions which:(i) exceed direct or, where available, indirect

ownership of 10% or more of the equityand have to be recorded as directinvestment (see Section 3.7.1); or

(ii) fall under the definition of financialderivatives (see Section 3.9.1) or reserveassets (see Section 3.11.1); or

(iii) have to be classified as other investment.

The distinction between portfolio investmentand other investment is less clear-cut than inthe case of the other financial account and i.i.p.items and depends on whether the subject of atransaction/position is defined as a �security�and on whether or not it takes the form of anequity or a debt security. Only transactions/positions in securities have to be recordedunder portfolio investment. The followingcriteria are used to judge whether a financialinstrument should be considered to be asecurity:(i) the provision of an ISIN code;(ii) the applicability of accounting rules and

banking regulations;(iii) market practices (derived from reports

of the International Securities MarketAssociation);

(iv) certain guidelines drawn from the Balanceof Payments Manual of the IMF and theSNA 93/ESA 95.

Nevertheless, there are still some problematicareas or borderline cases between portfolioinvestment and the other financial accounts andi.i.p. items which are mentioned below:

Private placementsTwo types of private placements can bedistinguished. Publicly announced privateplacements are tradable as from the time ofissue and should, therefore, clearly be recorded

in portfolio investment. Privately arrangedprivate placements are placements of securitieswhich are not publicly announced at the time ofissue and should be recorded under otherinvestment unless or until they becometradable.

Participating sharesParticipating shares are regarded as normalequity and recorded under portfolio investmentif they account for less than 10% of the shares ofan enterprise and are, therefore, not to beclassified as direct investment.

Investments in mutual funds and investment trustshave to be recorded as equity under portfolioinvestment. Negotiable certificates of depositshould be classified as portfolio investment, inthe form of debt securities. Depository receiptsshould be recorded according to the underlyinginstrument.


3.8.5.1 Valuation proposals

As financial instruments within portfolioinvestment are affected to a huge extent byprice adjustments, compilation based on marketvalue has priority in this area. Therefore, marketvalues should be applied as far as possible in thecase of equity and debt securities, on both theassets and the liabilities side, owing to the factthat the i.i.p. must show the economic value ofthe resources and not the value of redemption.The relevant prices are those prevailing at theend of the reference periods to which thereporting relates.

The market prices of both equity and debtsecurities listed in organised markets or readilytradable are easy to identify as they are thequotation prices. The equity of enterprises listedon a stock exchange should be valued using theprice prevailing on the main stock exchangeconcerned at the close of business on the lastday of the period. Equities not quoted on stockexchanges or not regularly traded should beestimated by using either prices of comparable


quoted shares or theoretical prices derivedfrom the enterprise�s net asset values. A quotedtraded market price, again at the close ofbusiness on the last day of the period, should beused for the market value of listed debt securities.For debt securities that are not readily tradable, thenet present value of the expected stream offuture payments/receipts could be a goodproxy. Otherwise, the market price of a securitythat closely approximates the tenor, risk andpayment characteristics of the unpriced securitycould be an alternative. Finally, a price indexbased on similar maturities in the samecurrency could also be used to approach themarket value of these types of securities. In allcases, closing mid-market exchange ratesprevailing at the end of the period should beapplied to the instruments denominated inforeign currency in order to convert their stockvalues into national currency.

3.8.5.2 Issues related to the accumulation

of flows

As in the case for direct investment, severaldiscrepancies between real and estimated stockdata occur when unadjusted accumulated flowsare used to collect the portfolio stock data. Inthat case, both price and exchange rateadjustments are necessary for the accumulationof flows to be a good proxy for marked-to-market stocks and, therefore, to be compatiblewith direct recorded portfolio stock data.

The perpetual inventory model is the mostcommon method used to derive priceadjustments. This model requires a benchmarkestimate of the stock data. Such an estimate canbe obtained from an occasional collection ofstock data. Alternatively a point in time whenthe stock position of the instrument is known orassumed to be nil can also be used as the base.The model calculates the value of a stock at theend of a period as being equal to the value ofthe stock at the beginning of the period, plus theimpact of transaction and non-transaction-related changes in the value of the stock duringthe period. Calculations should initially be madein the currencies in which the instruments are

denominated and converted, by using prevailingexchange rates, to the base currency.

More precise estimates could be obtained bymaking the required adjustments on a security-by-security basis, although much more detailedinformation would be necessary in order to takefactors such as bonus issues or write-offs intoaccount. Adjustments should also be carriedout whenever an issue matures, if detailedinformation is available. The availability of ISINcodes for all securities would be very helpful forthis approach. Otherwise, market prices and/orindices could be used to estimate the broadeffect that these changes in volume may have onthe stock outstanding.

Exchange rate adjustments also have to beaccounted for either on a security-by-securitybasis or for aggregated security data analysedby currency. Where exchange rates are volatile,such adjustment may be necessary even forshort-term securities. The actual exchange ratesof the transaction and the closing mid-marketexchange rates at the end of the periodshould provide the valid reference necessaryto derive exchange rate adjustments. Theaverage exchange rate for the reference periodcould be used as a proxy for the actualexchange rate at which the transaction wasexecuted, where this is not available or wheredata are reported in aggregate.

3.9 Financial derivatives


Financial derivatives are financial instrumentsthat are linked to a specific financial instrument,indicator or commodity, and through whichspecific financial risks can be traded in financialmarkets in their own right. Transactions infinancial derivatives are treated as separatetransactions, rather than as integral parts of thevalue of underlying transactions to which theymay be linked. The transactions and positionsrecorded under the item �financial derivatives�in the euro area b.o.p. and i.i.p. are those inoptions, futures, swaps, forward foreign exchange


contracts and credit derivatives. For practicalreasons relating to measurement, embeddedderivatives are not separately distinguishedfrom the underlying instruments to which theyare linked. Owing to practical problemsinvolved in separating the asset and liabilityflows in a meaningful way for somederivative instruments, all financial derivativestransactions in the euro area b.o.p. financialaccount are recorded on a net basis. Bycontrast, financial derivative asset and liabilitypositions in the i.i.p. should be recorded on agross basis. The recording of transactions infinancial items takes place when both creditorand debtor enter the claim and liability,respectively, in their books. A further importantpoint is to distinguish which flows/stocksassociated with financial derivatives areproperly recorded in the financial derivativesaccount in the b.o.p./i.i.p. and which shouldbe recorded elsewhere (e.g. under otherinvestment)3.

The following sections will introduce the maintypes of financial derivatives and presentpractical issues related to their recording in theb.o.p. and i.i.p.

3.9.2 Futures

3.9.2.1 General characteristics of futures

A futures contract is a form of forward contractin that it conveys the obligation to purchase orsell a specified quantity of an asset at a set priceon a fixed future date. The most importantcharacteristics of a futures contract are that theterms of the contract are standardised, thattrading must be conducted upon, and regulatedby, a centralised exchange, and that futures aresubject to regular margining. The contractsusually state the quantity to be delivered, andthey are normally traded in a cycle ofpredetermined delivery dates (e.g. March, June,September and December). The trading of

futures contracts takes the form of �openoutcry� in trading pits or via automated tradingsystems, with price movements being expressedin �ticks�; one tick represents 0.01% of thenominal value of the trading unit (e.g. 0.01% ofa US cent, or 0.0001% of a US dollar).

Exchanges use the services of a clearing houseto match and settle all transactions betweenmembers. Futures contracts are marked-to-market daily, which involves the buyer/sellerpaying/receiving the difference between the rateat the close of business of the day and the rateon the previous day. In order to operate on anexchange, a trader must have a margin account,into which the trader must pay initial margins(repayable) and variation margins (non-repayable) when they are required.

The initial margin requires each party to acontract to deposit a fixed sum with theclearing house as soon as the contract isexecuted. This amount is set at a level which theexchange considers sufficient to cover theanticipated scale of daily price movements andis used to ensure that each counterparty canmeet its potential obligations in the event oflosses. While the initial margin can be a cashpayment, it is often met by posting collateral.The initial margin is returned to the depositorsonce the contract is closed out.

The variation margin, however, reflects the actualprofit or loss realised on the contract from adaily marked-to-market valuation and is used,over the life of the contract, to fund the effectivetransfer of the asset from one counterparty tothe other. Owing to the fact that the transfers toand from both counterparties� accounts takeplace daily, the contract starts at a risk neutralposition each day. Some exchanges, however,choose to retain this daily variation margin untilthe end of the contract, rather than passing iton each day. In many cases the marginingposition of each counterparty is calculated on anet basis (netting purchased and sold contracts)by the clearing house. In practice, there mightbe only one margining account, which makes itmore difficult to separate initial margin and

3 In this context, it is worth noting that in money andbanking statistics repayable margin payments areconsidered to be deposits only where they are paid to orreceived by an MFI.


variation margin payments.

In all futures deals, the clearing house itselfbecomes a legal counterparty to the contract.Hence, the creditworthiness of anycounterparty is not a factor in exchange-tradedcontracts, as the clearing house will settle allaccounts should one counterparty default.When establishing a futures contract, acounterparty will have to pay commission to abroker for carrying out a transaction, as well asto the clearing house itself.

There are two main ways of liquidating a futurescontract. One is to take up an offsetting futuresposition prior to the value date in order to netoff the existing obligation on the clearinghouse�s books. The other is to allow the contractto expire, at which time the buyer can sometimestake physical delivery of the commodity orinstrument (where such exist) or choose toaccept the cash equivalent. In the most activeand developed markets, such as short-terminterest rate futures markets, usually only cashsettlement is authorised (e.g. three-monthcontracts on the LIFFE, MATIF, or DTB exchanges).However, long-term contracts (e.g. ten-yearcontracts) may involve delivery of the securities.

3.9.2.2 Practical treatment of futures in the

b.o.p./i.i.p.

At the start of a futures contract, no transactionis recorded under financial derivatives in theb.o.p. The futures-style variation marginpayments that are made during the life of thecontract are non-repayable in nature andshould be recorded as transactions in financialderivatives. Similarly, as is the case forexchange-traded options with futures-stylemargining (see Section 3.9.3.1 below), the initialmargin payments, which are repayable to thepayer, should be recorded as transactions in theother investment account.

In principle, the market values of futurescontracts should be recorded as financialderivative assets and liabilities in the i.i.p. Inpractice, however, the market values of futures

with daily margining, as mentioned earlier, areclose to zero at the end of each day , and it isnot necessarily cost effective to collect them.The outstanding amounts of initial margins paidare recorded as assets in the other investmentaccount and the outstanding amounts of initialmargins received are recorded as liabilities inthe other investment account.

More specifically, the recording of futuresshould be as follows:

Flows(i) Non-repayable margins: futures-style

variation margin payments:� amounts paid or received during the period

are recorded under financial derivatives;� the inflow (credit) of cash is regarded as a

decrease in assets and the outflow (debit)of cash is regarded as a decrease in liabilities.

(ii) Repayable margins: initial margin payments:� amounts paid or received during the period

are recorded under loans/currency anddeposits in the other investment account;

� the inflow (credit) of cash is regarded as adecrease in assets or increase in liabilitiesand the outflow (debit) of cash is regardedas a increase in assets or decrease inliabilities.

Stocks(i) Assets:� the sum of contracts with a positive

market value at the end of the period isrecorded in the financial derivativesaccount;

� the outstanding amount of initial marginspaid is recorded in the other investmentaccount.

(ii) Liabilities:� the sum of contracts with a negative

market value at the end of the period isrecorded in the financial derivativesaccount;

� the outstanding amount of initial marginsreceived is recorded in the otherinvestment account.


3.9.3 Options

3.9.3.1 General characteristics of options

An option is an instrument that gives thepurchaser the right, but not the obligation, tobuy/sell a specified amount of a particularfinancial instrument, or commodity from/to thewriter (seller) of the option within a givenperiod, or at some specific future time, at aspecified price. Options can be eitherexchange-traded or over-the-counter (OTC)instruments. Exchange-traded options arepackaged in fixed quantities and have a fixedrange of dates. Options can be marginedoptions-style (where there is an exchange of theinitial premium, and daily variation margins maybe covered by collateral rather than cash) orfutures-style (where there is no initial premiumand variation margins are settled in cash). OTCoptions, by contrast, are tailor-made to meet thecustomer�s requirements, and are therefore lesssuitable for trading on secondary markets.

At the inception of the contract, the purchaserof the option usually pays a premium to theseller. At maturity, the holder (buyer) of theoption has the right, but not the obligation, toexercise the option. If the right is not exercised,the option expires and is worthless (the lossincurred by the buyer is equal to the premiumpaid).

If the option is exercised on the due date(�European style�; or within the specified rangeof dates, i.e. �American style�), then a netpayment (representing the difference betweenthe market price and the contractually agreedstrike price) is usually made by the writer to theoption holder. However, in some cases, insteadof a net payment, a delivery of the underlyinginstrument or commodity takes place.

The percentage of the contracts reachingmaturity (i.e. contracts which are not closed outprior to the expiry date), and the percentage ofthose that end with the delivery of theunderlying instrument, vary considerably frommarket to market.

Different types of margin payments are made inthe exchange-traded markets. The margin is ameasure of risk to an institution that iscounterparty to a contract. Margining takes twoforms; an initial margin, to cover potential futureadverse price movements, and a variation margin,to cover actual past price movements since theprevious variation margin settlement. The initialmargin is held as a deposit (or by postingcollateral) for the duration of the contractwhich is returned when the contract expires.Variation margining is carried out eitheroptions-style or futures-style. The choicedepends on the type of instrument and thepractice applied by the exchange concerned.For example, equity options are often marginedoptions-style, while interest rate options areusually margined futures-style.

In options-style margining, the purchaser of theoption pays a premium to the seller and thewriter posts an initial margin to the clearinghouse. Daily variation margin payments aremade to the buyer only in proportion to the netliquidation value, since the clearing housecovers itself against potential future pricechanges in favour of the writer. The buyer�smargin account can be fully realised only whenthe deal is closed out or the option exercised.

With futures-style variation margining, there isno premium and this is reflected in the pricethat the contract is quoted at; options that aremargined futures-style can be regarded assimilar to futures, except that the downside riskfor the buyer is capped. Both the buyer and theseller are required to deposit initial margins. Thedaily variation margin payment is usuallycollected by the clearing house from one party� and simultaneously paid to the other party �and provides the means for effecting a change inownership.

3.9.3.2 Practical treatment of options with

options-style margining options in the

b.o.p./i.i.p.

OTC options and exchange-traded optionswith options-style margining involve a payment of


the premium up front. The full premium shouldbe recorded under financial derivatives as theacquisition of a financial asset by the buyer, andas the incurrence of a liability by the seller. Atthe close of the contract, the net payments thatreflect the difference between the underlyingmarket price and the strike price should also berecorded under financial derivatives. Thisdifference should be recorded under financialderivatives regardless of whether the underlyinginstrument is delivered or not.

Any actual delivery of the underlying instrumentshould be treated as a separate entry in thefinancial account, and the transaction should berecorded at the prevailing market price. Boththe premium at the start of the contract and netpayments at the close of the contract are non-repayable to the payer (buyer or seller).

Initial margin payments, options-style variationmargin payments or other collateral-typepayments related to option contracts should berecorded as transactions under the otherinvestment account, in currency and deposits.In principle, these are all repayable to the payerand should not therefore be regarded astransactions in financial derivatives. If arepayable margin is made in the form ofsecurities or other non-cash assets, there will beno transaction recorded in the b.o.p., since nochange of ownership takes place.

The market values of the option contracts at theend of the reference period should be recordedin the i.i.p.. Purchased options are regarded asfinancial derivative assets and written optionsare regarded as financial derivative liabilities.The outstanding amounts of initial margins paidare recorded as assets in the other investmentaccount and the outstanding amounts of initialmargins received are recorded as liabilities inthe other investment account.

More specifically, the recording of options withoptions-style margining (including OTC options)should be as follows:

Flows(i) Full premium and net payments at the close

of the contract (difference between theunderlying market price and the strikeprice):

� amounts paid or received are recordedunder financial derivatives;

� the purchase of an option (debit) isregarded as an increase in assets and thesale of an option (credit) is regarded as anincrease in liabilities.

(ii) Repayable margins (exchange-tradedoptions): initial margin payments (writeronly) or options-style variation marginpayments:

� net amounts paid or received during theperiod are recorded under loans/currencyand deposits in the other investmentaccount;

� the inflow (credit) of cash is regarded as adecrease in assets for the buyer of anoption or an increase in liabilities for thewriter of an option and the outflow (debit)of cash is regarded as an increase in assetsfor the buyer of an option or a decrease inliabilities for the writer of an option.

Stocks(i) Assets:� the market value of the purchased options

at the end of the period is recorded in thefinancial derivatives account;


(ii) Liabilities:� the market value of the written options at

the end of the period is recorded in thefinancial derivatives account;


3.9.3.3 Practical treatment of futures-style

options in the b.o.p./i.i.p.

In the case of exchange-traded options withfutures-style margining, payment of the premiumdoes not take place at the start of the contract,


and there is thus no transaction in financialderivatives at the start of the contract. Initialmargin payments, which are repayable to thepayer, should be recorded as transactions in theother investment account. The futures-stylevariation margin payments that are made duringthe life of the contract (usually daily) are non-repayable in nature and should be recorded astransactions in financial derivatives.

In principle, the market values of exchange-traded options should be recorded as financialderivative assets and liabilities in the i.i.p. Inpractice, however, the market values ofexchange-traded options with frequent marginingare close to zero at the end of each day. (Themarket value of a futures-style marginedcontract can be argued to be equivalent to anyunsettled variation margin payments, althoughthis may be difficult, in practice, to report formany institutions. However, as the figures arerelatively small, the collection of such data is oflimited value.) The outstanding amounts ofinitial margins paid are recorded as assets in theother investment account, and the outstandingamounts of initial margins received are recordedas liabilities in the other investment account.

More specifically, the recording of futures-styleoptions should be as follows:

Flows(i) Non-repayable margins: futures-style variation

margin payments:� amounts paid or received are recorded

under financial derivatives;� the inflow (credit) of cash is regarded as a

decrease in assets and the outflow (debit)of cash is regarded as a decrease in liabilities.

(ii) Repayable margins: initial margin payments:� amounts paid or received during the

period are recorded under loans/currency and deposits in the otherinvestment account;

� the inflow (credit) of cash is regarded as adecrease in assets or an increase inliabilities and the outflow (debit) of cash isregarded as an increase in assets ordecrease in liabilities.

Stocks(i) Assets:� the market value of the purchased options

at the end of the period is recorded in thefinancial derivatives account;


(ii) Liabilities:� the market value of the written options at

the end of the period is recorded in thefinancial derivatives account;


3.9.4 Swaps, forwards and forward rateagreements

3.9.4.1 General characteristics of swaps,

forwards and forward rate agreements

Swaps are contractual agreements between twoparties who agree to exchange sets of cashflows. Contracts are negotiated by thecounterparties themselves and, in principle, thepayment arrangements can be tailored to thewishes of the counterparties. However, standardconventions are followed in the most activeswap markets, thus helping the b.o.p. compilerto set out instructions for reporting. In manymarkets, such as the interest rate swap market,the principal is not exchanged at the start of thecontract. Nonetheless, in the case of cross-currency interest rate swaps, for instance, theprincipal is sometimes exchanged at the start ofthe contract. Interest payments are usuallycarried out on a net basis. Swaps are mainlyOTC contracts, but exchange-traded contractsmay also exist.

A forward contract is an agreement between twoparties to purchase/sell something at apredetermined price at a later date. Forwardsare always OTC contracts (by definition, afuture is a forward that is traded on anexchange). Forward rate agreements (FRAs) arepure interest rate forward contracts. While theinstruments pose the same problems, differing


market practices create unique practical issues.For example, most FRAs are settled via a netcash payment at the end of the contract,whereas forward foreign exchange deals usuallyresult in the delivery of the underlyinginstrument.

Swaps and forwards almost invariably go tomaturity. The only way to offset a position is toenter into a new contract reversing the original,although it is rare for contracts to be formallyclosed out. Swaps, forwards and FRAs areinstruments the value of which can switch frompositive to negative and vice versa throughoutthe life of the contract.

3.9.4.2 Practical treatment of swaps, forwards

and forward rate agreements in the

b.o.p./i.i.p.

Net payments related to swaps (including netinterest) and forwards are recorded astransactions under financial derivatives.Depending upon the contract specifications, netpayments relating to swaps can be made duringthe life of the contract or only when it reachesmaturity. If principal is exchanged in a swap(especially in the case of cross-currency swaps),the possible difference between the two legsrevalued in the base currency should berecorded under financial derivatives.Transactions relating to forward contractsinvariably occur at expiry. Collateral paymentsare only rarely made from one counterparty toanother, but when such cash payments dooccur they should be recorded in the otherinvestment account.

For forward foreign exchange contracts it isrecommended that the difference between theamount paid on the contract date and theamount that would be paid at the spot rateprevailing at settlement should be allocated totransactions in financial derivatives. In settlementdata collection systems in which amounts paidare reported it is, however, difficult orimpossible to identify and separate the marketprice component. A survey data collectionsystem is more practical, but the relatively

heavy burden upon the respondents has to bejudged according to local circumstances.

The market values of swap and forwardcontracts should be recorded in the i.i.p.Although the contract is usually negotiated sothat it has zero marked-to-market value atinception, a contract will gain value for oneparty and become a liability for the other asmarket values change. The value of swap andforward contracts is derived from the differencebetween the agreed contract price and theprevailing market price, or the expected marketprice, which is discounted accordingly. Hencethe relationship between the agreed contractprice and the prevailing market price is a crucialelement in the valuation of swap and forwardcontracts. If the agreed contract price and theprevailing market price are the same, thecontract has no value. If the contract price andthe prevailing market price differ, the derivativescontract does have a value, which can switch tobeing positive or negative during the life of thecontract.

More specifically, the recording of swaps,forwards and FRAs should be as follows:

FlowsSwaps and FRAs (net payments during the periodor at the close of the contract) and forwards (thedifference between the agreed contract priceand the market price at the close of thecontract):� amounts paid or received during the period

are recorded under financial derivatives;� the inflow (credit) of cash is regarded as a

decrease in assets or increase in liabilitiesand the outflow (debit) of cash is regardedas an increase in assets or decrease inliabilities.

Stocks(i) Assets:� the sum of contracts with a positive

market value at the end of the period.(ii) Liabilities:� the sum of contracts with a negative

market value at the end of the period.


3.10 Other investment


The other investment item is a residual categorythat includes all financial transactions notcovered under direct investment, portfolioinvestment, financial derivatives or reserveassets (see also Section 3.8.4 �Borderlinecases� for portfolio investment). Otherinvestment can be further subdivided into(i) trade credits, (ii) loans/currency anddeposits and (iii) other assets/other liabilities. Italso encompasses the off-setting entries foraccrued income on instruments classified underother investment.

Trade credits consist of claims or liabilitiesarising from the direct extension of creditrelating to transactions in goods and servicesand advance payments for work in progress (orto be undertaken) associated with suchtransactions. There are two types of trade creditassets: (i) prepayments on imports and (ii) tradecredit extended on exports. Assets representedby prepayments on imports are extinguishedupon delivery of the goods or servicesand assets represented by trade credit onexports are extinguished by actual payment(postpayment). Trade credit liabilities arise fromthe prepayment of exports or trade creditreceived on imports. Delivery of exportsextinguishes the former and actual payment(postpayment) extinguishes the latter.

Loans/currency and deposits comprise transactionsin the following financial instruments: loans, i.e.those financial assets created through the directlending of funds by a creditor (lender) to adebtor (borrower) through an arrangement inwhich the lender either receives no securityevidencing the transactions or receives anon-negotiable document or instrument;deposits; repo-type operations (see Section3.10.2 �Repurchase agreements, bond lendingand other related instruments�) and currency.Included are, inter alia, loans to finance trade,other loans and advances (including mortgages).In addition financial leases are covered.

Other assets/other liabilities covers all items otherthan trade credits, loans and currency anddeposits. Examples are: capital subscriptions ofthe participating Member States to internationalnon-monetary organisations, changes ininsurance technical reserves, offsets in respectof unsettled securities transactions.

Compared with BPM5 standard components,the other investment presentation of the euroarea b.o.p/i.i.p. is simplified by (i) not requiringany distinction between loans and deposits oneach side of the b.o.p./i.i.p., and (ii) the removalof the maturity breakdown for quarterly/annualb.o.p. and i.i.p. statistics. There is also a changein the presentation of the breakdown (i.e. sectoras first priority) which is compatible, but notidentical, with the BPM5 where instrumentshave priority. For the monthly key items, a splitbetween short-term and long-term flows in thebanking sector is required.

3.10.2 Repurchase agreements, bondlending and other relatedinstruments

The statistical treatment of repo-typetransactions is a complex issue where standardsat the global level are still the subject of debate.Within in the euro area, the followingconsensus treatment has been agreed.

3.10.2.1 Definition of repurchase agreements

Under a repurchase agreement (repo) theholder of a bond sells the bond for cash butagrees to repurchase the bond, or equivalentsecurity, at a fixed price on a fixed date. There isa formal contract between the two parties,which sets out the legal standing of thetransaction. In London and elsewhere, this is thePSA/ISMA Global Master RepurchaseAgreement. The contract allows for margining,marking to market, collateral substitution andmanufactured dividends.

If a coupon is paid during the life of the repo it ispassed on to the original holder (lender) of thesecurities. Most of the coupon payments are


transaction, there is an obligation to return thesecurities.

3.10.2.3Definition of bond lending

Bond lending either involves the lending ofsecurities (collateralised by cash or marketablepaper) or the payment of the fee for the bondslent without any capital transfer involved.Under lending of securities collateralised bycash or marketable paper, the borrower has theright to decide over these securities and maysell them to a third party. The borrower of thesecurity can sell or hold these securities, ordeliver the securities under a futures or optionscontract. The collateral, if cash, will most likelybe invested and the borrower of the securitieswill be paid a rate of interest. Coupon paymentson the bonds belong to the original owner.

3.10.2.4 Recording of repurchase agreements,

bond lending and other related

instruments

The treatment recommended by the ECB isbased on the notion of transfer of �economic�or �beneficial� ownership as distinct fromtransfer of �legal� ownership. All repo-typeoperations, i.e. �genuine� repurchase agreements,sell/buy-back operations and bond lending (in thecase of the latter, only if cash collateral is involved),are treated as collateralised loans in the euroarea b.o.p./i.i.p., not as outright purchases/salesof securities, and are recorded under otherinvestment, within the euro area resident sectorthat carries out the operation. This treatment,which is also in line with the accountingpractices of banks and other financialcorporations, is intended to clarify theeconomic rationale behind these financialinstruments. The firm commitment torepurchase the securities implies that theeconomic ownership remains with the originalowner, who retains the risks and rewardsassociated with that ownership, while notnecessarily retaining legal title. Such aprocedure is, in addition, consistent with thetreatment in money and banking statistics andwith the current practice in the MFI sector.

made to the actual bearer at the coupon date.The back office settlements system willrecognise the actual owner of the couponpayment. According to the ISMA contract, thecoupon is to be passed to the original owner onthe day that it is received, by way of amanufactured dividend.

Under a repo agreement, there is an obligationto return the securities. Therefore, theseinstruments can be labelled as �genuine�repurchase agreements.

In some Member States there are instrumentswhich appear to be similar to genuinerepo agreements or have the same name,but which do not entail an obligation toreturn the underlying securities; instead,there is an �option� to return them. Theseinstruments are, for example, �unechteWertpapierpensionsgeschäfte� or �spuriousrepurchase agreements� (Germany, Luxembourg,Austria and Italy), �Réméré� (France) and�outright sale with an option to buy back�(Denmark and Portugal). Such transactionsshould be recorded under portfolio investment,i.e. the recommendations outlined in thissection do not apply to them.

3.10.2.2Definition of sell/buy-back transactions

Like repurchase agreements, sell/buy-backtransactions are often a way of raising orlending short-term capital which is securedagainst securities, sold or purchased. In contrastto repurchase agreements, the transaction isstructured in two parts, a spot deal and aforward deal, which are, however, executedsimultaneously. The economic benefit of acoupon payment made during the duration ofthe transaction is the same as for repurchaseagreements, but the method of passing it isdifferent. The main difference betweenrepurchase agreements and sell/buy-backtransactions revolve around the settlementsystems required for the two types oftransactions. Repurchase agreements can beconsidered a technical evolution of sell/buy-back transactions. Under a sell/buy-back


As regards other features of repo-typetransactions, it was agreed that:(i) fees associatedwith securities-lending operations should berecorded as financial services, instead of asinvestment income in the b.o.p. and that(ii) repayable (option-style) variation marginsprovided to cover the value of the securitiesplaced as collateral should be recorded asdeposits within the other investment account.

3.10.3 Balances from TARGET operations

From 1999 onwards, with the start of StageThree of EMU, transactions between NCBs (i.e.intra-ESCB transactions), which are generallythe result of cross-border transfers or transferswhich are largely executed via TARGET, giverise to daily intra-ESCB positions/balances. Theeconomic and functional rationale of theseintra-ESCB transactions/balances, which aredenominated in euro, is similar to that of themovements of NOSTRO/VOSTRO accounts.Therefore, the changes in these TARGETbalances are to be recorded as flows on a netbasis under �other investment/assets/monetaryauthorities/loans, currency and deposits� withinthe b.o.p. The recording of these changes on anet basis as �assets� is a convention adopted inorder to simplify the recording procedures.Likewise, the end-of-period intra-ESCBbalances/ positions should also be recorded ona net basis under �other investment/assets/monetary authorities/loans, currency anddeposits� within the i.i.p. As a result, areconciliation of these transactions andpositions would only take place on anet basis. From a euro area b.o.p./i.i.p.perspective, only the aggregate transactions/positions of the Eurosystem with the NCBs ofMember States not participating in the euroarea which are related to the operation ofTARGET are relevant.

3.10.4 Recording of MFIs� transactions inloans and deposits

In the euro area b.o.p., �other investment� ofthe MFI sector (excluding the Eurosystem) hasproved to be a difficult item, in particular with

regard to the compilation of the geographicalbreakdown of these flows. A common methodto derive extra-euro area b.o.p. flows from MFIs�balance sheet stocks must be applied in thosecases where these flows cannot be directlyobtained from the b.o.p. collection system inplace. This procedure consists of (i) convertingthe stocks at the beginning of the reportingperiod (i.e. monthly) and those at the end ofperiod into original currencies by applying themid-point foreign exchange rate correspondingto the currency proportion of the stock as atthe beginning of the quarter and (ii) convertingthe differences in these stocks into euro byusing the average exchange rate of thereporting period (i.e. monthly).


3.10.5.1Valuation proposals

In the case of the other investment holdings, thediscrepancies between the market value and thenominal or book value can be considered to berather smaller than for other financial instruments,except in cases where there have been largewrite-downs or valuations are based onsecondary market quotations. For thesereasons, book values are accepted as thevaluation criteria for other investment stocks,except for loans that are negotiable at adiscount where market value should be applied.

Valuation problems for applying the properend-of-period exchange rates may arise if thecurrency composition of the underlying otherinvestment instruments is not well known. Thisis the case, in particular, for special financinginstruments, such as multi-currency loans, wherethe borrower can instantaneously change theoptional currency, at his own convenience, forthe drawdown, repayment and restatementthroughout the duration of the loan.Consequently, movements in these loans canoccur in several currencies. In these cases,it is recommended to translate each movementin the loan, irrespective of its currency, intothe currency in which the loan was initiallyextended by using the exchange rate prevailing


at the date of the movement. The amountin the basic currency should then be convertedinto euro at the closing mid-market exchangerate prevailing at the end of period. Theresult may be a fairly accurate approach tothe real valuation, except when strong fluctuationsoccur in the value of the currencies in question.

A similar effect occurs when the borrowerarranges exchange rate hedges or swaps on theprincipal with a non-resident. Borrowers oftenreceive a loan in one currency and then swapor sell the amount obtained against theequivalent amount in another currency. Since itis not easy to obtain information about the realexchange rate involved in the swap, the samevaluation problems may arise as thosedescribed for multi-currency loans.

3.10.5.2Issues related to the accumulation

of flows

The unadjusted accumulation of flows can leadto unrealistic stock estimates for otherinvestment since stock data valuation changescaused by exchange rate fluctuations can besignificant, especially if (i) the relevant exchangerates are volatile, (ii) the turnover of the assetsis high and (iii) the net movement in the stock islow. Therefore, exchange rate adjustments usingthe actual exchange rates at the time of thetransaction and closing mid-market exchangerates at the end of the period are stronglyrecommended in case where other investmentstocks are derived on the basis of accumulatedflows. If the actual exchange rate cannot beapplied on a transaction-by-transaction basis,the average exchange rate of the period may beused as a proxy if foreign exchange markets arerelatively stable.

Further difficulties may arise in the case of multi-currency loans if the loan operation is linked toan additional swap operation. In line with thevaluation proposals for stocks, the most feasiblesolution would be to translate each of theseloan movements into the basic currency inwhich the loan was initially extended. After that,exchange rate adjustments are calculated by

converting transactions into euro at the averageexchange rate in the period.

3.11 Reserve assets

3.11.1 Definition of the Eurosystem�sreserve assets

The definition of Eurosystem�s internationalreserves was approved by the ECB GoverningCouncil in March 1999. The reserve assets ofthe euro area consist of the Eurosystem�sreserve assets, i.e. the ECB�s reserve assets andthe reserve assets held by the NCBs of theparticipating Member States.

Reserve assets must (i) be under the effectivecontrol of the relevant monetary authority,either the ECB or the NCBs of the participatingMember States, and (ii) refer to highly liquid,marketable and creditworthy foreign (i.e. non-euro area) currency-denominated claims onnon-residents of the euro area � plus gold,Special Drawing Rights (SDRs) and the ReservePositions in the IMF of the participating NCBs.This definition expressly excludes foreign-currency claims on residents of the euro areafrom being considered to be reserve assetseither at the national or at the euro area level.

Although governments may hold workingbalances in foreign currencies, foreign exchangepositions of central governments and/or theTreasury are not included in the reserve assetsdefinition for the euro area in accordancewith the institutional arrangements in theTreaty establishing the European Community.Article 105 (2) of the Treaty, in conjunction withArticle 116 (3), gives the Eurosystem theexclusive right to hold and manage the officialforeign reserves of the Member States from thebeginning of Stage Three of EMU.

The off-setting entries for accrued interest onreserve assets should be recorded within therelevant reserve assets items.

Reserve assets data are compiled on the basis ofthe information provided by the accounting or


operation departments of the NCBs formingpart of the Eurosystem and of the ECB.

3.11.2 Concept of gross reserves

Against the background of the Asian crisis, theconcept of usable reserves, has gainedimportance. This concept supplements data onthe gross reserves with information aboutencumbrances on reserves, i.e. the so-calledreserve-related liabilities 4, and might be animportant indicator of a country�s ability tomeet its foreign exchange obligations. However,it was agreed that reserve assets presented on agross basis without any netting-off of reserve-related liabilities should remain the centralindicator of a country�s ability to meet itsforeign exchange obligations. (The onlyexception relates to the sub-category offinancial derivatives, which are recorded on anet basis; see Section 3.11.8).

3.11.3 Valuation principles

In principle, the valuation of reserve assets isbased on market prices by using (i) theprevailing market prices at the time when thetransaction takes place for transactions and(ii) the closing mid-market prices at the end ofthe appropriate period for positions. Goldshould be valued at the closing market price(gold fixing usually quoted in terms of USdollars per fine troy ounce) prevailing at theend of the reference period.

However, since the information for thecompilation of reserve assets statistics isobtained directly from accounting statements,information on marked-to-market values maynot be available at the appropriate frequency(i.e. monthly).

Accordingly, it was agreed that the followingpractical rules for the valuation of euro areareserves could be accepted as a proxy for amarket valuation of international reserves:

(i) taking the stocks of each instrument in theoriginal currency as disclosed inaccounting statements on the basis ofmarked-to-market valuation on aquarterly basis only; and

(ii) converting these stocks into euro usingthe mid-point foreign exchange rate of thelast day of the reporting period (i.e. on amonthly basis).

Such a procedure complies with internationalstatistical standards.

3.11.4 Specific issues related to gold

With regard to outright purchases and sales ofgold, in line with BPM5 recommendations, onlygold transactions in which both counterpartsbelong to the �monetary authorities� institutionalsector (including international monetaryorganisations) should be recorded underreserve assets (sub-item �monetary gold�) in theb.o.p. When at least one counterpart is not amonetary authority, gold transactions vis-à-visnon-residents should be recorded under thegoods item of the b.o.p. current account. Moreover,the parallel monetisation/demonetisation of thegold would induce increases/decreases in themonetary gold position of the NCB. However,this reclassification of the gold should only giverise to entries in the �other adjustments� columnof the i.i.p., without any recording in the b.o.p.

As regards reversible transactions in gold (swaps,repos, loans and deposits), the statisticaltreatment of the gold is similar in all cases:neither lending of gold nor delivery of securitiescollateral would involve any recording in theb.o.p. or the i.i.p., i.e. holdings of monetary goldwould remain unchanged. Only the foreignexchange cash delivered in gold swap/reposwould be recorded under reserve assets(sub-item �foreign exchange/currency anddeposits�).

4 This concept is being developed by the IMF in the contextof the Special Data Dissemination Standard.


3.11.5 Specific issues related tothe positions vis-à-vis the IMF (including SDRs)

For statistical purposes, SDR accounts reflectthe same rationale as traditional correspondentbank accounts, i.e. variations in these accountsmay constitute offsetting entries for the rest ofthe cross-border b.o.p. flows. Transactions/positions in these accounts should be recordedunder reserve assets (sub-item �SDRs�).Allocation/cancellation of SDRs should not giverise to any entry in the b.o.p., although changesin the stock of SDRs would be reflected in thei.i.p., by means of entries in the other adjustmentscolumn, thus permitting a reconciliationbetween flows and stocks of SDRs.

The operations related to the reserve position inthe IMF should be recorded under the sub-itemof the same name. Consequently, no entryunder sub-item �SDRs� should be derived frommovements in this position, despite their beingdenominated in SDRs.

Purchases of foreign currency using the Fund�sGeneral Resources Account by drawing on theposition in the Fund should be regarded asreclassifications of reserve assets, thus notaltering the total level of reserves. Suchtransactions cause increases in holdings offoreign exchange and symmetrical decreases inthe reserve position in the Fund. Repurchasesrepresent reverse transactions and wouldtherefore give rise to similar but reverse entries.

Claims on the IMF arising from Fund financingunder the �New Arrangements to Borrow�(NAB) and the �General Arrangements toBorrow� (GAB) should be reflected in the sub-item �Reserve position in the IMF�. However,claims arising from �Enhanced Structural-Adjustment Facility� (ESAF) 5 commitmentsshould be statistically treated as deposits andthus allocated to the sub-item �foreignexchange/currency and deposits�.

3.11.6 Specific issues related tosecurities

Only foreign-currency-denominated securitiesissued by non-residents of the euro area can beincluded in the category of reserve assets. Theaccruals principle should be applied for alltypes of securities under reserve assets,including zero coupon bonds (see Section3.4.7.2 �Specific issues related to income onreserve assets�). Securities lending would notgive rise to any entry under securities; only inthe event of cash exchanges, would transactionsbe treated as collateralised loans.

3.11.7 Specific issues related to currencyand deposits

Only foreign currency-denominated depositsplaced with non-euro area resident creditinstitutions can be considered to belong to thecategory of reserve assets. This categoryindistinguishably includes holdings of/transactions in foreign currency notes andcoins, in line with the treatment proposed in theIMF�s operational guidelines. It should be notedthat foreign-currency-denominated depositsplaced with non-euro area resident branchesand/or subsidiaries of euro area resident MFIsare also considered to be reserve assets of theeuro area.

Claims on external portfolio managers (notnecessarily included in the category of creditinstitutions) arising from funds sent abroad andsubsequently invested in other foreign currencyfinancial instruments should, in principle, beclassified in each prescribed category.Nevertheless, should NCBs not have access toinformation on the final destination of thesefunds, they should then be recorded under thesub-item �foreign exchange/currency anddeposits� in the b.o.p. and the i.i.p.

Foreign currency loans to non-financial non-residentsthat fulfil the necessary conditions to beincluded in the category of reserve assets will berecorded under the sub-item �other claims� inthe b.o.p and the i.i.p.

5 Replaced from 2000 onwards by �Poverty Reduction andGrowth Facility� (PRGF).


Repurchase agreements, securities lendingtransactions (in the case of the latter, only if cashcollateral is involved) and sell/buy-back operationsshould be treated as collateralised loans/deposits. Securities temporarily exchanged ascollateral in repos would not give rise to anyb.o.p./i.i.p. entry. Reverse repos involve thesubstitution of a reserve asset with an even saferclaim backed by collateral, provided that thecounterpart is highly creditworthy. Therefore, ifthe non-resident counterpart were a creditinstitution (including other NCBs), the cashlending NCB would not register any variation inthe total amount of reserve assets. Additionally,in accordance with the treatment of foreigncurrency loans, if the counterpart of a reverserepo transaction were neither a creditinstitution nor a financial intermediary/externalmanager, a decrease in holdings of currency anddeposits and an increase in other claims would beregistered in the b.o.p. reserve assets account,thus not affecting the total level of reserves.

Liquid claims arising from taken-up credit linesconceded by monetary authorities could beconsidered to be in the category of reserveassets, provided that the correspondentcounterpart is deemed highly creditworthy.Reciprocal currency arrangements among centralbanks and with the Bank for InternationalSettlements enter into this category, as well asother financing agreements between centralbanks and consortia of private financial institutions.

3.11.8 Specific issues related to financialderivatives

In order to reflect (i) the heightened interest inreserve assets and their composition in generaland (ii) the use of financial derivatives in thereserves management, financial derivatives haveto be recorded and presented as a separateitem within reserve assets. All recommendationsin this field are fully in line with the ESCBgeneral recommendations on financial derivatives(see Section 3.9 �Financial derivatives�).

Both transactions and positions have to berecorded on a net basis (i.e. including both

positive and negative positions) even though, inthe case of positions, this constitutes a deviationfrom the gross reserve assets concept. However,the application of this net recording is the onlyfeasible way to reconcile flows and stocksrelated to financial derivatives transactions in/holdings of reserve assets. Moreover, liquidpositions in financial derivatives settled inat least one foreign currency vis-à-viscreditworthy non-resident counterparts wouldbe computed under reserve assets on a marked-to-market basis, i.e. including all unrealisedgains and losses associated with changes inprices and foreign exchange rates. The inclusionof both positive and negative stocks underreserve assets on a net basis could result innegative positions, especially in the case ofinterest rate derivatives.

In line with the general treatment of positions infinancial derivatives (see Section 3.9), the netmarked-to-market value has to be considered inthe case of financial derivatives falling into thecategory of reserve assets. As regards OTCderivatives, each national compiler has todecide on whether claims arising from thesekinds of financial derivatives (for instance, swapagreements or some types of options) might beincluded in the category of reserve assets, whichdepends especially on whether such a financialinstrument may be offset in the market, andwhether a prevailing price for the underlyingassets permits this classification.

3.11.8.1Options

In the case of options margined options-style, thefull premium paid (i.e. the purchase price plus theimplied service charge) would be recordedunder the sub-item �foreign exchange/financial derivatives� (accounting for theacquisition of a financial asset). According to theabove-mentioned �net-basis� treatment, if acentral bank sells an option (�option written�by the NCB), the premium received wouldthen be symmetrically recorded under this sub-item with a negative sign (accounting for aliability). However, in the case of cash marginpayments and receipts associated with options,


they should be classified under the sub-item�foreign exchange/currency and deposits� inthe b.o.p., provided that no real change inownership occurs before the conclusion of thecontract.

If the option is finally exercised and theunderlying asset is delivered to the owner of theoption, the prevailing market price of theunderlying asset should be recorded under theappropriate item in the b.o.p. The differencebetween the market and the strike price shouldbe recorded under the sub-item �foreignexchange/financial derivatives�, irrespective ofwhether it implies a payment or a receipt. Thistreatment would be the same for both call andput (either bought or written) options.

3.11.8.2Futures

With regard to futures, futures-style variationmargin payments should be recorded under thesub-item �foreign exchange/financial derivatives�.This is due to the fact that daily variationmargin payments are usually collected by theclearing house from one party and paid to theother, accounting for an actual change in ownership.This treatment of variation margins would beconsistent with market stock values near to zeroat the end of each day (unrealised profits andlosses during the day would in the end becomerealised and be transferred to/received from thecorresponding counterpart). Hence, thereshould be no recording of stocks of futures withdaily margining.

3.11.8.3Interest rate derivatives

As regards financial derivatives with an interestrate component (namely interest rate swaps, cross-currency swaps and forward rate agreements), thenet stream of cash settlement flows associatedwith this component should be recorded underthe sub-item �foreign exchange/financialderivatives� in the b.o.p. In addition, thedifference between the two legs of a cross-currencyswap, corresponding to the principal exchangedin terms of the base currency, should also berecorded under this sub-item of reserve assets.

3.11.8.4Forward foreign exchange contracts

The difference between the amount agreed atthe time of the contract and the amount thatwould be paid at the spot rate prevailing atsettlement should be allocated to transactionsin reserve assets/foreign exchange/ financialderivatives.

3.11.8.5Swaps of foreign exchange against

domestic currency

The statistical treatment of these transactionswould be equivalent to considering independentspot and forward purchases/sales of foreignexchange against domestic currency. At themoment of delivery, an increase/ decrease inforeign exchange would be reflected under thesub-item �foreign exchange/currency anddeposits� in the b.o.p. The difference between theactual (agreed) and the market price of thetransaction would be reflected under the sub-item �foreign exchange/financial derivatives�.

� ��


Chapter 4.1 Belgium / Luxembourg

1 Organisation chart(s)

National Bank of Belgium

Financial andEconomic

Statistics Division

Foreign TradeStatistics Division

Surveys, financial account & IIP

Fin. acc.& IIP

Surveys

Assets &Liabilities

Dissemination

StatisticsDepartment

Balance of Payments Division

Staff &secret.

Collection &validation

Current account

Compilation &dissemination



STATEC

Director

DeputyDirector

I. General Services

II. Computer andDatabanks Section

IV. Foreign EconomicRelations Section

V. Statistics of Non-AgriculturalEnterprises

VI. Employment Statistics

VII. Consumer Prices, IndustrialIndicators, Agricultural Statistics

VIII. National Accounts

Foreign DirectInvestment

Balance ofPayments Data

III. Trade Statistics

IX. Economic Projections,Macroeconomic and EconomicModels, Economic Policy,International Organisations



2 Institutional aspects

2.1 Introduction

The Belgian-Luxembourg Economic Union(BLEU) was initiated in 1921 when the officialagreement confirming the monetary associationbetween the two countries was signed. In 1944the Belgian-Luxembourg Exchange Institute(BLEI) was set up for foreign exchange controlpurposes. From the very outset, the informationcollected in the framework of the exchangecontrol was used as basic data to produce ajoint balance of payments (b.o.p.) for the twocountries. Capital movements were graduallyliberalised from 1950 onwards. In 1990 the lastremaining foreign exchange control, the two-tier foreign exchange market, was abolished.Consequently, the task of the BLEI became apurely statistical one.

On 1 January 1999, with the advent ofMonetary Union, the BLEU was integrated into awider union. Until 1 January 2002, the BLEI willcontinue to provide b.o.p. data for the BLEU.From 2002 onwards Belgium and Luxembourgwill provide separate data.

2.2 Legislative provisions

(i) BelgiumThe current revised data collection system isdefined in the BLEI law of 2 January 1991, asamended by the law of 22 July 1993 and the lawof 12 December 1996. The Royal Decreenecessary for its full application is dated 13April 1997. The related adapted regulationshave been published by Ministerial Decree of 5August 1998.

(ii) LuxembourgThe regulations currently in force are theGrand-Ducal Decree of 10 November 1944 (asamended), which relates to exchange controls,the Grand-Ducal Execution Regulation of19 July 1997, which relates to foreign paymentsand the b.o.p., and the Ministerial Decree of 13November 1998, which relates to thepublication of the BLEI rules to be applied bythe reporting agents.

In 2000 some changes were made to the above-mentioned Grand-Ducal Decree. Under the lawmodifying the Grand-Ducal Decree of 10November 1944 (as amended), dated 28 June2000, the Banque centrale du Luxembourg(BcL) and the Service Central de la Statistique etdes Etudes économiques (STATEC) are jointlyresponsible for establishing the b.o.p.The BcL is responsible for establishing thei.i.p. for Luxembourg. However, in accordancewith the intergovernmental agreement, dated23 November 1998, between Luxembourg andBelgium, the BLEI will remain in charge of thecollection of data until December 2001, whilethe Nationale Bank van België/Banque Nationalde Belgique (NBB/BNB) will remain in charge ofthe compilation of the BLEU b.o.p. and i.i.p. untilthen, covering data of 2001. As from January2002, the BcL and the STATEC will take overfrom the BLEI.

The responsibilities are shared as followsbetween the two institutions:

Area of responsibility Institution in charge

Current account minus incomeon investments STATECIncome on investment BcLCapital account STATECFinancial account BcLForeign direct investment survey STATECInternational investment position BcL

2.3 Internal organisation

(i) BLEI and the NBB/BNBThe BLEI is a Belgian public institution, theadministration of which has been delegated tothe NBB/BNB. Since the creation of a StatisticalDepartment, the tasks of the BLEI are fulfilledby the Balance of Payments Division of thisdepartment. The BLEI is managed by a Boardconsisting of seven members from Belgiumand three members from Luxembourg. ThePresident of the Board is the Governor of theNBB/BNB and the Vice-President of the Board isthe Governor of the BcL; all decisions taken bythe Board are executed by the Secretary of theBLEI.



On behalf of the BLEI, the Balance of PaymentsDivision of the NBB/BNB collects data fromcredit institutions and enterprises and carriesout data control and data processing functions.The resolution of methodological issues relatedto the b.o.p. of the BLEU and its compilation areamong the statistical tasks performed by theNBB/BNB.

The Balance of Payments Division of the NBB/BNB has been reorganised to reflect the newdata collecting, processing and compilationsystem, which includes surveys on stocks (tradecredits, direct investment and portfolioinvestment). At present, it consists of fivesections which deal with:� data collection and validation controls;� the current account and the new capital

account;� the financial account and the international

investment position (i.i.p.);� compilation and dissemination;� the organisation of surveys.

In addition to these sections, a quality controlunit is operational.

Some of the data on the balance sheets ofcompanies which are collected by the DataExchange Department are currently used forchecking and validation purposes. Moreover, asystematic comparison is made, from 1995onwards, between the external trade data andthe goods items of the b.o.p. for Belgium.

The Balance of Payments Division of the NBB/BNB is in charge of publishing both the fullb.o.p. of the BLEU and the current account ofBelgium. In addition to the above-mentionedtasks, this division is also responsible for thecompilation and publication of the i.i.p. of boththe BLEU and Belgium as well as for thecompilation of the common template oninternational reserves defined by the IMF/BIS.

(ii) BcLThe Statistics Department of the BcL is incharge of establishing statistical data in the areaof money and banking statistics. Owing to the

fact that the actual b.o.p. data are still compiledby the BLEI, the Balance of Payments Sectiondoes not deal with any data compilation, withthe exception of the monthly compilation of thecommon IMF/BIS template. It is, however, incharge of methodological issues and relationswith international organisations. Currently, itsmain responsibility is the development of theinfrastructure necessary to compile theLuxembourg b.o.p. and i.i.p. for data collectedas from 1 January 2002.

The Balance of Payments Section of the BcL, inco-operation with the BLEI, establishes andmaintains contacts to reporting agents in thefinancial sector. The BcL is the representative ofthe BLEI in Luxembourg.

(iii) STATECSTATEC is responsible for centralising allstatistical information and for co-ordinatingLuxembourg�s statistical system. STATECcomprises eight sections, one of which � theForeign Economic Relations (Statistics) Section� is responsible for compiling foreign directinvestment and b.o.p. data.

In the field of the b.o.p., STATEC is in chargeof specific methodological issues and isresponsible for establishing a quarterly currentaccount for Luxembourg. STATEC isrepresented in the main decision-making bodiesat the level of the European Commission(Eurostat).

STATEC, in co-operation with BLEI, establishesand maintains contacts to reporting agents inthe non-financial sector.

2.4 External co-operation

In 1999 the Research Department of the NBB/BNB was reorganised so as better to reflect thenew environment of the b.o.p. as a result of theimplementation of EMU and the introduction ofthe euro.

The new structure is characterised by thepriority given to the national dimension of



economical analysis. As a result, the balance ofpayment unit has disappeared and its activitiesintegrated in two, likewise fully reorganisedunits, one of which is devoted to the realaccounts, while the other is devoted to thefinancial accounts, both including the respectiverest-of-the-world component.

The Balance of Payments Division and ResearchDepartment of the NBB/BNB liaise closely withone another. The latter was responsible forcompiling the b.o.p., on the basis of datacollected by the BLEI, from 1947 to 1993. TheResearch Department is still responsible foranalysing data and for producing estimates forthe current year as well as short-term estimates.It carries out comparisons with various othertypes of statistics, such as the national accounts,and investigates their coherence.

To ensure: (i) the consistency of the currentaccounts of Belgium and Luxembourg with thecurrent account of the BLEU, on the one hand;and (ii) the consistency of the external assetsand liabilities of the Luxembourg banks withtheir balance sheets as reported to the BcL, onthe other, there is also close co-operationbetween the NBB/BNB, the BLEI, STATEC andthe BcL.

The BLEI collects data for the compilation ofboth the b.o.p. for the BLEU and the currentaccounts of Belgium and Luxembourg (underthe Maastricht Treaty, a separate currentaccount for each Member State is one of thesecondary criteria to be taken intoconsideration with regard to participation inEconomic and Monetary Union (EMU)). Thesedata are transmitted to the institutions whichare responsible by law for compiling the b.o.p.,namely the NBB/BNB, which is in charge of theBLEU b.o.p. and the Belgian current account,and STATEC, which, in co-operation with theBcL, is responsible for the current account ofLuxembourg. Another task of the NBB/BNB andthe BcL is to collect data in relation to theinternational activities of credit institutions andto report this information to the Bank forInternational Settlements (BIS).

2.5 Users

The national compilers, i.e. the NBB/BNB andSTATEC/the BcL, are responsible both forreporting to international organisations and forpublishing all related statistics. Internationalorganisations, such as the ECB, the InternationalMonetary Fund (IMF), the Statistical Office of theEuropean Communities (Eurostat), theOrganization for Economic Cooperation andDevelopment (OECD) and the Bank forInternational Settlements (BIS), are providedwith data on the BLEU b.o.p.

3 Statistical system

3.1 Type of collection system

The collection system used to report statisticaldata for the b.o.p. is an �international transactionsreporting system (ITRS) of the closed type� whichis based on the collection of settlements. Asystem is said to be closed when all changes inthe external positions of the reporting banks,taken individually, must be supported by thereporting of all the flows affecting thesepositions. The position at the beginning of thereporting period plus the transactions duringthat period equal the position at the end of thereporting period. As a consequence, thestatistical reports are self-balancing statements.

In order to produce a sectoral breakdown ofportfolio investment and other investment forthe banking sector b.o.p. flows are derived fromthe balance sheets of banks.

For some components of the current accountadministrative sources are used:� income of employees � social security

information;� transactions of the European institutions;

and� insurance data from the supervisory

authority for insurance companies.

Furthermore, for portfolio investment, someflows data are adjusted on the basis of specificstatistics from general government. In addition,for flows of direct investment, some adjustments



are made on the basis of information taken fromspecialised media.

Within the framework of the i.i.p., stocks dataare used for the banking sector and generalgovernment, as well as stock exchangeinformation for the adjustment of prices relatingto portfolio investment.

For the reserve assets component of the b.o.p.,as well as for the new international reservestemplate and the corresponding i.i.p.components, data provided directly by theAccounting Division of the NBB/BNB are used,together with information provided directly bythe operational unit in charge of the executionof transactions in these assets.

3.2 Reporting agents

(i) Banks: These are banks and other financialinstitutions, as defined in the Second EUBanking Directive. Coverage will be extendedto include non-bank institutions in order tocover the monetary financial institution (MFI)sector. The �Office des Chèques Postaux�,Belgium, and the �Comptes Chèques Postaux�,Luxembourg (CCPL), are assimilated to a creditinstitution for b.o.p. reporting purposes. Banksare required to report all external transactionsundertaken on behalf of their customers andfor their own account, as well as interbankoperations affecting their external positions.These reports are of the �closed� type and areestablished on a daily basis and in the originalcurrencies. Moreover, they report their assetsand liabilities vis-à-vis non-resident counterpartson both a monthly and a quarterly basis. Since1 January 1999, data related to the currenciesof countries which now form part of the euroarea have been reported in euro.

(ii) Direct respondents: Enterprises have to reportall transactions settled through a channel otherthan resident credit institutions directly to theBLEI. This reporting covers bank accountsabroad, netting procedures and currentaccounts. Some general direct respondents(GDRs) (similar to the French general direct

reporting companies, or DDGs) report directlyto the BLEI on all transactions with non-residents. These reports are denominated eitherin the original currencies or, as from 1999, ineuro.

(iii) Monetary authorities: The NBB/BNB and theBcL provide data on reserve assets and othertransactions of the monetary authorities.

Within the framework of the new legislation inforce since 1991, as amended in 1996, the BLEIis authorised to organise surveys for thecompilation of the b.o.p./i.i.p. At the moment,three surveys have been developed, namely:� one on trade credits, which is aimed at

collecting data on the claims and debtsresulting from transactions in goods on amonthly basis;

� one on foreign direct investment, both incountries abroad and in the two countriesof the BLEU, which covers stocks andflows data on equity capital, results,dividends, loans, interest payments andcommercial credits as well as some othereconomic data for each direct investmentrelationship; and

� one on portfolio investment (as from 1997),which is aimed at collecting data onforeign securities held as investmentseither directly by enterprises or incustody by domestic custodians (forBelgium only).

3.3 Thresholds

Simplification, justification and identificationthresholds are applied in the BLEI collectionsystem.

A simplification threshold is applied and set atEUR 9,000 for both receipts and expenditure.Below this threshold, no information is requiredconcerning the nature of the underlyingtransaction or the country of the non-residentcounterpart. The lump sum registered as such isbroken down according to a key based onhistorical data. The adjustment key will have tobe modified in the future. The introduction of a



Table 1Reporting scheme for b.o.p. and i.i.p. data collection for BELGIUM and LUXEMBOURG

Target respondent Name of reporting Contents of reporting Frequency of Timeliness (numberpopulation form form reporting of days for submission(e.g. MFIs, after the end of theenterprises, etc.) reference period)

MFIs � banks Daily report Flows Daily 5 working days(répertoire)Assets/liabilities Stocks by currency Monthly 11 working daysAssets/liabilities Stocks by currency Quarterly 11 working days

and country

MFIs � non banks Assets/liabilities Stocks by curency Quarterly 11 working daysand country

Enterprises Accounts abroad Flows and balances Monthly 15 working daysBilateral netting Flows and balances Monthly 15 working daysMultilateral netting Flows and balances Monthly 15 working daysDirect reporting Flows and balances Monthly 15 working dayscompanies (DDG)Trade credits survey Stocks (assets/liabilities) Monthly 15 working days

Banks and FDI survey Stocks and flows Yearly Deadline: 30 Juneenterprises

P.I. survey (assets) Stocks Yearly Deadline: 31 March

survey for transactions below the threshold isthus being considered.

For transactions above this simplificationthreshold, the economic nature of thetransaction and the country of residence of thecounterpart have to be supplied. In addition, forreports on outgoing payments, a writtenjustification is required for amounts in excess ofEUR 9,000, given that this information shouldbe readily available, as customers have to fill in apayment order for the bank. In view of the factthat written justification is far moreburdensome in the case of incoming payments,because the resident receives the money beforethe reporting form is completed, the thresholdfor written justification has been raised toEUR 625,000.

A third threshold of EUR 25,000 is used toidentify the resident payer or payee. Theidentification number of the resident concerned

only has to be reported for payments in excessof this amount.

Above a fourth threshold of EUR 2,500,000,banks have to identify the resident bankingcounterpart for interbank transactions.

3.4 Availability of data

Separate current accounts for Belgium andLuxembourg were established in 1995.However, for the purposes of the financialaccount, monthly, quarterly and annual data areonly available for the BLEU.

A complete BLEU b.o.p. (monthly, quarterly andannual data) is made available in accordancewith most of the major IMF standardcomponents, together with a full geographicalbreakdown. However, the geographical allocationfor some estimates made at a high level ofaggregation has yet to be determined.



3.5 Timeliness

The reporting banks have five working days and11 working days within which to submit theirdaily reports and their assets and liabilitiesstatements respectively. Direct respondentshave 15 working days after the end of thereporting month to submit their reports. Someadjustments are made to cover any data missingwhen direct respondents are late in sendingtheir reports. A similar procedure is followed forthe banking statements. This procedure willenable the NBB/BNB to respect the six-weektime-lag granted by the ECB for the submissionof the monthly key items data.

3.6 Compilation frequency

With regard to publication, the b.o.p. of theBLEU is currently compiled on a quarterly basiswith a monthly breakdown; however, for ECBpurposes only, a monthly b.o.p. is also compiled.

3.7 Data controls

Data are checked within the mainframeenvironment for validation purposes, as well asat the technical level, to verify their content(adequacy, completeness, etc.) and cohesion.These controls consist in checking, inter alia,the accuracy of the identification number and inperforming certain cross-checks (transaction,country and currency codes). One of the in-house cohesion controls is aimed at verifyingthe consistency of each individual report.Corrections are made to the individual datastored in the mainframe. This correctionprocess is closely monitored using the followingfiles: a file for basic data, including all accepteddata; a file for correction purposes; and ahistorical file, which provides information onthe different stages through which a recordpasses.

Individual controls are carried out on atransaction-by-transaction basis. These controlsconsist in an evaluation of a selection ofindividual transactions, based on ad hoc criteriafor each item, the result of which may becorrections. Some plausibility analysis is also

carried out for each b.o.p. component at twolevels: by transaction code (time series) and byrespondent (on the basis of its profile).Systematic comparisons are made within theInfocentre environment using externalinformation, such as balance sheets (a check forthe FDI survey) and foreign trade statistics (acheck for the goods item of the b.o.p.; this isperformed on a quarterly basis for about 1,100enterprises, representing more than 60% oftotal import-export transactions).

In order to maintain the closed system and tobe able to compile a separate current accountfor Belgium and Luxembourg, all transactionsbetween Belgium and Luxembourg must berecorded as foreign payments. However, forcapital and financial flows, the nature oftransactions is not identified. Current accounttransactions (flows) between Belgium andLuxembourg are thus reported by bothcountries as part of the same statistical system,but the data collected nevertheless showserious discrepancies. The BLEI, the NBB/BNB,STATEC and the BcL are co-operating closely tominimise such discrepancies.

3.8 Revision policy

Data revision is a continuous process.Individual records can be updated on a dailybasis. These updates can be tracked in detail viahistorical files. Aggregated data for disseminationare currently revised as follows.

Monthly figures are produced within six weeks,in order to fulfil the requirements of the ECB.The revision process is carried out at aquarterly and an annual frequency. The revisionof a year or a quarter involves the revision ofevery month concerned.

Month Quarter Year

M + 6 weeks Q + 3 M Y + 3 MQ + 6 M Y + 9 M

Y + 15 M

The time periods given for reporting are as fromthe end of the month, quarter or year concerned.



3.9 Publication

The current national presentation of the BLEUb.o.p. and of the separate current accounts ofBelgium and Luxembourg are, in principle, inline with the IMF Balance of Payments Manual(5th edition) or BPM5.

Publication takes place on a quarterly basis andincludes monthly data.

The titles of publications produced by the NBB/BNB, STATEC and the BcL are listed in Sub-section 13.1.

The figures for the BLEU b.o.p. and for thecurrent account for Belgium are available onthe NBB/BNB�s Web site (www.nbb.be). TheLuxembourg current account data can befound on STATEC�s Web site (www.statec.lu).

The main internal users of the b.o.p./i.i.p. dataare the Research Department and the StatisticalDepartment; banks, ministries, professionalassociations, embassies, universities andstudents are regular external users.

As Belgium participates in the Special DataDissemination Standards (SDDS) system, therelease data for b.o.p./i.i.p. and reserve assetsare published in advance.

4 Monthly key items

4.1 Availability of monthly key items

The monthly key items are available within thesix-week time period; however, these data havea lower degree of reliability and coverage andare completed using estimates for certainmissing respondents.

Monthly b.o.p. statistics (flows) are published inthe quarterly bulletin on a transaction basis,together with a limited sectoral breakdown (inaccordance with the BPM5).

The level of the reporting provided by banks inthe field of both flow and stock data issatisfactory considering the six weeks� deadline.

Only a technical incident that prevents any datadelivery initiates a significant problem incoverage when it affects a major bank. In thatcase, some adjustment of the statistics may bemade if one of both types of data is available.

For direct reporting, the coverage within the sixweeks� deadline may be problematic. For thatreason, the missing data are systematicallysupplied on the basis of the data for the sameperiod of the year before. This procedure is onlyapplied to the selection of direct respondentswith regard to which the transmission of data isconsidered compulsory. The data incorporatedin this way are adjusted for outliers, especially indirect investment.

4.2 Estimation methods for monthly key

items

4.2.1 For trade in goods

The goods item is computed on a transactionbasis, in line with the preliminary results of anad hoc survey on trade credits. The settlementfigures, registered via the ITRS, are adjusted inorder to take account of the results of thesurvey. No estimates are made in the event ofmissing data. Furthermore, there is no valuationof the imports on a f.o.b. basis. The valueremains purely on an invoice basis. No seasonaladjustment is made.

The geographical breakdown refers to thecountry of the counterpart to the settlement;these data probably closely reflect the countryof origin/destination. Within this framework, it isindeed possible to identify, in the same way, thetransactions with the countries not yetparticipating in EMU.

The goods item is revised � as are all items � inaccordance with the general revision calendar(see Sub-section 3.8.). B.o.p. data have beenalmost compliant with BPM5 standards since1995. Owing to the data sources used atpresent and the related registration procedures,the b.o.p. general merchandise item is near tothe concept of �general trade�, because goods



stored in bonded warehouses are registered asimports and vice versa for goods removed fromstorage in bonded warehouses.

4.2.2 For investment income

Investment income flows are calculated on thebasis of the i.i.p. stocks for the main items of thei.i.p. An average return is defined for the majorcomponents on a yearly basis, except for theshort-term instruments where a quarterlyupdate is applied to the stocks data for theprevious year; this is then compared with theresults of the same process for the stocks dataof the year before. The magnitude of thevariation between the two sets of data is used toadjust the b.o.p. data. In order to obtainmonthly figures, the annual figure is divided by12. The result is a very rough proxy of accruals.

The breakdown by sub-component is availablefor the main items: direct, portfolio and otherinvestment. For the time being, reinvestedearnings are not estimated.

The split between portfolio investment incomeon euro area assets and non-euro area assets isbased on an estimate referring to the availableMFI stock data, including the ad hoc split, and tothe last available results of the yearly portfolioinvestment survey for the non-MFI sector.

The revision process is limited to one singlerevision which takes place when the i.i.p. for thefollowing year becomes available.

4.2.3 For direct investment

No specific estimates are made.

4.2.4 For portfolio investment

The figures are based on the settlement datacollected via the ITRS. These data arenevertheless adjusted for the banking sector onthe basis of its assets/liabilities data, and for thegeneral government sector on the basis of adhoc statistics related to short and long-termsecurities.

Until now, no write-off item for accrued interestis computed, whether for monthly, quarterly orannual data.

4.2.5 For financial derivatives

For financial derivatives and other investment,no specific estimates are made. The availabledata are taken from the ITRS, in which ad hoctransaction codes are identified in order toisolate those components. No furtheradjustments are made to ensure that derivativesfulfil the required methodology for options andfutures.

4.2.6 For other investment

See Sub-section 4.2.5 above.

5 Investment income

5.1 Specific features of data collection

5.1.1 General

As a consequence of the way in which incomesare computed, no specific bias towards theunder-recording of credits is observed.Nevertheless, in the ITRS a phenomenon ofunder-recording does appear, owing to the lackof a breakdown, at maturity date, betweenincome and capital.

Estimates are produced for the breakdown ofportfolio investment income into that on intra-euro area assets and that on extra-euro areaassets (see Sub-section 4.2.2).

By virtue of the compilation method, the dataare not adjusted further or reconciled inrelation to the different frequencies or stages ofpublication.

The geographical allocation refers initially tothe country of settlement, both for the debitsand the credits, in anticipation of an ad hoccollection procedure for the credit side. Thesame breakdown is available for historical data.The sole exception to this allocation principle



relates to the income derived from the bankingsector�s assets, where the debtor principle canbe applied.

5.1.2 Income on direct investment

The rate of return is based on an evaluation ofthe return on shares.

The revision process is currently limited to onerevision, related to the availability of the mostrecent i.i.p.

5.1.3 Income on portfolio investment

For both equity and bonds/notes, income iscalculated on the basis of stocks data. The return onequities is based on an average return for the stockexchange, adjusted for exceptional behaviour ofthe stock exchange. For money market instruments,an update of the reference rates has been made ona quarterly basis since 2000. A similar procedurewill be applied in order to update the 1999 dataand the data of previous years. Taking into accountthe calculation process, all instruments are treatedin the same way, i.e. there is no specific treatment fordifferent kinds of bonds (e.g. zero-coupon bonds orindexed bonds).

The result of the calculation procedure is theproduction of an overall estimate of portfolioincome that can be considered a first proxy ofincome on an accrued basis.

An estimate of the breakdown into income onintra-euro area assets and income on extra-euro area assets is made (see Sub-section 4.2.2).

5.1.4 Income on other investment

For the loans and deposits components of otherinvestment, income is computed in the sameway as for direct investment and portfolioinvestment, i.e. on the basis of the i.i.p.-relatedcomponents. These items cover assets andliabilities of both individuals and enterprises.Furthermore, certain income transactions arenot registered, such as income on trade creditsand the interest share in financial leasing.

Since 1999 the income on reserve assets hasbeen based on data provided by the AccountingDivision of the NBB/BNB.

5.2 Definitions

Definitions are in line with the BPM5, except forthe deviations set out in Sub-section 5.3. Since1999 all financial derivatives have been treatedas such, including those on interest rates, sothat income on derivatives is no longer includedin the income account.

5.3 Deviations from agreed definitions

Reinvested earnings are not yet included assuch in the b.o.p. The analysis of a reliablemethod, using the results of the yearly FDIsurvey and the estimate made on the basis ofthe i.i.p., is still under investigation. Thisprocedure would provide a first proxy for thecurrent year and definitive figures for previousyears.

Income on trade credits between relatedenterprises is recorded as income on otherinvestment.

A further deviation relates to income on bondsand notes between affiliates, which is recordedas portfolio investment income since theunderlying transactions in the financial accountcannot be recognised as direct investmenttransactions.

5.4 Gaps

None.

5.5 Intended harmonisation

For direct investment earnings, with regard tothe registration of reinvested earnings, acalculation procedure will be developed in linewith the ECB recommendations, referring to theall-inclusive approach, because the informationneeded to isolate the operating profit is notavailable.



With regard to income on portfolio investment,improvements will be made when the i.i.p. iscomputed in more detail (basic data will bebroken down security-by-security). In thatcontext, a more appropriate estimate of theincome would be possible for specific individualinstruments, and on a full accruals basis.

5.6 Estimation methods

The methods and data sources used to compilequarterly data are identical to those used formonthly data. The quarterly data are producedfrom a summary of monthly data.

6 Capital account


Part of the general reporting system (see Sub-section 3.2). No other source of information isused.

6.2 Definition

In principle, the definition of the capital accountis in accordance with the BPM5 and theharmonisation proposals made by the ECB�sWorking Group on Balance of Payments andExternal Reserves Statistics and its predecessor.The distinction between current and capitaltransfers is made by using different transactioncodes in the collecting system, in line with theBPM5 criteria.


None.

6.4 Gaps

The component �other capital transfers� is coveredonly partially and the quality of the availableinformation needs to be permanently checked.

Moreover, the component �debt forgiveness� ispoorly covered. An expansion of its coverage isunder investigation.


For debt forgiveness, potential sources are to becontacted, such as individual banks, government orthe Office du Ducroire, a public insurancecompany which provides payment guarantees forBelgian exporters.

7 Direct investment


At present, direct investment in the b.o.p. iscomputed on the basis of the informationcollected via the ITRS, where specifictransaction codes are used, thus also providinga breakdown between euro area assets andnon-euro area assets. Furthermore, the datafrom the ITRS are compared with the bankingstatistics � in order to improve the quality of thedata for the banking sector � and with balancesheet data and media information with a view toincreasing coverage and quality.

Geographical allocation is based on twocriteria: (i) the country of settlement; and (ii) thesplit between issuers within the euro area andnon-euro area issuers in the ITRS.

A yearly survey is organised on foreign directinvestment abroad and in the reportingeconomy. Here, the debtor/creditor principle isfully applied, with the information beingcollected for each individual direct investmentrelationship.

Transactions on equity capital made withoutany settlement are registered directly by theb.o.p. compilers. The valuation of thosetransactions is based on official publications, ifavailable (prospectus legally compulsory whentransaction is public), specialised mediainformation and stock exchange data.

A procedure for the adjustment of b.o.p. figureson the basis of the direct investment survey isunder evaluation and may be implemented inthe medium term. Any improvement made atthe level of coverage of direct investment



statistics will cause problems in relation tohistorical data. Currently no backwardadjustments are planned.

As a consequence of the full application of therule that all transactions between affiliatedenterprises should be recorded under directinvestment, the transactions effected by the co-ordination centres in Belgium and the holdingsin Luxembourg have considerably inflated thedata for direct investment.

7.2 Definition

In principle, Belgium/Luxembourg plans tocomply with the recommendations of the BPM5and the harmonisation proposals made by theECB�s Working Group on Balance of Paymentsand External Reserves Statistics and itspredecessor.

The definitions of the different concepts used indirect investment statistics are in line with theBPM5 and the OECD Benchmark (threshold of10% ownership, direct investor, direct investmententerprise, direct and indirect relationship).

Special purpose entities are considered to beordinary enterprises, regardless of the type oftransactions in which they engage.

As a result, even inter-company transactions offinancing-oriented SPE�s are included in directinvestment statistics. The transactions withrelated banks, such as loans and deposits, areexcluded from direct investment statistics.

For equity capital, the main information is basedon the related settlements. Those data arecompleted, in some cases, by using informationfrom specialised newspapers or otherdocumentary sources, or by using the directinvestment survey results, in order to adjust theequity capital item for transactions carried outwithout any settlement.

On the basis of an ongoing evaluation of majorfinancial flows registered as shares in portfolioinvestment, a fraction of these transactions are

reclassified as direct investment if they fulfil thead hoc criteria.

Loans are included regardless of their maturity,and even cash management transactions arecovered as far as possible.


The allocation of FDI in the reporting economyis based on a strict assets/liabilities principleand not on the directional one. An adequatemethod based on the use of a reference registerto reallocate the individual transactions is stillbeing analysed.

Adequate methods of implementation areunder development. Furthermore, trade creditsbetween related enterprises and in respect ofissues of bonds and notes between relatedenterprises are not included in directinvestment, but in other investment andportfolio investment respectively. Alltransactions between related banks or betweenrelated financial institutions, except thoserelating to equity capital, are recorded as otherinvestment of portfolio investment, rather thanas direct investment. The direct investmentsurvey will make it possible to adjust the tradecredits item in the near future, once coverage issufficient.

7.4 Gaps

Reinvested earnings are still not included in acorrect manner.

The use of the results of the survey couldprovide definitive figures for the past and formthe basis for producing an estimate of thecurrent year. The results would be establishedon an all-inclusive basis.


The survey conducted covers not only directinvestment flows and stocks, but also othercomponents (earnings, reinvested earnings anddistributed earnings, as well as income on debt



and Foreign Affiliated Trade Statistics (FATS)).The survey is also useful for reconciliationpurposes. The information obtained from thesurvey is expected to rectify most of thedeviations and fill the gaps mentioned, with theexception of transactions in bonds betweenaffiliates.


The information content of the quarterly data issimilar to that of the monthly data. No specificestimates are made.

8 Portfolio investment


The source for data collection on portfoliotransactions is the ITRS (settlement data). Thecodification used for these transactions is basedon a classification by instrument, by country ofissuer (Belgium/Luxembourg, euro area or non-euro area) and by maturity (up to one year ormore than one year). The euro area/non-euroarea split has been produced since mid-1998,but it is not possible to calculate this split forhistorical data.

The geographical allocation on the liabilitiesside follows the transactor principle (firstcounterpart of the settlement) in full. For theassets side, two types of information areavailable: the first counterpart, as in the case ofliabilities, and the issuer in an aggregated way(euro area/non-euro area split).

For the MFI sector, flows are derived from theavailable stock data where the allocation ismade by country of issuer (quarterly) for assetsand by country of first holder for liabilities.

For the general government sub-component,data derived from an ad hoc survey on theholdings of securities issued by the centralgovernment are used to revise the originalinformation collected via the ITRS.

An ISIN-based collection system is not possibleat present (see also Sub-section 8.5).

There is no separate reporting system for thetransactions settled through financial centres,custodians, etc.: they have to report within theframework of the ITRS. Within the Belgian-Luxembourg Economic Union (BLEU) twoimportant clearing houses operate, namelyEuroclear and Clearstream. A large number oftransactions passes through these clearinghouses. When they act as custodians, theyintervene in the transactions as counterpart forboth sides of the transaction; this shouldtheoretically result in large flows with othercountries and should have a serious impacton the geographical allocation in a numberof countries as well. However, in the nationalpresentation of the b.o.p., without thegeographical breakdown, those transactionsrelating to the role of Clearstream andEuroclear as intermediaries between non-residents are neutralised.

Finally, trading in loan portfolio (securitisationof loans) is classified under portfolio investment.

8.2 Definition

In principle, Belgium/Luxembourg plans tocomply with the recommendations of the BPM5and the harmonisation proposals made bythe ECB�s Working Group on Balance of Paymentsand External Reserves Statistics and itspredecessor.

For securities, the split between domestic andforeign securities is available, with a furtherbreakdown into euro area/non-euro area assetsand liabilities.

The collection system provides a single maturitybreakdown; over one year (long-term) and upto one year (short-term). For long-termsecurities, a distinction is made betweenequities and bonds; for short-term securities �money market instruments � there is no furtherbreakdown by instrument. Only for domesticissues have separate codes been created forgovernment and other issues.



In principle, income, commissions, charges andfees on portfolio transactions should berecorded separately in the collection system;where this is not the case, however, these itemsare included in the settlement amount for theportfolio transaction.

As yet no offsetting entries are made foraccrued interest.


In general terms, data for portfolio investmentcan be considered to be reliable, although thereare some areas in which there is still someprogress to be made.

Another deviation is the problem encounteredwhen applying the valuation principle to themarket value: the recorded value is the paymentvalue. Nevertheless, this should be a goodproxy for the market value.

Transactions in bonds between affiliatedenterprises are recorded under portfolioinvestment and not under direct investment(see Sub-section 7.3).

8.4 Gaps

None.


The ISIN codes have not been used so far, as thecurrent collection system does not allow ISINnumbers to be included in the reports.Nevertheless, the use of ISIN codes and theintegration of these in the actual collectionsystem (in a parallel circuit) will be studied inthe near future.

The codification used for portfolio transactionsis based on a classification by instrument, bycountry of issuer (Belgium, Luxembourg, euroarea or non-euro area) and by maturity (short-term or long-term).


Some estimates based on time series analysisare made for missing data and lead to someadjustments, if necessary.

9 Financial derivatives


With regard to financial derivatives, the BLEI hasmodified the nomenclature and codes for derivativesin order to distinguish between the option type andothers (forward, interest and currency swaps, andfutures). For the former, a supplementary breakdownhas been introduced in order to produce a splitbetween assets and liabilities according to the issuer.

9.2 Definitions

The definitions used for the instruments are inline with the BPM5. Nevertheless, no distinctionis made by type of margin; all are included infinancial derivatives.


The NBB/BNB complies with the recommendationsof the BPM5 and the harmonisation proposalsmade by the Working Group on Balance ofPayment and External Reserves (the former TaskForce on Financial Flows and Stocks Statistics).

All types of margin are included in financialderivatives.

9.4 Gaps

None.


None.


None.



10 Other investment


Information is based on the assets and liabilitiesdata of the banking sector (to be extended tothe MFI non-banks) for the MFI sector, and onthe general collection system for the othersectors.

Data for trade credits are covered by a monthlysurvey, from which a sectoral breakdown can beobtained. The survey provides month-endinformation on assets and liabilities related totransactions on goods for 1,500 companies.

For the banking sector and the MFI-non banksector (as from mid-1999) the flows data arederived from stocks data (contained in theirbalance sheet reporting). There is aninstrumental split between loans and deposits,and a sectoral breakdown is also available. Thegeographical breakdown can be provided, aswell as a maturity split (based on the initialmaturity of up to one year or more than oneyear). All these breakdowns are available for allperiods (monthly, quarterly and annually). Thesebreakdowns can also be supplied for historicaldata.

The breakdown into extra-euro area and intra-euro area bop flows are derived from thegeographical breakdown available in thebalance sheets of the MFIs for both assets andliabilities.

The transactions settled via TARGET areregistered by the intervening MFIs in the sameway as other cross-border settlements. Inthe organisation of the reporting procedures,the NBB/BNB or the BcL, as the operatorof TARGET, is considered to be a secondintervening MFI. As a result, interbanktransactions are registered between the NBB/BNB or the BcL and the domestic MFI thatintervenes for the resident counterpart, usingneutral codes.

10.2 Definition

In principle, Belgium/Luxembourg plans tocomply with the recommendations of the BPM5and the harmonisation proposals made by theECB�s Working Group on Balance of Paymentsand External Reserves Statistics and itspredecessor.

Repo transactions are included in otherinvestment, where they are recorded as loans.This instrument, which is used by the bankingsector, is very important; it accounts for morethan 60% of transactions in Belgian governmentissues and around 30-40% of operations settledby Euroclear. Most of these transactions aregenuine repos, although sale and buy-backtransactions also occur. By contrast, bondlending is not very well-developed. Trading inloan portfolios does take place, but is not yetvery significant; it is treated as portfoliotransactions.

Variations on short-term claims and liabilitiesbetween affiliated companies are classifiedunder the direct investment component.

Transactions in banknotes and coins areregistered in this b.o.p. only when they involve amovement on a banking account.


Trade credits between affiliated enterprises arecurrently recorded under the other investmentand not under the direct investment item (seeSub-section 7.3).

Loans and deposits between affiliated MFIs orbetween affiliated other financial institutions aswell as loans and deposits between MFIs andrelated enterprises are recorded under otherinvestment.

10.4 Gaps

None.




The direct investment survey will be used torecord trade credits between affiliatedenterprises under direct investment.


Some estimates based on time series analysisare made for missing data and may lead to someadjustments, if necessary.

11 Reserve assets


Part of the general reporting system (see Sub-section 3.2).

11.2 Definition

The information is obtained from theAccounting Department, where no problemsrelating to confidentiality are encountered inproviding breakdowns.

Financial derivatives are recorded on a netbasis. Embedded financial derivatives are recordedtogether with the underlying financial instrumentsand are not recorded and valued separately.

All transactions in reserve assets are registeredat market price and converted into euro usingthe market exchange rates at the time of thetransaction.


No significant deviations.

11.4 Gaps

Data availability does not pose a problem. Theinstrumental breakdown is not currentlyavailable.


None.

12 International investment position


The production of an i.i.p. within nine monthsimplies that many data have to be of a veryprovisional nature. As long as items areproduced by the accumulation of flows, the timeavailable is not an obstacle. Nevertheless, with aview to including the results of stocks data fromad hoc surveys, the period of nine months is tooshort, considering that it takes almost this longto collect the data; for direct investment stocks,for instance, a minimum of 12 months is neededto produce a first set of reliable data.

At present the following sources are used tocompile the i.i.p. data:(i) stocks:

banking sector:portfolio investment (equities, long-termdebt instruments and money marketinstruments); andother investment (short-term and long-term loans and deposits);general government:portfolio investment (government bonds);andother investment;monetary authorities (reserve assets andother assets);

(ii) flows:banking sector: direct investment;other sectors: all items.

The coverage is currently slightly different forgeneral government, where the stocks datawhich are used for other investment are notfully in line with the similar flows data used inthe b.o.p. The concepts are identical in both thei.i.p. and the b.o.p. financial account. As a result,the same weaknesses and gaps can be identified.

Although the IMF Co-ordinated PortfolioInvestment Survey is operational in Belgium, thedata provided are not yet used in the i.i.p.Luxembourg did not participate in the 1997IMF Co-ordinated Portfolio Investment Surveyand is not in a position to conduct this surveyon a regular basis. Considering the fact that the



survey will be repeated each year in Belgium, inthe long run the data will be incorporated in thei.i.p. Nevertheless, as the response time is intheory set at six months, the results of thesurvey will only be used in a revised version ofthe corresponding i.i.p.

The breakdowns by sector and by instrumentare based on the data sources. With theexception of the banking sector�s assets, noeuro area/non-euro area breakdown is possiblefor stocks data unless the survey results areused. Moreover, even if the survey results wereused, these would cover only the assets side.

Price changes are applied to equity capital andshares, using specific stock exchange indexesfor the main currencies. A reference to thecountry is not possible owing to the lack ofreliable information at present. Differentprocedures are applied to quoted andunquoted shares. For real estate investment, aprice adjustment is made by reference to adomestic index of real estate prices.

Exchange rate changes are calculated on thebasis of the data available on foreign currencies.The conversion is calculated using the end-of-year rate by currency, so that the stocks for theprevious year are estimated at current rates.The transactions are computed using themonthly average rate for the month ofregistration. The valuation is based on:� the book value: banking sector (portfolio

investment, where � for the tradingportfolio � the book value is mostly basedon the marked- to-market value of liquidassets, and other investment);

� the nominal value: general government(portfolio investment); and

� a proxy of the market value: other sectors(portfolio investment).

For the banking sector, equities are adjusted to aproxy of the market value in a similar way to theother sectors by applying a stock market indexevaluation rate. For all other items, the valuationis applied to the registered accumulated flows.

There are no plans at present to producequarterly data.

The results of the yearly FDI survey are notincluded in the i.i.p. Nevertheless, they may beused to make some adjustments. Further, theinformation included in the survey should makeit possible in the near future to compile a firstproxy of the reinvested earnings component.

A fully updated methodology and processing isunder development, to become fully operationalin 2002.

12.2 Definitions

12.2.1 General

The definitions for the i.i.p. items refer to the BPM5,as do the definitions for the respective b.o.p. items.

The reconciliation process is based either onstocks or on the accumulation of flows,depending on the item concerned.

12.2.2 Direct investment

As for the b.o.p., the directional principle is notapplied and reinvested earnings are not calculated.

12.2.3 Portfolio investment

For discounted instruments the discountedvalue is usually taken into account, so that thedifference in relation to the purchase price isincluded in the i.i.p.

12.2.4 Financial derivatives

There is no recording of financial derivatives ona gross basis. Financial derivatives arecomputed on the basis of accumulated flows;therefore, no valuation of market prices iscarried out for the resulting stocks.

12.2.5 Other investment

See Sub-section 12.2.1.



12.2.6 Reserve assets

Stocks of reserve assets are compiled in co-operation with the Accounting Division of theNBB/BNB.


See the b.o.p. financial account.

12.4 Gaps





None.

13 Administration

13.1 Titles of publications

Nationale Bank van België/Banque Nationale deBelgique:Annual ReportStatistical Bulletin (quarterly)A specific b.o.p. publication will be available inthe course of 2001 at six-months� frequency.

Banque centrale du Luxembourg (BcL):Annual reportBulletin (quarterly)

STATEC:Bulletin�Note de conjoncture� (quarterly)�Annuaire statistique� (annual)Web site: www.statec.lu

13.2 Contributors

This country information was drafted by theECB�s Balance of Payments Statistics andExternal Reserves Division and subsequentlyamended and agreed with Belgium/Luxembourg. Enquiries of a general natureshould be addressed to the Press Division of theECB. Enquiries specific to Belgium/Luxembourgshould be addressed to:

Mr. Guido MelisBanque Nationale de BelgiqueBoulevard de Berlaimont 14B - 1000 BRUXELLESBelgium

Tel.: (0032) 2 221 2170Fax: (0032) 2 221 3144

Mr. Germain StammetBanque centrale du LuxembourgBoulevard Royal 2L - 2983 LUXEMBOURGLuxembourg

Tel.: (00352) 47 74 4279Fax: (00352) 47 74 4920

78ECB EU

Balance of payments statistical m

ethods � Novem

ber 2000

Ch

apter 4.2 D

enm

ark

1O

rganisation chart(s)

Denmarks NationalbankStatistics Department

Assistant GovernorJørgen Ovi

Publications and horisontal issuesBent Christiansen Secretaries

Financial StatisticsPayments Statistics

Lars Sørensen

MFI-StatisticsJesper Mærsk

Other Financial StatisticsNiels Lynggård Hansen

Payments reportsVacant

Analysis and methodologyNiels Peter Mortensen

IIP and direct investmentTom Christensen

IT-issuesJørgen Petersen

DocumentationHanne Sørensen

Jens Hald

ECB EU Balance of paym

ents statistical methods � N

ovember 2000

79

Ch

apter 4.2 D

enm

arkStatistics Denmark Organisation Chart 1 January 2000

6 AdvisoryCommittees Board of Governors

Board of Governors/Steering Groupfor Central Business Register andEconomic Models

Director GeneralNational Statistician

Jan Plovsing

Social StatisticsDirector Kirsten Wismer

Business StatisticsDirector Karsten Stetkær

Economic StatisticsDirector Bent Thage

User ServicesDirector Lars Thygesen

General Staff FunctionsHead of Administration Henrik MunckChief Adviser Karin RavnChief Adviser Kim Voldby Pedersen

Population and Education (01)Head of Division Lars Borchsenius

Labour Market (04)Head of Division Carsten U. ZangenbergChief Adviser Thorkild Wedebye

Social and Health (10)Head of Division Carsten Torpe

Income and Consumption (17)Head of Division Finn Spieker

Customer Service (15)Head of Division Isak Isaksen

Business Structure (14)Head of Division Sven EgmoseChief Adviser Mogens Damgaard Larsen

Agriculture (03)Head of Division Kristian Hjulsager

Manufacturing andConstruction (08)Head of Division Bente Dyrberg

Service Sector (11)Head of Division Peter Bøegh Nielsen

Central Business Register (12)Head of Division Hilmar Bojesen

National Accounts (06)Head of Division Ole Berner

GNP Unit (23)Chief Economist Esben Dalgaard

Public Finances and Prices (05)Head of Division Søren Brodersen

External Trade (02)Head of Division Rewal Schmidt Sørensen

Economic Models (20)Head of Division Jes Asger OlsenChief Economist (CGEM) Lars HaagenPedersen

Environment and Energy (18)Head of Division Preben Etwil

Dissemination Centre (16)Head of Division Leon ØstergaardChief Adviser Annegrete Wulff

Library and Information (22)Head of Library Per Knudsen

Research Services (13)Head of Division Otto Andersen

International ConsultancyUnit (19)Chief Adviser Lars Erik Gewalli

IT Centre (09)Head of Division Palle QvistHead of Systems and OperationsArne Brask Jørgensen

Management Secretariat (21)Chief Adviser Karin RavnChief Adviser Kim Voldby PedersenChief Adviser Jørgen Alexandersen

Administration (07)Head of Administration Henrik MunckChief Adviser Lis IversenHead of Finance Helle Meyland


Chapter 4.2 Denmark


2.1 Introduction

Responsibility for the collection and compilationof balance of payments (b.o.p.) statistics isshared between Statistics Denmark andDanmarks Nationalbank. Statistics Denmark isthe official compiler of the Danish b.o.p.Danmarks Nationalbank collects all settlementdata and is responsible for defining theregulations for and processing the reports on allpayments to and from other countries. Inaddition, it collects, compiles and analyses dataon the international investment position (i.i.p.),direct investment and other external assets andliabilities.

In the past, the collection and compilation ofDanish b.o.p. statistics were partly determinedby foreign exchange regulations. Since Denmark�saccession to the European Union (EU) in 1972,there has been a gradual liberalisation ofexchange controls. The exchange controls inDenmark were totally abolished in 1988.

Since the impact of external transactions on theDanish economy is considerable, monthly b.o.p.statistics are seen as an essential ingredient ofgeneral economic policy. A new b.o.p. collectionand compilation system was implementedduring 1998 in order to improve the quality ofb.o.p. statistics and to comply with internationalstandards.


The legislative provisions for the collection ofb.o.p. statistics in Denmark are laid down inthe �Executive Orders on Foreign ExchangeRegulations� by the Ministry of EconomicAffairs . The system in place is based on the�Executive Order on Foreign ExchangeRegulations� issued on 11 July 1994. Thedetailed regulations, reporting forms, etc. forb.o.p. statistics are based on DanmarksNationalbank�s �Udlandsbetalinger-Indberetnings-forskrifter� of October 1998.


(i) Statistics DenmarkThe Balance of Payments Section of StatisticsDenmark is part of the national accounts office.

(ii) Danmarks NationalbankWithin the Statistics Department of DanmarksNationalbank, 25 staff members are involved inb.o.p. and i.i.p. statistics.


Statistics Denmark and Danmarks Nationalbankliaise with one another on the compilation ofdata for the current account and, in particular,the trade in goods items. For purposes ofproducing current account data, external tradestatistics (transactions-based data compiled byStatistics Denmark), replace payments on tradein goods and the difference between thesettlement date and the transaction date fromsettlement reportings (change in trade credits)are taken into account for the compilation ofthe current account. In addition there is anongoing comparison at enterprise level betweenthe reporting for the external trade statisticsand the settlement statistics of DanmarksNationalbank, as well as an ongoing comparisonbetween the reporting for the national accountsand the settlement statistics. This comparisonimproves the compatibility of the two statisticsin general, and the settlement statistics ontransactions without effective payments (setofftransactions) and on payments on merchanting,in particular.

Financial institutions are important externalcontacts. They are the main providers ofsettlement data, as well as users of b.o.p. andi.i.p. statistics. For these reasons, DanmarksNationalbank maintains close and continuouscontacts with these institutions.

At the international level, b.o.p. and i.i.pstatistics are discussed with other central banks,particularly those in the Scandinavian countries.


Chapter 4.2 Denmark

2.5 Users

Data on b.o.p. statistics, the i.i.p. and directinvestment are sent to the EuropeanCommission (Eurostat), the ECB, the Organisationfor Economic Co-operation and Development(OECD) and the International Monetary Fund(IMF). Domestically, the data are forwarded toStatistics Denmark, the Ministry of Finance andthe Ministry of Economic Affairs. Data onInternational Banking Statistics are sent to theBank for International Settlements (BIS).



During 1998 (April and October) DanmarksNationalbank launched a new reporting systemfor payment and settlement statistics. The newreporting system is a ticket-based closed systemin which all transactions that change anindividual bank�s external position are reported.

The reporting system consists of two differentcollection systems. Almost all transactionsconcerning portfolio investment (i.e. trading aswell as yield/redemption instalments) areautomatically reported by the banks withouttheir customers being contacted. These reportsare made in what is called the �securitiessystem�. Recording is carried out transaction-by-transaction. The values of the transactions insecurities are split into the value of the security,accrued interest, forward premium and charges,fees, commissions, etc.

All kind of transactions which change anindividual bank�s external position are reportedin the �transfer system�. Transactions areregistered automatically on the basis of thebookkeeping and information is exchangedbetween the banks indicating the residencestatus of the owner of the debited account.Whenever resident customers (non-banks)are involved in the transaction, they arerequired to inform the bank of the purpose ofpayment and the country of the non-residentcounterpart. This information is collectedthrough home banking links or via other means

of communication between the bank and thecustomer. The purpose of payment is forwardedto Danmarks Nationalbank as a four-digit codeor as a one-digit code with a supplementarytext.

When Danish enterprises and households holdaccounts abroad, each transaction is reporteddirectly to Danmarks Nationalbank if the grosstransactions exceed DKK 5 million (EUR700,000) on a quarterly basis. For holders ofaccounts abroad who use those accountsalmost solely for collecting revenue on exports,the threshold for direct reporting might behigher. Holders of accounts abroad are askedto reply to a monthly questionnaire on thesepayments. In addition, there is direct reportingon transactions that are settled as netpayments or without effective payment (set-offtransactions). Typically, these respondents haveaffiliates abroad.

The main features of the reporting systemare described in more detail in DanmarksNationalbank�s �Monetary Review�, 2nd quarter1999.

The MFIs� and Danmarks Nationalbank�s owntransactions in financial items are derived fromchanges in the relevant balance sheet items.This means that MFIs� and DanmarksNationalbank�s own transactions are measurednet. Changes in stocks in the monthly bankingstatistics reflect transactions at the marketprices at the time of the transactions. DanmarksNationalbank applies the same accountingrules. As a result, the flows data are inaccordance with the recommendations of theECB and International Monetary Fund (IMF).There is, however, one minor exception.Balance sheet items in foreign currency atthe end of the month are converted to Danishkroner at the end-month exchange rates.However, the effect of these valuationadjustments is offset in a separate item.Consequently, the changes in the net externalpositions of the MFIs reflect these transactions.These comments are relevant for understandingthe description given later on flow data for MFIs


Chapter 4.2 Denmark

(Sub-section 4) and Danmarks Nationalbank(Sub-section 11).

For supervisory and other purposes, anotherset of accounting rules apply to banks andDanmarks Nationalbank. The balance sheetitems are valued at market prices as at the endof the period. This other set of data is used fordrawing up the i.i.p.


MFIs report all relevant payments handled bythe banking sector. Today, about 70 MFI�s arereporting their settlements.

Other residents report payments via accountsheld abroad as well as setoff/netting transactionsdirectly to Danmarks Nationalbank. For the timebeing, approximately 430 residents reporttransactions via accounts held abroad directlyto Danmarks Nationalbank on a monthly basisand 150 residents report set-off/nettingtransactions.

3.3 Thresholds

Most payments related to securities transactionsare reported in the securities system regardlessof any threshold.

In the transfer system other payments in excessof DKK 60,000 are reported individually,with information on the purpose of thepayment, including the economic code, andthe identification of the resident orderingcustomer/beneficiary. Payments of less thanDKK 60,000 are reported on a monthly basis,without information on the purpose of thepayment or customer identification.

Payments related to transactions in which thebanks themselves take part are reportedregardless of any threshold. These transactionsare reported in aggregate form, so that the purposeof the payment and country codes is preserved.

Transactions via accounts held abroad arereported directly to Danmarks Nationalbank by

the reporting agents, regardless of anythreshold.


Statistics Denmark and Danmarks Nationalbankcompile b.o.p. data which have, since January1997 for monthly data and as from the firstquarter of 1997 for quarterly and annual data,to a large extent been in line with theharmonisation proposals agreed within theformer Task Force on Financial Flows and StocksStatistics.

3.5 Timeliness

Settlement data are available one month and sixworking days after the end of the reportingperiod. Data for trade in goods are released tenweeks after the reporting period, owing to theIntra-Community Trade Statistical System(Intrastat) system. Consequently, transactions-baseddata are available after approximately ten weeks.

Statistics Denmark is preparing a flash releaseon external trade statistics and this might leadin both settlement and transaction data beingavailable, as from end-2000, no later than 30working days after the reporting period.


The Danish b.o.p. is compiled on a monthlybasis.

3.7 Data controls

The new reporting system facilitates severaltypes of data control.

Validation procedures are incorporated intothe electronic data collection system. If theinformation in a report is not valid, the bank isimmediately prompted for correct informationand the report is not accepted until valid andconsistent information has been given.

The next level of control concerns theinterpretation of the specific information in the


Chapter 4.2 Denmark

Table 1

Reporting scheme for b.o.p. and i.i.p. data collection for DENMARK


All respondents External Trade Trade in goods Monthly 10 working daysStatistics, (EU-trade)INTRASTAT

All respondents External Trade Trade in goods Transaction-basis 0 days (data areStatistics, (non-EU-trade) reported as the goodsEXTRASTAT enters or leaves EU)

All respondents The securities Detailed information Payment basis � 2 dayssystem about the security and electronic(settlement the payment. Covers reporting systemstatistics) all securities trading,

yields and redemption.

All respondents The transfer system Payment purpose given Payment basis � 2 days(settlement by a four-digit code electronicstatistics) reporting system

MFIs � trade in MFI-statistics Balance statistics with Monthly 14 daysforeign securities a detailed breakdownand loans by instrument, country

etc.

Monetary Reserve assets Balance Monthly 2 daysauthorities

Enterprises with Reporting of Direct reporting. Monthly two weeksan account abroad payments Schemes with a break-

via accounts abroad down by end use of themoney transferredabroad. Paymentpurpose given by four-digit code.

Enterprises with Direct reporting. Monthly two weeksnetting or sett-offpayments

i.i.p. data

All respondents Questionnaire Information on Yearly 9 monthsexternal assets andliabilities


Chapter 4.2 Denmark

reports. For instance, it is investigated whetherexchange rates are used correctly, whethermarket values are reasonable on comparisonwith nominal values, whether country codes forissuers of securities are used consistently andwhether there are any systematic differences inthe use of purpose-of-payment codes.

For transactions in which one bank representsthe resident and pays or receives payments fromabroad via another bank, both banks have anobligation to report. The details reported arematched to ensure reporting by the bankrepresenting the resident, even though theexternal position of the bank may haveremained unchanged.

The new reporting system provides the basis forcomparing the balance sheets of banks withreported payments. As a start, various items areinvestigated, e.g. transactions in repurchaseagreements and securities issued by non-residents are compared with the changes in theindividual banks� accounts for repos and holdingsof foreign securities. Moreover, non-residents�holdings of Danish securities issued in Denmarkand registered at the Danish Securities Centreare compared with the flows statistics.

3.8 Revision policy

All revisions as from 1998 are included in themonth to which they relate. For the time being,there is no revision policy in place, i.e. atpresent all revisions are published in the firstsubsequent release. However, a revision policyfor settlement statistics � which is the mainsource of compilation � and for quarterly dataon direct investment was put in place inSeptember 2000.

(i) settlement statistics� continuous revision of the two previous

months;� revision of the previous and current years

at end of every quarter;� revision of all previous years once a year

in September

(ii) direct investment (quarterly data)� continuous revision of the previous and

the current years;� revision of the previous years with the

third quarter

Apart from these regular revisions, an exceptionalchange of data at the firstcoming release will becarried out in the case of significant revisions inthe reported information, which change theoverall picture of the b.o.p. items.

3.9 Publication

Danmarks Nationalbank publishes monthlyb.o.p. data on a settlement basis in �Nyt� andthe �Monthly Financial Statistics�.

�Nyt� is published in accordance with theabove-mentioned time schedule, and containsdata covering a limited period and fewspecifications. The publication entitled �MonthlyFinancial Statistics� is the most detailedpublication and covers a longer period.Quarterly data on foreign direct investment,broken down by country and industry, are alsoincluded in the �Monthly Financial Statistics�.These two publications have accompanyingnotes in English and contain a calendar offuture releases.

Two other publications of DanmarksNationalbank, the �Monetary Review� and the�Annual Report�, contain extracts of data fromthe �Monthly Financial Statistics�, together withb.o.p. data on a transaction basis.

Publications released by Danmarks National-bank are available on the Internet on theWeb site of Danmarks Nationalbank athttp:\\www.nationalbanken.dk.

The titles of the publications produced byDanmarks Nationalbank on b.o.p. statistics arelisted in Sub-section 13.1.

Statistics Denmark publishes monthly b.o.p.data on a transaction basis in �NYT fraDanmarks Statistik�.


Chapter 4.2 Denmark

4 Implementation

4.1 Monthly key items

Deviations from the 5th edition of the IMFBalance of Payments Manual (BPM5) (MonetaryUnion harmonisation proposals) areunavoidable for the monthly key items data, as aresult both of their prospective use formonetary and exchange rate policy purposes inStage Three and of constraints related totimeliness. However, Danmarks Nationalbankhas provided the European Monetary Institute(EMI)/ECB with national aggregate b.o.p. data,broken down into key items, as from the January1997 reporting period.

A decision to forward data on a transactionbasis, rather than on a settlement basis, wastaken in June 1999.The rationale for forwardingdata on a transaction basis is that it meets therequirements of the BPM5 and eliminates theinconsistency between monthly and quarterlydata. Furthermore, these are the official Danishb.o.p. data. However, at present data on atransaction basis are only available after a time-lag of around 10 weeks.

The decision to produce a b.o.p. within 30working days has been taken and is scheduledfor implementation by end-2000.

Data on a settlement basis are published byDanmarks Nationalbank within one month andsix working days. These data are used as inputfor Statistics Denmark�s elaboration of theofficial b.o.p.

Statistics Denmark and Danmarks Nationalbankare able to compile a country-by-countrygeographical breakdown for most key items.Statistics Denmark assumes that it will be in aposition to provide a euro area/non-euro areasplit for current account data and to prepare anassets/liabilities euro area/non-euro areabreakdown.

In order to improve the quality of the settlementstatistics and to ensure that the Danish b.o.p.statistics satisfy the demands set out for

countries participating in Monetary Union, an�EMU preparation� project has been initiated.The aim of the project is to examine deviationsfrom international standards, with a focus onhow to eliminate these. The project is scheduledto be completed in the autumn of 2001.

The methods and sources used to producemonthly and quarterly data are the same.Therefore, the evaluation of methodology andbreakdowns is discussed in the following sections.

4.2 Estimation methods for the monthly

key items

At the time monthly data are published, thecoverage of respondents is close to 100%,except in the case of enterprises with accountsabroad and netting payments. The coverage ofdirect reporting, for which the main source isreporting from enterprises with accountsabroad, is normally around 95% The currentrule for publication, one month and six workingdays, means that publication sometimes has totake place after only 23 working days, whichleads to lower coverage. It is planned to publishthe data after 30 working days by end- 2000,and thereby to reduce the prevalence of lowcoverage.

The only item of estimation is goods, where VATstatistics are used for grossing-up Foreign TradeStatistics and thereby the item goods. Grossing-up is based on an inclusion of a positivedifference between VAT statistics and Intrastatby a factor of less than 1.

It is inherent in a settlement system thatestimation is unnecessary.


Estimation is used for grossing-up ForeignTrading Statistics, as mentioned above. In orderto produce a b.o.p. within 30 working days,Statistics Denmark may need to estimate furtherfigures. The question of how to estimate iscurrently being considered by StatisticsDenmark. In general, in the area of the b.o.p.,


Chapter 4.2 Denmark

Statistics Denmark complies with theregulations in the ESA and the recommendationsin the BPM5.


Estimation is used for retained earnings.


No estimation used.


No estimation used.


No estimation used.


No estimation used.

4.3 Monthly key items � implementation

plan

The implementation plan relies heavily onStatistics Denmark, especially with regard to thedecision on estimating data for trade in goods.A table showing details of the implementationof the monthly key items is shown on thefollowing country page. A distinction is madebetween current data availability and futureimplementation requirements.

4.4 Implementation of the BPM5

As in the case of most Member States whichessentially collect b.o.p. data on cross-bordersettlements, the most difficult problemsencountered in the implementation of the BPM5relate to the coverage of transactions where nosettlement takes place.

Most of the new conceptual recommendationsmade by the IMF have been implemented. Thoseareas where deviations may remain after theimplementation of the BPM5 are indicated inthe various categories in Sub-sections 5 to 12.

4.5 Standard components � quarterly and

annual

The settlement statistics for 1995 and onwardhave been brought into line with therecommendations of the BPM5. The officialb.o.p. figures, released by Statistics Denmark,comply with the BPM5 as of 1997, with someminor exceptions.

5 Investment income


See Sub-section 3 for a description of the datacollection system.

There is an annual review of the income onportfolio and direct investment with the aim ofrecognising the return on direct investmentincluded in the securities part of the settlementsystem.

5.2 Definitions

As from end-2000 , it will be possible to fulfil therequirements of the ECB on the basis ofsettlement data. In respect of the geographicalbreakdown, reliable data from 1999 andonwards is planned to be available within theyear 2001.

Settlement data include discounts on moneymarket securities issued abroad by the Danishgovernment. Furthermore, settlement data aresupplemented by data on reinvested earningson direct investment and on discounts/premiums on Danish debt securities registeredat the Danish Securities Centre (in practice,equivalent to Danish securities quoted on theCopenhagen Stock Exchange). Data onreinvested earnings are collected annually byDanmarks Nationalbank by means of a surveyof enterprises with direct investmentrelationships (see Sub-section 12 on the i.i.p.).Statistics Denmark is responsible for thecalculation of the discounts/premiums on theDanish debt securities referred to above.


Chapter 4.2 Denmark

Table 2

Implementation of monthly key items

DENMARK N Current data availability

Timeliness for Timeliness for Timetable fornational data geographical break- implementing

down on a country- the euro area/by-country basis non-euro area split

Credits/ Debits/ Credits/ Debits/ Credits/ Debits/assets liabilities assets liabilities assets liabilities

Current account m 2 months 2 months Na Na � �Goods 2 months 2 months Na Na � �Services 2 months 2 months Na Na � �Income 2 months 2 months Na Na � �

on direct investment 30 days 30 days 30 days 30 days Q1 2001 Q1 2001on portfolio investment 30 days 30 days 30 days 30 days Q1 2001 Q1 2001on other investment 30 days 30 days 30 days 30 days Q1 2001 Q1 2001

Current transfers 30 days 30 days 30 days 30 days Q1 2001 Q1 2001Capital account m 30 days 30 days 30 days 30 days Q1 2001 Q1 2001Direct investment m 30 days 30 days 30 days 30 days Q1 2001 Q1 2001

Equity capital 30 days 30 days 30 days 30 days Q1 2001 Q1 2001Reinvested earnings 18 months 18 months 18 months 18 months* Q1 2001 Q1 2001Other capital 30 days 30 days 30 days 30 days Q1 2001 Q1 2001

Portfolio investment m 30 days 30 days 30 days 30 days Q1 2001 Q1 2001Equity securities 30 days 30 days 30 days 30 days Q1 2001 Q1 2001Debt securities 30 days 30 days 30 days 30 days Q1 2001 Q1 2001

bonds 30 days 30 days 30 days 30 days Q1 2001 Q1 2001money market instruments 30 days 30 days 30 days 30 days Q1 2001 Q1 2001

Financial derivatives m 30 days 30 days 30 days 30 days Q1 2001 Q1 2001Other investment m 30 days 30 days Na Na Q1 2001 Q1 2001

Monetary authorities m 30 days 30 days Na Na Q1 2001 Q1 2001General government m 30 days 30 days 30 days 30 days Q1 2001 Q1 2001MFIs 30 days 30 days Na Na Q1 2001 Q1 2001

long-term Na Na Na Na Q1 2001 Q1 2001short-term Na Na Na Na Q1 2001 Q1 2001

Other sectors 30 days 30 days 30 days 30 days Q1 2001 Q1 2001Reserve assets m 2 days 2 days Na Na Q1 2001 Q1 2001

* Based on the i.i.p.


Chapter 4.2 Denmark


Deviations are related to discounts/premiumson debt securities other than the securitiesmentioned in Sub-section 5.2. In addition, theissue of accruals of settlement data needs to beresolved.

Income on reserve assets is not included inincome on other investment, but is ratherdistributed according to the underlying instrument.

5.4 Gaps

See Sub-section 5.3.


A working group made up of representatives ofboth Statistics Denmark and DanmarksNationalbank is investigating the issuesmentioned in the first part of Sub-section 5.3.

Income on reserve assets is to be included inincome on other investment within the year2000.


None.

6 Capital account


The overall capital account is based onsettlement statistics from DanmarksNationalbank. No breakdown is released, butinformation on geographical allocation and asectoral breakdown are available in thesettlement statistics.

6.2 Definitions

The definition of the capital account is in linewith the BPM5. The implementation of therecommendations has been difficult, as thebroad statements in the Sections 295 and 303of the BPM5 are not very precise, andDanmarks Nationalbank also relies on thesubsequent chapters, including Section 350, in

which legacies, for instance, are mentionedindirectly as a capital transfer. Other sources ofinterpretation of the BPM5 are the reportentitled �Improvement and Harmonisation ofthe EU/EFTA balance of payments � Report ofTask Force 2 Current account� and the ECB�sreport on the same issue.

The basic problem of interpretation is that ofseparating capital transfers from currenttransfers. A borderline case for codification inDenmark is the treatment of legacies and gifts,where gifts above DKK 5 million (aroundEUR 800,000) are recorded as capital transfers,because they are assumed mainly to affect thesavings, rather than the consumption of thebeneficiaries.

Of course, the obvious cases, for instance, ofgovernmental debt forgiveness of lending todeveloping countries are also included.

The change of residency caused by thestatistical omission of the Faroes and Greenlandfrom the economic territory of Denmark hasbeen included as a capital transfer in July 2000.

6.3 Deviations from the agreed definitions

The estimation of migrants� transfers has beensolved in year 2000, and is now included in theestimation of transactions below threshold.

The present definition is that all migrants� andimmigrants� transfers of deposits/loans heldwith Danish banks are included in the capitalaccount.

EU transfers are compiled as current transfers.No decision has been taken on what EUtransfers to include in capital transfers.

6.4 Gaps

Migrants� and immigrants� assets/liabilities otherthan those held with banks are not covered.

Full data on investment grants made by generalgovernment are not available.


Chapter 4.2 Denmark

Data for private sector debt forgiveness are notavailable, but are believed to be insignificant.


Danmarks Nationalbank plans to investigate thegaps mentioned above, but this is notconsidered to be of very high priority.

7 Direct investment


Danmarks Nationalbank collects data on directinvestment flows and stocks from two differentsources: the general settlements reportingsystem and a sample survey of enterprises. Thesurvey was carried out at the end of the years1991, 1994, 1996 and 1998. It was decided that,as from the 1998 survey, the survey shouldbe conducted annually. In principle, thecombination of these two sources leads to agood coverage and quality of direct investmentdata. Some items, such as reinvested earningsand trade credits between affiliated enterprises,are derived from stocks data and are, therefore,only available on a annual basis.

Monthly data on reinvested earnings areincluded in the transaction-based b.o.p. statistics,but not, at present, in the settlement statistics.

Until data for reinvested earnings are availablefrom the survey, data are calculated as residualsfrom estimates on total income on directinvestment; i.e. monthly reinvested earnings arecalculated as one-twelfth of total estimateddirect investment income for the year minusactual dividend payments. Direct investmentincome is estimated on the basis of total returnon direct investment in earlier years (separatelyfor inward and outward investments).

7.2 Definitions

When the new collection system wasimplemented in October 1998, new paymentcodes were added which took into account thedirectional principle.


None.

7.4 Gaps

No detailed information is available on amonthly basis for trade credits betweenaffiliated enterprises. Data are estimated as thedifference between transactions and settlementdata for all types of goods. However, data ontrade credits are available annually, from thestock survey.

It has been difficult for the respondents tounderstand and report their transactions inaccordance with the new and expanded set ofcodes that implement the directional principle.

Non-response is also a problem. DanmarksNationalbank is trying to address this usingnewspapers and other sources. The enterprisein question is then contacted to verify therelevant transaction.


Some of the larger enterprises/banks have beencontacted in order to explain the directionalprinciple to them.

It is intended to contact more respondents andto write a more user-friendly description of thecodes.


None.



In April 1998, the first part of a new electronicsettlement system, called the securities system,was launched. This system contains all securitiestransactions that might be relevant to the b.o.p.In principle, all transactions involving eithera non-resident issuer or a non-residentcounterpart/customer or a denomination in


Chapter 4.2 Denmark

foreign currency or a non-resident clearinghouse or a non-resident fiscal agent arereported.

Portfolio investment is reported by the MFIs viathe securities system.

Comparisons of Danmarks Nationalbank�sinformation with settlement statistics from othersources suggests that the main part of thecentral bank�s settlement data are reliable.Comparison of settlement data and balancesheet statistics has proved to be useful. As aresult of these comparisons, errors related tosingle banks have been identified andeliminated. Further controls are expected to beimplemented within the next few years.

Another feature of electronic reporting is thatreporting on portfolio flows is received at thesettlement date, which means that extensivestatistics on portfolio flows are available withinonly three days.

Not all information on portfolio flows comes fromthe settlement system. As mentioned in Sub-section3, banking statistics are used, e.g. changes in banks�holdings of foreign securities. Some differencesbetween banking statistics and settlement dataconcerning foreign securities still exist, even thoughthe main part has been eliminated.

8.2 Definitions

The definition of portfolio investment is in linewith BPM5. The guideline is reflected in thestructure of the present economic codes andthe split between bonds and money marketinstruments is according to initial maturity.


The quality of the country split has not beenexamined in depth. Treatment of securities ofsupranational institutions is an outstandingtechnical issue. The quality of the sectorsplit is generally high. Items not allocated to anysector, however, represent a minor issue wherefurther investigation is necessary. In cases whereno sector is assigned automatically, trading is

allocated to the sector which it is mosts likely tobelong, given the type of asset.

8.4 Gaps

The gaps in portfolio investment data are thecounterparts of the gaps concerning investmentincome on debt securities which are mentionedin Sub-section 5.


None.


None.



The payments on financial derivatives are basedon settlement statistics. No breakdown isreleased at present, but information ongeographical allocation and a sectoralbreakdown are available in the settlementstatistics. In addition, net settlements on swapsand FRAs could be separated from other netsettlements on derivatives.

9.2 Definitions

The definition of financial derivatives is inaccordance with the BPM5. All payments onfinancial derivatives are considered as belongingto this item, regardless of whether they constituteinterest-related payments or foreign exchangeof principal-related payments. The codificationused by Danmarks Nationalbank distinguishesbetween, on the one hand, swaps and FRAs,and, on the other, derivatives such as foreignexchange agreements, futures and options.However, no information providing thedistinction is released.


None.


Chapter 4.2 Denmark

9.4 Gaps

In theory, there are no gaps. In practice,however, significant differences has beenexperienced as a result of the reporting ofprincipal for swaps. As the amounts of initialand final exchanges in relation to swaps are farlarger than other payments, even if only a smallnumber are reported incorrectly this can have asignificant impact on errors and omissions.Therefore, Danmarks Nationalbank runs adedicated check on the largest payments onderivatives, which is designed to identifyindividual payments not matched by anoffsetting payment for the same company.


None.


Payments on financial derivatives are notestimated.

10 Other investment


Other investment related to the MFI sector isderived from changes in balances in the MFIstatistics.

Trade credit is defined, by nature, as thedifference between settlement data andtransaction data. As data on a transaction basisis produced by Statistics Denmark withinaround 10 weeks owing to the well-knownIntrastat problem, data on other investmentare subject to the same time lag.

10.2 Definitions

The definition of other investment is in line withthe BPM5, except for the deviations referred toin Sub-section 10.3.


The flows of other investment are reported by

banks for transactions between residentialaccounts and foreign accounts. Loans and depositsinvolving foreign counterparts, which aresuccessively invested abroad without domestic roll-over are not, with a few exceptions, reported in thesettlement system. Thus the settlement systemfocuses on the flows between residents and non-residents. Once the new banking statistics are inplace by end 2000, Danmarks Nationalbank will beable to take account of the change of counterpart inroll-overs of loans and deposits.

There is no maturity breakdown between longand short-term investment in the case of otherinvestment, as this information is not availablein the settlement system. However, the newMonetary Financial Institution (MFI) statisticsintroduced by end-2000 will provide thematurity breakdown. Therefore, part of thefinancial flows (derived from the bankingstatistics) can be broken down by maturity.

Furthermore, no external assets or liabilities ofDanmarks Nationalbank are, at present,included in other investment, as all assets andliabilities of Danmarks Nationalbank arereported as reserves (net).

10.4 Gaps

None.


At present, there is a discrepancy in thetreatment of financial leasing between thenational accounts and the settlement statistics.One issue is consistency between financialassets exported/imported for leasing and thecorresponding loan, and another issue is theallocation of the financial leasing to interest andredemption. This issue is being investigated bya working group made up of representativesof both Statistics Denmark and DanmarksNationalbank.


None.


Chapter 4.2 Denmark

11 Reserve assets


Changes in the relevant items in the balancesheet of Danmarks Nationalbank.

11.2 Definition

At present, changes in the net external position ofDanmarks Nationalbank comprise monetary gold,SDRs, the reserve position in the IMF and foreignexchange (net). In practice, all external assets ofDanmarks Nationalbank are readily available to(i.e. highly liquid, marketable and creditworthy)and controlled by Danmarks Nationalbank, anddenominated in foreign currency (i.e. in currenciesother than the Danish krone). For accountingdetails, see Sub-section 3.1 above.


Reserve assets are compiled on a net basis.

11.4 Gaps

The breakdown of foreign exchange forquarterly data, as required by the Guideline ofthe European Central Bank of 1 December 1998on the statistical reporting requirements of theEuropean Central Bank in the field of balance ofpayments and international investment positionstatistics (ECB/1998/17), is available as monthlychanges in market value only.


None.


12.1 Special features of data collection

Danmarks Nationalbank endeavours toproduce i.i.p. data within nine months of theyear-end, initially for end-1998. The data arepure stock data based on sample surveys ofenterprises, banking statistics (will be replacedby MFI statistics from end-2000), informationon securities held in custody by banks for

enterprises and households, debt securitiesstatistics from the Danish Securities Centreshowing non-residents holdings� of Danish debtsecurities quoted on the Copenhagen StockExchange and the annual accounts of centralgovernment and Danmarks Nationalbank. Thesample surveys are conducted on a yearly basisand cover the private non-banking sector, localgovernment and social security funds.

Danmarks Nationalbank produces preliminaryi.i.p. statistics based on accumulated flows andestimated value changes. These statistics areproduced on an annual basis and are availablewithin three months of the year-end.

There is no geographical allocation in either thefinal or the preliminary i.i.p. statistics. However,in the final i.i.p. statistics direct investment isbroken down by country. None of the statisticsare available on a quarterly basis, but someelements are available at more than annualfrequency.

Denmark participated in the 1997 IMFCo-ordinated Portfolio Investment Survey.Danmarks Nationalbank did not provide any itemsother than the mandatory ones. DanmarksNationalbank will participate in the 2001 IMF Co-ordinated Portfolio Investment Survey and is willingto consider conducting the survey on a regular basis.

12.2 Definitions

12.2.1 General

With minor exceptions, the concepts anddefinitions used are in accordance with theBPM5 and the recommendations made by theWorking Group on Balance of Payments andExternal Reserves Statistics.


Direct investment is compiled according to thedirectional principle. Direct investment includesreinvested earnings. Direct investment is valuedat market prices if the company is listed on astock exchange and valued using the equity


Chapter 4.2 Denmark

method for all other companies.


Portfolio investment is valued at market price.


Data on financial derivatives are recorded on agross basis. Financial derivatives are valuedat market price in accordance with therecommendations of the Working Group onBalance of Payments and External ReservesStatistics. Futures with daily margining areexcluded from the statistics.


Trade credits, loans and deposits are valued atbook values, which are normally equal to theirnominal values.


Reserve assets are recorded at closing mid-market prices at the end of the appropriateperiod using the closing mid-market exchangerates prevailing at the reference date.


Mortgages are classified as debt securities becauseDanish mortgages are traded in an organised market.

12.4 Gaps

Small enterprises� and households� holdings ofsecurities, which are held in custody abroad, aswell as their loans and deposits with foreign-owned banks abroad are not covered by thesample survey. Non-residents� holdings ofequity securities issued by Danish enterpriseswhich are held in custody abroad and not re-deposited in Danish banks are not coveredeither.


None.


Private, non-commercial real estate investmentis estimated on the basis of registered paymentsconcerning private, non-commercial real estateinvestment and �inflated� using a price index.

13 Administration


The titles of the publications on b.o.p. statisticsproduced by Danmarks Nationalbank are:�Nyt� � monthly data (settlement data only) anddirect investment (quarterly) data;�Monthly financial Statistics� � montly data andannual data (settlement data only);�Monetary Review� � monthly and annual data;�Annual Reports� � annual data;�Special Reports� � direct investment;�Denmark�s external debt� � preliminary report(annual) and�Denmark�s external debt� (annual).

13.2 Contributors

This country information was drafted by the ECB�sBalance of Payments Statistics and External ReservesDivision and subsequently amended and agreed withDenmark. Enquiries of a general nature should beaddressed to the Press Division of the ECB. Enquiriesspecific to Denmark should be addressed to:

Mr. Niels Peter MortensenDanmarks NationalbankStatistics DepartmentHavnegade 5DK-1093 CopenhagenDenmarkTel.: (0045) 33 63 68 47Fax: (0045) 33 63 71 23

Mr. Tom ChristensenDanmarks NationalbankStatistics DepartmentHavnegade 5DK-1093 CopenhagenDenmarkTel.: (0045) 33 63 68 24Fax: (0045) 33 63 71 23


Chapter 4.2 Denmark

96



ovember 2000

Ch

apter 4.3 G

erman

y

1O

rganisation chart(s)Deutsche Bundesbank

Central Office

Vice-President

President Area I Area II Area III Area IV


Banking andExternal Stock

Statistics

- balance sheet of MFI�sstatist ics

- collecting and compilingexternal stock statistics

Balance of PaymentsStatistics

- IIP- BOP

General EconomicStatistics

- methodological issues- business cycle statistics- balance sheet of

enterprises statistics- capital market statistics- foreign exchange rate

statistics

Statistical Data Processing,

Mathematical Methods

- producing,publishing anddocumentingBOP statistics

- transit ion offoreign tradestatist ics

- financial accounttransactions

- transactions inreserve assets

- income fromfinancial assets

- compilation of IIP

- current accounttransactions


Chapter 4.3 Germany


2.1 Introduction

The Deutsche Bundesbank (named the BankDeutscher Länder prior to 1957) has beenresponsible for drawing up the balance ofpayments (b.o.p.) for the Federal Republic ofGermany since 1949. In the early years thereporting was linked to the foreign exchangecontrol system in place until the end of the1950s. The gradual relaxation of theexternal controls and the transition to fullconvertibility of the Deutsche Mark at the endof 1958, associated with a rapid rise inGermany�s external transactions, necessitatedthe development of a consistent reportingsystem. Data, which had previously beenderived from the foreign exchange controls andthe multiplicity of individual reports existingin the mid-1950s, were replaced by a statutorysystem which came into force in 1961with the Foreign Trade and Payments Act(Außenwirtschaftsgesetz).


The Foreign Trade and Payments Act (inparticular Section 26 thereof) provides the legalframework for the collection of b.o.p. data.The Foreign Trade and Payments Regulation(Außenwirtschaftsverordnung) sets out the datareporting requirements in greater detail. It formsthe legal basis for the core of the German datacollection system for the b.o.p.. It also allows theDeutsche Bundesbank to request more detailedinformation on direct investment stocks and onthe external positions of non-banks.

The statistical compilation of foreign trade datalies within the competence of the FederalStatistical Office (Statistisches Bundesamt; FSO).It is based on the Act on Statistics on Cross-Border Trade in Goods (Gesetz über die Statistikdes grenzüberschreitenden Warenverkehrs),together with the appropriate regulation for itsimplementation, as well as on the applicableEuropean Union (EU) legislation on Intra-Community Trade Statistical System (Intrastat)statistics.


The Deutsche Bundesbank is responsible forseveral sets of statistics. The StatisticsDepartment consists of the following fourdivisions: the Banking and External StockStatistics Division; the Balance of PaymentsStatistics Division; the General EconomicStatistics Division; and the Statistical DataProcessing and Mathematical Methods Division.Apart from banks� balance sheet statistics andspecial statistics on the banking sector, the firstof these divisions is also responsible forcollecting and compiling most of the externalstocks statistics. The overall compilation of theinternational investment position (i.i.p.),however, is carried out by the Balance ofPayments Statistics Division, the main task ofwhich is the compilation of the German b.o.p.The General Economic Statistics Division dealswith methodological issues relating to businesscycle statistics. A variety of other statistics arealso compiled by this division, namely statisticson the balance sheets of enterprises, capitalmarket statistics and foreign exchange ratestatistics as far as the ECB has not taken overresponsibilities in these fields. The calculationfor the financial accounts within the frameworkof the national accounts are carried out by theResearch Department rather than by theStatistics Department.

The Balance of Payments Statistics Division is dividedinto three sections. Section one is responsible forproducing, publishing and documenting the b.o.p.statistics, as well as for all contacts with users. Thissection also deals with the transformation of theforeign trade statistics to the merchandise account ofthe b.o.p. All other current account transactions(excluding income from financial assets) areprocessed by section two. Financial accounttransactions, transactions in reserve assets, incomefrom financial assets and the compilation of the i.i.p.are dealt with by section three.

There is close co-operation primarily with theBanking and External Stock Statistics Division. Itis the responsibility of this particular division tocollect and compile most of the stock statisticswhich are used by the Balance of Payments


Chapter 4.3 Germany

Statistics Division to compile short-termfinancial transactions and the i.i.p.

Regular meetings are held with representativesof the Landeszentralbanken (regional main officesof the Bundesbank), which collect b.o.p.statistics forms from reporting agents andforward them � once they have been checked �to the Central Office of the DeutscheBundesbank. Between meetings, there is acontinual exchange of information on problemsof common interest. Special problems orchanges to the data collection system arediscussed at such meetings. This form of contactis essential to ensure a common understandingof the reporting requirements.


The FSO is the most important external partnerof the Balance of Payments Statistics Division,both as a provider and as a user of data. Theforeign trade statistics provided by the FSO areused as the basis for ascertaining transactions ingoods for the German b.o.p. The FSO alsoprovides some complementary data forestimation purposes. Information from privateresearch institutes on workers� remittances andtravel are also used, partly for cross-checkingand partly for estimation purposes.

The Deutsche Bundesbank attempts to involve� to the greatest possible extent � associationsof banks and other enterprises in discussionsprior to important changes to the reportingrequirements and procedures. This co-operation is aimed at improving the acceptanceof statistical requirements, and thus at theincreasing reliability of reported data. TheLandeszentralbanken maintain contact with thecompanies within their area and are theaddressees for any questions on the reportingrequirements. Visits to the reporting companiesmay also involve representatives from theCentral Office of the Deutsche Bundesbank formatters relating to special problems ortechnical developments.

2.5 Users

B.o.p. data are used for the ROW account in thenational accounts statistics, which are producedby the FSO as far as current account transactionsare concerned (whereas financial accountsstatistics are covered by the DeutscheBundesbank). Information is also exchangedcontinuously with the internal users of theb.o.p. and i.i.p. data, i.e. the division responsiblefor analysing external economic relations andthe section responsible for compiling thenational financial accounts.

The Federal Ministry of Economics andTechnology (Bundesministerium für Wirtschaft undTechnologie) is an important user of informationon direct investment data.

Other important users are private and publicresearch institutes and universities; banks,associations of banks and enterprises addressthe bulk of enquiries to the Balance of PaymentsStatistics Division.

B.o.p. data compiled according to the 5thedition of the International Monetary Fund(IMF) Balance of Payments Manual (BPM5) aresupplied to the ECB and to internationalorganisations, such as the European Commission(Eurostat, the Statistical Office of the EuropeanCommunities), the Organisation for EconomicCo-operation and Development (OECD), theIMF and the Bank for International Settlements(BIS), on a regular basis via electronic datatransmission procedures. In addition tomultilateral co-operation within the numerousworking groups of these internationalorganisations, the Balance of Payments StatisticsDivision also maintains bilateral contacts withother central banks in order to exchange viewson special issues of common interest.



The German b.o.p. system is an internationaltransactions reporting system (ITRS). Wherenecessary, the data gained from this general


Chapter 4.3 Germany

reporting framework are supplemented fromvarious other sources and by estimates. Theentity responsible for the delivery of reports isthe resident economic entity, bank or non-bank,which carries out a transaction with a non-resident and/or the resident economic entitywhere the change of ownership occurs.Therefore, there are only certain items (eg.securities, travel) which banks also report onbehalf of their customers. Short-term financialtransactions in loans and deposits are excludedfrom the German ITRS; instead, they are derivedfrom end-month stock data on the outstandingexternal assets and liabilities of banks and non-banks.

Data collection is decentralised. TheLandeszentralbanken collect reports fromreporting agents, conduct initial checks on thereported data and maintain contact withrespondents. Thereafter, the reports aretransmitted to the Central Office of theDeutsche Bundesbank in Frankfurt, whereplausibility checks are performed, usinginformation from other sources, and estimatesare made in order to fill any reporting gaps inthe system.


(i) All economic agents, enterprises, banks (seebelow for banks� special reporting obligations),individuals and public authorities must report allexternal transactions on a monthly basis. Onlyoutgoing payments settled by payment orderthrough domestic bank accounts are reportedwhen they are carried out by forwarding a copyof the payment order form to the DeutscheBundesbank.(ii) Foreign assets and liabilities of resident non-banks are also reported on a monthly basis. Thefigures are used to derive the short-termfinancial transactions of non-banks for the b.o.p.(including trade credits). In addition, there is anannual survey on direct investment stocks.(iii) Banks have the same reporting obligations asenterprises, individuals and public authorities,but are also subject to special reportingrequirements. For travel, banks must report the

purchase and sale of the means of payment.Interest and dividends paid to non-residents ondomestic securities (without an exemptionthreshold) should be reported on a monthlybasis. With regard to financial transactions,banks have to report securities transactionswith non-residents for their own account andon behalf of other residents on a monthly basis.The short-term cross-border financialtransactions of banks are derived from theirmonthly balance sheets.(iv) Public sector: information on reserve assets isderived from the Deutsche Bundesbank�saccounts. In addition, the government sector issubject to the regular reporting requirementsdescribed above.

3.3 Thresholds

A general exemption threshold of DEM 5,000 isapplied to the transactions of all economicagents, enterprises, banks, individuals andpublic authorities.

For resident non-banks, any foreign assets orany liabilities exceeding DEM 3 million in totalare reported on a monthly basis.

Banks whose foreign assets or liabilities exceedDEM 20 million have to report all their stocksof foreign assets and liabilities on a monthlybasis.


Only quarterly and annual data on major itemsare available for the years between 1949 and1955. Monthly figures are available from 1956onwards. The breakdown of the b.o.p. wasextended until 1971, when it essentially took onits present form. As a result of newdevelopments and changing needs, however,additional items were recorded and theavailable components were combined in adifferent form. From the outset, the DeutscheBundesbank has adhered in its statistical workto the recommendations made by the IMF. Themost recent changes in the presentation of theGerman b.o.p. were due to its adaptation to the


Chapter 4.3 Germany

Table 1

Reporting scheme for b.o.p. and i.i.p. data collection for GERMANY


Non-banks Payment order for Debits for, inter alia, Simultaneouslycross-border imports, service trans- (reporting formtransactions (Z 1) actions, income, capital is copy of pay-

transactions,nfinancial ment ordertransactions (excluding addressed to theshort-term loans and resident bank)deposits), if conducted viadomestic bank accounts

Banks and non- Payments for cross- Debits and credits not Monthly 7 daysbanks border transactions covered by Z1 for, inter

(Z 4) alia, service transactions,income, capital trans-actions, financial trans-actions (excluding short-term loans and depositsand excluding securitiestransactions of banks)

Banks Payments for cross- Transactions in securities Monthly 5 daysborder securities with non-residents on owntransactions (Z 10) account and on account

of customers

Banks Debits for dividends See column to the left Monthly 5 daysand interest ondomestic securities(Z 11)

Banks Interest on cross- See column to the left Monthly 7 daysborder loans anddeposits received orpaid (Z 14/Z 15)

Banks Debits/creditsntravel Purchase and sale of bank- Monthly 7 days(Z 12/Z 13) notes and other means of

payments from/tonon-banks

Non-banks Claims and liabilities Assets (stocks): Monthly 10 days for claims andvis-à-vis non- � money market paper liabilities vis-à-vis non-residents (Z 5/Z 5a) issued by non-residents; resident banks;

� other claims (excluding 20 days for claims andlong-term securities); liabilities vis-à-vis non-� trade credits residentnnon-banksLiabilities (stocks):� liabilities excluding long-term securities and moneymarket paper;� trade credits

Banks Monthlynexternal Detailed balance sheet Monthly 8 daysposition (assets and positions (stocks) vis-à-visliabilities) non-residents (excluding(10 310/10 320) m securities liabilities)

Banks and Residents� assets Balance sheet of non- Annually 6 monthsnon-banks abroad (K 3) resident subsidiaries and

associates of resident directinvestors nnn

Non-residents� assets Balance sheet of residentin the domestic subsidiaries and associatesterritory m of non-resident direct

investors


Chapter 4.3 Germany

BPM5 in early 1995 and in January 1999. Acomplete b.o.p. is available on a monthly basis andwith a full geographical breakdown by country.

3.5 Timeliness

Data usually become available within six weeks.


The German b.o.p. is compiled on a monthlybasis.

3.7 Data controls

In the first instance, the Landeszentralbankencheck the completeness of reports and carryout plausibility checks. If necessary, they contactthe reporting agents in order to clarify anydoubtful details. Comprehensive data controlsare carried out by the Balance of PaymentsStatistics Division. All relevant transactions arechecked individually for plausibility. Unusualfluctuations in the monthly data reported bylarge enterprises are monitored and thereporters are asked for an explanation.Newspapers are used to detect possiblereporting gaps. Stock and flow data are availablefor direct investment and can thus be matchedfor each individual reporting enterprise. Across-check of aggregates on stocks and flowsfrom the i.i.p. and the b.o.p. is performed twice ayear when the i.i.p. is compiled. Alternative datasources can be used for some items to evaluatethe quality of data recorded in the b.o.p. (travel,for instance), although such sources are usuallyonly available after a long delay. Moreover, theDeutsche Bundesbank has attempted to assessthe quality of German b.o.p. data by performingseveral bilateral comparisons with other EUcountries. In the context of the nationalaccounts statistics, b.o.p. data are subject tofurther plausibility checks, as the results of theb.o.p. statistics should be compatible with otherdata on the general economic situation.

Finally, the reporting banks and other enterprisesare inspected by the Landeszentralbanken and bythe public authorities responsible for ensuring

the observance of regulations on externaltransactions (Oberfinanzdirektionen). The frequencyof the regular examinations depends upon thesize and importance of the cross-bordertransactions undertaken by the banks andenterprises. Special checks can be arranged if anenterprise is suspected of repeatedly ordeliberately failing to meet the reportingrequirements.

3.8 Revision policy

Revisions to the (provisional) monthly figuresare published together with the (provisional)data for the following month. Revised annualdata are published in March or April; revisedfigures for the previous three years are given inaddition to the figures for the past year.

In some cases revisions of a more historicalnature may also take place, for example if animportant methodological change occurs somerecalculations of time series will be undertakenso as to avoid breaks. These recalculations werenecessary following the implementation of theBPM5 recommendations.

3.9 Publication

The first monthly b.o.p. data are published sixto seven weeks after the end of the referenceperiod. The preliminary results for the annualb.o.p. are therefore available in mid-February ofthe following year. A full regional breakdown ispublished on a quarterly basis only. The annualb.o.p., together with a regional breakdown forthe past year and the previous three years, ispublished in August of the following year.

The titles of the publications produced by theDeutsche Bundesbank on b.o.p. statistics arelisted in Sub-section 13.1.

All data, as well as a one-year calendarincluding the dates on which press releases areto be issued, are published on the Internet(http://www.bundesbank.de).


Chapter 4.3 Germany

4 Monthly key items


All data for the monthly b.o.p. key items areavailable as from 1995. A geographicalbreakdown for EU Member States can beprovided on a country-by-country basis. Thetimeliness of data availability has recentlyimproved to six weeks. However, within sixweeks trade data are available for intra-euroarea, intra-EU/non-euro area and third countriesonly. Country-by-country trade in goods data areonly available after a further five weeks.

4.2 Estimation methods for monthly key items

Monthly and quarterly balance of paymentsdata are fully consistent. They are derived fromthe same set of (monthly) data. No specialestimation methods are carried out to meet thetimeliness of the monthly key items except fortrade in goods. For trade in goods, a euro area/non-euro area split is applied by the FSO priorto the availability of a full country-by-countrybreakdown. For imports, the transformation ofthe data to the f.o.b. basis is estimated.


The sources for data on trade in goods are theforeign trade statistics and Intrastat. Bothstatistics are compiled by the FSO, from whichmonthly transaction-based data are available.

In the event of data from the FSO not beingavailable on time, meaningful estimates cannotbe made due to the lack of other sources.

Monthly data for imports are valued on an f.o.b.basis. All data are seasonally adjusted byapplying a Census X-based procedure.

The geographical breakdown of data is derivedfrom Intrastat and customs documents. Importswithin the euro area are allocated accordingto the country-of-consignment principle. Transactionsrelated to non-participating Member States canbe identified separately. The provision of the intra/extra-euro area breakdown by the FSO is essential.

Data for trade in goods are compliant withBPM5 standards as far back as 1971. Time seriesbreaks were caused by German unification(1990) and changes in trade statistics (1988and 1993).

Trade data are calculated on the basis of thespecial trade principle. However, warehousetransactions with non-residents are included.








There are no monthly estimates in the field offinancial derivatives.



5 Investment income


5.1.1 General


Methodological changes causing breaks do notoccur for data from 1994 onwards; ageographical breakdown for these historicaltime series is available.

A bias towards the under-recording of credits inthe income account can also be observed forGermany, therefore the reported data aresupplemented by estimations.


Chapter 4.3 Germany


In the case of direct investment income, mostfigures are based on settlements data;reinvested earnings are derived from balancesheet information.


In the case of portfolio and other investmentincome, the reported settlement data aresupplemented by estimated figures; in theseareas, in particular, the increasing complexity ofcross-border transactions hampers the correctcompilation of income payments and increasesthe degree of statistical uncertainty.

Accrued interest is taken into account to theextent that coupon payments are reduced if thereceiver has not held the security for the wholecoupon period.

The geographical allocation of income onforeign securities is based on the debtorprinciple, i.e. allocation is according to thecountry of issuer. In the case of income paid tonon-residents on domestic securities, debits areallocated according to the residency of the firstknown counterpart.



Payments for income on trade credits arereported only in very rare cases; no estimationsare made.

In general, the interest share in leasing paymentsis not recorded.

Data on income on reserve assets are takenfrom the accounting system of the DeutscheBundesbank on an accruals basis.

5.2 Definitions

The definitions are, in principle, in accordancewith the BPM5.


The accruals principle is not followed for all itemsand only with regard to the income figures.

5.4 Gaps

See Sub-sections 5.1 and 5.3.


None.


Income data are reported on a settlement basis.In cases where these data are not plausible andwhere there are doubts concerning thereliability of reports, estimates are made.Estimated figures are derived from stock dataand information on interest rates.

Since in most cases aggregates reported to theECB do not show large swings, but aredistributed more or less evenly over time, anymodelling to construct figures on an accrualsbasis has been postponed.

A breakdown of investment income into its sub-components (direct investment, portfolioinvestment and other investment income), asrequired for quarterly and annual figures, is alsoavailable for monthly data.

6 Capital account



6.2 Definition

In principle, the definition of the capital accountis in accordance with the recommendations setout in the BPM5 and the harmonisationproposals made by the former Task Force onFinancial Flows and Stocks Statistics.


Chapter 4.3 Germany


None.

6.4 Gaps

It is not possible to receive any information onmigrants� transfers. The acquisition/disposal ofnon-produced non-financial assets (patents,copyrights) cannot be separated from fees forlicences, patents or copyrights in the currentaccount. However, in cases where significantindividual transactions are involved, these areshown in the capital account rather than in thecurrent account.


None.

7 Direct investment


Part of the general reporting system (see Sub-section 3.2). In particular, use is made ofreported transactions, monthly stocks statisticsof affiliated companies and annual balance sheetstatistics on direct investment enterprises in thereporting country and abroad.

With the exception of securities lendingbetween affiliated companies, data from 1996onwards are not distorted by breaks resultingfrom methodological changes.

A geographical breakdown is also available forhistorical data.

7.2 Definition

The definition complies in principle with therecommendations set out in the BPM5 and theharmonisation proposals made by the formerTask Force on Financial Flows and StocksStatistics. Special purpose entities are regardedas direct investment enterprises.

Equity contributions without payment (i.e. providingreal assets or financial assets) have to be reported.


All long-term and short-term loans betweenaffiliates are included. In some cases, however,short-term credits are treated according to theassets/liabilities principle instead of the directionalprinciple (for example, in the case of indirectparticipation and double-status enterprises).

7.4 Gaps

None.


None.


Reinvested earnings are estimated for actualperiods and, in general, to produce monthly andquarterly figures. There are no other estimationsfor direct investment.



Part of the general reporting system (see Sub-section 3.2). The main data sources are:(i) reports from Monetary Financial Institutions(MFIs) on transactions executed on their ownbehalf and on behalf of their clients, which areindistinguishable; and(ii) reports from other institutions ontransactions executed on their own behalfwhich involve either the purchase or sale ofsecurities directly from or to a foreigncounterpart.

In the case of securities held by MFIs, stock dataare used to provide a sectoral breakdown for flows.

Reporting agents use the securities database ofthe national numbering agency (Wertpapier-Mitteilungen) to report portfolio transactionson a security-by-security basis.

Breaks in historical time series may occur as aresult of the recording of securities lending.


Chapter 4.3 Germany

Prior to 1999 securities lending was treated as asale or purchase of the underlying security, withthe counter-entry of claims or liabilities for thesecurity to be returned included in otherinvestment.

The geographical allocation of foreign securities(residents� assets) is based on the debtor principle,i.e. allocation is made according to the country ofissuer. In the case of domestic securities,transactions are allocated according to theresidency of the first known counterpart. The samebreakdown is available for historical data.

8.2 Definition

In principle, the definition complies with therecommendations of the BPM5 and theharmonisation proposals made by the formerTask Force on Financial Flows and StocksStatistics.

Transactions related to trade in loans areincluded in other investment.


In general, service charges, fees andcommissions are not excluded. The offsettingentry for accrued interest is not recorded.

8.4 Gaps

There is considerable difficulty in capturingportfolio investment abroad, which is carried outdirectly by private households via foreign banks.


None.


Portfolio investment transactions are compiledwithin the framework of the general reportingsystem. Banking statistics are used to calculatethe sectoral breakdown for MFIs� transactions inforeign securities, using the change in stocks.Large exchange rate and price effects are taken

into account. Annual statistics from custodiansare used for checking purposes.

Some estimations are made for resident privatehouseholds� monthly transactions in securitiesvia non-resident banks, since most privatepersons do not report those transactions.

With regard to the monthly offsetting entryfor accrued interest, cross-border couponpayments on domestic securities are reduced incases where the non-resident holder holds thesecurity only for part of the coupon period (andvice versa for foreign securities and domesticholders).



Payments are reported in the same way as forother instruments; there is no special collectionsystem for derivatives. The followinginstruments can be identified separately: futures,warrants, traded options, over-the-counter(OTC) options and interest rate swaps. Premiafor options and margin payments are recordedas transactions in derivatives.

The residency of the counterparts is, in general,identified via the clearing house.

9.2 Definitions

In principle, the definition complies with therecommendations set out in the BPM5 and theharmonisation proposals made by the formerTask Force on Financial Flows and StocksStatistics. Interest rate derivatives are recordedcorrectly under financial derivatives.


None.

9.4 Gaps

No sectoral breakdown is available at present.


Chapter 4.3 Germany


None.


None.

10 Other investment


Part of the general reporting system (see Sub-section 3.2). Short-term transactions arederived from changes in stocks, eliminatingeffects of exchange rate changes and statisticalbreaks.

Prior to 1999 securities lending was treated as asale or purchase of the underlying security, withthe counter-entry of claims or liabilities for thesecurity to be returned included in otherinvestment.

The geographical breakdown distinguishingeuro area and non-euro area flows is alsopossible for historical data.

10.2 Definition

In principle, the definition complies with therecommendation set out in the BPM5.


None.

10.4 Gaps

Transactions via private accounts held abroadare difficult to capture statistically.


None.


Deposits of resident non-banks with foreignbanks are estimated on the basis of BIS statistics;

there are no other monthly estimates in the fieldof other investment.

11 Reserve assets


Data on reserve assets are taken from theaccounts of the Deutsche Bundesbank and arethus prepared by its Accounting Division.

11.2 Definition

The definition complies with therecommendations set out in the BPM5.


None.

11.4 Gaps

None.


None.



Germany�s i.i.p. is compiled mainly on the basisof several stocks statistics. These are themonthly stock statistics on the external assetsand liabilities of domestic MFIs and of domesticenterprises arising from financial operationsand trade credits and the annual statistics onthe level of foreign direct investment.These statistics allow a sectoral classificationbetween the monetary authority, MFIs, enterprises(including individuals) and general governmentsectors.

These stocks statistics are supplemented bydata on assets and liabilities in the form ofportfolio securities, which are � in general �obtained from accumulated transactions.


Chapter 4.3 Germany

Since there is no direct method of determiningthe total portfolio amounts of foreign bondsandnotes held by residents and of Germanbonds and notes held by non-residents, anindirect method is generally used for compilingGermany�s external position. This methodaggregates the net turnover recorded in theb.o.p. statistics since the founding of the FederalRepublic of Germany.

To capture the asset gains or losses resultingfrom market price fluctuations during areporting period, the market prices of allGerman and foreign securities have been usedto convert the recorded transactions tonominal values and then to aggregate thesenominal values to produce nominal holdingsand, finally, to show them as levels valued atmarket prices. Exchange rate movements arealso taken into account in the case of bondsdenominated in foreign currency and foreignequities. In all cases, the calculation is madeseparately by country of issuer. However, thismethod can be applied only to the totalholdings compiled for all sectors as a whole; thesectoral breakdown of MFIs� holdings iscompiled on the basis of their balance sheetdata and a special survey conducted by theDeutsche Bundesbank.

It is not possible to allocate holding gainsprecisely to MFIs, enterprises and individuals,since no specific information is available on thevaluation used in the balance sheets.Consequently, price fluctuations are most likelyto be reflected statistically in the non-bankingsector.

The globalisation of securities business hasadversely affected the recording of thesecurities components in the b.o.p. statisticsover the past few years. Transactions by privateinvestors cannot always be compiled with thedesired degree of accuracy. Since the businesstransacted by residents abroad is not fullyreported, the foreign securities (assets) held byresidents, as shown, are probably too low.However, the holdings of German securitiesascribed to non-residents (liabilities) have

possibly been too high over the past few years,since foreign purchases also include ordersplaced by residents abroad. Estimates forclosing these gaps are still subject toappreciable margins of uncertainty.

12.2 Definitions

12.2.1 General

Germany�s external assets and liabilities arepresented according to the broad classificationof the BPM5.


The starting point for compiling the levels ofdirect investment is balance sheet data onforeign and domestic direct investmententerprises. Investment capital is entered in thei.i.p. as book values in line with the statistics onGerman enterprises� international capital links.These book values are derived from the balancesheets of direct investment enterprises(subsidiaries and associates) and not from theinvestors� balance sheets. In order to makecomparison easier, book values are used even incases where participating interests have beentraded on stock exchanges and market priceswould therefore be available.

The Deutsche Bundesbank�s statistics oninternational capital links are partially in linewith the directional principle. On the basis ofbalance sheet data, these cover the equitycapital which German direct investors hold inforeign direct investment enterprises; the sameapplies to loans granted by Germanshareholders and other affiliated enterprises inGermany to the foreign investment enterprises.Finally, the loans which are granted by foreigninvestment enterprises to the Germanshareholders and which are to be booked asliquidation of German external assets aresurveyed. Both equity capital and the creditrelationships between foreign direct investorsand domestic direct investment enterprises areshown, in principle, in the same way.


Chapter 4.3 Germany

Nevertheless, the way in which creditrelationships are shown in the statistics oninternational capital links does not provide anyinformation on the types of loan (trade orfinancial credits); nor does it make anydistinction in terms of maturity.

Real estateStock data on real estate are accumulated fromflows. In compliance with the guidelines set outin the BPM5, claims arising from the acquisitionof real estate abroad are shown as financialassets. Accordingly, real estate held by non-residents is regarded as a domestic asset of anotional unit which is accompanied by adomestic liability to the foreign investor. Bothprivate and commercial real estate are shownunder direct investment. Real estate has beenadjusted more closely to market values in thenew method of calculation. Owing to gaps inthe available price data and the aggregatemethod which must be used, however, thefigures are subject to certain margins of error.


The definitions are in accordance with theBPM5.

(i) Bonds and notesSecurities, as defined here, include bonds, notesand similar paper with an original maturity ofmore than one year. Both paper with a fixedcoupon as well as paper with variable rates areincluded. The stocks data are calculated byconverting the recorded b.o.p. turnover attransaction values into nominal values andaggregating these data to form nominal stockson both the assets and the liabilities side. Usingthe matching market prices and exchange rates,these nominal stocks are converted to marketvalues. In all cases, the calculation is madeseparately by country of issuer.

(ii) Money market paperShort-term bonds, i.e. all paper with a maturityof up to one year, are recorded as moneymarket paper. This includes mainly short-termpublic issues (such as Bubills) as well as

commercial paper and certificates of deposit.These are recorded, both on the assets and theliabilities side, as stocks by aggregating the nettransactions shown in the b.o.p. Paperdenominated in foreign currency is valued atcurrent exchange rates. In the case of foreignmoney market paper the stocks which havebeen determined in this way can be checkedagainst data from the balance sheets of banks,special investment funds and enterprises.

(iii) Investment fund certificatesThe stocks of investment fund certificates offoreign and domestic investment companiescomprise shares of money market, securitiesand real estate funds, and are calculated byaggregating the transactions. Stocksdenominated in foreign currency are valued onthe basis of the exchange rates.

(iv) EquitiesHoldings of equities shown under portfolioinvestment are calculated by aggregating thetransactions. As the trend in assets held in theform of equities is determined, in particular, bymarket prices, the prices in the domestic andforeign stock exchanges are included on anaggregate basis when calculating holdings ofequities as part of the i.i.p.. In the case of foreignequities, the change in the exchange rates isadditionally included in the calculation. Equitiesissued by German incorporated enterprises areshown separately as equities of banks and asequities of other enterprises.


No stock data in accordance with the BPM5definition are available. Although it is possible tocapture the transactions relatively well asgenuine payments using the current reportingsystem, there is still no primary statisticalrecording of levels data. Neither the bankingstatistics nor other corporate statistics provideany information on asset or liability positionscorresponding to valuation at market prices.Previous surveys for other purposes did not aimat differentiating between market participantsaccording to their country of residence, which


Chapter 4.3 Germany

is necessary for the i.i.p. For that reason, it is notpossible to give market values for financialderivatives for the time being. Capturing thesedata statistically is hampered, in addition, by thepresent accounting rules for banks andenterprises, which do not provide for anystatement of this kind in the balance sheet.






None.

12.4 Gaps

Portfolio investment transactions via foreignmarkets cannot be determined exactly (see Sub-section 12.1).

In the case of direct investment, reverseinvestment by companies which are directinvestors as well as direct investmentcompanies is difficult to capture.


None.


None.

13 Administration


Regular publications related to the b.o.p. are:Monthly Current Account � main items,

preliminary, available five to six weeks afterthe reporting period: �Pressenotiz desStatistischen Bundesamtes über die Entwicklung desAußenhandels�;Monthly balance of payments � main items,preliminary, available five to six weeks after thereporting period: �Pressenotiz der DeutschenBundesbank�;Monthly balance of payments � main items andsub-items, preliminary, available seven toeight weeks after the reporting period:�Monatsberichte der Deutschen Bundesbank�,�Statistische Beihefte zu den Monatsberichten derDeutschen Bundesbank, Reihe 3, Zahlungsbilanzstatistik�(headings and explanatory notes available inEnglish);Annual balance of payments � including ageographical breakdown for the previous threeyears, available in August of the following year:�Zahlungsbilanz nach Regionen, StatistischeSonderveröffentlichung 11� (also available inEnglish).

13.2 Contributors

This country information was drafted by theBalance of Payments Statistics and ExternalReserves Division of the ECB and subsequentlyamended and agreed with Germany. Enquiriesof a general nature should be addressed to thePress Division of the ECB. Enquiries specific toGermany should be addressed to:

Mr. Wilfried MasselingDeutsche BundesbankWilhelm-Epstein-Straße 14D - 60431 FRANKFURTGermany

Tel.: (0049) 69 9566 8668Fax: (0049) 69 9566 8622


Chapter 4.3 Germany

112ECB EU


ethods � Novem

ber 2000

Ch

apter 4.4 G

reece

1O


Bank of Greece

Monetary andFinancial Statistic sDivision

Balance ofPayment StatisticsDivision� Bank Data Collect ion Section� Bank of Greece and Non-Bank Data Collection Section� BOP Com pilation Section� IIP Com pilat ion Section

Data ManagementSection

Secretaria t

General C ouncil

BankingSupervisionDepartment

InformationSystems

andOrganisationDepartment

AccountsDepartment

Administration Department

InternalAudit

Department

ForeignExchange

Department

InternationalTransactionsDepartment

LegalDepartment

CashDepartment

TechnicalServices

Department

GovernmentFinancial

Operationsand AccountsDepartment

MonetaryPolicy and

BankingDepartment

PrintingW orks

Department

International BankingRelationsDivision

27 Branches67 Agencies

Statistics Department

Monetary PolicyCouncil

Economic Research Department

Money andBanking Division

Fiscal AffairsDivision

Domestic Economy Division

External Economic AffairsDivision

AdministrationDivision

Econometric Forecasting Unit

Governor Deputy Governors


Chapter 4.4 Greece


2.1 Introduction

The Bank of Greece has been responsible forcompiling and producing the Greek balance ofpayments (b.o.p.) statistics since 1929. Thecollection system was based on exchangecontrols and the monitoring of foreignexchange flows. However, the gradualliberalisation of the exchange controlmechanism resulted in the system becomingincreasingly ineffective in recording flows in theb.o.p., which, in turn, necessitated a change inthe collection system. Short-term capitalmovements were liberalised in May 1994 and, inMarch 1995, the Bank of Greece began itssearch both for potential new methodologiesfor the compilation of its b.o.p. and for a newcollection system. The Bank of Greece hasdecided to employ a system similar to thePortuguese and Dutch systems for its new b.o.p.collection system. Monthly data derived fromthe new methodology and based on theconceptual framework set out in the 5th editionof the IMF Balance of Payments Manual (BPM5)were first produced in January 1999.


The legal basis for the collection andcompilation of b.o.p. transactions is containedin the Statute of the Bank of Greece. This legalbase has been reinforced by provisions includedin the new Statutes of the Bank of Greece(Law 2548/97), whereby all residents arerequired to report transactions with non-residents to the Bank of Greece for thecompilation of the b.o.p. and the assumptionof assets/liabilities vis-à-vis non-residents(international investment position (i.i.p.)).

The legislation provides for a sanctions procedurein the event of a failure to report b.o.p. transactions.


The field of statistics is the responsibility of thenew Department of Statistics established by aDecision of the General Council of the Bank of

Greece (23 October 2000). This Department hastwo Divisions, namely the Balance of PaymentsStatistics Division and the Monetary andFinancial Statistics Division, as well as aDatabank Management Section and a Secretariat.

The Balance of Payments Statistics Division hasthe following four sections: the Bank DataCollection Section, the Bank of Greece andNon-Bank Data Collection Section, the BOPCompilation Section and the InternationalInvestment Position Compilation Section. Theanalysis of b.o.p./i.i.p. data, econometric work,etc. is the responsibility of the EconomicResearch Department.

The Monetary and Financial Statistics Division hasthree sections: the Money and Banking Section, theCapital Market and Other Financial InstitutionsSection and the Financial Accounts Section.


The Bank of Greece is the only institutioninvolved in the production of b.o.p. statistics. TheNational Statistical Service of Greece (NSSG),however, supplies national accounts, trade data,background economic data on the consumerprice index (CPI), the gross national product(GNP), industrial production, tourist arrivals andother variables to the Bank of Greece. Trade datasupplied by the NSSG have been subject to longdelays, especially as regards revisions, primarilyowing to difficulties with the Intra-CommunityTrade Statistical System (Intrastat). The Bank ofGreece has therefore endeavoured to compile itsown data on merchandise trade using banksettlements and trade credits data, which are aclose proxy for transaction-based statistics.General government external debt is alsocompiled (stocks data).

2.5 Users

The Bank of Greece maintains regular contactwith users, such as the NSSG, the Ministries ofNational Economy and of Finance, othergovernment departments, universities andcredit rating companies, etc. Bilateral meetings


Chapter 4.4 Greece

are sometimes held with users to discussspecific issues. B.o.p. data, according to thestandards components of the IMF Manual (5th

edition), are supplied to the ECB, the EuropeanCommission (Statistical Office of the EuropeanCommunities; Eurostat), the Organisation forEconomic Co-operation and Development(OECD), the International Monetary Fund (IMF)and the Bank for International Settlements (BIS)on a regular basis.



The new Greek data collection system is a�closed settlement-based system�. Additionalinformation not based on settlements are alsobe collected on trade credits and, at a laterstage, financial derivatives. The new system wastested by means of a pilot scheme during theautumn of 1997 and has been in place for allrespondents since end-1998. Codification isundertaken by the respondents (reportingbanks) and not by the Bank of Greece. The Bankof Greece codifies reporting forms submitted bydirect respondents, as well as monthlysupplementary data on financial account items,such as portfolio investment.

The new system does not include an exemptionthreshold as there is no key for the allocation oflow-value transactions, but this may beintroduced at a later stage. Transactions arereported on a transaction-by-transaction basis.

Financial account transactions data derivedfrom a general bank settlements reportingsystem are supplemented with additionalinformation both on transactions (e.g. monthlyreports by resident stockbrokers) andstocks statistics (e.g. quarterly data fromcustodians).

Information derived from the press is used toupdate the transactions in direct investmentand the debt/liability registers.


(i) Banks: these are commercial banks and otherspecial credit institutions, such as theAgricultural Bank. They are required to reportexternal transactions on behalf of residents andnon-residents and on their own account,irrespective of whether they are acting as anintermediary between a non-resident bank ornon-bank and another resident bank, orcarrying out interbank operations affecting theirexternal position. Resident banks must alsoreport the opening and closing balances of theirexternal position broken down by currency.Changes between the opening and closingpositions should be equal to the net externaltransactions in the respective currencies.(ii) Direct respondents: direct respondents (some200 forms are usually submitted per month)report transactions with non-residents whichare not settled via resident banks. In addition,the new system collects data directly fromresident transactors such as mutual funds,stockbrokers and custodians.(iii) Public sector: various departments of theBank of Greece provide data for thecompilation of data on reserve assets, generalgovernment external debt and various officialtransactions. The Ministries of NationalEconomy and of Finance also provide data ongeneral government external debt and ontransactions with European Union (EU)institutions.

3.3 Thresholds

The new b.o.p. system does not include anexemption threshold as there is no key for theallocation of low-value transactions. Once thesystem has operated as such for a certain lengthof time, it is envisaged that some exemptionthresholds will be introduced. Transactions arereported on a transaction�by-transaction basis.For transactions of less than EUR 100,000,information on the resident transactor isavailable on request, as this has to be submittedto the Bank of Greece. However, most bankssubmit information on the resident transactorcounterpart for all transactions where this isrequested. The scrutiny of such large-valueexternal transactions constitutes the most


Chapter 4.4 Greece

Table 1Reporting scheme for b.o.p. and i.i.p. data collection for GREECE


MFIs AEE Exports and imports Monthly n 15 daysof goods

MFIs AES Allnotherntransactions Monthly n 15 days

Athens stock Portfolioninvestment Monthly n 15 daysexchange brokerage flowsfirms

Custodians, mutual Portfolioninvestment Quarterly n 1 monthfunds, investment stockscompanies

Sample of FDI form FDI data Annual n 6 monthsresident firms

Sample of Assets and Liabilities Annual n 6 monthsresident firms

important quality check on the data submittedby banks acting as intermediaries.


In order to meet the ECB�s key itemrequirements, both in terms of coverage andtimeliness, b.o.p. flows statistics under the newsystem are to be published monthly on asettlements basis. Imputations, netting-outoperations for a number of transactions and theuse of supplementary information provided byresident transactors are conducted onquarterly and annual b.o.p. data. In principle,such enhanced �detailed� data can also bemade available monthly. Stocks data are to bemade available on an annual basis with ageographical breakdown. Portfolio investmentstocks may be made available for shorterperiods, e.g. quarterly.

3.5 Timeliness

The reporting agents have 15 calendar days fromthe end of the reporting period (month) withinwhich to submit data to the Bank of Greece, whichthus has approximately three weeks within whichto process the data, check their validity and compilereports for the various users and publications.


The Greek b.o.p. is compiled on a monthlybasis.

3.7 Data controls

The monthly data submitted on tape to theBank of Greece are loaded onto the mainframeand then transmitted to the RISC system(computer system used by the Bank of Greece).The data sent via diskette are loaded directlyonto the RISC system. For each file received, thevalidity of the general information (bankidentity, reporting period, etc.) is checked andverified by a computer program. The data arealso checked for validity and accuracy by meansof plausibility checks and checks using previousmonths� data. A listing of all errors found isproduced and the reporting bank is notifiedimmediately. Once the necessary correctionshave been processed, a second round ofvalidation takes place and flows are comparedwith the change in the external position of thereporting bank. Additional comparative reportsare produced and manual checking takes place,principally of the high-value transactions (morethan EUR 100,000). It is difficult, however, toverify incoming payments on behalf ofcustomers, as the banks do not always know


Chapter 4.4 Greece

why the payments have been received, and thecustomer must in some cases be asked aboutthe nature of such transactions. A plausibilitycheck is fairly easy for transactions above thethreshold of EUR 100,000; below thisthreshold, plausibility checking is difficult tocarry out.

3.8 Revision policy

At present, data are revised by the banks for thecurrent month and the previous month only. Ifan error is detected in earlier data, the Bank ofGreece assesses the size and effect of the errorin the overall data and decides whether or notto adjust the earlier data and the output. B.o.p.data which are more than six months old areconsidered to be definitive.

3.9 Publication

The titles of the publications produced by theBank of Greece on b.o.p. statistics are listed inSub-section 13.1.

Data users of the Greek b.o.p./i.i.p. statisticsare:(i) other units of the Bank of Greece, e.g. theExternal Economic Affairs Division, the Moneyand Banking Division, the Governor�s andDeputy Governors� offices;(ii) other institutions, e.g. the Ministry ofthe National Economy, other Governmentdepartments, universities, banks.

The b.o.p./i.i.p. statistics are released on theInternet site of the Bank of Greece as soon asBOP data are published but no release calendaris published in advance.

4 Implementation


The current national presentation of the Greekb.o.p. more or less covers the ECB�s key items asendorsed by the Council of the EMI inNovember 1999. Timeliness is still a problem,principally because many banks supply the

Bank of Greece with data that do not fullymeet the Bank of Greece�s new requirements.It is expected that the ECB�s timelinessrequirements will be met by autumn 2000.

If there are delays, they usually involve smallbanks, so that coverage is more than 90%.

4.2 Estimation methods for the monthly key

items


Estimates are made by using trends andinterpolation from the previous month.

Supplementary information derived from oilrefineries are used to compile the data for theoil account.

For checking the conversion of imports fromc.i.f. to f.o.b., as derived from reporting agents�replies to questionnaires, the Bank of Greeceapplies a 5% rule check.

Seasonal adjustment methods are currentlyunder study in collaboration with ECB.

The geographical allocation of transactions isbased on the country of origin, but informationis also requested for the country ofconsignment.

The Bank of Greece does not have a strictrevisions policy. In principle, monthly data isrevised when the quarterly data are due forpublication and supplementary information isavailable on e.g. financial account transactions.NSSG trade data will also be used for quarterlydata.

Data have been compliant with BPM5 standardssince January 1999.

The Bank of Greece trade data are probably across between the special and general tradeprinciples. The NSSG data published are on aspecial trade basis.


Chapter 4.4 Greece


Flows for investment income are based onsettlements data. A mixed approach willprobably be used for quarterly statistics, wherestocks data will also be taken into account. Incase that data are not available on time,estimates are made on the basis of interpolationfrom the previous month.

Monthly data cannot be reported on anaccruals basis.

A breakdown of investment income into its sub-components (direct investment income,portfolio investment income and otherinvestment income) is currently not possible ona monthly basis.

The intra/extra-euro area split of income onportfolio investment income can possibly beobtained from the use of custodian informationwhich is actually a first known counterpart splitfor liabilities.


There are no monthly estimates in the field ofdirect investment.


Supplementary information on portfolioinvestment is obtained through the use ofcustodian statistics and other stock statisticsand transactions supplied by stockbrokers,mutual funds, etc.

Security-by-security data collection is onlycarried out for quarterly stocks data.

Difficulties are encountered in the estimation ofthe intra/extra-euro area breakdown, especiallyin the case of liabilities where geographicalallocation can only be made according to thefirst-known counterpart principle.

The off-setting entry for accrued interest is notcurrently available on a monthly basis.


There are no monthly estimates in the field offinancial derivatives.


There are no monthly estimates in the field ofother investment.

4.3 Monthly key items � implementation plan

A table with details of the implementation of themonthly key items is shown on the followingcountry page. A distinction is made betweencurrent data availability and futureimplementation requirements for Greece.

4.4 Implementation of the IMF Manual (5th

edition)

The Bank of Greece set end-1997 as thedeadline for the submission of b.o.p. data incompliance with the BPM5. Most banks startedreporting by mid-1998, but the old format wasretained for 1998 data. Since January 1999,however, data have been published using thenew BPM5 format. There is still significant roomfor improvement in terms of both data qualityand timeliness.

In principle, all the IMF�s recommendations havebeen implemented. However, for the currentaccount, it is difficult to apply the recommendationsregarding Insurance, Transport and Travel, asmost of the sub-items can only be derived fromsupplementary sources.

Those areas where conceptual recommendationsare yet to be implemented are listed in thevarious categories in Sub-sections 5 to 12inclusive.


annual

As of January 1999, the presentation of theGreek b.o.p. complies with the BPM5 standards.


Chapter 4.4 Greece

5 Investment income


5.1.1 General

Surveys are used to compile direct investmentstocks data, other sectors� debt liabilities andcustodians� positions.

Adjustment between annual, quarterly andmonthly figures are made when more detailed

Table 2

Implementation of monthly key items

GREECE Current data availability

Timeliness for Timeliness for Timetable fornational data geographical break- implementing

down on a country- the euro area/by-country basis non-euro area split

Credits/ Debits/ Credits/ Debits/ Credits/ Debits/assets liabilities assets liabilities assets liabilitiesweeks weeks

Currentnaccount n 8�9 8�9 n.a. n.a. End-2000 End-2000 Goods 8�9 8�9 n.a. n.a. End-2000 End-2000 Services 8�9 8�9 n.a. n.a. End-2000 End-2000 Income 8�9 8�9 n.a. n.a. End-2000 End-2000 on direct investment n.a. n.a. n.a. n.a. End-2000 End-2000 on portfolio investment n.a. n.a. n.a. n.a. End-2000 End-2000 on other investment 8�9 8�9 n.a. n.a. End-2000 End-2000 Current transfers 8-9 8-9 n.a. n.a. End-2000 End-2000Capitalnaccount n 8-9 8-9 n.a. n.a. End-2000 End-2000Directninvestment n 8�9 8�9 n.a. n.a. End-2000 End-2000 Equity capital 8�9 8�9 n.a. n.a. End-2000 End-2000 Reinvested earnings n.a.1) n.a.1) n.a. n.a. End-2000 End-2000 Other capital 8-9 8-9 n.a. n.a. End-2000 End-2000Portfolioninvestment n 8�9 8�9 n.a. n.a. End-2000 End-2000 Equity securities 8�9 8�9 n.a. n.a. End-2000 End-2000 Debt securities 8�9 8�9 n.a. n.a. End-2000 End-2000 bonds 8�9 8�9 n.a. n.a. End-2000 End-2000 money market instruments 8�9 8�9 n.a. n.a. End-2000 End-2000Financialnderivatives n 8�9 8�9 n.a. n.a. End-2000 End-2000Otherninvestment n 8�9 8�9 n.a. n.a. End-2000 End-2000 Monetary authorities 8�9 8�9 n.a. n.a. End-2000 End-2000 General government 8�9 8�9 n.a. n.a. End-2000 End-2000 MFIs 8�9 8�9 n.a. n.a. End-2000 End-2000 long-term 8�9 8�9 n.a. n.a. End-2000 End-2000 short-term 8�9 8�9 n.a. n.a. End-2000 End-2000 Other sectors 8�9 8�9 n.a. n.a. End-2000 End-2000Reservenassets n 1 1 n.a. n.a. End-2000 End-2000

1) Available for annual data only.

data becomes available on a quarterly basis andin some cases annually.

The geographical allocation of investmentincome is usually made according to thecountry of settlement; in the case of portfolioinvestment it is made according to theresidency of the issuer of the asset and of thefirst known counterpart in the case of liabilities.No geographical breakdown is available forhistorical data.


Chapter 4.4 Greece


With regard to income on equity, the rate ofreturn is estimated using a proxy based on theforeign direct investment companies listed onthe Athens Stock Exchange. The Bank of Greeceplans to use annual data for reinvested earningsobtained from the annual foreign directinvestment questionnaire.

With regard to income on debt, income on inter-company loans is not currently recorded.


The calculation of income on portfolioinvestment will be based on the use of stockdata, and could be subdivided according to theintra/extra-euro area split.

There are no problems with the recording ofincome for specific types of bonds.

No impact on portfolio investment income dueto taxation issues can be observed.


The Bank of Greece does not record income ontrade credits. Transactions in deposits by privateindividuals/enterprises with foreign institutionsare recorded, but the interest share in leasingpayments is missing.

Income on reserve assets is recorded on anaccruals basis.

5.2 Definitions

With the exception of the items given inSub-sections 5.3 and 5.4, the Bank of Greececomplies with the recommendations of theBPM5 and the harmonisation proposals madeby the Working Group on Balance of Paymentsand External Reserves Statistics (the formerTask Force on Financial Flows and StocksStatistics).


Income on financial derivatives (i.e. interest ratesswaps) is included in investment income, but thiswill change in conformity with ECB requirements.

5.4 Gaps

Income on inter-company loans is not currentlyrecorded and the Bank of Greece, in commonwith most compiling institutions, encountersdifficulties with the recording of income ontrade credits.


Exclusion of income on financial derivatives (i.e.interest rates swaps) is planned in conformity toECB requirements.


None.

6 Capital account


Part of the general reporting system (see Sub-section 3.2). Data for general governmenttransactions are available for EU budgettransfers, i.e. specific information on capitaltransfers involving EU institutions.

A distinction between current and capitaltransfers is very difficult to apply for most items,e.g. private sector transfers. Capital transferdata from the EU budget are provided by theEuropean Commission (Eurostat) on aquarterly basis. The Bank of Greece uses thesedata in its national presentation.

6.2 Definition

In principle, the definition of the capital accountis in accordance with the BPM5 and theharmonisation proposals made by the formerTask Force on Financial Flows and StocksStatistics.


Chapter 4.4 Greece


Emigrants� remittances are recorded undercurrent transfers, but the balances of theiraccounts held with resident MFIs are notconsidered to be an external liability. As aconcept, this treatment is not significantlydifferent from the �centre of economic interest�IMF residency guidelines for the followingreasons:� emigrants� accounts are usually jointly

held with residents of Greece, so theycannot be viewed as a liability to non-residents;

� emigrants are in fact individuals who, inmany cases, spend part of every year inGreece, and can thus be said to have�multiple residency� status (paragraph72, BPM5);

� emigrants can maintain these accounts,even if they no longer live abroad andhave returned to Greece and acquiredthe status of resident.

Historically, emigrants� deposits held with Greekbanks have been used almost entirely to financeexpenditure in Greece, i.e. they have been verysimilar to current transfers. Thus these depositsdo not have the characteristics of a short-termfinancial instrument. The stocks of suchdeposits, even in times of financial or politicalcrisis, have not shown the sharp fluctuationscommon to short-term instruments.

6.4 Gaps

Very little information is available on theacquisition/disposal of non-produced non-financial assets unless it is detected. Gaps occurthroughout the rest of the capital account; debtforgiveness is considered to be insignificant.Specific codes have been included in the newb.o.p. nomenclature, but so far no significantentries have been observed.


The provision of more detailed informationfrom the European Commission is a basicrequirement if data are to be harmonised and

the system is to function efficiently, i.e. for theprovision of both the monthly key items and thequarterly/annual detailed statistics.

7 Direct investment


After compiling a register of foreign directinvestment (FDI) companies, the Bank of Greecestarted collecting FDI data for the first time for1995-1998, using an annual pilot questionnairefor both inward and outward FDI. Data for1998 and 1999 have been included in the i.i.p.questionnaire submitted to the ECB. ConcerningFDI data, in the past only authorisation datawere collected, but the series stopped in 1992.

Experience in Greece shows that FDI statisticsof a reasonable quality cannot be producedunless a companies register is available and anannual FDI survey is conducted. FDI flowstatistics are not of good quality when onlybank settlements are used. There are limits tothe level of detail that a bank settlements systemcan produce. Flow statistics on direct investmentcannot be produced on a consistent basis unlessthere is an earmarking system in operation, i.e.specific transactions are identified as FDI-related.Therefore, the use of surveys is crucial for therecording of direct investment transactions.

Annual questionnaires, which are based on FDIregister information, are supplemented byvarious sources, such as flow statistics, pressreports and information from Bank of Greecebranches.

Difficulties in delimiting direct investment andportfolio investment have been resolved, asquarterly information can be obtained from theAthens Stock Exchange in order to reallocatetransactions of 10% or more of an entity�scapital to FDI. Quarterly/annual data areadjusted accordingly.

Information on long and short-term loansbetween affiliates is requested in the FDIquestionnaire sent to respondents.


Chapter 4.4 Greece

With regard to the treatment of special purposeentities, the Bank of Greece tries to record therelationship up to the second level.

Equity contributions without payment (i.e.providing real assets or financial assets) aredifficult to identify; supplementary informationis needed.

Domestic stocks acquired by non-residentinvestors through secondary markets can beidentified, since the Athens Stock Exchangepublishes confidential information on alltransactions involving more than 10% of theshare capital of any listed company.

7.2 Definition

For flows, the Bank of Greece complies with the10% rule and adds 50% in order to make thecompilation of foreign affiliates� trade statistics(FATS) possible.

Reporting agents are informed via the newreporting instructions that they must apply thedirectional principle.


There should be no deviations under the newcollection system.

7.4 Gaps

Data on reinvested earnings will only be knownafter the publication of the annual statements ofenterprises in May/June each year. It wouldprobably be very problematic to attempt toobtain data for reinvested earnings any earlier.


The introduction of the new collection systemshould enable the Bank of Greece to collectdata on direct investment in accordance withthe requirements of the BPM5.


There are no quarterly estimates in the field ofdirect investment.



Flows (inward): banks and direct respondentsreport portfolio investment data within thecontext of the general b.o.p. reporting scheme.Banks generally deal on their own account(usually in Treasury bills and GreekGovernment bonds) and only deal in shares if anew issue takes place or if they are acting as theunderwriters of the deal itself. Discussions withbanks have revealed three types of transactions:transactions on own account; transactions withnon-residents where the resident bank acts asthe custodian; and transactions with non-residents where the resident bank does not actas the custodian. For the first two types, all theinformation required by the ECB, the IMF, etc., isknown. However, in the latter case, not all thedetails are available, so that the Bank of Greecehas to contact the resident counterpart tocomplete the reporting form, as necessary.

Flows (outward): for mutual funds, all thenecessary information is known for investmentsmade through Greek banks and those for whichGreek banks act as intermediaries.

Difficulties in delimiting direct investment andportfolio investment have been resolved, asquarterly information can be obtained from theAthens Stock Exchange in order to reallocatetransactions of more than 10% of an entity.

Settlement data are used. Stocks date are usedfor checking purposes. The InternationalSecurities Identification Number (ISIN) forsecurities will be used to check the flows againststocks and to compile income flows on anaccruals basis.

The geographical allocation criterion for assetsis based on the country of residence of theissuer. For liabilities, it is based on the first


Chapter 4.4 Greece

known counterpart principle. The geographicalbreakdown is available on a quarterly and on anannual basis; however, it is not available forhistorical data prior to the introduction of thenew collection system.

8.2 Definition

The Bank of Greece complies with most of therecommendations set out in the BPM5 and theharmonisation proposals made by the formerTask Force on Financial Flows and StocksStatistics. However, the distinction betweendirect investment and portfolio investment isdifficult to determine for reporting agentsand can only be made by the Bank of Greeceusing the register of information on companieswhich is currently under development, andinformation for listed companies supplied bythe Athens Stock Exchange.

Service charges, fees and commissions areexcluded; the necessary information is obtainedvia the bank settlements system, as part offinancial services.

The offsetting entry for accrued interest isrecorded under portfolio investment on aquarterly basis.

Private placements will be recorded in theGreek b.o.p., if detected.

Transactions in relation to the trading of loanportfolios are included in other investment.


There are no deviations under the new system.

8.4 Gaps

For portfolio investment flows (outward),limited information is available for investmentsmade directly with non-residents, i.e. carriedout through either a broker or a non-residentbank.


The Bank of Greece uses ISIN codes in the newsystem. In addition, all resident stockbrokers,mutual funds and investment companies haveto submit monthly supplementary informationon both inward and outward portfolioinvestment transactions to the Bank of Greece.

The issue of recording accrued interest forbonds and zero coupon bonds has not, as yet,been addressed by the Bank of Greece, as this isstill an open issue for the ECB�s Working Groupon Balance of Payments and External Reserves.


None.



The recording of financial derivatives is aproblem that has not yet been fully resolved.Codes for financial derivatives are included inthe general reporting system, as well as in thestocks survey system. Derivatives transactionsare not yet in general use; an official derivativesexchange has been set up, but trading volume isstill small.

9.2 Definitions




9.4 Gaps





Chapter 4.4 Greece


None.

10 Other investment


The collection system for data on loans relieson the information declared to the Bank ofGreece. Data for loans issued by the generalgovernment sector are not problematic, as aredata for the banks sector, which are obtainedfrom money and banking statistics. Data onloans from the non-banks sector areunproblematic if the loan is made via a residentbank. However, data are more difficult tocapture if the loan is made by a resident directlywith non-resident bank. If the resident does notask a resident bank to �service� these loans, theloans cannot be recorded, as the customer hasnot declared them. An annual survey waslaunched in 1996, 1997, 1998 and 1999 torecord the outstanding debt liabilities of thenon-banks sector. To this end, a questionnairewas sent to more than 1,000 residententerprises. The quality of data seems to be high.

Historical data cannot be produced for allsectors; stocks positions are available for theyears 1997, 1998 and 1999.

Trade credits are recorded when the credits areopened and the payments are made.

The sectoral breakdown is available on aquarterly basis, as is the breakdown by maturity.However, a breakdown by instrument isavailable, for the time being, only on an annualbasis.

10.2 Definition

In principle, the Bank of Greece complies withthe recommendations set out in the BPM5 andthe harmonisation proposals made by theformer Task Force on Financial Flows and StocksStatistics. For example, the simplifiedbreakdown, as agreed by the above-mentionedTask Force in 1996, does not pose a problem.

Data for trade credits are reported under otherinvestment. Such data are collected, togetherwith settlement-based trade statistics.

Both �genuine� repurchase agreements at afixed price on a fixed date as well as sell/buy-back transactions are recorded. Althoughlending against collateral is currently moresignificant, repo activities are expanding.Evidence points to the predominance ofmonthly maturities.


There are no deviations under the new system.

10.4 Gaps

Deposits: there is a gap in the data for the non-banks sector (on the assets side).


Data available from the BIS are used as a proxyto cover the gap in the data for the assets of thenon-banks sector.


There are no quarterly estimates for the otherinvestment account.

11 Reserve assets


The information is obtained from the ForeignExchange Division of the Bank of Greece. Abreakdown by instrument is available only on amonthly basis.

11.2 Definition

In principle, the Bank of Greece complies withthe recommendations set out in the BPM5 andthe harmonisation proposals made by the formerTask Force on Financial Flows and Stocks Statistics.


Chapter 4.4 Greece


None.

11.4 Gaps

The Bank of Greece complies with the ECBRecommendations regarding reserve assets.


The Bank of Greece considers that theprovision of disaggregated stocks and flows dataon reserve assets should be a subject ofdiscussion in the Foreign Exchange Policy Sub-Committee.



The collection system of the Bank of Greece isbased on pure stocks data stemming fromannual surveys for FDI, other investment andquarterly surveys for portfolio investment(consolidations, banks, etc.).

Stock statistics are compiled for all items:� portfolio investment stock statistics

are compiled on a quarterly basis usingdata from custodians, private bankingdepartments of MFIs, stockbrokers, mutualfunds and investment companies;

� statistics on FDI are compiled once a yearon the basis of an annual survey based ona register;

� loan liabilities for general government andother sectors are compiled once a year onthe basis of data from the Bank of Greeceand an annual survey sent out to privatesector firms;

� MFIs� external assets/liabilities are compiledon the basis of data included in themonthly bank balance sheet statistics of theBank of Greece�s Money and Banking Division;

� BIS data are used for various purposes.

The Bank of Greece has no problem providing abreakdown by sector or by instrument. For thegeographical breakdown, similar problems are

encountered as for the flows: assets can beallocated according to the issuer, but liabilitiescan only be allocated according to the firstknown counterpart.

Timeliness problems do not seem to arise formost items, with the possible exception of FDIstocks.

Greece did not participate in the 1997 IMF Co-ordinated Portfolio Survey, as the data did notseem to be of good quality. In principle, Greecemight be in a position to conduct surveys on aquarterly basis. Data on inward investment areof better quality and coverage than data onoutward investment (timeliness: quarter plus sixto eight weeks).

12.2 Definitions

12.2.1 General

The coverage and the concept are broadly inline with the appropriate position of thequarterly/annual b.o.p. position of the financialaccount. The definitions are in line with therecommendations in the BPM5 and those of theWorking Group on Balance of Payments andExternal Reserves Statistics (former Task Forceon Financial Flows and Stocks Statistics).

For the reconciliation adjustment, the changesin stock positions are compared with changes intransactions, taking into account valuationadjustments.

The valuation is based on:(i) market values for equity;(ii) nominal values for bonds and Treasury bills,since the secondary market has only justdeveloped; and(iii) book values for FDI stocks; where possiblemarket values are used for companies quotedon the stock exchange.


The directional principle is followed andreinvested earning are included.


Chapter 4.4 Greece




Data are recorded on a gross basis.




With the exception of gold, for which valuationis based on 65% of the average market price inDecember of each year, reserve assets arerecorded at closing middle market prices at theend of the appropriate period, using the closingmiddle market exchange rates prevailing at thereference date.

No major discrepancies occur when compilingreserve assets from account balance sheets.

Regarding the adjustment between accounting-based data and b.o.p./i.i.p. consistent data,reserves are, at present, revalued once a year toadjust them for exchange rate changes.


None.

12.4 Gaps

None.


None.


None.

13 Administration


Provisional BOP with Summary Report (monthly)� this is a Press Release in which the monthlyfigures are published, together with a report toexplain developments; (these data are published inUSD millions, EUR millions and GRD billions);Monthly Statistical Bulletin � the data presentedhere are shown in a more analytical breakdown;Bulletin of conjuctural indicators � monthlyQuarterly Economic Bulletin � also detailsrecent b.o.p. developments;Monetary policy � bi-annual report submittedto Parliament;Governor�s Annual Report;Budget statement � Annual details recent b.o.p.developments together with an analysis.

13.2 Contributors

This country information was drafted by the ECB�sBalance of Payments and External Reserves Divisionand subsequently amended and agreed with Greece.Enquiries of a general nature should be addressed tothe Press Division of the ECBH. Enquiries specific toGreece should be addressed to:

Ms Verra RodisHead of BOP Compilation SectionBOP Statistics DivisionStatistics DepartmentBank of Greece Bank of GreecePanepistimiou Avenue, No 21GR � 10250 ATHENSGreeceTel.: (0030) 1 32 02379 or 1 32 02540Fax: (0030) 1 32 6035

Mr. Andreas KarapappasDeputy Head of BOP Compilation SectionBOP Statistics DivisionStatistics DepartmentBank of GreecePanepistimiou Avenue, No 21GR � 10250 ATHENSGreeceTel.: (0030) 1 32 02540 or 1 32 02379Fax: (0030) 1 32 6035


Chapter 4.4 Greece

128ECB EU


ethods � Novem

ber 2000

Ch

apter 4.5 S

pain

Banco de EspañaGoverning Council

Executive Commission

Governor

Deputy Governor

General Direction General Direction General DirectionForeign DepartmentGeneral Direction

General Direction

Staff Group

InformationProcessing

Administrationand Control

Balance of PaymentsFinal Data and Analysis

Data Editing

Foreign OperationsBalance of Payments

Chief

Deputy Chief

Reporting Credit Institutions

Direct Declaring

External Loans

Exchange Offices



Chapter 4.5 Spain


2.1 Introduction

The Banco de España has been responsible forcompiling the balance of payments (b.o.p.)statistics since 1991. Before then, theircompilation was the responsibility of theSecretary of State for Trade at the Ministry ofEconomics and Finance. After the fullliberalisation of cross-border economictransactions in 1992 and the publication of thenew Balance of Payments Manual (5th edition)of the International Monetary Fund (IMF), theBPM5, a completely new b.o.p. data collectionsystem was introduced in 1993.


All residents in Spain are obliged, by RoyalDecree, to declare all cross-bordertransactions they undertake. This is for fiscaland administrative reasons as well as forstatistical purposes. The Banco de España, inturn, is responsible for declaring thisinformation to the fiscal authorities.

The Royal Decree and circulars regulate theb.o.p. reporting obligations in a uniform manner.The burden of reporting is therefore equal forbanks and all direct reporters. The legal basisprovides the possibility of imposing sanctionson individuals and companies which do not fulfiltheir obligations to report on b.o.p.transactions. The sanctions imposed are of anadministrative nature and take the form of afine. Credit institutions can also be fined by theBanco de España whenever they fail to complywith the general rules imposed by the centralbank.


Generally, all statistics produced by the Bancode España are compiled by the ResearchDepartment, which consists of four sections:the Economic Analysis and Forecasts Section,the Statistics and Central Balance Sheet OfficeSection, the Economic Research Section andthe Monetary and Financial Research Section.

The Balance of Payments Section, however, isnot part of the Research Department; rather, itis located together with the ForeignOperations Section in the Foreign Department.

The Balance of Payments Section co-operatescontinuously with the other departments ofthe Banco de España. Information obtainedfrom the Book-entry Department enables theaccruals principle to be applied to the interestpaid by the Treasury on registered bonds andnotes. The Statistics and Central Balance SheetOffice Section, which produces data for thenational accounts (financial accounts), and theBalance of Payments Section work together ona regular basis to check that the figuresproduced for the national accounts arereconciled with the b.o.p. figures.


The Balance of Payments Section consults theGovernment Customs Department, whichprovides figures for merchandise � foreigntrade (intra-EU and extra-EU trade). A tape isprovided on a monthly basis and adjustments tothese data are carried out within the Banco deEspaña. This is one-way traffic � the Balance ofPayments Section does not provide data to theCustoms Department. The trade statisticsrepresent transaction data.

In the past, the involvement of the Ministry ofEconomics and Finance was primarily forexchange control reasons, whereas it is now forpurely statistical purposes. The Banco deEspaña uses some data provided by theMinistry for flow figures on direct investment.

Co-operation with the National Institute ofStatistics (NIS) is continuous, since the Rest ofthe World (RoW) account is compiled by theInstitute using b.o.p. data as a source.

The Spanish National Stock MarketCommission (CNMV) provides information oncompanies quoted in the stock markets, whichis used for flow figures on direct investment.


Chapter 4.5 Spain

The Spanish Treasury provides detailedinformation on payments between Spanishinstitutions and the European Union whichmakes it possible to differentiate betweencurrent and capital transfers.

2.5 Users

B.o.p. data according to the standardcomponents of the BPM5 are supplied tointernational organisations, such as the ECB,the European Commission (Eurostat), theOrganisation for Economic Co-ordination andDevelopment (OECD), the IMF and the Bankfor International Settlements (BIS), on a regularbasis. Data are now transmitted to the ECB andthe European Commission (Eurostat) using theGESMES/CB message format. The same appliesto other organisations such as the IMF and theBIS, provided that they have agreed upon its use.



The Banco de España introduced a new datacollection system in 1993. It is described as a�semi-closed settlement system�. The generalreporting system is fully closed: all changes inthe external accounts of banks or non-banksare explained by the full reporting oftransactions (flows). The balance of externalaccounts at the beginning of the period plus thetransactions during the period equal the balanceat the end of the period. The general reportingsystem is complemented by other sources:� data on trade/goods are obtained from

the Customs Department;� data on government transactions (public

transfers) are reported directly;� the accruals principle is applied to the

interest paid by the Treasury on registeredbonds and notes, using informationobtained from the Book-entry Departmentof the Banco de España.

Further sources such as the supervisory reportsof Monetary Financial Institutions (MFIs) areused for checking purposes and also to:

� obtain the geographical breakdown ofMFIs� other investment; and

� transform the reported net figures of thecorrespondent accounts of MFIs intogross figures.

The Banco de España is waiting for theestablishment of the Centralised SecuritiesDatabase (CSD) which will be used to producethe split between euro area and non-euro areatransactions in securities. Finally, all newsavailable via public information systems (press)and relevant for b.o.p. purposes is used tocheck the b.o.p. returns. The BIS database is notused at present.


(i) Deposit money institutions: these institutionsare banks, savings banks and credit co-operatives. They must report the transactionswith non-residents carried out both on theirown account and on behalf of their customers,in accordance with Banco de España Circular15/1992. Data submitted by this group ofreporting agents should include the openingand closing balances of the accounts, the creditsand debits of which are the counterpart of thereported flows. Hence the change in theresulting balance must be equal to the sum ofthe individually declared flows. The plausibilityof the data is checked against balance sheet data.(ii) Other financial institutions registered with theBanco de España or the Spanish National StockMarket Commission: these institutions arespecialised lending institutions, agency brokersand broker-dealers. They must declare alltransactions carried out on their own accountand on behalf of their customers (Circular 15/1992).(iii) Holders of accounts with non-resident creditinstitutions: these account holders must reportthe opening and closing balances of theiraccounts and all operations settled throughthem to the Banco de España (Circular 24/1992).(iv) Inter-company accounts with non-resident firmsare becoming increasingly important. Alltransactions through these accounts must bereported directly to the Banco de España(Circular 24/1992), together with the opening


Chapter 4.5 Spain

Table 1Reporting scheme for b.o.p. and i.i.p. data collection for SPAIN

Target respondent Name of reporting Contents of reporting Frequency of Timeliness (numberpopulation form form reporting of days for sub-(e.g. MFIs, mission after the end ofenterprises, etc.) the reference period)

Banks and other No name � � Date 10 days 8 working daysfinancialninstitutions electronicnformat n � Identification of theacting on behalf of residentclients n � Concept (code)

� Country of the non-resident n

� Currency n� Amount n� Issuer identification

(if applicable)� ISIN code (if applicable)� Some other fields for

internal purposes

Residentsnholding n DD-2 � Date n Monthly n 20ndays naccounts abroad � Currency nandnintercompany n � Amount naccounts n � Conceptn(description)

� Country of the non-resident n

� Issuer identification(if applicable)

� ISIN code (if applicable)� Some other fields for

internal purposes

Residentsnconcluding CP-1 � Date n Transactionnby n 1nmonth noff-setting n � Currency n transaction ntransactionsnwith n � Amount nnon-residents n � Conceptn(description)

� Name and country ofthennon-resident n

� Issuernidentification n(if applicable)

� ISIN code (if applicable)� Some other fields for

internal purposes

Residentsnunder- CC-1, CC-2, PE-1, � Date n Loan by loan 1nmonth ntakingnlending PE-2, PE-3 and � Currency ntransactionsnwith n PE-4 n � Amountnon-residents n � Conceptn(description)

� Name and country ofthe non-resident n

� Relationship betweenresident and non-resident(ID relationship)

� Repayment date, interestrate n

� Some other fields forinternal purposes


Chapter 4.5 Spain

and closing balances of these accounts and thetransactions debited or credited through them(Circular 24/1992).(v) Clearing transactions with non-residents:Clearing means any operation that does notgive rise to a settlement via credits or debits ona bank or inter-company account, since itinvolves a receipt and a payment of the sameamount with opposite signs. Residents whocarry out such transactions must report themdirectly to the Banco de España (Circular 23/1992).(vi) Foreign lending and borrowing by residentsother than credit institutions: Spanish residentswho carry out such transactions must reportthe terms of the loans or private issues to theBanco de España. This also includes therelationship between the lender and theborrower.

3.3 Thresholds

The reporting threshold for banks and directreporters (foreign bank account holders orinter-company accounts) is not an exclusionthreshold, but a simplification threshold. Forbanks, the amount (ESP 500,000) refers toindividual transactions: only receipts andpayments exceeding this amount are reportedindividually and the nature of the transactionspecified. For direct reporters, the amount(ESP 50 million) refers to the total transactionssettled through the foreign account in any givenmonth: if these transactions exceed ESP 50million, the account holders have to reportthem. If not, there is no obligation to reportthem in that particular month, and thetransactions are reported in the followingmonth (if the threshold is exceeded), or at theend of the year (if the threshold was notreached in any month). Only if the total amountof the transactions settled in the year is lessthan ESP 10 million are direct reporters notobliged to report them.


At the beginning of 1993 the Banco de Españawas aware of the requirements of the newBPM5 and it took advantage of this when

preparing the new data collection system. Soonafter the new data collection system wasintroduced, the Banco de España publishedb.o.p. figures in accordance with therequirements of the revised Manual and sentdata translated into the new format to theinternational organisations. Data were sent tothe IMF on all three accounts (includingfinancial derivatives), from 1991 onwards.

3.5 Timeliness

At present, a complete set of data, includinggoods data supplied by the CustomsDepartment, are available within nine to tenweeks. Goods data for the provision of themonthly key items within six weeks areestimated by the Banco de España (see Sub-section 4.2.1 below).

Banks and other financial institutions have tosubmit their data within 10 working days of thereporting period. Other residents (accountholders or clearing transactors) have 20 and 30calendar days respectively after the end of thereporting period to submit their data. In somecases reporting agents experience difficulties inmeeting these deadlines. The Banco de Españahas ongoing contact with reporting agents asdata are submitted every 10 days. The Banco deEspaña intends to receive these data in a moreautomated way.


The Spanish b.o.p. is compiled on a monthlybasis.

3.7 Data controls

There are three levels of checking controlswhich can be distinguished. First, a fairlycomplete set of validity and consistency checkshas been defined that are executed on the databy automatic procedure. Second, controls onthe aggregate data are carried out by means ofmacro-editing reports based on expectedvalues. Unexpected results are checked, so thatflows contributing to any suspicious figures are


Chapter 4.5 Spain

analysed and banks are asked to justify orcorrect them. Third, a set of plausibility checksis performed on the data where the aggregateddata reported by the banks are compared withthe data reported on the balance sheets of thebanks or with other data sources.

3.8 Revision policy

In Spanish publications monthly data arerevised as follows:� when data for the current month are

published, data for the preceding monthare revised;

� in January (i.e. when the December dataare revised), data for the previous 23months can also be revised.

There is no differentiation between monthly,quarterly and annual figures in Spanishpublications.

3.9 Publication

The titles of the publications produced by theBanco de España on b.o.p. statistics are listed inSub-section 13.1.

B.o.p. data are used internally by other units ofthe Banco de España as well as by otherinstitutions to compile statistics and to carryout studies. Mostly, b.o.p. data are used forvarious purposes and only in some specificcases (i.e. national accounts) do they serve aspecific purpose.

The dissemination follows the Special DataDissemination Standards (SDDS) criteria. TheSpanish b.o.p. data, together with the date oftheir release, are available on the Internet(HTTP://www.bde.es/infoest).

4 Monthly key items


The Banco de España can provide monthly euroarea b.o.p. data in accordance with therequirements for the key items, including the

euro area/non-euro area breakdown. Data forthe monthly key items are available, with theexception of data on goods, within five to sixweeks. Since the customs data for goodsbecome available at a later stage, the Banco deEspaña has to estimate preliminary data for thegoods item.

Coverage of banks and other financialinstitutions reporting directly to the BOPDepartment is always 100%. Data on residentsholding accounts or having off-settingtransactions, which is reported with a delay, arenot estimated, and the information isincorporated when it is received, so that it isreflected in the data revisions.


items


Except for goods and some breakdowns inother investment of MFIs, the Spanish monthlykey items are reported as flows without anyestimations.

Data on trade in goods are, in principle, derivedfrom customs data based on transactions on anf.o.b. basis. Data from 1990 onwards arecompliant with the BPM5 standards in forcesince 1993. When data are not available ontime, estimations are made, using the ARIMAmodel. The seasonal pattern of the settlementdata is applied to the transactions.

The euro area/non-euro area split oftransactions depends on the countriesreported in the Intra-Community TradeStatistical System (Intrastat) or customsdocuments. Since the data referring to January1998, the Banco de España has been followingthe principle of country of consignment. Spainapplies the �special trade� principle, meaningthat goods placed in bonded warehouses withinthe national territory of the reporting countryand exports of goods previously kept inbonded warehousing are excluded from theb.o.p. statistics.


Chapter 4.5 Spain

The number of revisions to be carried outdepends on the Customs Department. Usuallydata are revised once a year.


The monthly flows for the investment incomeaccount are mainly based on settlement data,with the exception of the income accrued bynon-resident holdings of bonds and notesregistered at the Book-entry Department ofthe Banco de España. In the case of Spain,monthly and quarterly data are fully consistent.Thus, no forecasts are produced in this areaand the accruals principle is followed in thesame way as for the quarterly b.o.p.

Although it would be possible to provide amonthly breakdown of the investment incomeaccount into its sub-components (directinvestment income, portfolio investment andother investment income), as is requiredquarterly, further disaggregation entails the riskof increasing mistakes and revisions.

With regard to the geographical allocation ofportfolio investment income, Spain is able tobreak down the inflows according to thedebtor principle (subject to the limitationsmentioned in Sub-section 8.1 below), and isthus able to identify the actual residency of thecounterpart, as is required. No finalcounterpart can be identified for outflows ofportfolio investment income.

No estimates are made in the event of data notbeing available on time.


There are no monthly estimates in the field ofdirect investment income.


The collection of monthly data takes place on asecurity-by-security basis. Book-entries forregistered general government bonds andnotes are used to apply the accruals principle

to income on these instruments. No modellingis used.

With regard to the estimation of thegeographical breakdown, the situation is similarto that described in Sub-section 8.1 below.While the actual residency of the debtor can beidentified on the assets side (based on the firsttwo digits of the ISIN code), the main problems ofcorrect allocation are on the liabilities side and inthe identification of the creditor�s residency.


Only reported flows are included. No estimatesare made.


Banking supervision reports are used to makethe euro area/non-euro area split of MFIs� flowsand to translate some of the reported net flowsinto gross figures (see also Sub-section 3.1).

5 Investment income


5.1.1 General

Part of the general reporting system (see Sub-section 3.1). Neither stocks statistics norsurveys are used.

Realised gains and losses are generally recordedcorrectly in the financial account. Income onfinancial derivatives (i.e. interest swaps) isincluded in the financial account, even forperiods before January 1999.

Data for 1998 and 1999 are fully consistent. Forprevious years, the use of the InternationalSecurities Identification Number (ISIN) code isnot possible, and the euro area/non-euro areasplit of the MFI sector in other investment andits income component is not available. For thehistorical data on all other components, ageographical breakdown is available on amonthly basis.


Chapter 4.5 Spain

Adjustments or reconciliations betweenmonthly, quarterly and annual figures are notnecessary since no estimates are carried outfor monthly data, in particular, and there shouldthus not be any inconsistencies.

The geographical allocation of investment incomefor both credits and debits is generally based onthe debtor-creditor principle, except for portfolioinvestment income (see Sub-section 5.1.3). Themain problems concern the income componentof portfolio investment liabilities and the incomeon other investment of MFIs.

No bias towards the under-recording of creditscan be seen with regard to the income account.


With regard to income on equity, the Banco deEspaña does not currently include anyreinvested earnings in the b.o.p. Income isregistered when it is paid. No rate of return onstocks is calculated.

Regarding income on debt, interest on inter-company loans is recorded appropriately owingto the fact that all loans are reported directlyto the Banco de España, which can separatelyidentify inter-company loans and thecorresponding income transactions.


The return on income on debt is not usuallycalculated on the basis of stocks (see also theremarks in Sub-section 5.1.1), except in thecase of general government registered bondsand notes. Income on specific types of bonds(i.e. indexed bonds) is recorded when amountspaid or received are registered.

Accrued interest from the date of the lastcoupon payment to the date on which thetransaction takes place is registered as part ofthe price of the bond and �coupon washing�distortions are eliminated by recording theincome on these bonds and notes on anaccruals basis.

Income related to money market instrumentsis not well-covered; however, the amounts arenot significant in the Spanish b.o.p. Accruals arenot applied to these instruments.

The impact of taxation issues on portfolioinvestment income are difficult to assess.

With regard to the geographical breakdown ofincome on portfolio investment, Spain is able tobreak down the inflows according to thedebtor principle, based on the first two digits ofthe ISIN code, and thus to identify the actualresidency of the counterpart. The issuerprinciple can consequently be applied in a waysimilar to the treatment of portfolioinvestment in the financial account. However,this principle is less efficient as a result ofthe absence of a Centralised SecuritiesDatabase (see Sub-section 8.1 below). No finalcounterpart can be identified for the outflowsof portfolio investment income.


Reported flows on the share of interest inleasing payments are included under income onother investment.

Data on income on reserve assets are providedby the Foreign Department.

5.2 Definitions

Apart from the fact that it does not take intoaccount reinvested earnings for income onequity, the Banco de España complies with therecommendations of the BPM5 and theharmonisation proposals made by the WorkingGroup on Balance of Payments and ExternalReserves (the former Task Force on FinancialFlows and Stocks statistics).


See Sub-section 5.1.2 concerning the recordingof reinvested earnings.


Chapter 4.5 Spain

5.4 Gaps

Reinvested earnings in direct investmentincome.


None.


Accruals are estimated only for income onSpanish general government registered bondsand notes, using the daily stocks data availablefrom the Book Entry for Public DebtDepartment.

6 Capital account


6.2 Definition

Adaptation to the new requirements wasaccomplished at an early stage in most areas.The following criteria for distinguishingbetween current and capital transfers areapplied:� for transfers with the EU institutions,

allocation takes place according to theagreements reached by the EuropeanCommission (Eurostat);

� for other transfers, reporting agentsallocate according to the instructionsgiven by the Banco de España.


None.

6.4 Gaps

None.


None.

7 Direct investment


This forms part of the general reporting system(see Sub-section 3.2) from which mainlysettlement data are derived. Furthermore, theBanco de España uses some data provided bythe Ministry of Economics and Finance toobtain flow figures on direct investment. Thisinformation allows the Banco de España toestimate foreign direct investment in Spain inthe form of quoted shares (these data are notavailable in the settlement system, in which allinvestments in listed securities are reported asa lump sum). Moreover, information providedby the Ministry is used to produce thebreakdown of direct investment flows byresident economic activity and for the purposeof checking other data sources. However, thisissue and other methods of obtaining thisbreakdown are under consideration.

Historical data for 1998 are fully in line with1999 data; there are no methodological breaksin the time series.

All inter-company loans are covered, exceptthose short-term trade credits which are notinstrumented via inter-company accounts.Transactions in equity contributions withoutpayments may not always be fully covered,although there is an obligation to report thiskind of transaction, whether in the form of realor of financial assets, to the Banco de España.

7.2 Definition

With the exception of reinvested earnings, theBanco de España complies with therecommendations of the BPM5 and theharmonisation proposals made by the WorkingGroup on Balance of Payments and ExternalReserves. Special purpose entities are treatedas recommended in the BPM5.


The main deviation is the absence of reinvestedearnings. Difficulties are encountered in the


Chapter 4.5 Spain

identification of some transactions as directinvestment such as: (i) debt securities; (ii) cross-participations of less than 10% (mostly includedin portfolio investment); and (iii) foreign directinvestment in Spain through the acquisition oflisted shares.

7.4 Gaps

No information is available on reinvested earnings.


There is no intention to introduce a differentcollection system or a new survey on directinvestment (stocks). The new system forreporting foreign investment to the Ministry ofEconomics and Finance could be used forcompiling direct investment figures (a newRoyal Decree was issued in April 1999).


There are no quarterly estimates for the directinvestment account.




All transactions in securities are reported withthe ISIN code. The first two digits are used tomake the euro area/non-euro area split forassets. Only in the case of �matador� bonds isthe country, as indicated in these first twodigits, corrected. The ISIN code is only availablefrom 1998 onwards. Stocks data are not usedto calculate flows.

No ISIN Security Database is available at thenational level. The Banco de España is currentlyawaiting the establishment of a centralisedsecurities database which would ensure thecorrect allocation of assets, provided that allMember States participated, and foster furtherharmonisation of data.

The geographical allocation criterion followsthe issuer principle on the assets side (subjectto the limitations mentioned in the firstparagraph of this Chapter), meaning that theactual residency of the counterpart can beidentified. This geographical breakdown isavailable on a monthly basis from 1998onwards. Liabilities are allocated according tothe first known counterpart. This is also in linewith the allocation of the income item forportfolio investment (see Sub-section 5.1.3, lastparagraph).

On the liabilities side, payments associated withtransactions via financial centres (intermediariesas well as investment funds), internationalcustodians and lead managers are allocated tothe relevant country of the financial centre, etc.The same applies to payments to internationalclearers (i.e. Euroclear or Cedel) where nomore detailed identification of the securityholder is possible. Consequently, manytransactions on the liabilities side are allocatedto Luxembourg and Belgium.

Trading in loan portfolios is not captured in theportfolio account; the collateral deposits areincluded in the Spanish b.o.p., as otherinvestment.

The Banco de España has noticed an increase insecuritisation and the use of repurchaseagreements and bond lending.

8.2 Definition

In principle, the Banco de España complies withthe recommendations of the BPM5 and theharmonisation proposals made by the WorkingGroup on Balance of Payments and ExternalReserves.

MFIs are required to exclude any kind offinancial service (i.e. service charges, fees, andcommissions) from their reporting underportfolio investment.

Money market instruments cannot be identifiedseparately by type of instrument, but are


Chapter 4.5 Spain

reported under one heading. Income related tothese instruments is not well-covered and accrualsare not applied (see also Sub-section 5.1.3).


None.

8.4 Gaps

None.


The ISIN is regarded as a possible means ofimproving the quality of the data. However, thecorrect use of the ISIN requires a centralisedsecurities database.


There are no quarterly estimates for theportfolio investment account.




Within the Spanish b.o.p., financial derivativescapture options issued over-the-counter(OTC) or on organised markets, financialfutures issued on organised markets, warrantson securities, OTC futures contracts, forwardrate agreements, currency and interest rateswaps and other swaps. The treatment offinancial derivatives as recommended by theBPM5 is virtually impossible to achieve in allcases.

Payments and receipts associated withtransactions involving derivatives are reportedto the Banco de España according to thedifferent concepts for each type of instrument.The instruments are listed in the reportinginstructions issued by the Banco de España tothe MFIs. When payments are on a �net� basis,

the MFIs are asked to report all thetransactions involved, implying that theunderlying payments and receipts are includedin the financial derivatives account of theSpanish b.o.p.

The reporting instructions also stipulate thatthe reporting agents have to separate themargins to be included in deposits from thoseto be considered as financial derivatives.Although the terminology �option style� and�future style� is not used, the result should bethe same.

The premium for options is recorded.

Gross data (credits and debits) are available, butthey are not checked since only net data arepublished.

A geographical breakdown for derivatives is, inprinciple, available. For OTC contracts, theactual residency of the counterpart can bereported. However, if clearing houses areinvolved in derivatives transactions,identification of the actual residency of thecounterpart is impossible. In this case, theBanco de España can only distinguish betweenthe transactions of Spanish clearing houses andthose of foreign clearing houses. There are nomajor problems when derivatives are reportedas �net of nets�.

9.2 Definitions

The coverage of the financial derivatives itemhas improved in the Spanish b.o.p. Owing to thenew reporting guidelines for the reportingagents, all deviations from the BPM5 for therecording of transactions in financial derivativesshould have disappeared. Nevertheless,reporting agents may still face problems infollowing the instructions, for instance in caseswhere options are executed and the underlyinginstrument is bought or sold.

The net stream of settlement flows associatedwith interest rate derivatives is recordedcorrectly under financial derivatives.


Chapter 4.5 Spain



9.4 Gaps

As mentioned in Sub-section 9.1, the main gapsare related to the correct treatment of sometransactions.


None.


There are no quarterly estimates for financialderivatives.

10 Other investment



As a general rule, actual flows are recorded;however, the geographical breakdown and thetransformation from net figures into gross figuresare based on the use of stocks data. Both thematurity breakdown and the sectoral breakdowncan be compiled for the monthly key items.

Discrepancies between loans and deposits forMFIs may cause problems for the b.o.p.compiler, as does the inclusion of financialleasing under loans, instead of under tradecredits. Long-term trade credits have to bereported when goods are delivered.

The geographical breakdown of MFIs� transactionsis not available for periods before 1998.

Extra-euro area b.o.p. flows for the MFI sectorare derived from the MFIs� balance sheets atthe beginning and end of period, with anadjustment for exchange rate fluctuations.

Transactions carried out through TARGET arereported under the general reporting system.

Usually the MFIs report the concept of thepayments/receipts and the Banco de Españareports the change in the accounts with theother NCBs and the ECB.

10.2 Definition

In principle, the Banco de España complies withthe recommendations of the BPM5 and theharmonisation proposals made by the WorkingGroup on Balance of Payments and ExternalReserves Statistics.

Foreign currency notes and coins, financialleasing, repos and collateral deposits areincluded under other investment.

All claims and liabilities between affiliatedenterprises are recorded correctly underdirect investment (see Sub-section 7.1).

Sell/buy-back transactions with Spanishsecurities (usually maturing within a month)predominate among cross-border repo-typetransactions. Conversely, lending with collateralsuch as loan portfolio (also included underother investment) is less significant.


Short-term trade credits are not included andadvance payments are included as payments ofgoods, rather than as trade credits.

10.4 Gaps

No information on short-term trade credits isprovided.


No change is planned to rectify the recordingof advance payments as trade credits.


There are no quarterly estimates in the field ofother investment.


Chapter 4.5 Spain

11 Reserve assets



11.2 Definition

The new presentation follows therecommendations of the BPM5 and includes: (i)financial assets that are readily available to themonetary authorities such as gold, specialdepository receipts and foreign exchangeassets; and (ii) the changes seen in reserves,excluding changes in valuation, which areinduced by exchange rate or price fluctuations.

Pure transactions data broken down byinstrument are available since January 2000,with data from the Foreign OperationsDepartment. In accordance with ECBrecommendations financial derivatives arerecorded separately and on a net basis. Goldswaps are recorded as repos.

With regard to the use of market prices,recording is carried out according to theprinciple laid down in the ECBrecommendations. Both valuation andconversion into euro are made on the basis ofthe market prices and market exchange ratesprevailing at the time of the transaction.


None.

11.4 Gaps

Data availability is unproblematic.


None.



The main statistical sources for the compilationof the i.i.p. are:(i) the MFIs� reports to the SupervisionDepartment of the Banco de España. The creditinstitutions� balance sheets are used directly toobtain the stocks of their financial assets andliabilities vis-à-vis the rest of the world;(ii) the Public Debt Book-Entry System forbonds and notes issued by general governmentin domestic currency. The Book-Entry Systemmanaged by the Banco de España providesinformation on the portfolio of book-entrygeneral government debt held by non-residents;(iii) the Register of external loans granted andreceived by resident sectors other than thecredit system in the Banco de España�s Balanceof Payments Division. These statistics arecompiled from the administrative accountingdocuments created to monitor both loanstraded by the other resident and generalgovernment sectors with non-residents and theissuance of non-marketable securities byresidents other than the credit system. Thefigures obtained from this source cover bothloans between related (parent companies andaffiliates) and non-related companies andfinancing obtained through Euronotes,commercial paper and other issuanceprogrammes. Depending on the relationshipbetween the two counterparts involved, eachtransaction is recorded under either directinvestment, portfolio investment or otherinvestment;(iv) the Banco de España�s Foreign OperationsDepartment, for reserve assets;(v) b.o.p. statistics, which are used to constructthe stocks when there are no reliable censusstatistics on a specific financial instrument, suchas portfolio investment of the other residentsector;(vi) the BIS, which prepares a quarterlyestimate of the asset position of non-financialresident sectors with non-resident creditinstitutions;(vii) other sources: the Banco de España has a


Chapter 4.5 Spain

very detailed databank on securitiesdenominated in both Spanish pesetas andforeign currency which are issued by residentinstitutions, encompassing data obtained fromthe Book-Entry System, the National SecuritiesMarket Commission (CNMV) and numerousspecialised publications.

The data collection system of the Banco deEspaña is based on a combination of purestocks data and the accumulation of flows. Thecoverage is good, except in the case ofreinvested earnings and financial derivatives. Insome cases the accumulation of flows mayproduce deviations from real stocks. Inparticular, data are derived in one of the twofollowing ways:� directly from the sources of information

available, when they provide data onstocks. Some of these stocks are notalways valued in accordance with theIMF�s guidelines. This has held true ofpractically all the series of assets andliabilities of the credit system, the data ofwhich come from the accountingstatements for each period, Some arevalued at historical prices (as is, forinstance, direct investment); or

� by the accumulation of flows. In those itemsfor which this procedure has been used,unless indicated otherwise, the initial end-1989 stocks have been taken as the startingpoint. These, in turn, have normally beenestimated through the accumulation offlows and corrected � where applicable �for the exchange rate valuation effect, astaken from the b.o.p. on a cash basis,which has been available since 1969, andfrom b.o.p. data prior to that date(available since 1959). The stocks compiledsince 1990 have been obtained by addingthe flows of the items of the financialaccount of the b.o.p., adjusted � wherenecessary � for exchange rate valuation,to the initial stocks. This adjustment is madeby applying the nominal effective exchangerate index of the Spanish peseta againstthe currencies of developed countries.Moreover, these accumulated flows are

corrected for changes in asset prices inthose cases in which this effect has beensignificant.

Apart from differences due to exchange rateand asset price adjustments, the maindifferences between changes in i.i.p. stocks andb.o.p. flows relate to the different data sourcesused, especially in the following cases:(i) sector allocation:the b.o.p. assigns new flows of residentinvestment abroad to those sectors whichoriginally acquired the assets involved. However,given the current data collection system, theredistribution of assets which maysubsequently take place among the residentsectors is not taken into account. Thisredistribution is recorded, at least in part, in thestocks of the i.i.p.;(ii) assets and liabilities relating to insuranceoperations:the technical reserves of insurance companiesare included in the i.i.p., but are not recorded inthe b.o.p.

The Banco de España does not experience anyproblems with regard to providing end-of-yeardata within the agreed period of nine monthsafter the end of the respective year; nor does ithave any difficulty with the breakdowns bysector or maturity. Nonetheless, it is necessaryto emphasise the estimated nature of some ofthe figures obtained. As there is no updatedcensus of all the financial instruments in whichresident agents are the financial counterpartsof non-resident units, it has been necessary tocompile the information required from variousstatistical sources, so that a reconciliation ofthe information supplied by all the sources hasnot been possible in every case. This is oftendue to valuation problems and, in many othercases, also to a lack of sufficient detail.

The geographical allocation is affected by thelack of a security-by-security database for theappropriate identification of the end-investoron the liabilities side and the actual country ofissuer on the assets side.


Chapter 4.5 Spain

Spain participated in the 1997 IMF Co-ordinated Portfolio Investment Survey. The datawere produced by the Ministry of Economicsand Finance, which has been conducting asimilar survey since 1992 and intends tocontinue to do so on an annual basis. Inaddition to the mandatory requirements, Spainsubmitted data on foreign investment insecurities issued by Spanish residents, whichwere based on information from custodiansand end-investors.

12.2 Definitions

12.2.1 General

The definitions correspond, in general, to thosein the BPM5. The valuation criteria areessentially in line with the BPM5. Theexceptions relate to cases where data arebased on the accumulation of flows.

In the case of financial institutions, the generalvaluation criteria provide for:� assets representing claims on persons or

over property to be valued at cost;however, there are certain exceptions:

� assets purchased at a discount, except formarketable securities, have to berecorded at their redemption value. Thedifference between the amount recordedand the price paid has to be recorded in abalancing account until the assetsdisappear from the balance sheet. In thecase of liabilities issued at a discount(whether securities or other assets), thedifference between the redemption valueand the amount received when theobligation to a third party is generated istreated in the same way as for assetsother than securities issued at a discount;

� securities included in trading portfoliosare valued at market prices;

� variable-yield securities not included intrading portfolios have to be valued atcost, adjusted � where applicable � forlegally established write-downs orrestatements;

� fixed-income securities not included in

trading portfolios initially have to be recordedat cost, after the deduction � whereapplicable � of accrued interest, which hasto be recorded temporarily in sundry accounts;

� balances representing payment obligationsto be recorded at their redemption value.In the case of liabilities issued at a discount(securities or others), the differencebetween the redemption value and theamount received when the obligation to athird party is generated is treated in thesame way as for assets other thansecurities issued at a discount.

At present, no reconciliation adjustment ismade between surveys of stocks andtransactions.


(i) Spanish investment abroad (residents� financialassets)The information under this heading effectivelycoincides with the provisions of the BPM5. Thedata on the stocks of the credit system aretaken directly from its accounting statements,and those of other resident sectors areobtained, in the case of equity capital, by theaccumulation of flows and corrected forexchange rate valuation effects. Other capitaldata for other resident sectors are obtainedfrom the Register of external loans mentionedin Sub-section 12.1 (iii) above.(ii) Foreign investment in Spain (residents� liabilities)The information under the heading of equitycapital is an approximation to the concept ofthe BPM5. In principle, as far as shares areconcerned, this caption encompasses all sharesissued by resident companies which are neitherlisted nor in the process of listed on the stockexchange and only an estimation of directinvestment through listed shares. Therefore, itincludes part of portfolio investment throughunlisted shares, but that part is of minorimportance.

In the case of equity capital, stocks are obtainedby accumulating flows and, given that themajority of these investments are denominated


Chapter 4.5 Spain

in the national currency, no exchange ratecorrection is made. Other capital stocks areobtained from the Register of loans mentionedin Sub-section 12.1 (iii) above.


(i) Spanish investment abroad (residents� financialassets)The various instruments included under thisheading coincide with those indicated in theBPM5. The credit system data are obtaineddirectly from the respective balance sheets,while those of other resident sectors areobtained through the accumulation of flowswhich are corrected for exchange ratevaluation effects.(ii) Foreign investment in Spain (residents� liabilities)The series on equity capital does not fullycoincide with the concept of the BPM5, sinceonly an estimation of direct investment in listedshares issued by residents is deducted, asrequired, from portfolio investment andrecorded under direct investment.Furthermore, it excludes part of portfolioinvestment through unlisted shares, but thatpart is of minor importance.

The stocks relating to shares issued by thecredit system and other resident sectors areobtained through the accumulation of b.o.p.flows. A price correction is applied to thestocks, so as to approximate their value tomarket prices.

The stocks of fixed income securities in Spanishpesetas are obtained from the followingsources: those issued by general governmentare obtained from the Banco de España�s Book-Entry System and are valued at market prices,including accrued interest, while those issuedby the credit system and by other residentsectors are obtained through the accumulationof b.o.p. flows.


The Spanish i.i.p. does not include data onfinancial derivatives.


This heading includes the various investmentsindicated in the BPM5.(i) Spanish investment abroad (residents� financialassets)Loans from the credit system to non-residentsare obtained directly from the balance sheets ofcredit institutions, while those from otherresident sectors are obtained from the Registerof loans mentioned in Sub-section 12.1 (iii)above. The data on deposits between creditinstitutions are taken from the balance sheetsof the credit institutions themselves. Those ofother resident sectors, up to and including1993 data, were obtained from the BIS and,thereafter, by adding b.o.p. flows to those initial1993 stocks, with deposits denominated inforeign currency being corrected for exchangerate valuation effects.(ii) Foreign investment in Spain (residents� liabilities)With regard to the statistical sources, the loansreceived by general government and otherresident sectors are obtained directly from theRegister of loans mentioned in Sub-section 12.1 (iii) above. The information ondeposits and repos is taken from theaccounting statements of resident creditinstitutions.


As agreed in the report by the Working Groupon Balance of Payments and External ReservesStatistics, positions in reserve assets arerecorded at the closing mid-market prices atthe end of the appropriate period, using theclosing mid-market exchange rates prevailing atthe reference date. Gold is recorded at theclosing market price.


Reinvested earnings are not currently included.

12.4 Gaps

The main information gaps with regard to theavailability of data on stocks are to be found inthe non-financial private sector. It is necessary


Chapter 4.5 Spain

to make estimates of this sector�s financialassets (except in the case of its loans and partof its deposits abroad) and of its liabilities(except in the case of loans received fromabroad). Another important difficulty is theapplication of the market price principle inaccordance with the BPM5.


None.



13 Administration


Banco de España�s �Boletín Estadístico� (monthly)Banco de España�s �Boletín Económico� (monthly)The Spanish Balance of Payments (annual)Banco de España�s Annual Report

13.2 Contributors

This country information was drafted by theECB�s Balance of Payments Statistics andExternal Reserves Division and subsequentlyamended and agreed with Spain. Enquiries of ageneral nature should be addressed to thePress Division of the ECB. Enquiries specific toSpain should be addressed to:

Mr. Eduardo Rodriguez TenésBanco de EspañaBalanza de PagosPlaza del Rey 6E - 28004 MADRIDSpain

Tel.: (0034) 1 338 5433Fax: (0034) 1 338 6532

146ECB EU


ethods � Novem

ber 2000

Ch

apter 4.6 F

rance

1O


��

��

��

��

��

��

� ��

��

��

��

��

�� !��

� ��

� ��"

#�� "

��

�� $� � ��

� ��

��

�� !�%� ��

� ��

��&�

�� ' (

��& ��

)�� * � ��

$��

�$��

!��

�*��

��' (��+��*�

��

��(��$��"

��!��

$��

!�%� ��

��

��

,� ��

��

��

��%�'�"� ��

�� (

�� "

��

��

�%��

,� ��$� ��

��-�

,� �� - ��

��&�%��

,� .��

��*��

�� "

��(�"

��/

,� ��'�+ ��-�� /

�� *��0

�� *��

�� *��

��

,� � ��

*��

�� "

��(�"

��/

, ��'�+ ��-�� /

��'��,��

*��#�

��*��

, �� %�' (

��

��

,� �� *�� *��*��

,� 1��$�

,� ��

��(��

�� $�

, ��

, !�%� �� &

�� - ��

��

��%��

��$�

,� ��

!�� (��!�

�� -��

, ��*��

��+��&�$.

, !�� ("��(��

, ��

, �2!�� %��

,��

�� 3��&��"��!�� %�� (��"�� (�� "�� *��!�� ' (��

�� 0

#� �� ' (��* � ��


Chapter 4.6 France


2.1 Introduction

The Banque de France has been responsible forcompiling the French balance of payments(b.o.p.) statistics on behalf of the Treasurysince 1959 (Decree No. 59-1438, 21 December1959). The role of the Banque de Francewas confirmed in Article 16 of Act No. 93-980of 4 August 1993, as amended by Act No.98-357 of 12 May 1998. Decree No. 89-938,dated 29 December 1989, abolished theremaining exchange controls and introducedsome changes to the reporting system.The system combines banking settlementreports and direct reporting to the Banque deFrance.


The legal basis for the compilation of the b.o.p. isprovided in two legal texts (Act No. 93-980,dated 4 August 1993, on the Banque de FranceStatute and Decree No. 89-938, as amended on16 December 1992), which set out the statisticalobligation for residents to report their cross-border payments and their international assetsand liabilities to the Banque de France.


At the Banque de France, statistics are compiledin the Directorate General Research andInternational Relations. B.o.p. statistics arecompiled in the Balance of Payments Directoratewithin this Directorate General. The Balance ofPayments Division is also responsible forcompiling the international investment position(i.i.p.), conducting external forecasts and variouseconomic studies and providing the Bank forInternational Settlements (BIS) with Euro-money statistics and other financial data.


Use is made of various external informationsources in order to compile the b.o.p. TheINSEE (French national institute of economicand statistical information) provides the

company register SIREN (system ofidentification code numbers for French firms),while FININFO (a commercial firm specialisedin providing data on securities) provides thesecurities descriptions and the quotationrecords. Data on trade are obtained from theCustoms Administration. Moreover, dataoriginating from the Banking Commission areused for the analysis of external banking flowsand stocks.

2.5 Users

Information systems have been developedto provide international organisations, suchas the ECB, the International Monetary Fund(IMF), the European Commission (Eurostat),the Organisation for Economic Co-operationand Development (OECD) and the Bankfor International Settlements (BIS), with dataon France�s b.o.p. in an efficient manner. TheGESMES-CB message is used for b.o.p. datadissemination to the ECB, the EuropeanCommission (Eurostat) and to otherorganisations such as the IMF and the BIS whichhave agreed upon its use.



The b.o.p. collection system is a �semi-opensystem�. Reporting on transactions betweenresidents and non-residents is based on thesettlements of resident banks and of directreporting companies. Transactions carried outby companies via an account abroad arereported directly to the central bank.

Stocks statistics are used to compile:(i) for portfolio investment:� changes in foreign securities held by

banks and money market mutual funds;(ii) for other investment:� general government and monetary

authorities� financial flows. These areobtained from changes in stocks, adjustedfor changes in exchange rates. Thiscalculation is also used for banking sector


Chapter 4.6 France

flows (loans and deposits) and for tradecredits of resident firms.

The following data sources are used (or theiruse is planned) in addition to the returns of theactual b.o.p./i.i.p. statistics:

The securities database managed by the Balanceof Payments Directorate is used for two mainpurposes:(i) checking the portfolio data provided by thebanks;(ii) producing the breakdowns required withinthe b.o.p. and i.i.p. (breakdown between Frenchand foreign securities, geographical breakdownof foreign securities, breakdown by instrument(equity, bond, money market instrument)and those needed for analytical purposes(breakdowns between currencies, etc.).

A unified bond database (managed by theDirectorate Monetary Research and Statistics)will be fully operational by the end of 2000. Itwill include French bonds issued on thedomestic market (previously managed by theResearch Department) and French bondsissued on international markets (previouslymanaged by the Balance of Payments Department).This database contains the characteristics ofthe bonds (including the ISIN code), theamounts at issue and the amounts stilloutstanding. It will make it possible to calculate,on a monthly basis, the share held by non-residents in the bonds included in the database.

Another database of the Banque de France, thedatabase on resident firms (name, mainshareholders, accounting data) is used for thestocks of foreign direct investment in France(identification of resident firms with foreigninvestors, accounting data).

BAFI is the database on financial agents. It isused to check the amount of the foreignsecurities portfolio held (and reported) bybanks as well as foreign direct investment inresident banks (identification of resident banksin which foreign companies have holdings,accounting data).

Further information is taken from:(i) press releases, for checking transactions indirect investment and in portfolio investment;(ii) returns from firms, helping to explain theflows on direct investment (mainly on equitycapital: new investment and disinvestment);(iii) Cedel and Euroclear, for generalgovernment bonds or �OAT� stocks depositedby residents with Cedel and Euroclear (annualdata);(iv) the National Statistical Institute (INSEE),the Customs Administration and the Ministryof Transport, for other transportation in thetransportation services item.

Moreover, it is planned to use data from the�Direction du Tourisme� for the compilation ofthe travel services item once the eurobanknotes and coins are introduced.


(i) Banking sector: historically, the banking sectorhas been central to the reporting system.Although residents are no longer required tomake transfers abroad via a resident bank, amajor proportion of all operations are stillchannelled via the domestic banking sector. Alloperations which are carried out betweenresidents and non-residents through the booksof a bank must be reported. All transactions aregiven an individual economic code except forsome transactions below a certain threshold(where aggregation of payments is possible) andmost transactions concerning direct reportingagents (see paragraph (iv) below). The reportsuse the CRP (standard record of payment),which provides details of the nature, country,amount and currency of the transaction, as wellas the identification number of the company(SIREN) and the identification number of thebank involved. In addition, intermediaries mustsubmit periodic returns showing their totalexternal claims and liabilities. Banks report ontransactions in securities on their own accountand on behalf of their customers. The use of theISIN code and of a securities master fileensures a high level of reliability of theinstrumental and geographical breakdown for


Chapter 4.6 France

Table 1Reporting scheme for b.o.p. and i.i.p. data collection for FRANCE

Target respondent Name of reporting Contents of reporting Frequency of Timeliness (numberpopulation form form reporting of days for submission(e.g. MFIs, after the end of the Menterprises, etc.) reference period)

Direct reporting Statement E83 Short-term claims and Monthly 25 working daysenterprises liabilities

Direct reporting CRS/C80: Statistical Economic settlements Monthly 25 working daysenterprises record of payment M

MFIs M Statement R20 Foreign currency sales and Monthly 10 working daysStatement R21 purchases.

MFIs M Record of payment M Amount of the payment; debit or Monthly 10 working daysC01/C02 credit; country code; economic code

(allows the identification of thenature of the transaction, e.g. directinvestment equity capital portfolioinvestment, issues of Frenchsecurities, other investment, othersectors, short-term loans); currencyof settlement and neutral code(except for portfolio) if the residentinvolved is a direct reporting company.

MFIs Monthly Statement Portfolio flows (debits and credits). Monthly 10 working dayson securities R30 Compilation on a security-by-

security basis, with the provisionof the ISIN code. Distinctionbetween flows on issues, secondarymarket flows and reimbursements

MFIs and enterprises, Annual survey on Survey includes data on: Annually 240 calendar daysincluding insurance French direct � Foreign affiliates� equity capitalcompanies investment abroad (book values);

� Percentage of the affiliate equitycapital held by the French directinvestor;

� Profits or losses;� Dividends;� Affiliates� turnover

No specific inquiry Stocks of foreign direct Contents of the database: Annually 300 calendar days(use of existing data- investment in France � equity capital of Frenchbases) affiliates of foreign

companies (book values);� percentage of the equity

capital held by the foreigndirect investor;

� profits or losses;� dividends;

MFIs Annual survey on Compilation on a security-by- Annually 75 calendar daysportfolio stocks security basis, with the provisionE26/28 of the ISIN code:

� French securities held by non-residents in securities accountsopened with resident banks;

� French securities issued oninternational markets and held byresidents in securities accountsopened with resirent banks;

� foreign securities held byresidents in securities accountsopened with resident banks

MFIs (sample) Quarterly survey on Compilation on a security-by- Quarterly 30 calendar daysportfolio stocks held on security basis, with the provisiontheir own account of the ISIN code:E24 � French securities issued by

residents on internationalmarkets and held by residentbanks;

� Foreign securities held byresident banks;

Enterprises (sample) Stocks on external assets External assets: Annually 75 calendar daysincluding insurance and liabilities (portfolio � on affiliates;companies excluded � on non affiliates

E90 External liabilities;� on affiliates;� on non-affiliates

Enterprises (sample) Statement E84 Stocks of trade credit Monthly 15 working days

MFIs (special b.o.p. E10/E11 External assets and liabilities, detailed Monthly M+20 (15 working days)reports on external assets by counterpart, currency, with aand liabilities) distiction between long-term and

short-term

E20/E21 Dito, but with a country breakdown Quarterly M+30 calendar days


Chapter 4.6 France

securities issued by residents and non-residents and of the sectoral breakdown of theflows of securities issued by residents.(ii) Monetary authorities: the Banque de France(Foreign Exchange Division) provides theBalance of Payments Division with data onreserve assets. Its own external assets andliabilities, moreover, are reported under �otherinvestment� of the monetary authorities in theb.o.p.(iii) General government: this includes, first, theTreasury with the centralisation of its ownflows with non-residents (accounts held withthe Treasury by the Zone Franc countries,accounts held by some international entities,such as the European Commission, andoperations conducted by French embassies andother general government units abroad). It alsoincludes flows of other state agencies such asthe Post Office.(iv) Direct reporting companies (DRCs) reportdirectly to the Banque de France ontransactions and positions with non-residents.There are nearly 2,500 DRCs covering around50% of the b.o.p. volume of the current accountcredits and debits. They are divided into�general� and �partial� direct reportingcompanies, comprising around 790 and 1,700firms respectively.� General direct reporting companies (DDGs)

are companies or groups of companies,the debits and credits of which in thecurrent account cross-border transactionsexceed a certain threshold in a given year(see Sub-section 3.3). DDGs report, allcross-border transactions to the Banquede France, including flows via foreignaccounts and netting, except for portfolioinvestment cash management and incomefrom capital when these transactions areconducted through resident banks.Instead, these types of transactions arereported by the domestic banks involvedin the particular transactions. However, ifthese transactions are carried out directlyvia foreign accounts abroad, they remainunder the responsibility of the DDG inquestion, as it is the only entity aware ofthe transaction. At the request of the

companies themselves there is nothreshold for the items to be reported.The reports give details of the currency,amount, economic nature and geographicalbreakdown of the transactions. To avoidduplication, international paymentscarried out via a domestic bank are givena special � neutral � code by the bank.Reporting is �closed�, i.e. reconciled withpositions, and takes place on a monthlybasis.

� Partial direct reporting companies (PDRCs)are entities which hold accounts abroador participate in an international nettingthrough which payments are made orreceived. These companies are subject todirect reporting requirements when themonthly total of incoming and outgoingpayments through the accounts exceedsthe agreed threshold (see Sub-section3.3). The reports of PDRCs are similar tothose of the DDGs, but they cover onlyflows via their foreign accounts andchanges of position within these accounts.Other transactions between PDRCs andnon-residents are reported by theresident banking sector.

For DDGs and PDRCs, banks report cashtransfers between DDGs� and PDRCs�domestic and external accounts using a neutralcode. These transfers are also reported byDDGs and PDRCs using a code which specifiesthe nature of the settlement.(v) Customs: the Customs Administrationtransmits data to the Banque de France on thebasis of which the import and export accountis compiled. It should be noted that thecompilation of the �extra� bloc requires importflows to be broken down by country of originand by country of consignment.

3.3 Thresholds

For banks, transactions below the threshold ofFRF 100,000 (approximately EUR 15,000)(where aggregation of payments is possible) arereported, but are not given an individualeconomic code (no specification of the nature


Chapter 4.6 France

of the transaction). However, some items arereported as from the first unit. The thresholddoes not apply because the average unitamount is low. Detailed documentation onthese items, including the codes, is availablefrom the Banque de France.

Companies or groups of companies, the debitsand credits of which in current account cross-border transactions exceed a threshold ofFRF 1 billion (approximately EUR 152 million)or, in the case of insurance companies, FRF 250million (approximately EUR 38 million) as ofJanuary 1992, are known as DDGs.

Partial direct reporting companies are subjectto direct reporting requirements when themonthly total of incoming and outgoingpayments through their accounts held abroadexceeds FRF 100,000 or EUR 15,000.


A complete b.o.p. with a geographical andsectoral breakdown is available on a monthlybasis. However, for banks, the monthlygeographical breakdown between �intra� and�extra� flows is based on a statistical treatment.The monthly breakdown is estimated using thelast known figures. BAFI, the database onfinancial agents, could also be used, but wouldonly make it possible to identify the breakdownbetween residents of euro area Member Statesand non-euro area residents. The banks providethe Balance of Payments Directorate with acomplete geographical breakdown of their ownassets and liabilities on a quarterly basis only.

3.5 Timeliness

B.o.p. data become available 58 days after theend of the month of reference. The Banque deFrance is currently improving the timeliness ofdata, by means of a communication campaigndirected at banks and companies (laterespondents are targeted as a priority).Improvements in timeliness are also expectedas a result of the increase in Electronic datatransmission (70% of the number of

respondents and 94% of the volume reportedin 1998).


France�s b.o.p. is compiled on a monthly basis.

3.7 Data controls

Checking procedures are aimed at obtainingthe highest reliability/cost ratio. With theexception of built-in computerised controls(data processing errors, anomalies orinconsistencies), there are systematic qualitychecks (plausibility, economic nature, codification,etc.). These checks are carried out bycomparing previous reports (i.e. previousmonth, quarter, half year, year, etc.) with currentreports. These checks may be based on priorknowledge of the sector of the firm concerned,newspaper articles, contacts with the reportingbanks and firms, or purely on staff expertise.Checks are also carried out using informationobtained from BAFI, the database on financialagents managed by the Banking SupervisionCommission.

Reporting by general direct reporting companies(DDGs) is checked for consistency with reportsby banks. Each individual transaction reported byeach direct reporting company (DRC) with aneconomic codification is matched to the reportsmade by banks on these individual transactions,owing to the identification code number(SIREN) of the concerned DRC which appearson the banks� reports. The banks reports onDRCs are only used for comparison with theDRC reports; they are given a neutral b.o.p.code and they are not taken into account in thecalculation of the b.o.p.

Partial direct reporting companies (PDRCs)report to the Banque de France only theirtransactions carried out via accounts heldabroad. Cash transfers from an account held inFrance to an account held abroad must also bereported. Such cash transfers are also used totrace PDRCs. Since such transfers involve adomestic bank, these should be matched with


Chapter 4.6 France

the reports of the domestic banks. In addition, ifthe cash transfers are added to the transactionsdirectly settled abroad, this sum should equalthe difference between the opening and closingbalances of the accounts abroad. Checks arecarried out on a currency-by-currency basis.

Macroeconomic controls concern the generalconsistency of the whole b.o.p. Particularattention is paid to:� closely monitoring the errors and

omissions item and any major areas likelyto be at the root of errors and omissions;

� the difference between goods settlementsand customs data; and

� consistency between investment incomeand the i.i.p.

3.8 Revision policy

Historical data are revised whenever amethodological change is implemented. Inaddition, monthly data are revised on aquarterly and an annual basis. Should the needarise, data concerning previous years are alsorevised once a year. The revised figures arepublished in France�s �Balance of PaymentsAnnual Report�.

3.9 Dissemination

Users of b.o.p./i.i.p. data are: (i) other unitswithin the Banque de France, such as theDirectorate Monetary Research and Statisticsas well as the market operators in the(ii) other French administrative bodies such asgeneral government, including the Ministry ofFinance (Treasury) and the National StatisticalInstitute (INSEE), (iii) international organisationssuch as the IMF, the OECD, the World TradeOrganization (WTO), etc. and (iv) universitiesand journalists.

As of January 1992, a communiqué from theMinistry of Economic Affairs and Financeprovides provisional figures for the completemonthly b.o.p., for which there is nogeographical breakdown. Moreover, the Banquede France publishes monthly figures concerning

b.o.p. data in �The Digest of the Banque deFrance Bulletin�. A b.o.p. on a quarterly basis ispublished 60 days after the end of the quarter.A geographical breakdown of the externalassets and liabilities of the residentbanking sector is available and is published on aquarterly basis. The annual b.o.p. is publishedjointly by the Banque de France and theMinistry of Economic Affairs and Finance.This Annual Report includes the completeb.o.p., the i.i.p., historical data, annualsettlements broken down by country anddirect investment flows broken down bycountry and by sector. The report also includessome notes on the methodologies used. The titlesof the publications produced by the Banque deFrance on b.o.p. statistics are listed in Sub-section13.1 below.

Recent data are available on the Internet, onthe Web site of the Ministry of EconomicAffairs and Finance and on the Web site of theBanque de France (www.banque-france.fr). Therelease timetable for b.o.p. figures is publishedby INSEE on behalf of the Ministry of EconomicAffairs and Finance.

The French data are also submitted byelectronic means to external databases (i.e. theBIS).

4 Monthly key items


The Banque de France has provided monthly keyitems in the format requested for 1999 witheffect from January 1997. For the period fromJanuary 1994 to December 1996, the Banquede France has also provided detailed monthlydata, the origin/consignment breakdown ofwhich differs from subsequent data, however.The totals are currently available within a six toeight-week workable time limit. The �intra/extra� geographical breakdown is also madeavailable within the same time limit. As from1999, data are available within a six-weekworkable time limit.


Chapter 4.6 France

The average coverage of respondents for MKIpurposes varies between reports from the MFIsector, for which coverage is at least 95% ormore, and reports from companies in thecontext of direct reporting, where up to 30%may be subject to estimates.


items

4.2.1 For the current account in general

The Banque de France primarily uses the dataalready reported and checked in its owndatabases and supplements them withestimates, notably for goods. The customs dataare not available on time. However, theCustoms Administration is trying to reduce thetime taken to publish the data. At present,customs data are published about seven weeksafter the end of each month. An improvementin timeliness is expected. So far, the CustomsAdministration has not deemed it advisable toestimate external trade in goods.

For all other monthly key items, the Banque deFrance receives a large volume of settlementsdata from reporting agents. However, thesedata are not sufficient and further refinement isneeded.

The procedure followed by the section incharge of providing estimates consists of threesteps to obtain merchandise data and the othermonthly key items of the current account,including investment income.

The first step provides estimates using twomodels, X-11 ARIMA and TRAMOSEATS,1

which provide seasonal adjustment as well asshort-term forecasting. X-11 ARIMA producesshort-term forecasts for four key items, namelygoods, services, income and current transfers.The model also forecasts the travel item.TRAMOSEATS provides estimates for eachseries within the current account (40 series)

and for each key item. The respective creditsand debits are given for each forecast. Theanalysis refers to monthly series (from January1990 to December 1998, i. e. 108 observations)of current account statistics between Franceand the rest of the world. These series areloaded every month and updated on a quarterlyand an annual basis.

In a second step the settlements alreadyrecorded in the b.o.p. database are examined.Owing to the reduction in the reportingdeadline, most sub-items within the servicesaccount (travel, for instance), current transfersand capital account are almost complete 35days after the deadline for the monthlyreporting.

In the third step the �economist expert�compares the results given by TRAMOSEATSand X-11 ARIMA with the settlements alreadyrecorded in the b.o.p. database. The expertmakes the final choice. The last step relies farmore on the economic insight of the forecaster,notably concerning the current economicsituation. The estimates of investment incomeare also based on the last known data forportfolio investment stocks, and take intoaccount the trend indicated by the portfolioinvestment flows. The valuation of imports isprimarily made on c.i.f. and f.o.b. bases, andsubsequently on an f.o.b./f.o.b. basis forcountries of consignment.

The seasonally adjusted values are available fornearly all the current account sub-items. Theyare supplied by X-11 ARIMA, which is currentlyused at the Banque de France to seasonallyadjust current account statistics. The results ofTRAMOSEATS were also tested in order tocompare the output of the two models. Forexternal trade, the seasonally adjusted valuesare supplied by the Forecasting Division of theMinistry of Economic Affairs and Finance.

All monthly transactions reported to theBanque de France are compiled with ageographical breakdown. For the time being,the �intra/extra� split is obtained from:

1 The TRAMOSEATS software has been implemented with theMS Excel 5.0. interface distributed by Eurostat.


Chapter 4.6 France

(i) an intra/extra split average calculated indebit and credit on historical series (five years);(ii) the geographical allocation observed on thesettlements already recorded in the b.o.p.database (except for external trade).

With regard to external trade, the estimationsare given by country of origin and consignmentand an average is calculated for exports andimports on the basis of previous series. Then,the imports by �country of consignment� arededuced from imports by country of origin, bymeans of a proxy. As of October 1999 theBanque de France applies the �country ofconsignment� geographical allocation principlefor trade data requested by Eurostat as well asfor historical data. The Banque de France alsoapplies the �special trade� principle.

The data are revised three times: first, 60 daysafter monthly reporting has closed; second, ona quarterly basis; and, third, on an annual basis.

France�s monthly b.o.p data have complied withmost of the standards set out in the BPM5 since1997. Changes based on these new standardshave been introduced in the b.o.p. data since 1992.However, it should be noted that some changes inmethodology for the revision of historical datastill have to be carried out in 1999.


Further to the general remarks in Sub-section4.2.1, some specific features of the estimationof investment income should be mentioned inthe following paragraphs.

At present, monthly data on interest arerecorded when the interest is payable (the �dueto be paid� principle) and are thus not availableon an accruals basis.

Monthly data on investment income are theresults of a bottom-up approach stemmingfrom the addition of the sub-components(direct investment income, portfolioinvestment income and other investmentincome) calculated previously. Hence, a

breakdown into sub-components (directinvestment income, portfolio investment andother investment income) is available formonthly data as well.

All monthly transactions reported to theBanque de France are compiled with ageographical breakdown. For the time being,the intra/extra split of portfolio investmentincome is obtained from:(i) an intra/extra split average calculated indebit and credit on historical series (five years);(ii) the geographical allocation observed on thesettlements already recorded in the b.o.p.database.


Monthly estimates of direct investment arebased on transactions already recorded, plusdata taken from the press, plus staff expertise.


Monthly estimates of transactions in portfolioinvestment are essentially based ontransactions already recorded on a security-by-security basis, plus data taken from the press(new issues of French bonds), plus staffexpertise. No modelling takes place.

Data on foreign securities held by residentbanks are taken from banking statistics. Asalready mentioned in Sub-section 4.2.2, the off-setting items for accrued interest are notavailable on a monthly basis.


Estimates of financial derivatives are based ontransactions already recorded, plus staffexpertise.


Estimates of:(i) general government and monetaryauthorities: no estimates of monthly data;


Chapter 4.6 France

(ii) monetary financial institutions: estimates forthe detailed geographical breakdown; and(iii) other sectors: based on transactionsalready recorded, plus staff expertise.

5 Investment income


5.1.1 General

This forms part of the general reporting system(see Sub-section 3.1).

A few years ago the Banque de Francedeveloped a statistical model which makes itpossible to check the investment income item byusing stocks and representative interest ratesfor each type of security (bonds, shares,Treasury bills, etc.) and loans. The estimatesalso derive from the flows of transactionsrecorded between the dates of two positions.The results obtained with this model arecompared with the settlements data sent byreporting agents. So far, it is merely used forchecking and the results are not included in theb.o.p.

Nevertheless, the Balance of PaymentsDirectorate plans to use stocks to implementthe accruals principle. At present, this principle isonly applied when obtaining the interestactually included in financial flows relating tobond dealing. In the latter case, the Banque deFrance favours a global approach as opposed toa security-by-security method. From a practicalpoint of view, if stocks are used, it will benecessary to get a regular valuation of stocksmarked-to-market.

So far, methodological changes have notcaused any breaks or problems. Realisedgains/losses are generally recorded correctlyin the financial account or remainunidentified. Income on financial derivatives(i.e. interest swaps) is included in thefinancial account, even for periods beforeJanuary 1999.

Data of different frequency (monthly, quarterlyand annual) are in principle consistent with oneanother.

The reconciliation of estimates and outcomesis a matter of revision policy.

A bias towards the under-recording of creditsin the income account can be observed forFrance, as in all countries.


With regard to income on equity, reinvestedearnings are calculated and taken into account.Data on reinvested earnings included in theFrench b.o.p. pass through three successivestages: forecast, estimation and finalisation.Moreover, revisions are made to forecast andestimated data as the information becomesavailable, until the final version is produced. Asin most countries, the recording as well as theestimates and forecasts deal separately withprofits and dividends from which reinvestedearnings are deducted.

Final flows of reinvested earnings are collectedby the Balance of Payments Directoratethrough its annual surveys of French directinvestment stocks abroad and foreign directinvestment stocks in France. Until final data areavailable, two methods are used successively inorder to determine reinvested earnings:estimates (for more distant periods) andforecasts (for the current period). They aresometimes used simultaneously on profits anddividends, according to the informationavailable.

Estimates:(i) for direct investment in France, theestimates relate to both dividends and profits.The information sources are the databasesmanaged by the Companies Division of theBanque de France and by the BankingCommission. The estimates of dividends arebased on figures recorded on b.o.p. forms(records of payments) used for b.o.p. purposes;(ii) for direct investment abroad, the estimates


Chapter 4.6 France

only concern dividends and are derived frominformation recorded on b.o.p. forms. Thesepartial figures, which are likely to be revised, arethen extrapolated. Concerning profits, globalforecasts are used and applied to the last knownprofits.

Estimated flows of quarterly reinvestedearnings are produced on a county-by-countrybasis, but are not broken down by sector.

Forecasts depend on global hypotheses andconcern both profits and dividends:(i) dividends: b.o.p. flows are extrapolatedunder an hypothesis of stability of the policy ofthe distribution of dividends;(ii) profits: macroeconomic forecasts of profitsin France and abroad are applied to the lastknown results of the firms covered by the twostocks surveys.

The Banque de France also estimates the rateof return on direct investment stocks with theaid of the statistical model mentioned above(see Sub-section 5.1.1). For the time being,however, these figures are not included in theb.o.p.

With regard to income on debt, i.e. onintercompany loans, the interest on long-termloans, short-term loans, advances, deposits andcash transactions is recorded in the b.o.p., butunder one economic code only, according tothe general economic nomenclature of theFrench b.o.p. Currently, it is impossible to breakdown income on loans into income onintercompany loans and income on non-affiliated company loans.


Where income on debt is concerned, the Banquede France does not record portfolio income onan accruals basis, except for the interestactually included in financial flows concerningbond dealing.

The rate of return on portfolio investmentstocks is estimated, using the statistical model

already mentioned (see Sub-section 5.1.1). Forthe time being, however, these figures are notincluded in the French b.o.p.

No income is calculated for specific types ofbonds, such as indexed bonds.

Taxation issues do not, in principle, play any rolein the portfolio investment income in France.However, it should be noted that, for incomepaid to non-residents, the banking sector sendstwo records of payments to the Banque deFrance, namely:(i) net income after withholding tax; and(ii) refunds of withholding tax.

The geographical allocation of portfolioinvestment income credits is made according tothe issuer for the majority of transactionsabove FRF 5 million (and by country ofsettlement for the other transactions). If thecountry which appears on the record ofpayment sent by reporting agents (transactionshigher than FRF 5 million) is not the country ofissue, corrections are made whenever thesecurities involved in the transaction can beidentified (by virtue of the ISIN code). Whereportfolio investment income debits areconcerned, the Banque de France cannotidentify the residency of the final counterpart.

A geographical breakdown is also available forhistorical data, with a monthly frequency bycountry of settlement (debit) and country ofissue (credit).


The interest on long-term loans, short-termloans, advances, deposits and cash transactionsis recorded in the b.o.p., but under oneeconomic code only, according to the generaleconomic nomenclature of the French b.o.p.Currently it is impossible to break downincome on loans into income on intercompanyloans and income on non-affiliated companyloans (see also Sub-section 5.1.2).


Chapter 4.6 France

The economic code is indicated by therespondent on the record of payment (banks)or on the statistical record of an incoming oroutgoing international payment (otherenterprises).

Income on trade credits granted by theresident banking sector and income ondeposits made by private individuals/enterprises with foreign financial institutionsare recorded under specific economic codes.

The interest share in leasing payments isincluded in the service items.

Income on reserve assets is recorded on a cashbasis. Data are obtained from the Banque deFrance�s accounting system.

5.2 Definitions

Except in the case of recording income onintercompany loans, the Banque de Francecomplies with the recommendations of theBPM5 and the harmonisation proposals madeby the Working Group on Balance of Paymentand External Reserves (the former Task Forceon Financial Flows and Stocks Statistics).


See Sub-section 5.1.2, last paragraph, on therecording of intercompany loans.

5.4 Gaps

None.


Full implementation of the accruals principlefor interest payments.


For quarterly data (timeliness: Q + 90 days),actual data are available and estimates are notneeded. Accruals are not as yet estimated.

6 Capital account


Part of the general reporting system (seeSub-section 3.2). With regard to the distinctionbetween current and capital transfers, theBanque de France applies the criteriarecommended by the BPM5. Thus,the capital account item covers transfers offixed assets, on the one hand, and debtforgiveness, on the other. Most data areprovided by the general government sectorand the monetary financial institution (MFI)sector. They have to fill in a record ofpayment for this type of transaction, whichis identified by a specific economic code.Some subsidies received from EU institutionsare recorded (as investment grants) underthe capital account, namely those from theEuropean Regional Development Fund(ERDF) and European Agricultural Guidanceand Guarantee Fund (EAGGF). All othersubsidies are recorded under current transfers(general government item). Data on theacquisition/disposal of non-produced non-financial assets has been included in the capitalaccount with effect from January 1996.

6.2 Definition

The French definition of the capital account isin accordance with the BPM5 and theharmonisation proposals made by the WorkingGroup on Balance of Payments and ExternalReserves (the former Task Force on FinancialFlows and Stocks).


None.

6.4 Gaps

Information on investment grants is available ona monthly basis through ratios; the Eurostatproposal for these ratios provides relativelygood proxies. Migrants� transfers are partiallyreported by banks. For European transfers andfor the split between current transfers and


Chapter 4.6 France

capital transfers, the definition is close to thatproposed by Eurostat.


None.

7 Direct investment


Information is available in reports produced bythe banks (for their own direct investmentflows and for flows concerning resident firms,with the exception of DDGs) and from DDGs.All respondents have to report direct investmentand portfolio investment flows separately.

The main source of information is the standardrecord of payment (CRP). Moreover, othersources are used to supplement theinformation provided by the CRP, but they arenever used as such to compile the b.o.p. On theone hand, more detailed information thanthat conveyed by the CRP is sometimestransmitted by firms, or by the banks onaccount of their clients (i.e. the name andaddress of the non-resident counterpart andthe total amount of the operation, whereasseveral CRPs may concern a single operationwhenever the settlements involved are not allmade at once). On the other hand, the press isalso used to anticipate new operations onequity capital.

The collection system draws mainly uponsettlements data, except in the case of equitycontribution without payment and in the caseof reinvested earnings. The final data necessaryto cover reinvested earnings are compiled oncea year, at the same time as the stocks data (seeSub-section 5.1.2). Settlements data may berevised using changes in stocks data, ascompiled from surveys, when necessary.

The directional principle has been implementedfor long-term intercompany loans only, as thistype of transaction is difficult to capture in thepresent collection system. The consistency of

historical data may suffer, as a result of thisimplementation.

Equity contribution without payment isincluded, if identified, in the form either of realor of financial assets. In the event that domesticstocks acquired by non-resident investorsthrough secondary markets are discovered,they are reallocated from portfolio investmentto direct investment, where relevant. Inpractice, however, this kind of flow is onlyidentified when huge amounts relating to asingle company are involved.

A geographical breakdown is also available.

7.2 Definition

With the exception of commercial credits(trade credits) between affiliates, which are notyet included in direct investment flows, theBanque de France complies with therecommendations of the BPM5 and theharmonisation proposals made by the WorkingGroup on Balance of Payments and ExternalReserves. Special Purpose Entities are includedas well, since no distinction is currently madebetween so-called Special Purpose Entities andother firms.


The directional principle is not yet applied toequity capital, reinvested earnings and short-term intercompany loans.

7.4 Gaps

None.


The introduction of the directional principle forthe recording of direct investment flows isdifficult and different methods are underconsideration at the Banque de France.


Chapter 4.6 France


The Banque de France does not use quarterlyestimates, except in the case of reinvestedearnings in the current year, and � in somecases � in the previous year (see Sub-section5.1.2).

8 Portfolio Investment


Securities transactions between residents andnon-residents are reported on a security-by-security basis, using the ISIN code or a genericcode built on the structure of the ISIN code inthe case of short-term money marketinstruments, for which ISIN codes are notavailable. The respondents have to report directand portfolio investment transactions (with the10% threshold) separately. For each security,the database contains the ISIN code, whichmakes it possible to access the database andcheck the flows reported by the respondentson a security-by-security basis, using the ISINcode. Moreover, all b.o.p. breakdowns are madeusing the securities database which contains allthe elements necessary for b.o.p. treatment(nature of the instrument; country of residenceof the issuer, which allows the breakdownbetween French and foreign securities; sectorof the resident issuer and sector of the non-resident issuer, etc.) as well as other data(quotation, currency of issue, date of issue andreimbursement for most debt securities,market of issue: domestic or international, etc.).Banks have full responsibility for reportingsecurities transactions on their own accountand on behalf of their clients. Two monthlyreports are involved:(i) a record of payment is drawn up, whichincludes the usual information (as for othertransactions) without specifying the financialinstrument involved. Each respondent has tobreak down the transactions according to thedirection of the flows (a credit or a debit forFrench residents), the currency of settlement,the counterpart country, the economic nature(issues, secondary trade or repayments) andthe distinction between French and foreign

securities. There is no individual breakdown bycountry of residence of the issuer for foreignsecurities and no breakdown by instrument(equities, bonds, etc.) of the flows. Thesebreakdowns are made on the basis of a monthlystatement (see sub-paragraph (ii) below). Therecords of payments are compared with themonthly statements (see below) in order toimprove the reliability of the flows. As therecords of payment are more rapidly availablethan the monthly statements, they are also usedto work out indicators, but they are not usedto draw up b.o.p.;(ii) monthly security statements are used to drawup the b.o.p. as stated above. The monthlystatement issued also provides data ontransactions in securities between residentsand non-residents. Unlike the record ofpayment, the monthly statement is drawn up ona security-by-security basis, using the ISIN code.Apart from the sectoral breakdown (seebelow), all the data necessary to elaborate theportfolio flows are obtained from thisstatement, i.e. the breakdown between Frenchand foreign securities, the breakdown of foreignsecurities according to the country ofresidence of the issuer and the breakdown byinstrument (equity, bond, etc.).

The banks report flows on French and foreignsecurities separately, but this breakdown ischecked against the securities masterfilemaintained by the Banque de France. Thegeographical breakdown of foreign securities bycountry of residence of the issuer is alsoeffected via the securities masterfile, as is thebreakdown by instrument (equity, bond, etc.).

For French securities, the sectoral breakdownof the flows is made on a monthly basis usingthe securities masterfile, which indicates theissuing sector for each security.

For foreign securities � irrespective of theperiodicity (month, quarter or year) � thesectoral breakdown between the residentholders is made through changes in stocksstatements.


Chapter 4.6 France

On a monthly and quarterly basis, thebreakdown is made only between the bankingsector and other sectors. De facto, the �othersectors� include the flows related to the othersectors items, as defined by the IMF, and theflows involving monetary authorities andgeneral government, which are not consideredto be very significant.

On an annual basis, data are already available formonetary authorities, for banks and for othersectors. As of 1999, changes in the foreignsecurities stocks of general government arealso available.

In addition, the press is used to check thereports by banks on new issues by Frenchresidents on the international markets.

The collection system is based on settlementsdata; stocks are used for the sectoralbreakdown of flows of foreign securities. In thecase of money market instruments, historicalseries prior to 1996 are distorted owing tomethodological changes.

The geographical allocation criteria are thedebtor principle for assets and the transactorprinciple (first known counterpart) forliabilities. The breakdown on the assets sidebetween transactions in securities issued byeuro area residents and securities issued bynon-euro area residents can be provided in astraightforward manner using the securitiesdatabase. The geographical breakdown isavailable on a monthly basis. Furthermore,historical data are broken down according tothe country of residence of the issuer on theassets side and according to the transactorprinciple on the liabilities side.

No difference is made in recording practicewith regard to the nature of the non-residentcounterpart (financial centre, lead manager,etc.), the country of residence of the non-resident counterpart with which the security isnegotiated, the currency of payment and theplace of payment.

With regard to the role of internationalclearers, the country of custody has no impactas such on the compilation of flows. Changes inthe place of custody are not recorded;transactions with clearers may be compiledonly if these transactions are not related to theplace of custody, but rather effective purchasesor sales of securities. Nor is there any impacton the geographical allocation. In cases of aneffective purchase or sale involving a clearer, thegeographical allocation will be the country ofresidence of the clearer for French securitiesand the country of residence of the issuer forforeign securities.

The Banque de France would expect significantbenefits to be derived from the setting-up of acentralised database:(i) cost effectiveness at the national and theEuropean level;(ii) fully harmonised data for the treatment ofportfolio investment (i.e. no difference in theclassification of bonds and money marketinstruments for a given security; fullyharmonised country of residence of the issuerand, as a consequence, a fully harmonisedbreakdown into euro area and non-euro areasecurities).

8.2 Definition

The Banque de France complies with most ofthe recommendations of the BPM5 and theharmonisation proposals made by the WorkingGroup on Balance of Payments and ExternalReserves.

The following money market instruments canbe identified separately: Certificates of depositand commercial paper. Most of them areidentified by generic codes and are notcompiled on a security-by-security basis.Treasury bills will be identified separately fromTreasury bonds.

Loan portfolios are included in the otherinvestment item provided that there is amonetary counterpart; otherwise they are notcovered at all in the French b.o.p.


Chapter 4.6 France


None, except for flows of affiliates� securities.Service charges, fees and commissions areincluded in portfolio flows, while off-settingentries for investment income are not usuallyincluded.

8.4 Gaps

No monthly or quarterly gaps.


Full implementation of the accruals principlefor interest payments.


There are no quarterly estimates for theportfolio investment account.



Flows of derivatives are recorded from monthlyrecords of payments, regardless of the residentsector involved. The compilation system doesnot allow any sectoral distinctions to be made.Currently flows of interest swaps, premiums onoptions, futures and margins are compiled. Atpresent it is not possible to distinguishbetween option-style and future-style.

Gross data (debits and credits) are, in principle,available; swaps � including interest rate swaps� are recorded on a gross basis and nettedafterwards. Premiums do not expire at theexercise date.

The geographical allocation criteria depend onthe individual instrument:(i) premiums: first known counterpart countryin the case of French counterparts and countryof residence of the issuer in the case of foreigncounterparts (similar to the portfolio account);(ii) margins: the transactor principle.

Investigations do not go beyond the clearinghouse. For example, a premium negotiated in

London with the London International FinancialFutures Exchange (LIFFE) is deemed to havebeen �issued� by the LIFFE (country: UnitedKingdom).

9.2 Definitions

The Banque de France complies with therecommendations of the BPM5 and theharmonisation proposals of the Working Groupof Balance of Payments. Financial derivatives arerecorded within a specific item. The net streamof settlement flows associated with interestrate derivatives is recorded correctly underfinancial derivatives.


None.

9.4 Gaps

None.


None.


There are no quarterly estimates for thefinancial derivatives account.

10 Other investment



The Banque de France uses actual flows,recorded using CRPs, except for banks. Both asectoral and an instrumental breakdown areavailable. The maturity breakdown is made onthe basis of the initial maturity (up to one yearand more than one year), except for stand-bycredits, for which the breakdown is based onthe maturity of the drawing.


Chapter 4.6 France

Trade credits are recorded on a monthly basis.

Historical data prior to 1996 are distortedowing to a methodological change in therecording of money market instruments, whichwere transferred from the other investmentitem to the portfolio investment item. Thisbreak also affects the geographical breakdown,implying that data for money market mutualfunds and other funds are estimates.

Data on transactions which were carried outthrough TARGET are transmitted by theAccounting Department and are only used forthe global calculation of �other investment/monetary authorities�.

Non-euro area b.o.p. flows for the MFI sectorare derived as adjusted changes from specialb.o.p. stock reports which are consistent withMFIs� balance sheet data at the beginning andend of the reference period.

10.2 Definition

In principle, the Banque de France complies withthe recommendations of the BPM5 and theharmonisation proposals made by the WorkingGroup on Balance of Payments and ExternalReserves.

All short-term flows between affiliates excepttrade credits are recorded under directinvestment (see the BPM5) and not underother investment. Foreign currency banknotesand coins are included.

Bond lending and repos are included providedthat there is a monetary counterpart;otherwise there is no record in the Frenchb.o.p. at all. Genuine repurchase agreementsconducted at a fixed price on a fixed datepredominate, but only marginally. Comparedwith lending against collateral, repo activities playa far more significant role. Repo activities usuallymature within a month.


Commercial credits (trade credits) betweenaffiliates are not identified separately and areincluded under other investment. There is nodeviation from the recommended treatment ofrepo activities. The recording of financial leasingis not compliant with the BPM5 in all cases.

10.4 Gaps

None.


None.


There are no quarterly estimates for the otherinvestment account.

11 Reserve assets



11.2 Definition

The new presentation follows therecommendations made in the BPM5.

An instrumental breakdown is available on amonthly and a quarterly basis. In accordancewith the ECB recommendations financialderivatives are recorded separately and on anet basis. Gold swaps are recorded as repos.

With regard to the use of market prices,recording is in line with the principle laid downin the ECB recommendations. The calculationof flows for the b.o.p. is based on the valuationof changes in currencies at average exchangerates recorded in the period (average of dailyexchange rates). This proxy was accepted bythe Working Group and helps to harmonise thecalculation of b.o.p. flows.


Chapter 4.6 France


Full accrued interest is not taken into account.

11.4 Gaps

None.


None.



The collection system of the Banque de Franceis based on pure stocks data stemming fromsurveys. The following data sources are takeninto account:(i) direct investment: surveys of resident firms;(ii) portfolio investment: surveys of residentbanks (own portfolio and portfolio held on theaccount of their clients) and, for the collectionof money market instruments, of a very limitednumber of firms;(iii) other investment: surveys of firms andbanks;(iv) monetary authorities and generalgovernment sector: reporting from the entitiesincluded in these categories;(v) other sources: Cedel and Euroclear.

With regard to stocks for portfolio investment,the liabilities vis-à-vis non-residents for bondsissued by French residents on internationalmarkets are calculated by subtracting theamount held by residents (reported by theresident banks) from the total amountoutstanding (available in the bond databasemanaged by the Banque de France).

While the sectoral breakdown can be providedwithout any problems, the availability of ageographical breakdown differs among theindividual items:(i) direct investment: available for equity capitaland reinvested earnings, but not for all loans;(ii) portfolio investment: available for assets, butnot for liabilities (possible improvement as a

result of the use of the IMF Co-ordinatedPortfolio Investment Survey);(iii) other investment: only available for MFIs.

Estimates are available six months after the endof the reference period, except in the case oftrade credits, MFIs� positions and reserveswhich are available earlier. In addition to therequirement of annual reporting to the ECB,the Banque de France could also provideestimates on a quarterly basis, but only with abreakdown by instrument and without anygeographical allocation.

France participated in the 1997 IMF Co-ordinated Portfolio Investment Survey andwould expect to do so on a regular basis(annually) in the future, by providing data basedon stock surveys, primarily from custodians.

12.2 Definitions

12.2.1 General

The coverage and the concept are broadly inline with the financial account of the quarterly/annual b.o.p. flows. Exceptions relate to theportfolio position of non-banks, where onlysecurities held in custody with resident banksare compiled, together with the informationfrom Cedel or Euroclear.

The reconciliation exercise works as follows:Previous stock (revalued at new prices)+ flows for the year (revalued)+ other adjustments (difference not accountedfor by price changes)= new stock

The following valuation principles are applied:(i) direct investment: book values; marketvalues are available on a global basis, but not bycountry or by firm;(ii) portfolio investment: market values formost of the stocks;(iii) other investment: book values (which aresupposed to be equal to the market values inthis case).


Chapter 4.6 France


The directional principle is not followed at themoment. Reinvested earnings are included.


No indication is given of the time remaininguntil the maturity of the money marketinstrument. Market values are, in principle,required.


Data are recorded on a gross basis (assets/liabilities). Valuation at market prices is requiredfor options and futures, but not for swaps,forwards, and other derivatives (derived fromoff-balance sheets).




Quarterly positions are valued in line with thebookkeeping practice of revaluing reserveassets on a quarterly basis. This means thatamounts relating to revaluation are included inreported positions and market prices are used.The same applies for gold.

No major discrepancies are encountered whencompiling reserve assets from accountingbalance sheets, apart from the fact that foreignexchange deposits with local banks are treatedas official reserves in the accounting database.

The adjustment of data from accountingsystems to produce data consistent with theb.o.p./i.i.p. methodology is carried out by meansof quarterly consistency checks based onexpertise and analysis.


None.

12.4 Gaps

Not all financial derivatives are included. Thereis no sectoral breakdown for financialderivatives.


None.


None.

13 Administration


�Rapport adressé à M. le Président de laRépublique et au Parlement� (annual).�Bulletin de la Banque de France� (monthly).�La balance des paiements et la position extérieurede la France (y compris les annexes) (Exercice19..)� (d) (annual).�Rapport du Conseil national du crédit e du titre(Exercise 19..)� (annual).�Les balances des paiements nationales enUnion Monétaire� (National Balances ofPayments in Monetary Union) (�Bulletin de laBanque de France�, monthly, July 1998 edition).

13.2 Contributors

This country information was drafted by theECB�s Balance of Payments Statistics andExternal Reserves Division and subsequentlyamended and agreed with France. Enquiries of ageneral nature should be addressed to thePress Division of the ECB. Enquiries specific toFrance should be addressed to:

Mr. Marc SchweitzerBanque de FranceD.G.E.I. � Direction de la Balance des Paiements51-146575049 PARIS Cedex 01France

Tel.: (0033) 1 42 92 31 68Fax: (0033) 1 42 92 56 80

166ECB EU


ethods � Novem

ber 2000

Ch

apter 4.7 Irelan

d

1O

rganisational chart(s)

Central Statistics OfficeBOP Division

Senior Statistician(Head of Divis ion)

Ongoing management of BOP system including planning and implementation of development and enhancement

Statistician Statistician Statistician Statistician Accountant

Administration and operation of the BOP/IIP data processing andpublication system

Higher Executive Officer Higher Executive Officer

Administrative andoperation of the BOP/IIPcomputer system (incl. register and data entry)

Higher Executive Officer

11 Executive Officers 1 Staff Officer4 Clerical Officers

Staff Resources (25)1 Senior Statis tician4 Statist icians1 Accountant3 Higher Executive Off icers

11 Executive Officers1 Staff Officer4 C lerical Officers


Chapter 4.7 Ireland


2.1 Introduction

The Central Statistics Office (CSO) is the nationaloffice responsible for compiling and publishing officialbalance of payments (b.o.p.) statistics for Ireland.

B.o.p. data collection in Ireland is based onstatistical surveys combined with administrativedata and is closely integrated in the CSO with thecompilation of the national accounts.

An extensive overhaul of the b.o.p. data collectionand compilation systems, which had beenunderway for about four years, was largelycompleted in early 2000 with a view to meeting theagreed b.o.p. and international investment position(i.i.p.) data requirements. Further enhancementsare being made on an ongoing basis.


Apart from national legislation relating to the CSOand the Central Bank of Ireland (see below), theprovisions of Council Regulation (EC) No. 2533/98 of 23 November 1998 and ECB Guideline(ECB/2000/4) of 11 May 2000 apply to thecompilation and dissemination of b.o.p. and i.i.p.statistics. The non-binding ECB Recommendation(ECB/2000/5) of 11 May 2000 on b.o.p. and i.i.p.statistical reporting also applies to the CSO as anofficial non-central bank compiler.

(i) CSOB.o.p. data are collected by the CSO under aMinisterial Order, supported by the 1993 StatisticsAct (the 1926 and 1949 Statistics Acts werepreviously in force), which makes the provision ofdata for the purpose of compiling b.o.p. statisticscompulsory.

The Ministerial Order for the b.o.p. specifies in broadterms the kind of information which is required andallows for the collection of data by various means,both from b.o.p. transactors and from agentsconducting b.o.p. transactions on behalf ofcustomers. The 1996 Ministerial Order (S.I. No. 378,P. No. 3327) provides for a comprehensive b.o.p.data collection system, including the acquisition of

information on the transactions and activities ofentities acting on behalf of clients.

In addition, the European Communities (Statistics)Regulations, 1999 (S.I. 177 of 1999; P.N. 7396) wereintroduced in June 1999 in order to permit the CSOto meet the obligations under Council Regulation(EC) No. 2533/98 of 23 November 1998.

(ii) Central Bank of IrelandThe legal authority for all statistics collected,compiled and published by the Central Bank ofIreland, including those relating to the b.o.p., isderived from legislation relating to the Central Bank(Central Bank Acts of 1942, 1971, 1989 and 1997).


(i) GeneralA formal written agreement is being preparedbetween the Central Bank of Ireland and theCSO. Although liaison between the twoinstitutions is usually informal, it is neverthelessvery effective. Both institutions have close formaland informal working relationships as regardsthe general compilation and interpretationof b.o.p. results. A Statistical Liaison Committeecomprising representatives from bothinstitutions has existed since 1995. Its purposeis to enable the discussion of items relevant toboth institutions, not only in terms of the b.o.p.,but also in relation to the relevant aspects of thenational accounts and the financial accounts.

The Central Bank of Ireland provides valuableassistance to the CSO with regard to the qualitychecking of banking sector data and in relation to theCSO�s maintenance of its financial services enterpriseregister, particularly for International FinancialServices Centre (IFSC)1 enterprises. The Bank

1 The International Financial Services Centre (IFSC) inDublin was established under specific legislation in 1987with a view to creating a significant international financialservices industry for Ireland. Tax advantages are availableto companies located in the IFSC and the types ofactivities which qualified under the licensing andcertification process include fund management, insurance,treasury management, banking and asset financing, as wellas securities trading and brokerage. This licensing andcertification process has been discontinued for new stand-alone projects since 1 January 2000, but still applies to�additional� projects under existing licenses.


Chapter 4.7 Ireland

also attends relevant international b.o.p.meetings.

(ii) CSOThe CSO�s B.o.p. Division has 25 members ofstaff, nine of whom are responsible for themanagerial, administrative and technical aspectsof the b.o.p. system, as well as for developmentalaspects. The remaining staff are principallyinvolved in the ongoing issue and receipt ofsurvey forms, data processing, routinerespondent contacts and the preparation ofresults for internal examination, nationalpublication and transmission to internationalorganisations. All the staff were involved in theextensive multi-annual b.o.p. developmentprogramme, which was largely completedearlier this year. Further improvements arebeing made on an ongoing basis and the newsystem is essentially capable of meeting thenational and international b.o.p. and i.i.p. datarequirements.

Part of the development programme is theacquisition of new hardware and softwarefacilities that will result in the development of arelational database management system. Thiswill be operational in the B.o.p. Division, but willultimately be linked to the overall CSOcomputer system in order to improvecommunication with other parts of the CSO.

(iii) Central Bank of IrelandThe Bank does not have a b.o.p. department orsection. The equivalent of three full-time staffmembers are involved in b.o.p.-related tasks,mainly comprising the compilation of datarequired by the CSO, the provision of the Bank�sown b.o.p. estimates and forecasts, includingmonthly estimates for the ECB, and thetreatment of aspects of b.o.p. development inconsultation with the CSO.


(i) CSOThe CSO maintains close contact on anongoing basis with a number of governmentdepartments (e.g. Finance, Agriculture and

Food, Marine, Defence, Foreign Affairs) and theiragencies, as well as with the Central Bank ofIreland, to obtain information necessary for thecompilation of the b.o.p. These contacts serve avariety of purposes covering, for example,consultation for information on statistical policychanges introduced by the CSO, requests forinformation of a quantitative (i.e. transactions,positions, etc.) or qualitative (i.e. for statisticalregister needs) nature.

The CSO consulted all these regulatoryauthorities prior to the introduction of its newdata collection system covering financial serviceenterprises in 1998. The Central Bank of Irelandwas consulted with regard to the inclusion ofcredit institutions and collective investmentschemes over which it has direct regulatorycontrol; the Department of Enterprise, Tradeand Employment with regard to insurance andreinsurance companies; and the Department ofthe Taoiseach (the Prime Minister) concerningIFSC coverage in general.

The support of all these authorities, togetherwith that of the relevant industry associations,was very helpful with respect to the CSO�sprogramme to achieve a substantial improvementin the coverage of financial service enterprisesin its statistical data collection system. Thissector had not previously been specificallytargeted for coverage. The inclusion of financialservice enterprises in the national accounts andb.o.p. statistics was effected on the basis ofadministrative data obtained from the relevantauthorities. Moreover, the IFSC had essentiallybeen treated as offshore in statistical terms andthe impact of these companies on the Irisheconomy (national accounts and b.o.p.) hadbeen estimated on a net basis from indirectinformation (on tax revenue, local salaries andlocal services revenue).

(ii) Central Bank of IrelandThe Bank traditionally provided the CSO withquarterly estimates for certain items as inputinto the compilation of the official b.o.p. Theselargely related to the banking and governmentsectors. Specifically, they covered the following:


Chapter 4.7 Ireland

interest flows between banks and non-residents;changes in the aggregated net external balancesheet position of the banking sector, includingestimated valuation adjustment; net portfolioflows through the government sector; changesin non-bank residents� deposits held abroad,including estimated valuation adjustments;transactions between resident banks and non-bank IFSC entities; and relevant data concerningthe Bank itself (mainly relating to reserve assets).

Much of this information has been replacedwith information directly available from theCSO�s new collection system. However, data onthe Bank�s own positions and transactions vis-à-vis non-residents in relation to reserve assetsand other assets as well as liabilities will still berequired for b.o.p./i.i.p. purposes.

The Bank, assisted by the CSO, compilesmonthly b.o.p. estimates for the ECB basedlargely on the interpolation of trends from thequarterly b.o.p. system. The institutionalarrangements concerning the provision ofmonthly b.o.p. estimates to the ECB are beingreviewed. The Bank also supplies national dataon reserve assets and foreign currency liquidityto the ECB.

2.5 Users

(i) CSOApart from the publication of its quarterly b.o.p.release, the CSO provides further details andanalyses to a number of specialist users. TheCSO supplies b.o.p. data to the Department ofFinance and to the Department of Enterprise,Trade and Employment. As a result of its role inmonitoring Ireland�s economic performance, theDepartment of Finance is interested in allaspects of the b.o.p. The main focus of theDepartment of Enterprise, Trade andEmployment is on industrial development andemployment creation in the manufacturing andservices sectors. This Department and theIndustrial Development Authority (IDA), anagency operating under its aegis and involved inattracting foreign direct investment to Ireland,are particularly interested in the direct

investment aspects of the b.o.p., as well as in thedata on services. Data are also supplied tostockbrokers, analysts in the field of economicand social research as well as to universities.The National Accounts Division also uses b.o.p.results internally within the CSO.

The CSO supplies data to internationalorganisations such as the ECB, the EuropeanCommission (Eurostat), the IMF and the OECD.

(ii) Central Bank of IrelandThe b.o.p. estimates and forecasts that areprepared by the Bank are based on official b.o.p.data published by the CSO. Where possible,they take account of more recent informationcollected from the banking sector, governmentdepartments and the National TreasuryManagement Agency (NTMA).



As mentioned above, the b.o.p. collectionsystem is based on surveys and administrativedata and is closely integrated with thecompilation of the �rest of the world� (ROW)account in the national accounts.

In recent years, the CSO has undertaken anextensive restructuring of the b.o.p. datacollection and compilation system and thequarterly b.o.p. system is essentially now in linewith the requirements of both the IMF Balanceof Payments Manual (5th edition), or BPM5(including i.i.p. data), and the ECB.

A number of the existing surveys wereredesigned and the new versions of the formswere introduced in 1997. Others werediscontinued or in some cases replaced byessentially very much expanded versions of theoriginals. In addition, a totally new surveysystem was introduced at the start of 1998 forIFSC and non-IFSC financial service enterprises.This required a major expansion of thecoverage and capability of the b.o.p. companyregister/registry system.


Chapter 4.7 Ireland

The new statutory quarterly collection systemfor financial service enterprises requirestransactions data on services, income andtransfers. Transactions and positions data (alongwith the reconciliation items) are required forassets and liabilities. The transaction details (i.e.services and income items and instrumentbreakdowns) necessary to meet BPM5requirements are obtained � see Sub-section 3.2on reporting agents for a description of CSO datarequirements from non-IFSC credit institutions.Sectoral and geographic details are alsoprovided. In order to reduce the reportingburden, less active companies report thisinformation on an annual basis.

Manufacturing and non-financial servicecompanies are required to supply b.o.p.current, capital and financial account data on atransactions basis each quarter. Annual positionand transactions data are also required for thefinancial account/i.i.p. items (and for income).While some geographical detail is collectedquarterly (for services and direct investment),comprehensive geographical information iscollected annually. Sectoral information is alsocollected.

Both information on merchandise trade andtravel statistics are obtained from the relevantcompiling divisions within the CSO. Administrativedata from government departments (or theiragencies) and from the Central Bank of Irelandare also used.

Apart from data obtained from direct collection,internal CSO or external administrativesources, ancillary support information to assistwith the compilation of results is also used. Thislargely consists of: Irish Stock Exchange listings;Reuters market information concerning equitiesand bonds, currency exchange and interestrates; Central Bank of Ireland statistics; andindustry association or any other relevantstatistical information. Qualitative informationuseful for statistical register purposes is mainlyobtained from the CSO Central BusinessRegister. In addition, information fromDepartment of Finance and Central Bank of

Ireland sources is used in the maintenance ofthe b.o.p. financial services enterprises sub-register. Individual company data from theinternal CSO trade statistics database, alongwith any useful information from newspapers,periodicals, etc., are used as inputs into thestatistical register system. Securities databasesare not used, as the portfolio investment dataare compiled on an end-investor, aggregatebasis.


(i) CSOA. Companies. The type of survey form issuedto a company depends upon the type ofcompany being surveyed. A short description ofb.o.p. surveys follows.

I. Manufacturing and non-financial servicecompanies

Survey of foreign assets and liabilities� annual (BOP40):The original version of this survey, which wascarried out from 1991 to 1995, was replaced atthe end of 1997 to facilitate easier completionby respondents and to address outstandingBPM5 requirements. When introduced, itrequested annual data for 1996 and 1997. Thissurvey continues to be used. The form requestsdata on foreign assets and liabilities (flows andstocks) as well as on related incometransactions from companies incorporated inIreland and Irish branches of foreign companies.It is designed to summarise all the foreigntransactions of the resident parts of Irishgroups, Irish companies and Irish branches. Allforeign assets and liabilities have to be reported,including investment in overseas companies byany part of a group, Irish company or Irishbranch which is resident in Ireland. Sectoral andgeographical detail are also required.

Survey of foreign assets and liabilities� quarterly (BOP40Q):A quarterly version of the BOP40 form(BOP40Q) was introduced at the start of 1998.This form concerns income and asset/liabilitytransactions in the quarter � position data are


Chapter 4.7 Ireland

Table 1Reporting scheme for b.o.p. and i.i.p. data collection for IRELAND

Target respondent Name of Contents of reporting Frequency of Timeliness (numberpopulation reporting form reporting of days for sub-(e.g. MFIs, form mission after the endMenterprises, etc.) of the reference period)

Manufacturing and BOP10 Exports and imports of business Quarterly (annually 25 Working daysnon-financial service services with geographical detail for small companies)enterprises

Manufacturing and BOP40Q Transactions in financial assets and Quarterly 25 working daysnon-financial service liabilities and associated incomeenterprises flows with geographical detail for

direct investment

Manufacturing and BOP40 Positions, transactions in financial Annually 25 working daysnon-financial service assets and liabilities and associatedenterprises income flows. Geographical detail

IFSC collective BOP41 Positions, transactions in financial Quarterly 25 working daysinvestment institutions assets and liabilities and associated (annually for small

income flows. Geographical detail companies)

IFSC non-life insurance BOP42 Positions, transactions in financial Quarterly 25 working daysand reinsurance assets and liabilities and associated (annually for smallenterprises income flows. Geographical detail companies)

IFSC life insurance and BOP43 Positions, transactions in financial Quarterly 25 working daysreinsurance enterprises assets and liabilities and associated (annually for small


IFSC stand-alone BOP44 Positions, transactions in financial Quarterly 25 working daystreasury enterprises assets and liabilities and associated (annually for small


IFSC credit institutions BOP45 Positions, transactions in financial Quarterly 25 working days(MFIs), asset finance assets and liabilities and associated (annually for smallcompanies, securities income flows. Geographical detailtrading companies, agencyand captive treasurycompanies. Service providers(administration, management,custodial trustee, brogerageand other service companies)also complete this form

Non-IFSC investment BOP30 Positions, transactions in financial Quarterly 25 working daysmanagers and brokers acting assets and liabilities and associated (annually for smallon behalf of resident and income flows. Geographical detail companies)non-resident clients

Non-IFSC credit institutions BOP50 Positions, transactions in financial Quarterly 25 working days(MFIs) assets and liabilities and associated (annually for small


Central Bank of Ireland BOP51 Positions, transactions in reserve Quarterly 30 working daysassets and other financial assets andlibilities and associated incomeflows. Geographical detail

Department of Finance Not numbered Positions, transactions in non- Quarterly 30 working days(National Treasury resident assets and liabilities ofManagement Agency Irish Government and associated� NTMA) income flows. Geographical detail

Other government Not numbered Current account flows (services, Quarterly Data supplieddepartments income, transfers) automatically

Internal CSO-sourced data Not numbered Merchandise flows; tourism flows; Quarterly Data suppliedGeographical detail automatically

Miscellaneous items Not numbered Cross border workers earnings Annual Data suppliedautomatically


Chapter 4.7 Ireland

not requested. Geographical detail is requestedonly for direct investment and related income. Ageographical breakdown of transactionsreported for portfolio investment, financialderivatives and other investment � for all ofwhich the amounts involved are relatively small� is estimated on the basis of the precedingannual b.o.p. profile for the reporting company.Respondents: the BOP40 and BOP40Q arecompleted by Irish companies and Irishbranches of foreign companies which areengaged in manufacturing or the supply of non-financial services and which have foreign assetsor liabilities.

Survey of international trade in services androyalties� quarterly and annual (BOP10):This survey requests information ontransactions with non-residents concerning thesale/purchase of services (including royalties,copyrights, licences, etc.). Geographical detailis requested. The information obtained identifiesthe outright purchase/sale of copyrights,patents, licences, etc.

Respondents: manufacturing and non-financialservices companies.

II. IFSC and non-IFSC financial services companies

A number of new quarterly and annual surveyswere formally introduced for IFSC companies atthe start of 1998. These surveys are verycomprehensive and were designed to collectinformation relevant to b.o.p./i.i.p. compilationand for wider national accounts purposes. Thesurveys are customised on the basis of the maintypes of IFSC activity, namely: (a) collectiveinvestment schemes, (b) insurance (distinguishingbetween life and non-life policies) andreinsurance, (c) stand-alone treasury activity,and (d) banking, asset financing, securitiestrading, captive and agency treasury. The largercompanies are required to return theinformation each quarter, while the smaller onesmake annual returns. Administration andmanagement companies as well as custodiansand trustee companies are also included; the

principal b.o.p. interest in these companiesconcerns transactions in service fees, althoughfull b.o.p./i.i.p. details are required. The system isdesigned to ensure complete coverage of allIFSC activity.

From a b.o.p./i.i.p. point of view, the informationrequired is essentially the same for all thesurveys and covers services, income flows,assets and liabilities and the reconciliation ofpositions and flows along with the necessarygeographical detail. The various surveys are:� survey of collective investment schemes �

quarterly and annual (BOP41);� survey of IFSC non-life insurance/

reinsurance � quarterly and annual(BOP42);

� survey of IFSC life insurance/reinsurance� quarterly and annual (BOP43);

� survey of IFSC stand-alone treasury -quarterly and annual (BOP44); and

� survey of IFSC banks, asset finance andsecurities trading companies, agency andcaptive treasury companies and otherrelated financial service companies �quarterly and annual (BOP45)

Respondents: IFSC administrative ormanagement companies that provide financialservices to collective investment schemes,captive investment (including insurance/reinsurance) companies and agency and captivetreasury companies. Stand-alone companies(e.g. banks, treasury companies) are alsocovered.

Apart from including the IFSC operations in thesurvey system, new information has also beencollected from non-IFSC financial serviceenterprises since the start of 1998. As for IFSCenterprises, the data collection requirementsare designed to meet the needs of both theb.o.p. and the national accounts. As a result, thedemands on Irish resident investment managershave been expanded to cover both assets andliabilities, with a breakdown between residentand non-resident investments (see thedescription of the BOP30 survey below). Inaddition, the activities of life and general


Chapter 4.7 Ireland

insurance companies and credit institutions arecovered by the new collection system.Complete coverage is aimed at. As for IFSCoperations, the larger companies are requiredto return the information each quarter, whilethe smaller companies make annual returns.Financial service companies which provideother types of services and which conducttransactions relevant to the b.o.p. will beincorporated into the system as it develops. Atpresent, the activities of these companies, inaggregate, are insignificant from a b.o.p.perspective. The specific data collectionarrangements are described below.

Survey of portfolio investment by Irishinvestment managers� quarterly and annual (BOP30)This survey was introduced at the start of 1998and expands on the requirements of theoriginal BOP30 survey that it replaced. It isaddressed to investment managers resident inIreland and requests information on ownaccount and client account investments in Irishand foreign securities by resident and non-resident investors. Geographical detail andsectoral information are requested. A variant ofthis survey is addressed to stockbrokers (acategory of financial service providers notpreviously surveyed) to obtain data relevant tothe b.o.p. It is hoped that the informationreturned will result in a better coverage of thehousehold sector.

Respondents: non-IFSC Irish resident portfolioinvestment managers and stockbrokers.

Survey of insurance companies� quarterly and Annual (BOP46)Information similar to that required from IFSCinsurance companies is required for all threeaccounts of the b.o.p. Quarterly (and, forsmaller companies, annual) position data as wellas data needed to reconcile flows and positionsare required. Geographical detail is also required.

Respondents: all non-IFSC insurance companiesincorporated in Ireland as well as Irish branchesof foreign companies.

CSO interim data requirements for creditinstitutions� quarterly (BOP50)While credit institutions have traditionallyreported to the Central Bank of Ireland withinthe framework of banking and prudentialreturns statistics, they had not been covered bythe CSO�s data collection system, the relevantb.o.p. and national accounts information beingobtained from administrative data from theCentral Bank of Ireland and the Revenueauthorities. This administrative framework didnot directly provide relevant data on banks�own b.o.p. current account transactions; norwas there a suitable functional breakdownavailable so as to distinguish direct investment,portfolio investment and other investment datain line with BPM5 requirements.

As part of the development of the b.o.p. systemfor the financial services sector, the CSO� assisted by the Central Bank of Ireland �initiated consultations some years ago with theIrish Bankers Federation on b.o.p. datarequirements affecting credit institutions.Following an agreement reached with the CSOat the end of 1997, a three-year interim datacollection arrangement � the BOP50 formrequirements � was put in place at the start of1998 for non-IFSC credit institutions. Sincethen, for each quarter, they have been supplyingthe CSO with elements from the returns madeto the Central Bank of Ireland, along withrelated supplementary detail and additionalinformation (on services, factor incomes, etc.),to enable the CSO to compile reliable BPM5-compliant b.o.p./i.i.p. estimates pending thedevelopment of a complete data reportingsystem by the start of 2001. To reduce the datasupply burden, the smaller credit institutionsare required to provide the supplementary dataon an annual basis.

As from the start of 2001 a full b.o.p./i.i.p.reporting system will replace the existinginterim arrangement and consultation with theIBF and its members on outstanding issues hasrecently been completed.


Chapter 4.7 Ireland

Respondents: Irish resident non-IFSC creditinstitutions, including Irish branches andsubsidiaries of foreign companies.

B. Government sector. Information is providedby the various government departments, forexample the Department of Agriculture andFood (Common Agricultural Policy data), theDepartment of Finance (amounts received fromthe Structural and Cohesion Funds of the EUand own contributions to the EU, as well aslistings of IFSC licensed companies for b.o.p.register purposes), the Department of Social,Community and Family Affairs (data on pensionpayments abroad), the Department of Defence(data on military assistance to UN peace-keeping) and the Department of Foreign Affairs(foreign embassies in Ireland and Irishembassies abroad).

C. Other sections of the CSO. Foreign tradedata (collected via Intrastat and the customsauthorities) are provided by the Trade StatisticsDivision of the CSO. The B.o.p. Section adjuststhese data on a b.o.p. merchandise basis (seeSub-section 4.2 below). Data on tourism andtravel are provided by the Tourism andTransport Section of the CSO in Cork, whichconducts a passenger inquiry and a country-of-residence inquiry among travellers to producethe results.

D. Official sector. As described above, theCentral Bank of Ireland provides data on officialexternal reserves as well as data on the Bank�sportfolio and other investment assets andliabilities (including TARGET transactions andpositions). The NTMA provides data on the bulkof the non-resident part of the national debt;data on certain portfolio debt of theGovernment are provided by the Central Bankof Ireland.

(ii) Central Bank of IrelandA. Credit institutions. All credit institutions,including IFSC banks, are required to report tothe Central Bank of Ireland on a monthly�Resident Offices Return� (a balance sheetreturn with resident and non-resident columns

for assets and liabilities). This reporting takesplace within the framework of bank statisticsreporting, rather than reporting for b.o.p.purposes.

B. Government sector. The various centralgovernment departments and the NTMA alsosupply information similar to that supplied tothe CSO.

3.3 Thresholds

There is no general simplification threshold forreporting, but � for financial service companies� materiality criteria are applied to determinethe frequency (quarterly or annual) of thereturns required.

3.4 Availability of data (quarterly/annual

b.o.p.)

The current and capital account items areavailable on a BPM5 basis and withgeographical detail.

Within the financial account, a functionalbreakdown for investment into �direct�,�portfolio�, �financial derivatives� and �other�investment, as specified by the ECB, is available,but there are some reporting difficulties forfinancial derivatives as the information availableto respondents is not in a form suitable forb.o.p. compilation purposes. A geographicalbreakdown is available, in addition to therequired sectoral breakdown.

3.5 Timeliness

The response level and the speed of response toCSO surveys have traditionally been persistentproblems. Attempts have been made to addressthese difficulties on two fronts: first, by reducingor eliminating unreasonable reporting burdenswherever possible (e.g. by designing more user-friendly forms and instructions and by reducingthe reporting frequency for less activecompanies); and, second, by having greaterrecourse to legal enforcement, in which casenotification of the initiation of legal proceedings


Chapter 4.7 Ireland

against sub-standard respondents tends to resultin the required information being returned.Bringing about further improvement in responseis an ongoing, but resource-consuming task.

The time allowed to the reporting agents torespond varies, depending on the survey formto be completed.

BOP40 (covering foreign assets and liabilitiesand related income flows of manufacturing andnon-financial service enterprises): reportingagents have 35 working days from the end ofthe reporting calendar year within which tosubmit the annual data to the CSO. If noresponse is received within this time, a reminderis sent seven days after the expiry of thedeadline, and a further fourteen working daysare allowed for the response. If no response isforthcoming, the CSO contacts the reportingagent to obtain a response by telephone.

BOP40Q (as for the BOP40, but coveringtransactions only): reporting agents have 21days from the end of the reference quarter torespond. Follow-up is by written reminder andsubsequently by telephone.

BOP41-BOP45 (covering services and incometransactions as well as the assets and liabilitiesof IFSC financial service companies): reportingagents have 21 days from the end of thereference quarter to respond. Follow-up is bywritten reminder and subsequently bytelephone.

BOP46 (covering services and income flows aswell as the assets and liabilities of non-IFSC lifeand non-life insurance enterprises): reportingagents have 21 days from the end of thereference quarter to respond. Follow-up is bymeans of written reminder and by telephone.

BOP50 (covering services and income flows aswell as assets and liabilities of non-IFSC creditinstitutions): reporting agents have six weeks torespond for quarterly data and three monthsfor annual data. Follow-up is by writtenreminder and subsequently by telephone.

BOP30 (covering outward and inwardinstitutional portfolio Investment): reportingagents (approximately 35 companies) have 20working days from the end of the referencequarter within which to submit data to the CSO.If no response is received within this time,follow-up procedures are started immediately.

BOP10 (covering services of manufacturing andnon-financial service enterprises): reportingagents have 21 working days from the end ofthe reference quarter within which to submitdata to the CSO. If no response is received withinthis time, a reminder is sent seven days after theexpiry of the deadline, and a further 14 workingdays are allowed for a response. If no responseis forthcoming, the CSO will contact the reportingagent to obtain a response by telephone.


Official Irish b.o.p. results (with geographicaldetail) are currently compiled on a quarterly/annual basis only. While broad unofficialestimates of the monthly key items are beingsupplied to the ECB, there are no plans tointroduce a monthly b.o.p. collection system toobtain monthly data over and above the systemcurrently in use. Any developments in this areawill have to be made using appropriatemodelling and estimation approaches.

3.7 Data controls

Apart from the BOP10 services survey and theBOP50 survey of non-IFSC credit institutions,which are processed using SAS software, allsurvey data are processed using a combinationof MS Access and Excel.

On receipt, all returns in paper form aremanually checked for obvious reporting errorsby the person responsible for each particularcompany. If no errors are apparent, the data aremanually keyed into the Access database (orinto SAS datasets for BOP10 and BOP50 data)and undergo various automated consistencyand plausibility data checks. Where data arereturned in electronic form, they are imported


Chapter 4.7 Ireland

into the database and are subjected to a similarchecking procedure. If the data fail the moreimportant checks, the CSO contacts the companyconcerned to query the data and make anycorrections necessary. Estimates are made forpartial or complete non-responses. This facilityis largely applied only to non-returning smallercompanies surveyed, as the larger companiesare pursued until the data are supplied. If thisis unsuccessful, estimates are made. Onceverified and further processed as necessary,the data are summarised and then transferredinto an Excel spreadsheet and supplementedby the data supplied by the Central Bank ofIreland, Government departments and othernon-survey sources. Some further manualchecking is also carried out on the consistency ofthe b.o.p. results with information availableelsewhere, e.g. financial trade data, productionstatistics and profits data. More in-depth dataquality checks are conducted annually againstdata available to the National AccountsDivision.

Apart from this general checking, the DataConsistency Unit of the CSO carries out checkson the consistency of data returned by individuallarge manufacturing and non-financial servicecompanies to various divisions within the CSO,including the BOP Division. The Data ConsistencyUnit liaises on an ongoing basis with thesedivisions and with any company concerned todetermine the reasons for any significantdiscrepancy or inconsistency. In an ongoingeffort to improve data quality the DataConsistency Unit operates a programme ofcompany visits and ongoing liaison so that theCSO becomes aware as early as possible of anymaterial change in companies� operational,accounting or reporting practices affecting thedata returned. BOP Division personnel oftenparticipate in these visits and also make visitsindependently as and when specific b.o.p.problems need to be resolved.

3.8 Revision policy

The CSO�s general revision policy is toincorporate changes when the data for the

calendar year are being produced, i.e. thefollowing spring/summer. However, the policy isflexible and significant changes to previouslypublished figures are incorporated on aquarterly basis. In addition, and in the interest ofpublication consistency, smaller revisions areincluded in cases where data sourced from andpublished by other divisions of the CSO alsoappear as separate items in the b.o.p. release.

In the case of monthly b.o.p. estimates providedby the Central Bank of Ireland, revisions aremade mainly on a quarterly basis. The monthlyestimates are subject to significant historicalrevisions each quarter when the officialquarterly b.o.p. data are published.

The ECB�s revision policy will be implementedas far as possible.

3.9 Publication

Official b.o.p. data are collected and publishedby the CSO on a quarterly basis, with a time lagof three months. The data are published in hardcopy and are also available on the CSOdatabank and on the Internet. Users are madeaware of the expected (�no later than�) date ofpublication three months beforehand in theCSO�s monthly advance publication calendar, whichcovers a three-month period (under the IMFBulletin Board arrangements). Regular users arenotified each Thursday of the date of CSO�sreleases and publications due in the following week.

The Central Bank of Ireland provides its ownearly independent estimates and analysis ofb.o.p. flows to the public as part of its quarterlyreview of monetary and financial marketdevelopments. These data have a timeliness ofaround two months following the referencequarter.

The titles of the publications produced by theCSO and the Central Bank of Ireland on theb.o.p. are listed in Sub-section 13.1.


Chapter 4.7 Ireland

4 Monthly key items


In contrast with other euro area countries,there is no monthly b.o.p. data collectionsystem in Ireland. Official b.o.p. data arecollected and compiled on a quarterly basisonly through surveys and administrative data.These data have a timeliness of the order ofthree months, compared with the six-weekrequirement for monthly b.o.p. estimates.

There are currently no plans to extend the datacollection frequency beyond the limitedmonthly data already available, mainly becauseof the burden this would place on b.o.p.respondents and because of resourceconstraints concerning the collection andcompilation of b.o.p. statistics generally. Institutionalarrangements for monthly data estimation andcompilation are subject to review.

Broad unofficial monthly b.o.p. estimates,including a euro area/non-euro area geographicsplit, are at present provided by the CentralBank of Ireland. The Bank uses a range ofmethods to estimate monthly flows within therequired time-frame. For a few components,monthly data are available. The remaining dataare based largely on proxies and forecasts ofquarterly data interpolated into monthlyfrequency, partly using a system of indicatorsbased on other published CSO data series. Allof the estimates are provided to the ECB withinsix weeks of the reference month. Both currentestimates and historical data are subject tosubstantial revision each time official quarterlyb.o.p. results are published.

In line with ECB requirements, virtually all of themonthly series are sub-divided into flowsbetween countries participating in MonetaryUnion and extra-Monetary Union flows. This isbased essentially on the corresponding split inthe quarterly data supplied by the CSO to theECB and Eurostat.


items

A summary of the estimation methods used isgiven in the table below. These are subject toreview in the context of changes beingimplemented in the official quarterly b.o.p. system.

4.2.1 For the current account

� Merchandise tradeThe CSO publishes a series relating tomerchandise trade, with exports and importsrecorded on an f.o.b. and c.i.f. basis respectively.The data are compiled from Intrastat andcustoms (i.e. extra-EU) data, the latter beingcompiled on a �general trade� basis. Countryattribution is currently made using the �countryof origin� (for imports)/�country of destination�principle (for exports), but the CSO isexamining the implementation of the EuropeanCommission (Eurostat) recommendations oncountry allocation. In addition, the CSO isimplementing the recommendations of the BOPWorking Party of the Committee on Monetary,Financial and Balance of Payments Statistics(CMFB) concerning the conversion of c.i.f.imports to an f.o.b. basis. Pending theintroduction of a more up-to-date methodology,the CSO is currently providing b.o.p.merchandise exports and imports on a f.o.bbasis using traditional adjustment factors. Apartfrom these possible future changes, the CSO�sBOP Division currently makes furtheradjustments to the published official foreigntrade statistics for Ireland in order to align themmore closely with b.o.p. concepts. Theseadjustments take account of the application ofthe �change in ownership� principle as well asvaluation adjustments arising from traders�accountancy practices. The merchandise traderesults are published both seasonally adjustedand unadjusted by the CSO, and its BOPDivision is examining the introduction ofseasonally adjusted b.o.p. merchandise tradedata on a quarterly basis.

The CSO data are brought up to date on thebasis of the Bank�s latest macroeconomicforecast. The latter contains estimates of both


Chapter 4.7 Ireland

import and export growth which can be appliedto monthly estimates, with appropriateadjustments reflecting the intra-year pattern oftrade and any available information on outputprices and industrial production.

The CSO monthly merchandise trade series arepublished without any adjustment for b.o.p.purposes. An adjustment is applied by the Bankto the monthly series based on recent trends inthe quarterly adjustment used by the CSO.

� Services tradeThere are no equivalent monthly seriescovering the services trade. A number of otherCSO monthly series � relating to inward andoutward passenger movements and exportvalues � are used to interpolate the requiredmonthly series. The indicator series are chosenon the basis of whether they show a statisticallysignificant correlation � at a quarterlyfrequency � with the CSO quarterly credit anddebit items for services transactions. Thisreflects the link between passenger movementsand tourism flows and the strong connectionbetween the demand for other services importsand the output growth of the exporting sectors.These interpolated series are brought up to

date by a procedure similar to that used formerchandise trade, i.e. using the Bank�smacroeconomic forecast.

� Factor incomesThe lack of monthly data also renders aninterpolation procedure necessary for thiscomponent of the current account. Exportvalues are used as an indicator for the debititem, reflecting the link between export earningsby the foreign-owned sector and profit outflows.The credit item is much smaller and less volatileat the quarterly frequency. It is interpolatedwithout the use of an indicator by simple timeseries methods. These series are also brought upto date in a similar fashion to those onmerchandise and services trade.

� Current international transfersThe Bank conducts a telephone survey of themain recipients of EU funds in order to generatemonthly data on the credit item. The budgetcontribution to the EU is the main debit itemand it is obtained directly from the Departmentof Finance on a monthly basis. Small residualcomponents of the credit and debit items areestimated on the basis of recent trends in thequarterly data relating to these items.

The compilation of monthly balance of payments estimates

B.o.p. Item Source Comments

1. B.o.p. current account

1.1 Merchandise trade Central Bank of Ireland Published monthly data are available within a period ofaround three to four months. Data are not adjusted forb.o.p. purposes. These are updated using the Bank�smacroeconomic forecast and slightly more up-to-dateinformation on output prices and manufacturingproduction. These data are adjusted for b.o.p. purposes.

1.2 Services Central Bank of Ireland Monthly inward passenger movements by air and seaare used as an indicator for the credit item. On the debitside, estimation is based mainly on relating servicesimports to activity in the multinational sector.Monthly data on outward passenger movements areused as an indicator for travel abroad by Irish residents.

1.3 Factor income flows Central Bank of Ireland The output of the multinational sector is used as anindicator for profit outflows. Other sub-components of


Chapter 4.7 Ireland

factor income flows are based on the interpolation oftrends from quarterly data.

1.4 Current transfers Central Bank of Ireland Monthly data are based on figures supplied to theBank by the relevant bodies (mainly governmentdepartments).

2. B.o.p. capital account2.1 EU capital transfers Central Bank of Ireland See the note on current transfers.

2.2 Acquisition/disposal Central Bank of Ireland This refers mainly to the acquisition or disposal of intangibleof non-produced/ assets (patents, copyrights, trademarks, etc.). The amountsnon-financial assets involved are insignificant according to the results of the

CSO�s BOP10 Services Survey.

2.3 Migrants transfers Central Bank of Ireland Monthly estimates are based on a broad interpolationof CSO quarterly figures.

3. B.o.p. financial account3.1 Direct investment Central Bank of Ireland Monthly estimates are based on a broad interpolation of

(abroad and in the trends from quarterly CSO figures.reporting economy)

3.2 Portfolio investment Central Bank of Ireland Monthly estimates are based mainly on a broad interpolation� inward and outward of trends from quarterly data.

3.3 Other investment Central Bank of Ireland(inflows and outflows)

Monthly estimates are available on movements in theexternal assets and liabilities of the MFI sector frommoney and banking statistics. Comprehensive monthlydata are available for the monetary authorities sector.Monthly data are available on government directexternal borrowing. All other estimates within �otherinvestment� are based on

an interpolation of trends

from quarterly b.o.p. data.

3.4 Reserve assets Central Bank of Ireland Monthly data are available in line with ECBrequirements for consistent reporting of Eurosystemreserves assets.

4.2.2 For the capital account

The bulk of transactions on the b.o.p. capitalaccount consists of EU transfers. As notedabove, these are collected directly fromrecipient bodies, mainly governmentdepartments. The data are all classified asextra-MU transactions in line with generalECB recommendations on this matter.

4.2.3 For the financial account

In the b.o.p. financial account, data pertaining tothe MFI and government sectors and todevelopments in the official external reserves

are available on a monthly basis from banking statistics.By contrast, broad estimates have to be made withrespect to all other items and these are based largelyon an interpolation of official quarterly b.o.p. results. Asis the case for the b.o.p. current account, estimatespertaining to the euro area/non-euro area � coveringdirect investment, portfolio investment and otherinvestment flows � mirror those provided by the CSOwith regard to official quarterly results.

4.2.4 For direct and portfolio investment

Data concerning direct investment flows arecollected on a quarterly basis only and monthly


Chapter 4.7 Ireland

estimates are based on these data. With regardto portfolio investment flows, much of theinformation provided concerns institutionalportfolio outflows on the assets side and theuptake of government securities by non-residents on the liabilities side.

Monthly estimates of institutional portfoliooutflows are based on an interpolation of trendsfrom the quarterly b.o.p. system. Data onchanges in the holding of government securitiesby non-residents are derived fromadministrative sources at the Central Bank ofIreland. A rough breakdown within debtsecurities between bonds and notes andmoney-market instruments is based on thebreakdown provided in the quarterly statistics.Estimates for portfolio investment assets andliabilities are derived from a broad interpolationof trends from the quarterly b.o.p. results.


Monthly data on financial derivatives are notcollected. Given the diversity and complexity oftransactions inherent in this particular b.o.p.data category, there is no basis upon which tomake reasonable estimates on a monthly basis.


Other investment flows for the MFI sector arebased on money and banking balance sheetinformation. Data for the monetary authoritiessector are compiled directly by the CentralBank of Ireland. Data in respect of other itemsare based on an interpolation of trends from thequarterly statistics.

5 Investment income


5.1.1 General

The CSO�s survey system, as well as its datacollection from administrative sources (CentralBank of Ireland, National Treasury ManagementAgency), requires investment income to be

reported on an accruals basis. The survey formsand the requests to official sources are designedto collect financial account positions andtransactions data as well as income flows on aBPM5 basis. Direct investment income, portfolioinvestment income and other investmentincome are identified, as are the necessaryBPM5 breakdowns of these items. Geographicaldetail is requested on the basis of the debtor/creditor principle, but only going back to 1998.Sectoral detail is also available.


Direct investment income comprises income onequity and income on debt. For statisticalcompilation purposes, direct investment incomeon equity is defined as the direct investor�sshare of the combination of operating surplusand investment income earned by the directinvestment enterprise. Income arising fromrealised or unrealised capital and exchangegains/losses is excluded, as is any profit (or loss)arising from abnormal circumstances. Data arecollected by means of the CSO�s survey systemto reflect this definition, i.e. the profit/loss (forb.o.p. purposes) of the direct investmententerprise is its profit/loss after tax and minorityinterest deductions and excluding capital andexchange gains/losses, any abnormal write-off ofbad debt, revaluation gains/losses and gains/losses from extraordinary items. This income issubdivided into dividends and distributed branchprofits and reinvested earnings and undistributedbranch profits. Dividends are recorded when duefor payment, which in most cases reflects thetiming of the actual payment. This also appliesfor remittances of branch profits.

Direct investment income on debt relates todividends on preference shares and interest oninter-affiliate trade credit, loans, bonds andnotes and money market instruments.Preference share dividends are recorded whendue for payment and interest is recorded on anaccruals basis, the interest unpaid/not yetreceived being recorded in the financialaccount.


Chapter 4.7 Ireland

Geographical detail is required on the basis ofthe debtor/creditor principle. In the case of anIrish-owned foreign direct investmententerprise, the country attribution isdetermined by the location of the entity, if it is abranch, or by the country of incorporation, if itis a subsidiary or an associate company. Factorincome outflows in the case of a foreign directinvestment enterprise located in Ireland areattributed to the country of residence of theimmediate direct investor (which, in the case ofa company, is the country of incorporation).


Portfolio investment income for bonds and notesand money market instruments is separatelyrequested from survey respondents (includingcollective investment institutions) andadministrative sources on a �time-shifted�accruals basis (i.e. from their accounts). TheCSO is investigating the possibility of a fullaccruals approach, i.e. the application of marketrates to marked-to-market position valuations.This latter approach will be implemented if itproves to be feasible. In addition, positions andmovements in outstanding interest arecurrently collected to facilitate the correctinclusion in the financial account of any interestunpaid or not received. Geographical detail iscollected and the country allocation is requiredon the basis of the debtor/creditor principle, asfor financial account transactions. Incomecredits can therefore be split according to theeuro area/non-euro area assets/liabilities split. Asectoral breakdown is also available.


Interest flows on loans, deposits, leases, tradecredits, etc. between non-affiliated entities arerequested from survey respondents andadministrative sources on an accruals basis.Income on reserve assets is also included underother investment income and recorded on anaccruals basis. Information on positions andmovements in outstanding interest is alsocollected. Geographical allocation is requiredon the basis of the residency of the creditor/

debtor. In the case of syndicated loans, however,the country allocation is based on the residencyof the lead bank whenever the residencies of allparticipating lenders are not known. Sectoraldetail is also available.

5.2 Definitions

Except for the deviations in Sub-section 5.3,data are in line with the recommendations ofthe BPM5 and the harmonisation proposalsmade by the ECB�s Working Group on Balanceof Payments and External Reserves (the formerTask Force on Financial Flows and StocksStatistics).


The only known deviation concerns theapplication of time-shifted accruals, rather thanthe full accruals principle required by the BPM5(i.e. market rates applied to marked-to-marketpositions).

5.4 Gaps

None.


As indicated above, the CSO is investigating thepossibility of implementing the full accrualsprinciple.


As the income information is collectedquarterly and annually from surveys andthrough the use of administrative sources, fullestimation is not required. However, wherepartial or complete non-response occurs forindividual respondents, some data need to beestimated or imputed from other respondents�data or from the non-respondent�s earlier data,trended forward as appropriate.


Chapter 4.7 Ireland

6 Capital account


General government capital transfers arealready available on a BPM5 basis and arealmost totally accounted for by transfers from/to the EU institutions. These EU capital transfersare compiled from data obtained from Irishgovernment departments and comply with thetables produced by Eurostat.

Data relating to the outright purchase oflicences, copyrights, patents, etc. aredistinguished in the BOP10 (�Survey onservices�) form. The amounts involved appearto be relatively insignificant.

6.2 Definition

The recommended split between current andcapital transfers was introduced by the CSOsome years ago and is based on therecommendations of the European Commission(Eurostat) BOP Working Party. Only itemsqualifying as current transfers are included inthe current account of the b.o.p.

Debt forgiveness is thought to be insignificant.The amounts involved in the acquisition/disposal of non-produced non-financial assets,as collected in the expanded version of theBOP10 services survey, were relativelyinsignificant.


None.

6.4 Gaps

Data sources for migrants� transfers continue tobe a major problem, as only estimates based onthe former exchange control data are available,and these are completely out of date.


The European Commission (Eurostat) informationprovided in the national tables on EU current

and capital transfers vis-à-vis the Member Statesis a useful means of verifying data compiled on anational basis and facilitates greaterharmonisation.

Investigations to date on how to capture betterestimates for migrants� transfers, which arethought to be relatively small, but neverthelesssignificant in terms of both inward and outwardflows, have not proved successful. The Revenueauthorities are considering whether anysuitable data can be compiled from their recordsin the future, but little progress seems possiblein the short term.

7 Direct investment


As indicated above, all direct investment dataare collected by means of surveys (see Sub-section 3.2). These surveys request data ondirect investment positions, flows and valuationchanges, along with factor income information(see Sub-section 5.1.2 for details concerning directinvestment income). The information providedidentifies equity investment and inter-affiliatetransactions/positions with regard to loans,trade credits, bonds/notes, money marketinstruments and financial derivatives. Geographicalinformation is also collected and a sectoralbreakdown is available. The surveys areconducted each quarter for the financialservices sector (annually for smallerenterprises) and annually for manufacturingand non-financial services companies, with aquarterly variant being undertaken to collecttransactions data only.

7.2 Definition

The CSO applies the �10% rule� to determinewhether ownership of the ordinary shares orvoting power in an incorporated enterprise orthe equivalent in an unincorporated entity issuch that a direct investment relationship exists.In line with the international requirements forfully consolidated direct investment statistics,the application of the rule covers transactions


Chapter 4.7 Ireland

with any affiliated entities in the corporatestructure which are part of the directinvestment relationship. In the case oftransactions between financial intermediaryaffiliates (including credit institutions), directinvestment is limited to those transactionsassociated with permanent debt and equityinvestment. The directional principle forrecording direct investment has been adopted(but the data are collected in a way that alsopermits classification according to assets andliabilities if required). Reinvested earnings arerecorded as part of direct investment and canbe separately identified.


For the CSO b.o.p. surveys, there are nodeviations from the agreed definition of directinvestment.

7.4 Gaps

None.


The compilation system is, in principle, compliantwith the BPM5. In practice, the informationappears to be provided as required and hence nofurther harmonisation appears to be necessary.


As direct investment information is collectedquarterly and annually by survey, full estimationis not required. However, where partial orcomplete non-response occurs for individualrespondents, some data need to be estimated orimputed from other respondents� data or fromthe non-respondent�s earlier data trendedforward as appropriate.



Inward and outward portfolio investment dataare collected from a combination of surveys and

administrative data (see Sub-section 3.2), thelatter relating to (a) non-resident investment inIrish government securities and (b) investmentin foreign securities (non-reserve assets) by theCentral Bank of Ireland. Positions, transactionsand reconciliation data are collected as describedabove and geographic detail is provided. Inter-company transactions between affiliated entitiesare treated as direct investment, except wheresuch transactions are between affiliatedfinancial intermediaries.

The CSO�s collection/compilation system is anend-investor/aggregate security approach whichdoes not rely on security databases. Informationon the various types of long-term and short-term securities is collected to meet therequirements of the BPM5. Geographicalallocation is requested on the basis of thedebtor/creditor principle. Few difficulties havebeen reported by respondents in relation to theapplication of the country-of-issuer principle forassets; for liabilities, the country of creditor isavailable in many cases, but some difficultiesare evident in relation to acquisitions onbehalf of non-residents by intermediaries.The CSO is exploring the possibility of havingthe residencies of the holders and the amountsinvolved identified from resident banks�nominee accounts. A major proportion ofoutward and inward portfolio investmentis accounted for by IFSC enterprises such ascollective investment institutions, specialpurpose investment companies (SPICS � forwhich only outward investment is portfolio innature), credit institutions, insurance companies,etc. These entities� activities are covered bythe survey system. Apart from the IFSC, mostof the remainder of inward portfolio investmentis accounted for by non-resident uptake ofgovernment securities (the data being obtainedfrom the National Treasury Management Agency� NTMA) and by non-resident smallshareholdings in Irish public limited companies.On the outward portfolio investment side, mostof the �non-IFSC� investment is made byinstitutional investors which are also surveyedand which are understood to account for thebulk of household foreign investment.


Chapter 4.7 Ireland

8.2 Definition

The definition of portfolio investment usedin Ireland essentially complies with therecommendations in the BPM5. Service charges,fees and commissions, where separately identifiable,are reported by respondents under the servicesitem; otherwise they are included as part of thevalue of transactions. Positions and transactionsare requested from respondents at marketvaluation on a �clean price� basis, i.e. exclusiveof accrued income. As already indicated, amountsof accrued interest outstanding as well asinterest movements are both distinguishedseparately in the survey forms. The clean-pricevalues of positions and transactions are thenconverted into a market valuation inclusive ofaccrued interest.


None.

8.4 Gaps

None.


As part of its b.o.p./i.i.p. statistical harmonisationdevelopment the CSO participated in the IMF�sDecember 1997 Co-ordinated Portfolio InvestmentBenchmark Survey. To facilitate the compilationof the relevant data, all companies surveyedwere required to supply the data on the basis ofthe BPM5 concepts and definitions. To ensureadequate coverage in the IMF Survey and in thenew collection/compilation system generally,IFSC companies and other financial servicescompanies were included as from end-1997/start-1998.

The only significant harmonisation improvementrequired is that relating to the determination ofthe correct country of creditor allocation forportfolio investment liabilities. Work iscontinuing in order to find additional informationfrom intermediary financial institutions actingon behalf of non-resident investors that wouldenable the identification of the residencies of

the actual holders of securities issued byresidents of Ireland.


As portfolio investment information is collectedquarterly and annually by survey, full estimationis not required. However, where partial orcomplete non-response occurs for individualrespondents, some data need to be estimated orimputed from other respondents� data or fromthe non-respondent�s earlier data trendedforward as appropriate.



As indicated in Sub-section 3.2, information onfinancial derivatives is collected using surveysand, in the case of government debt,administrative NTMA data. These surveysaddress all sectors, but most of the derivativesactivity involves the financial institutions.Separate data are sought on swaps (crosscurrency and interest rate), exchange-tradedfutures and options, over-the-counter (OTC)options and forward contracts. Owing todifficulties experienced by respondents,positions in some cases are only available on anet (asset/liability) basis. Transactions arerequested on a net basis, as required by theECB. Geographical breakdowns are availablebased, for the most part, on the country ofresidence of the counterpart which, in the caseof exchange-traded contracts, is the country inwhich the exchange is located. Inter-companytransactions between affiliated entities aretreated as direct investment, except where suchtransactions are between affiliated financialintermediaries.

At present, while a number of respondentsseem to be able to provide the informationrequired, many respondents are reportingmajor difficulties in providing the data requested.The difficulties generally concern: reporting ona market value basis (nominal values frequentlyappear in returns); reporting asset and liability


Chapter 4.7 Ireland

positions separately; and distinguishingvariation margin payments from initial margins.

9.2 Definitions

The definition of financial derivatives used isthat given in the IMF paper entitled �TheStatistical Measurement of Financial Derivatives�.The valuation of positions and transactions atmarket value is requested. Net interest streamsfor interest arising from interest rate derivativesand cross-currency interest rate swaps arerecorded under derivatives and not underfactor income. In the case of exchange-tradedcontracts, respondents are requested todistinguish between initial margin payments andvariation margin payments and to record theformer under other investment and the latterunder financial derivatives.


None.

9.4 Gaps

With regard to flows, some respondents experiencedifficulty in distinguishing initial margins fromvariation margins, while others have difficultyreporting market values (as opposed to nominalvalues), although this situation is improvingthrough ongoing contact with the CSO.


The flow data for derivatives follow the agreedharmonisation principles.


No estimation methods are used, as the data arereported quarterly.

10 Other investment


Other investment data are collected from acombination of surveys and administrative data

(see Sub-section 3.2), the latter relating to (a)Irish government borrowing from foreignlenders and (b) foreign assets and liabilities ofthe Central Bank of Ireland under the TARGETarrangements as well as its currency anddeposits transactions. Positions, transactionsand reconciliation data are collected asdescribed above and geographic detail isprovided.

Long and short-term claims and liabilities vis-à-vis non-resident affiliates are treated as directinvestment, except where such transactions arebetween affiliated financial intermediaries anddo not involve permanent debt.

The b.o.p. transactions of the MFI sector arecompiled from information directly provided bythese institutions to the CSO. As indicatedabove, MFIs operating from the IFSC supplyboth quarterly transactions and positions data(as well as information on valuation changes)via the BOP45 Survey. Non-IFSC MFIs currentlyprovide only end-quarter positions data to theCSO. Their transactions are estimated as thedifference between the opening and closingpositions, but an attempt is made to adjust forvaluation changes using currency analyses ofthe positions. It is assumed that, when fullreporting by non-IFSC MFIs commences in2001, the flow data will be supplied directly tothe CSO. IFSC MFIs account for about three-quarters of all MFI other investment assets vis-à-vis non-residents.

10.2 Definition

The CSO has adopted the BPM5 definitions,with necessary modifications, as approved bythe ECB. Repurchase agreements and bondlending transactions are recorded as requiredby the ECB. Financial leases are recorded underother investment and the income flows arerecorded in the current account.


None.


Chapter 4.7 Ireland

10.4 Gaps

There are no known gaps of any significance.


Insofar as is known, the results are compiled ona harmonised basis.


As the information is provided on a quarterly basis,the results are compiled from these returns. Someimputation is necessary for the few instances of lateresponse, while quarterly estimation is necessaryfor those companies subjected to annual reportingbecause of their low activity volume.

11 Reserve assets



11.2 Definition

The definition followed is the same as thatendorsed by the ECB�s Statistics Committee inDecember 1998, namely foreign-currencyclaims on non-euro area residents as well asmonetary gold, special drawing rights and thereserve position within the IMF.

Reserve assets are recorded at market prices.An instrument breakdown is available for b.o.p.purposes, in line with ECB requirements. Whilethere are no financial derivatives transactionson reserve assets at present, their recording ona net basis � as recommended by the ECB � issupported by the Bank.


None.

11.4 Gaps

Transactions data on reserves are notseparately identifiable at this stage. They are

estimated from the difference between start-month and end-month positions and takeaccount of valuation adjustments made at theend of each quarter.


As is the case in other euro area countries, theCentral Bank of Ireland is awaiting the outcomeof discussions and follow-up within the WorkingGroup on Balance of Payments and ExternalReserves Statistics on inconsistencies betweenaccounting and b.o.p./i.i.p. principles in relationto reserve assets.



As indicated in Sub-section 3.2, since thebeginning of 1998 the CSO has been operatingan integrated b.o.p./i.i.p. survey collectionsystem. Positions, transactions and reconciliationitems are collected from financial servicesenterprises each quarter and from enterprisesin other sectors each year. The collection systemis designed to meet the detailed requirements ofthe ECB and the IMF and follows, to the extentpossible, the recommendations of the BPM5 (asmodified in particular instances to meet theharmonisation requirements of the ECB).Geographical detail is requested on the countryof residency of the debtor for assets and that ofthe creditor for liabilities. Some difficulties areencountered by respondents in relation toidentifying the country of the creditor forportfolio investment securities issued byresidents of Ireland in all cases.

The CSO participated in the IMF�s 1997 Co-ordinated Portfolio Investment Survey andsupplied the results for the �mandatory items�(i.e. asset positions for equities and long-termdebt instruments). It intends to participate inthis project on future occasions.

The CSO supplied the December 1998 (and1997) i.i.p. results for Ireland to the ECB withinthe specified nine-month deadline.


Chapter 4.7 Ireland

12.2 Definitions

12.2.1 General

The definitions used follow the BPM5recommendations and the ECB�s harmonisationrecommendations.










As noted earlier, reserve assets are defined as foreigncurrency claims on non-euro area residents aswell as monetary gold, special drawing rightsand the reserve position within the IMF. Therevaluation at market prices of the stock of reserveassets takes place on a quarterly basis only.


In general there are no deviations from theagreed definitions.

12.4 Gaps

In the case of financial derivatives, it is not possible �owing to difficulties experienced by respondents � to

isolate completely positions for assets and liabilities,and only net positions are available in some cases.


In the case of financial derivatives, further effortsare needed, particularly at the respondent level,to provide position data on a gross basis and toreport separately both initial margins (underother investment) and variation margins (underfinancial derivatives).


Generally, respondents can provide positioninformation as required and in many casesmore easily than flows data. Consequently,estimation techniques are only required fornon-response imputation.

13 Administration


(i) CSOBalance of International Payments (quarterly)Statistical Bulletin (quarterly)Economic Series (monthly � selected b.o.p.items)National Income and Expenditure (annual)Statistical Abstract (annual)CSO Eirestat Databank (quarterly updating)CSO Web site: www.cso.ie

(ii) Central Bank of IrelandQuarterly Bulletin (quarterly);Annual Report (annual).

13.2 Contributors

This country information was drafted by theECB�s Balance of Payments Statistics andExternal Reserves Division and subsequentlyamended and agreed with Ireland. Enquiries of ageneral nature should be addressed to the PressDivision of the ECB. Enquiries specific to Irelandshould be addressed to:


Chapter 4.7 Ireland

Mr. John FitzpatrickCentral Statistics OfficeBalance of Payments DivisionArdee RoadRathminesIRL - Dublin 6Ireland

Tel.: (00353) 1 497 7144Fax: (00353) 1 497 1106

Mr. John O�MalleyCentral Bank of IrelandMonetary Policy and Statistics DepartmentPO Box No. 559Dame StreetIRL - Dublin 2Ireland

Tel.: (00353) 1 671 6666Fax: (00353) 1 671 6561

190ECB EU


ethods � Novem

ber 2000

Ch

apter 4.8 Italy

1O


Banca d�Italia

Ufficio Italiano dei Cambi

Credit SystemStatistics Committee

BANCA D�ITALIA

Credit SystemInformation Department

ResearchDepartment

Banks� StockData

StatisticsDivision

BOP Unit

UFFICIO ITALIANO DEI CAMBI


Securit ies Dat abase andCoding Sy stem (ISIN)

Banks� inputBanks� output

Monetary M ovements

No n Bank�s InputNo n Banks� Output (c urrent and financ ial

transact ions)


Chapter 4.8 Italy


2.1 Introduction

The Banca d�Italia and the Ufficio italiano deicambi (UIC) are responsible for the balance ofpayments (b.o.p.) and international investmentposition (i.i.p.) statistics. The UIC, which hasbeen an instrumental entity of the Banca d�Italiasince 1998, gathers information for the compilationof b.o.p. and i.i.p. statistics. Both institutionspublish data on b.o.p. and i.i.p. statistics. Theinformation is derived from the data on cross-border transactions collected by the UIC andsample surveys for certain services which arealso collected by the UIC. Other sourcesinclude the international trade statistics collectedby the Istituto nazionale di statistica (Istat).


The Exchange Reform Law, which came intoforce in October 1988, reorganised Italy�sstatistical system over the following two yearsand enabled the country to make the transitionfrom a system in which residents wereprohibited from transacting with non-residents(except for expressly authorised transactions)to one in which residents could freely carry outforeign transactions. Residents continued to beobliged to settle through the domestic bankingsystem. The Ministerial Decree of April 1990meant that operators no longer had to�channel� foreign transactions through residentbanks, but were completely free to deal withforeign banks (e.g. to open deposit and currentaccounts abroad) or to export paymentinstruments, securities, etc. As a consequence ofthese laws, it became apparent that a newcollection system for b.o.p. data was needed. InMay 1990 the old data collection system wasintegrated into a new system and, from thenonwards, all residents were required to supplystatistical documentation on foreigntransactions either directly or through thedomestic banking system. The directive putforward by the Interministerial Committee forCredit and Savings in October 1995 authorisedthe collection by the UIC of data on assets andliabilities of non-bank operators above a certainthreshold.

Legislative Decree No. 319/98, which modifiedthe institutional position of the UIC, confirmedits powers to collect data for the purposes ofb.o.p. compilation. The compilation ofInternational trade data lies within thecompetence of Istat.


At the Banca d�Italia responsibility for the b.o.p.is vested in the Balance of Payments Unit of theStatistics Division, which also carries outanalyses of b.o.p. developments. The StatisticsDivision is responsible for money and bankingstatistics and for financial account statistics. Inaccordance with the Guideline of the EuropeanCentral Bank on the statistical reportingrequirements of the European Central Bank inthe field of balance of payments andinternational investment position statistics, dataare made available by the UIC to the ECB, forthe production of the euro area b.o.p., and tothe Banca d�Italia. The Banca d�Italia and the UICare required to �monitor the quality andreliability� of statistical information.

At the UIC various divisions in the StatisticsDepartment are involved in the production ofthe b.o.p. and i.i.p. The management teamcomprises three sections: the first is involved inthe coding system (International SecuritiesIdentification Number or ISIN), statisticalregulations and procedures, relationships withinternational organisations, and bank/non-bankdata co-ordination; the second deals withbanks� data input, banks� data output andmonetary movements; and the third addressesnon-banks� data input, non-banks� data output(current transactions), non-banks� data output(financial transactions) and feedback data flows.


Close links both at the executive and at theoperational level exist between Istat, the Bancad�Italia and the UIC. Data are exchangedmutually and there is a permanent committeefor co-ordination at the highest level betweenIstat and the Banca d�Italia which meetsmonthly.


Chapter 4.8 Italy

2.5 Users

B.o.p. data are used as input in the nationalaccounts statistics produced by Istat.

Data are also supplied to the Treasury; toprivate and public research institutes anduniversities; and to international organisationssuch as the ECB, the European Commission(Eurostat), the Organisation for EconomicCo-operation and Development (OECD), theBank for International Settlements (BIS) andthe International Monetary Fund (IMF).



The Italian b.o.p. collection system is, inprinciple, an open settlement system based on acomprehensive reporting system. Banks arerequired to report transactions performed fortheir own account and for the accounts of theircustomers. For some items, annual surveys areconducted by the UIC in order to collect data:� since 1996 a survey of travellers has been

in place to compile the travel service account;� since 1998 an enterprise survey has been

used to measure international transportationservices;

� since 1998 a survey on portfolioinvestment and direct investment stockshas been carried out; some of thequestions are dedicated to the collectionof data on reinvested earnings.

Istat supplies trade data on goods which isbased on c.i.f.-f.o.b. valuation; the conversion tof.o.b. is made on the basis of the data oninternational transport and insurance services.Istat also provides data on repairs of goods,goods for processing, non-monetary gold andexport data on goods procured in ports; importdata are taken from returns submitted to theUIC. The Government reports to Istat on publiccurrent and capital transfers.

Data on compensation of employees arepartially estimated on the basis of OECD dataon international wage taxation.

Flows figures are collected directly for all b.o.p.items. The reporting on foreign transactionsrelated to financial instruments is done on asecurity-by-security basis. The respondentsindicate the ISIN code of the securities inthe statistical reporting form entitled�Comunicazione valutaria statistica� (CVS) forthe flows, and in the data entry provided by theUIC for the stocks survey.


(i) The Monetary Financial Institution (MFI) sector:MFIs report to the UIC. They are involved instandard reporting. MFIs have to report stocksdata on their claims and liabilities vis-à-visresidents and non-residents by type of asset/liability, currency, maturity and debtor/creditorcountry. They also have to report data on theirforeign transactions and on those of theircustomers (flows data) with a breakdown bytype of operation, currency and country.(ii) The non-banking sector: internationaltransactions have to be reported either directlyto the UIC or through resident banks ifsettlement takes place in this way. Data arebroken down on the CVS forms mainly bynature of operation, country and currency, andby variables used to classify operators (type ofoperator, type of enterprise, branch ofeconomical activity, last financial year�s turnover,number of employees in enterprise, etc.). Italianlaw enforces anonymity, which means that it isimpossible to identify the resident transactorafter the data have been compiled.(iii) The official sector: the AccountingDepartment of the Banca d�Italia reports on theexternal monetary position of the official sectoron a monthly basis. The Treasury reports publictransfers.(iv) Customs and the Intra-Community TradeStatistical System (Intrastat): for goods, reportsare made to Istat, which then calculates the data(on a c.i.f.-f.o.b. basis). The UIC subsequentlyestimates goods data on a f.o.b.-f.o.b. basis.

3.3 Thresholds

The collection of stocks data on assets andliabilities of non-bank operators which exceed athreshold of ITL 500 million (EUR 250,000) by


Chapter 4.8 Italy

Table 1Reporting scheme for b.o.p. and i.i.p. data collection for ITALY

Target respondent Name of reporting Contents of reporting Frequency of Timeliness (numberpopulation form form reporting of days for(e.g. MFIs, submission afterenterprises, etc.) the end of the

reference period)

MFIs Matrix Flows/stocks Monthly 12 working days

MFIs Survey on PI Stocks PI (assets) Annually 180 daysMFIs Survey on DI Stocks DI Annually 180 daysMFIs (custodians) Survey on PI - other sectors Stocks PI (assets) Annually 180 daysOFIs CVS Flows Monthly 25 daysOFIs Surveys Stocks Annually 180 daysEnterprises CVS Flows Monthly 25 days

Enterprises Survey on transportation Flows Annually 30 daysEnterprises Survey on reinv. earnings Flows Annually 180 daysEnterprises Survey on PI Stocks (assets) Annually 180 daysEnterprises Survey on DI Stocks Annually 180 daysHouseholds CVS Flows Monthly 25 daysHouseholds Survey on travel Flows Monthly 30 days

General Government Survey Flows Monthly 12 working daysMonetary Authorities n Matrix Flows/stocks Monthly 12 working days

the UIC was authorised by the InterministerialCommittee for Credit and Savings in October1995.

For the banking source (Matrix system), athreshold of ITL 5 million is applied to bulktransactions. For such transactions below thethreshold, breakdowns are requested on thebasis of best estimates. However, for the non-banking source (CVS system), only internationaltransactions exceeding ITL 20 million (EUR10,000) are to be reported. Changes to datapreviously submitted may be notified to the UICby telephone, but this must always be followedup and confirmed in writing. This applies underall circumstances, i.e. regardless of whether theerror is notified to the reporting agent by theUIC or the reporting agent identifies the error.


A complete b.o.p. with a full geographicalbreakdown is available on a monthly basis.

3.5 Timeliness

Banks are requested to submit Matrix systemdata within 12 working days of the reporting

date, whereas the CVS data are submittedwithin 25 days of the reporting date. Theprovisional data are published 30 working daysafter the end of the reference period. The finaldata are published 90 days after the end of thereference period.


The Italian b.o.p. is compiled on a monthlybasis.

3.7 Data controls

The procedure for handling and processing theraw data contained in the 1,000,000 recordsreceived each month by Matrix system and inthe 4,000,000 records received by the CVS wasupgraded by the introduction of an advancedinformation processing system. A specificsoftware tool called UIC-Maestro wasdistributed to the reporting entities. This systemcombines simplicity with numerous functionswhich are designed to classify and input dataand to reduce the potential for error. It providesa guided data entry system for reporting agentswhich automatically codes transactions bycountry, currency and type of good. It covers a


Chapter 4.8 Italy

whole range of cross-border transactions andsignificantly reduces the cost of reporting whilereducing the margin for error. UIC-Maestroallows bank and non-bank operators totransmit data to the UIC on floppy disks. Thishas improved both the accuracy and the speedof reporting. The most important banks also usea diagnostic software, provided by the UIC,which carries out checks similar to thoseprovided by UIC-Maestro.

Controls are also exercised on the data in thesystem environment used for the collection ofstatistics (known as Matrix and Eleuteria). Someroutine data checks are carried out on theintegrity of the data, as well as some morecomplicated checks which take into accountcomparisons of flows and stocks. Ifinconsistencies are detected in the data, theData Processing Division contacts the reportingagent, either by telephone or by means of astandard form on which details of theimplausibility are given and broken down bytype of transaction.

3.8 Revision policy

Revisions to published data are typically madewhen the major official reports on Italy�seconomy are published, namely the �RelazioneGenerale sulla Situazione Economica del Paese�(Ministry of the Treasury, Budget and EconomicPlanning) in March and the Banca d�ItaliaAnnual Report in May.

3.9 Publication

As of the first months of 1999 the Italian b.o.p.statistics are published in a new format that isentirely in line with the standard components ofthe 5th edition of the IMF Balance of PaymentsManual (BPM5).

Provisional flow data are provided in a UICmonthly press communiqué that is releasedabout six weeks after the end of the referenceperiod (coverage: goods, total services, totalincome, current transfers, total capital account,direct and portfolio investment, otherinvestment, derivatives, reserve assets). Moredetailed and updated flow data become

available around three months after the end ofthe reference month and are published in amonthly supplementary annex to the Bancad�Italia Statistical Bulletin and in the monthlyUIC Statistical Bulletin.

The supplementary annex to Banca d�ItaliaStatistical Bulletin includes time series data,broken down according to the main items of theIMF/ECB classification for the b.o.p. The UICStatistical Bulletin mainly reports cross-sectiondata referring to a single month, with a detailedgeographical breakdown. The coverage of theUIC Statistical Bulletin is greater than that of thepress communiqué (greater detail formerchandise: general merchandise, goods forprocessing, repair of goods, goods procured inports by carriers, non-monetary gold; services:all the IMF standard components; income:compensation of employees and capital income;current transfers: private sector and generalgovernment; capital account: capital transfersand acquisition/disposal of non-produced, nonfinancial assets; financial account: residentsector and financial instrument/assets/liabilitiesbreakdown). Six summary tables with timeseries of flow data are also reported in the UICStatistical Bulletin.

Provisional semi-annual stock data on the i.i.p.are published around three months after theend of the reference period in the monthly UICStatistical bulletin (coverage: assets andliabilities for direct investment, portfolioinvestment, other investment derivatives andassets for official reserves. A breakdown byresident institutional sector is also available).

Annual and final data (b.o.p. flows and the end-of-year i.i.p.) are published in the Banca d�Italia annualreport five months after the end of the year.

The titles of the publications on b.o.p. statisticsproduced by the UIC and the Banca d�Italia arelisted in Sub-section 13.1.

The publications are available in electronicform on the Internet at the Web siteswww.bancaditalia.it and www.uic.it.


Chapter 4.8 Italy

The release dates for the UIC monthly presscommuniqué and for the supplementary annexto the Banca d�Italia Statistical Bulletin arepublished in advance for the next six months.

4 Monthly key items


Italy provides monthly key items within theagreed deadline of 30 working days followingthe end of the reference month. In principle, keyitems conform to the standards set out in theBPM5.

The aggregate data are available within theabove-mentioned deadline. The need forestimates relates to 5% of the total amount.However, the major need for estimates relates tothe breakdown into key items, mainly in thefinancial account.


items


Istat compiles the International Trade Statistics(ITS) by collecting customs documents forextra-EU trade statistics and referring to theIntrastat collection system for the intra-EUstatistics. While the ITS are the source for thegoods key item, transaction-based data are alsoavailable from foreign transaction reports - CVSforms - collected by the UIC. Intrastat data arenot available within 30 working days, asrequired for monthly key items. As a result, aprovisional intra-EU trade figure is estimatedusing a forecasting technique relying on aseasonal autoregressive model.

Intra-EU trade statistics are compiled followingthe country-of-consignment principle, while thecountry-of-origin principle applies to extra-EUdata. Shortly after Intrastat statistics becomeavailable - generally within eight weeks since theend of the reference month - the provisionalintra-EU trade figure is revised. A furtherrevision is carried out as soon as data for thewhole reference year become available.

ITS show a detailed geographical breakdownfrom which it is possible to recover datareferring to the transactions of the non-participating Member States.

Goods imports enter the b.o.p. on a f.o.b. basis.Estimates for transport and freight insuranceare available from a sample survey by the UIC.The average c.i.f.-f.o.b. ratio was estimated at3.6% (of which 0.25% was due to freightinsurance) for 1998 data. The goods item iscompiled by applying the special trade principle.

Since January 1999 data have been compiledaccording to the standards set out in the BPM5.In addition, time series dating back to 1970have been estimated to ensure consistency withsuch standards.


Investment income flows are mostly compiledfrom settlement data. The only exception is debtsecurities income stemming from portfolioinvestment, to which the accruals principle hasbeen applied since January 1999. Theinvestment income item relies mostly on thesettlement data collected from the respondentsand no forecast is normally performed exceptfor estimating missing data when providing theprovisional key item. The approach adopted forcompiling the item is mixed, insofar as debtsecurities income is estimated on the basis ofthe underlying stocks, while the other sub-components are compiled according to theactual transactions reported. For the only sub-component for which the accruals principle isapplied, the estimation is carried out on amonthly basis. A breakdown into sub-components, as required for quarterly andannual data, is not currently available at amonthly frequency.

With reference to portfolio investment income,the geographical split is performed by applyingthe same method as that used for splittingportfolio assets and liabilities in the financialaccount. When providing the first provisionalkey item, missing data are estimated by takinginto account the output of both a time trend


Chapter 4.8 Italy

regression and an autoregressive model fordepartures from the trend. As soon as missingdata become available - generally eight to tenweeks after the reference month - a revision ofthe key item is performed. Further revisions mayoccur when data for the whole reference yearbecome available.


The compilation of the direct investment item isentirely based on the collection of settlementdata from both the banking sector and otherrespondents. However, in order to meet thedeadline of 30 working days for key items,estimates are carried out to take missing datainto account. As soon as the data becomeavailable, a revision is carried out.


Portfolio investment is compiled by collectingdata from both the banking sector and otherrespondents. However, in order to meet thedeadline for key items, an estimate for missingdata is carried out. The estimate is based on theoutput of an autoregressive model and is revisedsoon after further information becomes available,generally eight to ten weeks after the referencemonth. Nevertheless, as some differencesbetween provisional and final data have beenemphasised, Italy is refining the above-mentionedprocedure to reduce the discrepancies. Thegeographical split between intra and extra-euroarea data has not posed any difficulties.

Accrued interest is estimated on a monthlybasis.


An estimate for the financial derivatives keyitem is performed only when providing the firstprovisional figures for key items. The estimationtechnique for missing data relies on a modelcombining both a time-trend regression and anautoregression for departures from the trend.


An estimate for the other investment key item isperformed only when providing the firstprovisional figures for key items. The estimation

technique for missing data relies on a modelcombining both a time-trend regression and anautoregression for departures from trend.

5 Investment income


5.1.1 General

Income on bonds and notes and on moneymarket instruments is compiled on the basis ofthe accruals principle, so that stocks statisticsare used. No relevant difficulties have so farbeen encountered in applying such amethodology. The use of stocks statistics will beextended when the whole investment incomeitem is compiled on the basis of the accrualsprinciple. Such stocks statistics have been basedon a yearly survey - since 1997 - of portfolioassets and of direct investments of both assetsand liabilities. Moreover, reinvested earningsrelated to direct investment are also surveyed.Since stocks are surveyed on an annual basis,adjustments are made to estimate monthlyfigures.

The reconciliation between estimates forproviding the first provisional key items and theoutcome is ensured as final data replaceprovisional estimates once available.

The geographical allocation is performed indifferent ways for credits and debits. The formerare broken down according to the debtorprinciple, the latter according to the residencyof the first known counterpart. So far, thegeographical breakdown of the item has notentailed any relevant difficulties.

The geographical breakdown has beenperformed with regard to historical data, butfurther checks are still needed before it can bemade available. Italy may provide the euro area/non-euro area split of portfolio investmentincome. The difficulty in applying both theaccruals principle and the issuer principle tohistorical data will result in a discontinuity asfrom January 1999.


Chapter 4.8 Italy

Some under-recording is possible in the incomeaccount credits. It is thought to be mainlyrelated to the investment income sub-item. Amore extensive application of the accrualsprinciple to the estimation of the whole sub-item is likely to reduce the bias and a testingexercise will be carried out in the near future.


As for income on equity, the rate of return onunderlying stocks is not currently estimated asdata on settlements are still being used.

Current data on reinvested earnings areestimated on the basis of the most recentannual survey; revisions are performed oncefinal data become available.

By way of example, in the 1998 directinvestment stocks survey, the respondents havesupplied:� data on net operating profits (all inclusive

concept); and� dividends paid for the years 1997 and

1998.

Since the available time series is very short, theestimation procedure for recent years has beenbased on the assumption that a simple relationexists between the total amount of the monthlydirect investment income and direct investmentstock data. Improvements to the procedure areenvisaged as the time series becomes longer.

Income on inter-company loans is not currentlyrecorded, but its compilation in the future isplanned. Consequently, Italy intends to set up anecessary estimation procedure. Afterimplementation, a testing exercise will benecessary before data can be made available.

Interest on loans between non-affiliatedenterprises is compiled on the basis ofsettlements data.


Stocks data are not employed as a basis forestimating CII�s income; settlements data areused instead. In the future, the use of stocks

statistics is envisaged for checking the quality ofthe settlements data.

The UIC and the Banca d�Italia are not currentlyable to draw relevant conclusions on the impactof taxation issues on portfolio investment income.


Income on trade credits as well as interestshares in leasing payments are not currentlyrecorded. Furthermore, CVS forms provide forthe compilation of data on deposits by privateindividuals/enterprises with foreign financialinstitutions.

Income on reserve assets is compiled on anaccrual basis using stocks data from theaccounting system.

5.2 Definitions

Definitions are consistent with those outlined inthe BPM5.


Income on inter-company loans is not currentlyrecorded as direct investment income (see Subsection 5.1.2).

5.4 Gaps

Income on trade credits as well as interestshares in leasing payments are not currentlyrecorded. Italy intends to set up a necessaryestimation procedure. After implementation, atesting exercise will be necessary before datacan be made available. Its compilation is thusplanned in the future.


The extension of the accruals principle to thewhole investment income account will beimplemented.


Accruals are estimated by the UIC on the basisof stocks, as surveyed every year since 1997.Additional information is then taken from thesecurity-by-security database, referring to, interalia, interest rates, coupon maturities andinterest calculation methods. For index-linked


Chapter 4.8 Italy

bonds, the UIC estimates accrued interest onthe basis of an average of the current interestrates.

6 Capital account



6.2 Definition

The capital account includes capital transfersand the acquisition/disposal of non-producednon-financial assets, as defined in the BPM5.

In particular, capital transfers consist of: (i)migrants� transfers in cash or transfers resultingin a change in the foreign net position ofresident banks; (ii) debt forgiveness; and (iii) alltransfers of cash linked to such investment.

Any transfer in kind that determines a change ofownership of fixed assets (machinery andequipment) is considered as capital. Othertransfers in kind are classified as current.

Regarding data sources, the main sources ofdata on private transfers (current and capital)are the reports from the banking and the non-banking sectors. For government transfers(current and capital), information is mainlyderived from Istat statistics on data of theMinistry of the Treasury, Budget and EconomicPlanning. Pensions paid by the Italian pensionscheme to non-residents and taxes paid to theItalian Government by non-residents are mainlyderived from the banking and non-bankingsectors� reports. Data on debt forgiveness arerecorded in the Italian b.o.p. Banks� debtforgiveness is derived from the banking reports.Government debt forgiveness is estimated usingdata of the Ministry of the Treasury, Budget andEconomic Planning.

The source of data on capital transfers with EUinstitutions are the quarterly Istat statistics, asbased on data of the Ministry of the Treasury,Budget and Economic Planning, disaggregated

on a monthly basis by the UIC. The distinctionbetween current and capital transfers isconsistent with the European Commission(Eurostat - the Statistical Office of the EuropeanCommunities) proposal for EUI transfersapproved in March 1997. In particular, capitaltransfers with the EU include: (i) contributionsunder the EAGGF (European Agriculture Guaranteeand Guidance Fund) - �Guidance� section(credits); and (ii) investment contributions fromthe Regional Development Funds (credits).


None.

6.4 Gaps

None.


No harmonisation necessary.

7 Direct investment


Italy collects data on inward and outward directinvestment flows and stocks through thegeneral reporting system. Information from thesurvey on direct investment is used forestimating reinvested earnings. A geographicalbreakdown is available.

Owing to significant changes in the statisticalcollection system, the revision of historical datarequires estimation.

7.2 Definition

Italy complies with the recommendations of theBPM5 and the harmonisation proposals madeby the Working Group on Balance of Paymentsand External Reserves (the former Task Forceon Financial Flows and Stocks Statistics).

Transactions between affiliates are recordedunder direct investment. All short-term transactionsbetween direct investors and affiliates areincluded in direct investment. Long and short-term trade credits between direct investors andaffiliates are included in direct investment.


Chapter 4.8 Italy

Special purpose entities are included in directinvestment. Equity contributions in terms of realor financial assets and not implying any actualpayment are included in direct investment.


None.

7.4 Gaps

None.


No harmonisation is necessary.


No estimation is necessary.



Italy collects data on portfolio investment flowsthrough the general reporting system. Surveydata are used for portfolio investment stocks.The ISIN securities database is available. Ageographical breakdown is available at anyfrequency. Geographical allocation is madeaccording to the debtor principle on the assetsside; for liabilities, only the residency of the firstknown counterpart is available. Therefore non-euro area assets data are available according tothe issuer principle.

Owing to changes in the definition of directinvestment, the revision of historical data onportfolio investment requires estimation; stocksdata will not be used to provide flows. Thebreakdown of assets into intra and extra-euroarea is possible for historical data.

8.2 Definition

Italy complies with the recommendations of theBPM5 and the harmonisation proposals madeby the former Task Force on Financial Flows andStocks Statistics.

Service charges, fees and commissions are notincluded in portfolio investment. Adjustmentsfor accrued interest are made monthly.


None.

8.4 Gaps

None.







Italy collects data on: (i) daily margins forderivatives; (ii) premiums earned/paid forderivatives; and (iii) net payments at the close ofthe derivatives operation. All these data arecollected through the general reporting system.The residency of the counterpart is, on theassets side, the country of residence of theissuer or the country where the market islocated; for exchange traded derivatives, thecountry corresponds to the country in whichthe clearing house is located. On the liabilitiesside, the residency of the counterpart is thecountry of settlement. Breakdowns by sectorand by country are available on a monthly basis.No instrumental breakdown is available. Dataon a gross basis are available. Initial marginpayments are recorded under other investment.Daily margin payments are recorded as financialderivatives. For daily margins no breakdown isavailable between options-style and futures-style transactions.

9.2 Definitions

Italy complies with the definition agreed upon atthe �11th meeting of the IMF Committee onBalance of Payments Statistics� and set out inthe ECB recommendations.


In the settlement system it is not possible torecord derivatives transactions in the event ofdelivery of the underlying asset.


Chapter 4.8 Italy

9.4 Gaps

(See above.)


No harmonisation is planned.



10 Other investment


Italy collects data on MFIs� and other sectors�flows through the general reporting system. Formonetary authorities, flows are derived as achange in stocks. Breakdowns by sector,instrument and maturity are available on amonthly basis. Geographical allocation is basedon the transactor principle.

For trade credits, the time of recording is thedate on which settlements are reported to theUIC, in the case of prepayments. For post-payments, a distinction is needed betweenshort-term and medium/long-term trade credits.Since the former are only recorded by thesettlement system ex post, they have to beestimated; this occurs in two stages: (i) aforecast of the total amount of goods to beexported/imported in the following 12 months;and (ii) an estimate of the post-payments sharefor each month and for each leg, based on theaverage share observed in the previous twoyears. The time of recording is derived from thetime distribution of trade credits recorded inthe previous two years. For medium/long-termtrade credits, the time of recording of post-payments is, in principle, the date on whichimports/exports occur, as reported to the UIC.Estimates are made to correct incompletedata.

For data before January 1999, MFIs� flows wereestimated from changes in the underlying stockswith adjustments for exchange rate valuation,and the geographical breakdown is estimatedon the basis of stocks data.

The data collection system for transactionssettled through TARGET has changed sinceOctober 2000. One of the most importantcharacteristics of the new system is thattransactions carried out through TARGET areidentified separately. Consistency checksbetween transactions, as reported by banks, andsettlements, as reported in TARGET accounts,are feasible. In addition, partial omissions inreporting of original transactions by residentMFIs are more difficult. Previously, transactionssettled through TARGET were lumped togetherwith other transactions settled indirectly.

The new data collection system gives greaterattention to the geographical allocation of flows.In most cases, the banks settle their own or theircustomers� transactions directly throughTARGET. In the new data collection system theyhave to report information on both thecounterpart and the settlement country. Thisprocedure makes it easier to check andcompare the reported geographical breakdownwith that derived from the change in theTARGET positions.

10.2 Definition

Italy complies with the recommendations of theBPM5 and the harmonisation proposals madeby the Working Group on Balance of Paymentsand External Reserves (the former Task Forceon Financial Flows and Stocks Statistics).

Foreign currency notes, coins, bond lending,repos and financial leasing are included underother investment. Bond lending and repos areconsidered as collateralised loans; the latter aremuch more significant than the former. Amongrepos, �genuine� repos are predominant.


None.

10.4 Gaps

None.




Chapter 4.8 Italy


Trade credits and life insurance premia arepartially estimated.

11 Reserve assets



11.2 Definition

Italy complies with the recommendations of theBPM5 and with the national definition of reserveassets approved by the Governing Council inMarch 1999.

The instrumental breakdown is available on amonthly basis; financial derivatives are recordedon a net basis. Reserve asset flows are derivedfrom the change in end-of-month stocks data.Balances denominated in foreign currencies areexpressed in the currency of denomination.Therefore, reserve assets are recorded at themarket price at the time of the transaction andconverted into euro at the relevant monthlyaverage foreign exchange rate.


None.

11.4 Gaps

None.







The collection system is based on monthlyreporting of pure stocks for monetaryauthorities and for MFIs� assets and liabilities.For other sectors, stocks are calculated bycumulating flows to a benchmark, taking into

account the change in valuation owing toexchange rates and market price movements.For portfolio investment assets, the benchmarkis based on the 1997 IMF Co-ordinatedPortfolio Survey, while the benchmark for otheritems is a 1988 survey (data on money marketinstruments which are not mandatory in theIMF survey are also provided). The UIC willconduct a survey of direct and portfolio stockson a yearly basis. The survey will collectinformation on stocks and on reinvestedearnings flows and, after further necessaryinvestigation, the direct Investment stock surveywill replace the old benchmark. Owing to thecollection and calculation method, the nine-month timeliness does not pose a problem; thei.i.p. is also published on a semi-annual basis.

Close co-operation and integration with theFinancial Account Unit guarantees that thecoverage and concept of the financial accountsand the i.i.p. are in line with regard to theexternal position.

12.2 Definitions

12.2.1 General

The definitions comply with the BPM5.

For direct investment, the directional principle isfollowed and reinvested earnings are included.

For portfolio investment, the valuation of theissuance of money market instruments is basedon the discounted price.

Data for financial derivatives recorded on agross basis are available; no valuation at marketprices is available.

For monetary authorities, flows are derivedfrom changes in stocks; the revaluation/devaluation of monetary gold adjustments arealso available and exchange rate adjustmentsare calculated.

For MFIs, both stocks and flows data areavailable; prices, foreign exchange and otheradjustments are derived.


Chapter 4.8 Italy

For all other sectors, stocks data are based onthe accumulation of flows.

Valuation is carried out on the basis of themarket price for listed securities and on thebasis of book value in all other cases.


The resident operator is asked to specify thepercentage of equity capital held after thetransaction. If the owned share is greater than10%, then investment is treated as �direct�. Inthis case, all the transactions between investorand enterprise are treated as direct investment,according to the directional principle. The non-equity-linked participations are also consideredas direct investment. Reinvested earnings areincluded.


This includes equity securities, debt securitiesand money market instruments that are notincluded under direct investment and reserveassets. Money market instruments are evaluatedat the discounted price.


The item complies both with the definitionagreed upon at the 11th meeting of the IMFCommittee on Balance of Payments Statisticsand with the ECB recommendations. Data on agross basis are available. No valuation at marketprices is carried out.


This item covers all the assets/liabilities notrecorded as direct investment, portfolioinvestment or reserve assets. The item includestrade credits, loans, and currency and deposits.


This item complies with the national definitionof reserve assets approved by the GoverningCouncil in March 1999 and to be applied from1999 onwards. Reserves include claims inforeign currencies on non-residents of the euroarea, gold, SDRs and the IMF reserve position.

End-quarter and end-year stocks data onreserve assets are valued at the middle marketprices prevailing at the end of the period. Goldis valued at the end-of-period market price (thefixing at 3 p.m., loco London). Conversion intoeuro is performed using the middle marketexchange rates prevailing at the end of theperiod.

There are no reconciliation problems withregard to the stocks of reserves owing torevaluation practices. At present monthly flowsof reserve assets are derived from changes inend-month stocks data (reported stocks dataare calculated using a �flow-oriented� procedure).Quarterly revaluation time series are available.Moreover, balances denominated in foreigncurrencies are expressed in the currency ofdenomination. As a consequence, prices andforeign exchange rate adjustments can becalculated.

The criterion used by accountants for thevaluation of gold stocks is different from thatapplied in the Italian b.o.p. In the case of thelatter, monetary gold is revalued monthly, usingthe market price (fixing at 3.00 p.m., locoLondon).


None.

12.4 Gaps

None.


No harmonisation is needed.


No estimation is performed.

13 Administration


Statistical Bulletins�Banca d�Italia - Supplemento al BollettinoStatistico, Indicatori monetari e finanziari, Bilanciadei pagamenti�: Orange series - (monthly)


Chapter 4.8 Italy

Ufficio italiano cambi - Bollettino Statistico,statistiche analitiche valutarie (monthly)

Other publicationsBanca d�Italia - Annual Report (end-May)Banca d�Italia - Economic Bulletin (publishedtwice a year: end-February and end-October)Banca d�Italia - The Manual of Italy�s Balance ofPayments: Statistical Sources and CompilationMethods - September 1996

13.2 Contributors

This country information was drafted by theECB�s Balance of Payments Statistics andExternal Reserves Division and subsequentlyamended and agreed with Italy. Enquiries of ageneral nature should be addressed to the PressDivision of the ECB. Enquiries specific to Italyshould be addressed to:

Mr. Francesco Vincenzo LoiUfficio italiano dei cambiStatistics DepartmentVia Quattro Fontane, 123I - 00184 ROMAItaly

Tel.: (0039) 06 466 34 354Fax: (0039) 06 466 34 629

Mr. L. Federico SignoriniBanca d�ItaliaResearch DepartmentVia Nazionale, 91I - 00184 ROMAItaly

Tel.: (0039) 06 479 23 713Fax: (0039) 06 479 23 611


Chapter 4.8 Italy


Chapter 4.9 Netherlands


De Nederlandsche Bank

Statistical Information and Reporting Department

General AffairsSection

ReportingSection

Automation and Administrative Organisation

Section

StatisticalInformation

Section

Governor

SupervisionMonetaryAffairs

Payment andInternal Affairs

Statistical Informationand ReportingDepartment

EconometricResearch andSpecial Studies

Monetary andEconomic Policy

FinancialMarkets

Departments

Directorates

Manager

Advisor




2.1 Introduction

De Nederlandsche Bank has been responsiblefor compiling full balance of payments (b.o.p.)statistics since 1945. It compiled the first fullb.o.p. for 1946.


Until 1981 the legal basis for the collection ofb.o.p. data was the Foreign Exchange Decree of1945, which established a general prohibitionprinciple that required prior permission for allcross-border transactions. The exchangecontrol regime gradually became more flexible,with a growing list of exceptions to the generalprohibition against cross-border transactions.In principle, the External Financial Relations Actof 1981 permits all external transactions unlessthese are explicitly prohibited. The legislationimposed a general obligation on banks and non-banks to report their external positions and alltransactions that are settled on the accountsheld with/by non-residents. In return, fullconfidentiality is ensured. In 1994 the ExternalFinancial Relations Act was revised to enableDe Nederlandsche Bank to exchangeconfidential data with the ECB.


All the statistical activities of De NederlandscheBank are centralised in the StatisticalInformation and Reporting Department. TheStatistical Information and ReportingDepartment consists of three sections � theReporting Section, the Automation andAdministrative Organisation Section and theStatistical Information Section � in addition toan auxiliary Secretariat Section. Around 70 ofthe 150 staff members are involved in thecompilation of b.o.p. statistics.

The Reporting Section receives data from allreporting agents and gathers information froma reporting population of approximately2,000 companies. In addition, special financialinstitutions (SFIs) account for approximately3,500 companies. Around 100 banks accountfor some 60-65% of the total turnover. If

problems are detected in the data, the reportinginstitutions are contacted for clarification.Around 40 staff members in the ReportingSection work on b.o.p. issues.

The Automation and Administrative OrganisationSection is responsible for processing andaggregating information via an elaborate system.The data are coded in-house, using asophisticated, fully-automated process whichsearches for identifying character strings withinthe alphabetical descriptions of reportedtransactions. Approximately 200 codes areavailable for cash data and around 160 areavailable for transactions data. Approximatelyhalf of the section (15 staff members) deal withb.o.p. statistics.

The Statistical Information Section is responsiblefor the final compilation of the b.o.p. and dealswith aggregated information, produces tablesand graphs, analyses the plausibility of figuresand is responsible for methodological issues. Itis also responsible for maintaining contact withboth internal and external end-users ofinformation. It has around 40 staff members,12 of whom are involved in b.o.p. statistics.


De Nederlandsche Bank draws up the goodsaccount in co-operation with StatisticsNetherlands (CBS), which provides tradestatistics (intra and extra-EU trade). Dataprovided by the CBS are adjusted for the c.i.f./f.o.b. margin and transformed into informationon a transactions basis according to definitionsset out in the 5th edition of the InternationalMonetary Fund (IMF) Balance of PaymentsManual (BPM5). When the Intra-CommunityTrade Statistical System (Intrastat) wasintroduced, the quality of trade statisticsdiminished, thus causing integration problems.The CBS National Accounts Department makessubstantial corrections to trade data, and DeNederlandsche Bank takes over thesecorrections. De Nederlandsche Bank providesthe CBS with statistics on income, services andfinancial transactions needed for thecompilation of the national accounts.



There are many platforms on which statisticalissues are discussed with the CBS. As far as theb.o.p. is concerned, De Nederlandsche Bankholds regular meetings with the CBS and theCentral Planning Bureau or CPB (the part of theMinistry of Economic Affairs which deals withmacroeconometric models). Issues such as dataquality and coverage, volume and price indices,and the choice of solutions are covered.Frequent meetings are held with the CBSNational Accounts Department to reconcilediscrepancies in the current account betweenthe national accounts and the b.o.p. Differencesin numbers cannot be explained fully bydifferences in definitions, partly owing to the useof different sources, which are generally moredetailed for the national accounts. Discussionsare being held about the implementation of theBPM5 and the System of National Accounts(SNA) in the CBS goods and services groups, forexample.

2.5 Users

Links with international organisations generallyfocus on the dissemination of Dutch b.o.p. dataand methodological issues. The CPB generallyuses national accounts data, although data fromDe Nederlandsche Bank are also used in theshort term and for forecasts. The b.o.p. is alsoused as input for the Rest of the World (ROW)account compiled by the CBS. Detailed b.o.p.data are obtained from De NederlandscheBank, especially on a quarterly basis.

Data are supplied to international organisations,such as the ECB, the Statistical Office of theEuropean Communities (Eurostat), the Organisationfor Economic Co-operation and Development(OECD), the IMF and the Bank for InternationalSettlements (BIS), on a regular basis.



The Dutch data collection system is a �closedsettlement system�. All changes in the externalaccounts of individual banks or non-banks areexplained by the full reporting of transactions

(flows). The balance of the external accounts atthe beginning of the period plus thetransactions during the period equal thebalance at the end of the period. The generalreporting system is complemented by othersources: the CBS supplies trade statistics; andthe Government reports on current and capitaltransfers.


(i) Banking sector: De Nederlandsche Bank isprovided with self-balancing reports on nostroand loro accounts and on over-the-counter(OTC) transactions in foreign banknotes.(ii) The non-banking sector: enterprises arerequired to provide self-balancing statementson accounts held with non-residents, includingopening and closing positions, with abreakdown of movements showing totalreceipts and payments per type of transactionand country. The information reported includesbank accounts abroad, inter-company currentaccounts and participation in internationalclearing/netting systems. There is also an annualsurvey of foreign direct investment stockscovering approximately 80% of the total, and afull survey every two years. Settlements whichdo not involve actual payments are alsoreported. Enterprises include SFIs, mainlyfinance and holding companies, which aresubject to special reporting requirements.(iii) Monetary authorities: De Nederlandsche Bankreports on reserve assets and other holdings aswell as on transactions of its clients (whichinclude government agencies).(iv) General government: reports are provided oncapital and current transfers (mainly EC andforeign aid).(v) Central Bureau of Statistics: monthly tradefigures are provided. These were originallybased on customs information and, from 1993onwards, figures for intra-EU trade are based ondirect reporting by importing/exportingenterprises.

3.3 Thresholds

For banks, payments and receipts of domesticbank customers above a simplificationthreshold of NLG 25,000 (or EUR 12,500) are



Table 1Reporting scheme for b.o.p. and i.i.p. data collection for the NETHERLANDS


reference period)

Balance of payments:MFIs NB/LR-forms Nostro and loro Monthly n 15 working days

accounts nA/B-forms Client transactions n Monthly n 15 working daysAR/BR/BB/BK-forms Counter transactions n Monthly n 15 working days

Enterprises n HI-form Accounts held abroad Monthly n 15 working days

I.i.p.:Enterprises n DIU/DIO n Direct investment n Yearly n 5 months

(equity)

Special financial BFI survey Balance positions n Yearly n 5 monthsinstitutions n

Custody Banks Depotenquête (8037-8039) n Portfolio investment n Yearly n 4 months

Banks and clearing Positions in financial n Financial derivatives n Quarterly n 20 working daysagencies derivatives (8050) n

reported by the customers themselves (but arecollected by the banking sector), stating thenature of the transactions. For transactions upto NLG 100,000 (EUR 50,000), banks reportany information which is available withouthaving to ask customers.

For non-banks, there is a monthly reportingobligation for enterprises (or groups of affiliatedenterprises) reporting a monthly turnover onforeign accounts above NLG 5 million(EUR 2,268,900). Enterprises (or groups ofaffiliated enterprises) with a monthly turnoveron foreign accounts below NLG 5 million areexempt from reporting.


A complete b.o.p. is available on a monthlybasis, with a full geographical breakdownavailable after approximately six weeks on acash basis and after approximately four monthson a transactions basis. Before final data ona transactions basis are available, a set ofdata is compiled based on estimates andapproximations from settlement data.

3.5 Timeliness

As far as banks are concerned, almost all aretimely reporters. However, some minor banksare not. Late reports are generally processedafter one month. Non-banks are more likely toreport late on their foreign or inter-companyaccounts, after one month. This implies that amonthly b.o.p. on a cash basis is produced aftersix weeks. Late reporting is generally processedby revising data for the month affected by theuntimely report. There are many smallcompanies which report late without thishaving a significant impact on figures.


The Dutch b.o.p. is compiled on a monthlybasis.

3.7 Data controls

There are different levels of data controls whichare linked to the level of aggregation of data. TheReporting Section conducts the first level ofchecks. The controls are performed at a micro-level of individual transactions and reportinginstitutions. An example of these could bechecks on loans, to verify whether repayments



eventually exceed the balances drawn, orchecks conducted on direct investment figures;flows data have to be consistent with the annualsurvey on stocks. At the second level, controlson aggregate data are carried out by theStatistical Information Section. Unexpectedresults trigger an analysis of suspicious figures,usually uncovering errors at a lower level ofaggregation. De Nederlandsche Bank is alsoworking on the implementation of amanagement information system for b.o.p.reporting, which is intended to determinewhether or not companies have reported, andwhether reported figures are in line with otheravailable sources of published information(annual reports, press releases and othersources).

3.8 Revision policy

The b.o.p. data are revised and corrected asnew information becomes available. Thishappens on an ongoing basis. The revisions andcorrections appear in the data only when theb.o.p. is compiled anew, which is done once amonth. Most revisions and corrections arecaptured within a quarter and tend to tail offthereafter.

3.9 Publication

The titles of the publications produced by deNederlandsche Bank and the URLs of theinternet Web sites on which data on b.o.p.statistics are published are listed in Sub-section 13.1. A release calendar is also availableon the statistics Web site.

4 Monthly key items


De Nederlandsche Bank provides monthlyb.o.p. data for all the key items. A euro area/non-euro area breakdown is available as well asa split by Economic and Monetary Union (EMU)assets and EMU liabilities for portfolioinvestment. For financial derivatives, transactionsare not separately collected for assets andliabilities. This figure is provided in net terms asan asset. Information on a cash basis is

available within six weeks, whereas data on atransactions basis are available withinapproximately 15 weeks. A preliminary b.o.p.on a transactions basis is compiled after sixweeks on the basis of estimations for trade ingoods.

No estimations are made for non-response.Coverage is usually sufficiently high after six weeks.


items

Data for the monthly key items are estimatedfor trade in goods on a transactions basis, andestimation is used for reinvested earnings, basedon direct investment, and for short-term tradecredits.


When trade data from CBS are not availablewithin six weeks, an estimate is made byextrapolating data from previous months, usinggrowth rates calculated on the basis ofinformation from the settlement system. Theextrapolation is performed country-by-countryso that an extra-EMU figure can be derived byaggregating the estimates for non-EMUcountries. The geographical breakdown is basedon that of the trade data of the previous year.Preliminary trade data on a transactions basisare usually available after 10 weeks. The dataare then revised twice: after the end of thequarter and after the end of the year.


Reinvested earnings, which are included both inthe income account and in the financialaccount, are estimated for each current year asthe average of reinvested profits over theprevious five years. The figures are revised oncethe actual data on reinvested earnings havebeen collected through the survey on directinvestment, which is conducted once a year.




No estimates are used.






No data on short-term trade credits arecollected through the settlement system. Alldata for this item are estimated. The estimatesare made using an econometric model whichrelates the supply of short-term trade credit (onthe assets side) to exports and the demand forshort-term trade credit (on the liabilities side) toimports. The model�s results effectively mimic aninventory process, whereby trade creditssupplied and demanded in a given month arecompiled from trade credits from the samemonth plus a certain percentage of the tradecredits from previous months. The percentageused declines for months further back, so as totake redemption into account.

5 Investment income


5.1.1 General

The collection of data on investment income ispart of the general reporting system (see Sub-section 3.2).


Data on reinvested earnings are collected throughthe annual survey on direct investment.





5.2 Definitions

De Nederlandsche Bank complies with therecommendations set out in the BPM5 and theharmonisation proposals made by the WorkingGroup on Balance of Payments and ExternalReserves Statistics.


There are no serious deviations from agreeddefinitions.

5.4 Gaps

No data are collected for income on moneymarket instruments (either paid or received) orfor reinvested income from investments inforeign collective investment institutions. Nodata are available on income from trade credits,although the amounts involved are deemed tobe relatively small.


De Nederlandsche Bank is planning toinvestigate the possibilities for estimatingincome from money market instruments on thebasis of stocks data.


Reinvested earnings from direct investment areestimated as the five-year moving average ofreinvested earnings in the previous years.Income from bonds and notes is transformedinto data according to the accruals principle,using seasonal adjustment.

6 Capital account


Part of the general reporting system (see Sub-section 3.2). The distinction between currentand capital transfers according to the BPM5 isproblematic, since it requires information onthe use of funds abroad whichis generally not available. De NederlandscheBank uses information from the EuropeanCommission (Eurostat) on European Commissionaccounts to provide a reasonable estimation ofthis distinction.

6.2 Definition

In principle, De Nederlandsche Bank complieswith the recommendations set out in the BPM5and the harmonisation proposals made by theWorking Group on Balance of Payments andExternal Reserves Statistics.




The acquisition/disposal of non-produced non-financial assets item cannot be distinguishedfrom the use of these assets and these are jointlyincluded in the services account. All aid todeveloping countries is included in the b.o.p.under current transfers.

6.4 Gaps

Coverage is poor in the case of other sectors.


No further harmonisation efforts are planned.

7 Direct investment


De Nederlandsche Bank collects data oninward and outward direct investment flowsthrough the general reporting system whichidentifies them separately. Information isstored on participation in capital, equity-relatedinvestments, (inter-company) credit and changesin current accounts. A combination of partialbiannual surveys (covering around 80% of thepopulation) and complete annual surveys onforeign direct investment stocks ensures fullannual coverage of direct investment stocks.

7.2 Definition

De Nederlandsche Bank complies with therecommendations set out in the BPM5 and theharmonisation proposals made by the WorkingGroup on Balance of Payments and ExternalReserves Statistics.


The 10% rule is not strictly adhered to. In theNetherlands direct investment is assessedaccording to effective control. This treatmentdoes not lead to significant deviations from theagreed concepts. If a large investment is foundto bear the features of a direct investment, theinvestor will be consulted.

7.4 Gaps

Final data on reinvested earnings are availablewith an 18-month time lag. Preliminary data are

available after around nine months, at whichpoint a provisional international investmentposition (i.i.p.) is compiled.




Reinvested earnings are estimated for thecurrent year (see Sub-section 5.6).



Part of the general reporting system (seeSub-section 3.2). A small number of banksreport transactions (purchases/sales, emissions,redemption and income) by ISIN code.

8.2 Definition

In principle, de Nederlandsche Bank complieswith the recommendations set out in the BPM5and the harmonisation proposals made by theWorking Group on Balance of Payments andExternal Reserves Statistics.

The geographical allocation criteria used aretransactor/transactor for flows and debtor/creditor for stocks. For foreign securities, thedistinction between securities issued byresidents of the euro area and those issued bynon-residents of the euro area was introducedat the start of 1999. Banks should � and to alarge extent do � �look through� internationalclearing and security depository institutionssuch as Cedel and Euroclear. As regards theparticular form of transactor principle applied,it is assumed that a broker becomes atemporary owner of the transacted security, andthus constitutes the counterparty. For secondarytrade, the country where the transaction iseffected � i.e. the country where the stockexchange is located � is regarded as thetransactor.


There are no serious deviations. Banks providedata for each transaction separately, including



own transactions and business on behalf ofcustomers. The banks classify transactions byinstrument themselves, unless they report byISIN code. Much is left to the banks� owninterpretation and guidance is needed for newinstruments. In general, there is regularcommunication between reporting institutionsand de Nederlandsche Bank.

8.4 Gaps

In the settlement data, no sectoral breakdown isavailable for transactions on the assets side. Thissectoral breakdown is derived from informationfrom money and banking statistics and othersources.




No estimations are used for portfolioinvestment, apart from the offsetting entryunder bonds and notes for income on anaccruals basis (see Sub-section 5.6).




9.2 Definitions

As from July 1999 data is reported byinstrument: options (including warrants),futures (variation margins), outright forwardsand foreign exchange swaps (forward legs only),forward rate agreements, interest rate swaps(only swaps where no principal is exchanged)and cross-currency interest rate swaps(including other swaps). For exchange tradedderivatives, the geographical allocation is madeaccording to the country where the exchange isbased or, in the case of a contract traded on aDutch exchange, the country of residency ofthe client. For OTC contracts, for which it isassumed that the resident party is always a bank(Monetary Financial Institution, or MFI), thecountry of the actual counterpart is used.


There are no serious deviations from thedefinitions given in the BPM5 or those agreedwithin the Working Group on Balance ofPayments and External Reserve Statistics.

9.4 Gaps

Currently, only banks (MFIs) report ontransactions in financial derivatives, both fortheir own accounts and for clients, according tothe latest international guidelines. Nevertheless,coverage is considered to be sufficiently high.




No estimations are used for financial derivatives.

10 Other investment


Part of the general reporting system (seeSub-section 3.2).

As from January 1999, the extra-euro areab.o.p. flows for the MFI sector are derived fromMFIs� balance sheets at the beginning and end ofthe period.

Transactions through TARGET are reported ona neutral code. Positions on TARGET arereported with position codes (with a distinctionbetween positions on euro area and non-euroarea countries). The net mutation on positions isreported under �Other investment, currencyand deposits, monetary authorities�.

10.2 Definition

In principle, De Nederlandsche Bank complieswith the recommendations set out in the BPM5and the harmonisation proposals made by theWorking Group on Balance of Payments andExternal Reserves Statistics.


There are no serious deviations from thedefinitions given in the BPM5 or those agreed in



the Working Group on Balance of Payments andExternal Reserves Statistics.

10.4 Gaps

No data are available from the settlementsystem on short-term trade credits. Both assetsand liabilities are estimated (see Sub-section4.2).




Transactions are estimated for short-term tradecredits (see Sub-section 4.2).

11 Reserve assets



11.2 Definition

Since January 1999 the Eurosystem�s definitionof reserve assets has been applied.


There are no deviations from the Eurosystem�sdefinition.

11.4 Gaps

None.





Data on pure stocks are collected throughsurveys for direct investment, portfolioinvestment and financial derivatives. Data onstocks of other investment are collectedthrough the settlement system. Data on reserveassets are collected from administrative sourcesat De Nederlandsche Bank.

For the annual direct investment survey, allcompanies that have been identified as beinginvolved in a direct investment relationship onthe basis of information from the settlementsystem are asked to complete a separate formfor each relationship. The form is limited toquestions on stocks and changes in stocks ofequity, such as retained/reinvested earnings.Data on stocks of loans and other forms ofinvestment capital are collected through thesettlement system. For each relationship, theactual direct investor and the direct investmententerprise are identified individually, along withtheir residency, thereby enabling assets andliabilities to be reclassified in order to complywith the directional principle.

Data on portfolio investment assets andliabilities are collected through an annualsurvey of Dutch custodians. This data issupplemented with information on Dutchsecurities registered with foreign depositories(such as American Depository Receipts) and onDutch holdings of foreign securities held withnon-resident custodians.

Data on financial derivatives are collectedthrough a quarterly survey of banks andclearing organisations. In the survey, adistinction is made by instrument and theresident sector (only for exchange-tradedcontracts).

12.2 Definitions

12.2.1 General

In principle, all data comply with the definitionsset out in the BPM5 and those agreed by theWorking Group on Balance of Payments andExternal Reserves Statistics. All positions arevalued at end-of-year market prices andexchange rates, except for direct investment,which includes book values if no market valuesare available.


The 10% rule is not strictly applied, although �in practice � quantitative differences arenegligible (see Sub-section 7.3).




In principle, all data comply with the definitionsset out in the BPM5 and those agreed by theWorking Group on Balance of Payments andExternal Reserves Statistics.


Since the start of 2000, De Nederlandsche Bankhas collected positions on financial derivativeson a quarterly basis. In the collection ofpositions, the same breakdown by instrumentand geographical attribution is used as for thecollection of transactions. No data on positionsis be collected for exchange traded futures, asall positions are assumed to revert to zeroowing to the practice of daily marking-to-market. All OTC positions are assumed to be onthe books of banks (MFIs).


In principle, all data comply with the definitionsset out in the BPM5 and those agreed by theWorking Group on Balance of Payments andExternal Reserves Statistics.


As agreed by the Working Group on Balance ofPayments and External Reserves Statistics, theEurosystem�s definition of reserve assets will beapplied for the first time in the i.i.p. for end-1998.

12.2.7 Deviations from agreed definitions

There are no serious deviations from agreeddefinitions.

12.3 Gaps

No data on direct investment stocks from SFIsare included. Survey data on direct investmentare finalised after 12 to 15 months. The data ondirect investment included in the i.i.p., which iscompiled nine months after the end of the year,are therefore provisional.

Data on stocks of money market instrumentsare compiled from a combination of pure stocksdata (for MFIs) and data on transactions (forother sectors). The annual survey of custodiansincludes pure stocks for all sectors for data fromend-1998 onwards.




As final data for direct investment stocksbecome available only after 12 to 15 months,preliminary totals are estimated by country andsector, based on the survey results that havebeen received at a certain time, for thecompilation of the i.i.p. after nine months.

Stocks of short-term trade credits are estimated(see Sub-section 4.2).

13 Administration


Statistical BulletinsStatistical BulletinAnnual Report

Additional articles in Quarterly Bulletins:�Adjustment of the presentation of the Dutchbalance of payments�, Quarterly Bulletin, June1994�The Dutch balance of payments according tonew international guidelines�, produced by H.Lub, J. M. Thoolen and F. E. M. Ouddeken(Quarterly Bulletin, June 1996)

Other�The Balance of Payments�, a booklet from the�blue information series�, DNB, 1997 (fourthedition)�The Netherlands international directinvestment position�, De Nederlandsche Bank,Monetary Monographs No. 7, 1987�Methodology of the balance of payments in theNetherlands� � forthcoming.

Internet:General website of De Nederlandsche Bank:http://www.dnb.nl/Statistics website: http://www.statistics.dnb.nl/

13.2 Contributors

This country information was drafted by theBalance of Payments Statistics and External



Reserves Division of the ECB and subsequentlyamended and agreed with the Netherlands.Enquiries of a general nature should beaddressed to the Press Division of the ECB.Enquiries specific to the Netherlands should beaddressed to:

Mr. Raymond F.D.D. ChaudronDe Nederlandsche BankStatistical Information and ReportingDepartmentWesteinde 1NL - 1017 ZN AMSTERDAMNetherlandsE-mail: [email protected]

Tel.: (0031) 20 524 1924Fax: (0031) 20 524 2512

218ECB EU


ethods � Novem

ber 2000

Ch

apter 4.10 A

ustria

1O


Oesterreichische Nationalbank

President Vice President

Office of the President

Governing Board (Direktorium)

Central Bank Policy Department

Anniversary Fund

Internal Audit Division

Secretariat of the Governing Board andPublic Relations

Planning and Controlling Division

Financial Statements Division

Accounts Division

Legal Division

Management of Equity Interests

Money, Payment Systems and Information Technology Department

Section: Payment Systems and InformationTechnology

Systems Development Division

Technical Support Division

Payment Systems Division

Section: Cashier�s Division and Branch Offices

Cashier�s Division

Co-ordination of Branches

Printing Office

Balance of Payments Division

Banking Statistics and Minimum Re- serveDivis ion

Investment Policy and Internal ServicesDepartment

Personnel Divis ion

Mail Distribution, Files andDocumentation Services

Section: Treasury

Treasury - Strategy Divis ion

Treasury - Front Office

Treasury - Back Office

New York Representative Office

Section: Organisation and Internal Services

Organisation Division

Administrative Division

Security Division

Section: Statistics

Section: Accounting

Section: Legal Matters and Management of Equity Interests

London Representative Office

Economics and Financial MarketsDepartment

Section: Economic Analysis and Research

Economic Analysis Division

Economic Studies Divis ion

European Affairs and InternationalFinancial Organisations Division

Foreign Research Divis ion

Brussels Representative Office

Section: Financial Ins titutions and Markets

Financial Markets Analys is and Surveillance Division

Banking Analysis and InspectionsDivis ion

Credit Division

Paris Representative Office

Office of the Governor

Unit

Future Unit


Chapter 4.10 Austria


2.1 Introduction

The Oesterreichische Nationalbank (OeNB) isresponsible for producing the followingmacroeconomic statistics: monetary, balance ofpayments (b.o.p.), international investmentposition (i.i.p.) and financial account statistics.

The OeNB has been responsible for compilingthe Austrian b.o.p. statistics since 1946. Thesystem for collecting and compiling the statisticshas altered over time to reflect the dramaticdevelopment of the international integration ofthe Austrian economy over the past threedecades and the liberalisation process whichtook place during the 1980s. The exchangecontrols in Austria were totally abolished on4 November 1991 and resulted in a completelyrevised data collection and compilation systemwith effect from November 1991. First figuresfrom the new system were published for January1992.

In order to adapt to recommendations laiddown in the 5th edition of the IMF Balance ofPayments Manual (BPM5) and to meet theadditional requirements deriving from Austria�sobligations to the European Commission(Eurostat) and to the ECB in the field of b.o.p.statistics, a major restructuring of the internalcompilation system took place between 1996and 1998. This was carried out withoutsignificant changes to the established datacollection system and without imposing anyadditional burden on the reporting agents.

Since the impact of external transactions on theAustrian economy is considerable, b.o.p.statistics are seen as an essential ingredient inmonetary, exchange rate and general economicpolicy. In order to improve the analytical valueof these statistics, as well as to meetinternational standards, such as thoseestablished by the International Monetary Fund(IMF), several conceptual and presentationalchanges were introduced. The system in placebefore the major statistical revision in 1991 hadbeen implemented in 1974. In 1978 the

definition of external reserves was brought intoline with the IMF standards. In 1982 thecoverage of the current account was extendedin the sense that the difference between tradefigures and payments for goods was included inthe current account and excluded from errorsand omissions.

The following chapters reflect the status of thecollection and compilation of b.o.p. statistics inAustria as of January 1998 (reporting period).The implementation of data requirementsoutlined in the EMI document entitled�Statistical requirements for Stage Three ofMonetary Union � Implementation package�, aswell as data requirements laid down in theBPM5 and the ESA 95, had been completed bythis date.


Resident banks and non-banks are obliged toreport all international transactions undertakento the OeNB under the Foreign ExchangeAct (Section 20 Devisengesetz, BGBl No. 162/1946) and later revisions (Novelle zumDevisengesetz 1/92 Section 20,3); reportingrequirements are published in so-called OfficialAnnouncements (Kundmachungen). Datareported by Austrian residents are only used forstatistical purposes. A strict confidentialityregime is applied.


The OeNB has a separate Statistical Department.The production of basic statistical information(primary statistics) is concentrated in twodivisions within this department, namely theBanking Statistics and Minimum ReserveDivision and the Balance of Payments Division.

The Banking Statistics and Minimum ReserveDivision is in charge of the compilation,publication and observation of bankingstatistics, statistics concerning investmentinstitutions, and interest rate statistics as well asthe BIS Banking Statistics. The Balance ofPayments Division is responsible for thecompilation, publication and analysis of data onAustria�s external economic relations, namely



its b.o.p., i.i.p., portfolio investment (flows andstocks) and direct investment (flows and stocks).The compilation and publication of financialaccounts statistics are carried out by theEconomic Analysis Division in co-operationwith the Accounting Department and theStatistics Department.

The Balance of Payments Division of the OeNBcomprises 40 staff members at present. B.o.p. andi.i.p. statistics are compiled and published by aunit composed of 11 members. The group issupported by a data collection unit responsiblefor reports received from banks and non-banks(16 members). The Head of the Division has onedeputy and is advised directly by theMacroanalysis and Quality Control Unit, which iscomposed of seven members. Administrativeduties are carried out by four staff members.

The Balance of Payments and IIP Statistics Unitis responsible for both the compilation,following international guidelines, and theanalysis of the following statistics: b.o.p., i.i.p.,direct investment survey as well as the portfolioinvestment position. The group also preparesfigures for national and international reports.

The Data Collection Unit is responsible for theavailability of reports by banks and non-bankswithin the time and in the format requested. Thegroup also prepares guidelines for the reportingagents and runs the master file of the securitiesdatabase (individual securities according to ISINcodes).

The Macroanalysis and Quality Control Unit isresponsible for the current quality control ofthe reporting system, including the preparationof estimation methods and contact withthe Data Processing Development Division. Inaddition, this group carries out the macroeconomicanalysis of the b.o.p. and i.i.p. figures, i.e. therelationship between the b.o.p., the i.i.p. and thefinancial accounts.


For the compilation of b.o.p. statistics, theOeNB co-operates with other statistical

authorities in Austria, but retains overallresponsibility for their production. The OeNBand Statistics Austria, the Austrian StatisticalOffice (Statistik Österreich), liaise to compiledata for the current account and, in particular,data relating to trade in goods items. The officialforeign trade statistics collected by StatisticsAustria have always been used in the b.o.p., aswell as in the national accounts. Severalexternal sources are used for the compilation ofthe Austrian b.o.p. In this context, as well as intheir capacity as users, the OeNB co-operatesclosely with Austrian economic researchinstitutes and with the Austrian Government.National accounts statistics are compiled byStatistics Austria. In this context, currentaccount data of the OeNB are used for thecalculation of the gross domestic product(GDP). An ongoing evaluation of the respectivemethods and figures is carried out by the OeNBand Statistics Austria. The aim is to achieveconsistency between the Rest of the Worldsector and the corresponding b.o.p. data.

Outside Austria the Balance of PaymentsDivision maintains close contact with othercentral banks which involves, inter alia, theexchange of data. Naturally, contacts with theECB have been of particular importance in thiscontext since the start of Stage Three ofEconomic and Monetary Union (EMU), giventhat the Balance of Payments Division has tofulfil reporting obligations vis-à-vis the ECB. TheOeNB has also developed close contacts toeastern European Countries. Among variousother forms of (bilateral) support, variousactivities are undertaken for the Joint ViennaInstitute, which was established by fiveinternational organisations (the BIS, the EBRD,the IBRD, the IMF and the OECD).

2.5 Users

B.o.p., i.i.p. and special direct investment dataare sent to the following internationalorganisations: the European Commission(Eurostat), the ECB, the BIS, the IMF and theOECD.





The current b.o.p. system, which wasintroduced in 1991, is a �closed system� which isself-balancing for the banking sector as well asfor the non-banking sector. Reports receivedfrom the banking sector comprise accountsheld abroad by domestic banks and accountsheld with domestic banks by foreign banks andnon-banks. The reports of non-banks compriseaccounts held abroad, inter-company workingbalances and clearing accounts. The system isbased on the continuous monitoring of foreignpayments.

The reports of banks and non-banks basicallyconsist of stocks at the beginning of the period,stocks at the end of the period and a completeand detailed classification of all credit and debittransactions that led to the change of the stocks.The classifications of transactions often containdetailed information such as the Austrian and/or foreign counterpart, the security concerned,the transaction country, etc. These reports haveto be produced for every combination ofcurrency, country and type of accounts relevantto the b.o.p. (short/long-term, deposits/loans,assets/liabilities, etc.). The stocks data are usedfor the compilation of the i.i.p. (mainly otherinvestment) and the transactions areincorporated into all areas of the b.o.p. Sometransactions that are not considered relevantfor the b.o.p. are also included in the i.i.p. asprice or other adjustments.

Information taken from a comprehensivecompany database is automatically used tomake correct sectoral allocations of reportedtransactions, particularly in the area of income,transfers and the financial account.

In addition, stocks data on portfolio investmentare collected from banks and non-banks for acomprehensive securities database. Thesecurities stocks data are used in combinationwith the securities database to make accrualcalculations for the flows statistics (portfolioinvestment income and offsetting entries in

financial account) and to check and, ifnecessary, correct the securities transactionsincluded in the above-mentioned stocks andtransaction reports. This reconciliation of flowsand stocks may also lead to a correction ofstocks data. Information from the securitiesdatabase is also used to derive automatically acorrect geographical, instrumental and sectoralallocation for the securities transactions andstocks. Additional details of this system aregiven in Sub-section 8.

Annual surveys are conducted in the area ofdirect investment stocks. Apart from itsincorporation into the i.i.p., the information isalso used to check information on directinvestment transactions. Data on direct investmentrelations between Austrian and foreigncompanies derived from the surveys are used toidentify automatically flows and stocks of directinvestment loans and flows of direct investmentincome reported elsewhere. The survey data arealso used to estimate reinvested earnings incombination with general economic indicators(such as nominal GDP) and expectations. In thearea of direct investment it is also commonpractice to use information from various newssources to anticipate and identify directinvestment transactions. In order to reduce thereporting burden for respondents, directinvestment cases below certain thresholds(below ATS 5 million (EUR 363,364) for directinvestment in the reporting economy and belowATS 10 million (EUR 726,728) for directinvestment abroad) only have to be reportedevery two years. These cases are surveyedalternately, i.e. one-half of those enterpriseswhose direct investment relations fall below theabove-mentioned thresholds fill in the reportingform in one year, while the other 50% of thoseenterprises report in the following year. Forthose enterprises, which do not report directinvestment stocks for a certain period, estimatesare made on the basis of the report of theprevious year.

Annual and quarterly surveys of trade creditsare incorporated both in b.o.p. and in i.i.p. statistics.



For the current account, commodity tradefigures are based on the official foreign tradestatistics; however, settlement data are animportant and timely source of information,especially for preliminary data on trade ingoods items. These settlement data are used forthe monthly b.o.p., while the commodity tradefigures are incorporated into quarterly andannual statistics.

For the travel item in the services item of thecurrent account, two external sources are usedin addition to the data taken from the generalreporting system. A private institute isconducting an annual survey on behalf of theOeNB to gather data on the travel expenditureof Austrians abroad. The results are mainly usedto improve the geographical allocation of thedebit side of the travel item, to determine theamount of goods bought by travellers abroadand to determine the purposes of their visits.Austria is also exchanging data with severalOECD countries in the area of foreign currencyexchanges of tourists.


(i) The banking sector: the following entities areincluded in the reporting obligations for thebanking sector: credit institutions, building andloan associations (Bausparkassen), enterpriseswhich carry out factoring business and allenterprises undertaking business similar to�banking�. According to the Foreign ExchangeAct (Kundmachung DL 1-3/91, 2/93, 1/96),banks are required to report (on a daily/monthly basis) all transactions carried out viathe domestic banking system, includingtransactions on behalf of their customers. Morespecifically, they report the following:� all settlements carried out through the

accounts of domestic banks held abroadand through the accounts of foreignbanks and non-banks held by domesticbanks as well as the beginning and end-of-month stocks of these accounts(Devisentableaumeldung); daily or weeklyreporting is possible if preferred by thereporting agent;

� all sales/purchases and (beginning/end-of-

month) stocks of foreign currencytransactions (Valutentableaumeldung, over-the-counter or OTC money); and

� monthly stocks of securities, as defined inthe BPM5, which banks acting as primarycustodians hold for their own account oron behalf of their resident and non-resident customers (Wertpapierstandmeldung).

In addition, banks (acting as a direct investorand/or as a direct investment company) arerequested to respond to an annual surveyconcerning direct investment if the value of thenominal capital of the direct investmentexceeds the threshold of ATS 1 million (EUR72,673) and 10% of overall nominal capital. Ifthe nominal capital does not exceed ATS 1million, but the balance sheet total of the directinvestment enterprise exceeds ATS 500 million(EUR 36,336,417) and the 10% criterion is alsofulfilled, banks also have to respond to thedirect investment survey.

(ii) The non-banking sector (enterprises andhouseholds not included in sub-paragraph (i)above): according to the Foreign Exchange Act(Kundmachung DL 1-3/91, 2/93, 1/96), non-banks are required to report all settlements andstocks on accounts held by banks abroad aswell as settlements and stocks of short-term andlong-term loans granted to non-residents orprovided by non-residents to residents on amonthly basis if the annual volume oftransactions exceeds a certain threshold(Auslandskontenmeldung). Stocks of fixed-termassets (deposits) and stocks of securities held bybanks abroad have to be reported by non-banks on a yearly basis.

Non-banking private companies and privatehouseholds (acting as a direct investor and/oras a direct investment company) are requestedto respond to an annual survey concerningdirect investment if the value of the nominalcapital of the direct investment exceeds thethreshold of ATS 1 million (EUR 72,673) and10% of overall nominal capital. If the nominalcapital does not exceed ATS 1 million, but thebalance sheet total of the direct investment



Table 1Reporting scheme for b.o.p. and i.i.p. data collection for AUSTRIA

Target respondent Name of Contents of reporting Frequency of Timeliness (numberpopulation reporting form reporting of days for sub-(e.g. MFIs, form mission after the end Menterprises, etc.) of the reference period)

MFIs n Devisentableaumeldung n Transactions carried out through Daily or weekly or 3 working days(einschl. Zusatzmeldungen) n MFI�s own accounts held abroad monthly (up to the(Foreign exchange reports and accounts of non-residents held choice of the(including supplementary n by these MFIs and stocks of these reporting agent) nreports)) accounts

MFIs n Valutentableaumeldung n Sales and purchases and stocks of Monthly n 10 working days(Foreign currency reports foreign currency (over-the-counter

money)

MFIs n Wertpapierstand- n Stocks of securities which MFIs Monthly n 7 working daysmelkdung (Securities n hold for their own account or for theholdings reports) n account of resident and non-resident

customers (MFIs acting as primarycustodians n n

MFIs n Zusatzmeldung für n Stocks of certificates of deposits not Monthly n 7 working daysDepotzertifikate n reported as securities which MFIs(Supplementary hold for their own account or for thereports for certificates account of resident and non-residentof deposits) customers

MFIs n Zusatzmeldung Stammdaten nKey data concerning �internal� Daily or weekly or n 3 or 7 working dayszur internen Wertpapier- n securities where no ISIN-code is monthly (depending n(depending on thekennnummer (Supplementary navailable and which are reported in on the nature of the nature of the underlying nreports for key data for connection with foreign exchange underlying report) n report) n�internal� securities) n or securities holdings reports

Non-banks n Meldung über Konto- n Initial report about the existence, Monthly n 10 calendar daysverbindung mit Ausländern nrespectively opening of deposit(Report on banking n accounts, loans or clearing accountsconnections with n held with non-residentsnon-residents) n

Non-banks n Auslandskontenmeldung n Stocks and transactions of deposit Monthly n 10 calendar days(Report on foreign accounts, loans or clearing accountsaccounts) n held with non-residents

Non-banks n Verrechnungs- (Verfügungs)- Transactions between a resident and Monthly n 10 calendar daysMeldung n a non-resident, in which the(Report on netting/ settlement is carried out by meansdisposal) of a netting of mutual claims and

liabilities or by means of directdisposal of funds this non-residentowes to the resident

Non-banks n Zusatzmeldung/ n Details to cross-border collective Monthly n 10 calendar daysSammelzahlung � n transactions that were carried outZahlstelle Ausland n through accounts held abroad orbzw. Zahlstelle n through domestic paying agents(Supplementary n (MFIs) and which were reported asreport/collective n a lump sum in a report on foreignpayment � paying n accounts or in a foreign exchangeagent in Austria) n report

Non-banks n Transithandelsgeschäfte n Payments received or effected in Monthly n 10 calendar days(Merchanting transactions) n connection with merchanting

Non-banks n Standmeldung/ n Claims against non-resident banks Annually n 3 monthsGebundene Guthaben n from short- or long-term tied(Report on balances deposits (�fixed-term assets�)of tied deposits)

Non-banks n Standmeldung/Wertpapiere Stocks of securities not kept in Annually n 3 months(Report on stocks of n custody accounts at domesticsecurities) n banks n

MFIs and non-banks n Direktinvestitions- n n Balance sheet data and Annually n 10 monthsbefragungen � Aktiv und n supplementary data (for instancePassiv (Direct investment n number of employees) to be suppliedsurvey � abroad and in n by resident subjects which arereporting economy) n direct investment enterprises and/or

have direct investments abroad

Non-banks n Unternehmensbefragng zum n Stocks and transactions of trade Semi-annual n 1 monthästerreichischen Aussen- n credits and advance payments inhandel � Quartale conection with goods. To be reported(Enterprise survey n by a selected sample of enterprisesconcerning trade in goods � with a quarterly breakdown (twoquarterly sample) n quarters to be reported in every

semi-annual survey

Non-banks n Unternehmensbefragung n Stocks and transactions of trade Annually n 5½ monthszum österreichischen n credits and advance payments inAussenhandel � Jahreswerte nconnection with goods. To be(Enterprise survey concerning n reported by enterprises which aretrade in goods � annual n not included in the quarterly samplesample) n (only annual figures).



enterprise exceeds ATS 500 million (EUR36,336,417) and the 10% criterion is alsofulfilled, non-banks also have to respond to thedirect investment survey.

In addition, companies have to submit quarterlyand annual surveys (covering a selected sampleand a full range, respectively) on trade credits.

(iii) General government: public authorities reportall transactions of relevance to the b.o.p. to theOeNB. In addition, some data which are usedfor checking purposes are received from theFederal Ministry of Finance (particularlyconcerning the area of current and capitalpayments of the public sector vis-à-vis EUinstitutions).

(iv) Monetary authority: the OeNB reports on theexternal monetary position and monthly flowsand stocks in the same way as the bankingsector. Special quarterly reports on stocks andflows are also compiled by the AccountingDepartment of the OeNB for b.o.p. purposes.These reports are mainly used to checkmonthly flows, to obtain data on an accrualsbasis and to calculate reserve assets for the i.i.p.

3.3 Thresholds

No exemption threshold exists for the bankingsector. However, a simplification threshold existsfor all transactions below EUR 5,500. Thesetransactions are reported with a special codeand the b.o.p. classification is carried out bymeans of estimations. This estimated itemallocation of payments below the thresholdconcerns almost all areas of the b.o.p. and is notseparately listed under estimation methods inthe following sections. The contributions of theseestimations to the various items can be significant.

The present threshold for reporting by the non-banking sector is EUR 2,500,000, based on theannual turnover in cross-border transactions.These transactions include inter-companyworking balances and clearing accounts. Inaddition, non-banks have to report merchantingtransactions if an individual transaction exceedsthe threshold of EUR 5,500.

Above the threshold of EUR 75,000, fixed-termassets (deposits) and portfolio investmentstocks held abroad require annual reports.


The b.o.p. is available monthly on a cash basiswith a limited breakdown according to keyitems and quarterly on a transaction basis withmore details for individual items as well as forpartner countries. Data for trade in goods itemsare currently only available after a long delay,owing to problems concerning the collection ofintra-EU trade figures via the Intra-CommunityTrade Statistical System (Intrastat). Therefore,the foreign trade data of Statistics Austria areonly used for the b.o.p. goods item on aquarterly basis. Settlement data are used for thegoods item on a monthly basis.

3.5 Timeliness

The OeNB compiles monthly b.o.p. data withinsix weeks of the end of the reporting period. Atthe same time, a country-by-countrygeographical breakdown is produced internally.However, the timeliness of complete b.o.p. datalargely depends on the availability of data fortrade in goods, which are provided by StatisticsAustria.


The Austrian b.o.p. is compiled on a monthlybasis.

3.7 Data controls

Formal data controls are carried out once datahave been received from reporting agents.These checking procedures for individualreports include controls concerningcompleteness, consistency and the eliminationof double reporting. Mistakes are corrected bytransmitting queries to the reporting agents.Once the checks have been completed a firstaggregation of the data is undertaken for bothflows and stocks.

This first aggregation leads to the data beingbroken down geographically and by currencyand for each reporting agent, as well as by thetype of report, and results in up to 300,000



separate data fields existing simultaneously atthis level of aggregation. At this stage theregional and currency classification scheme istransformed into building blocks for b.o.p.statistics and the i.i.p. The building blocks forthe b.o.p. contain up to 1,000 information fields,the regional building blocks from 10,000 to20,000 and the currency building blocks from6,000 to 10,000. Plausibility checks and datacontent checks are carried out at this stage ofthe compilation process. Among the othermethods applied, the development of differentitems which are economically linked to oneanother is compared (ratio analysis). In addition,significant transactions are checked on anindividual basis. Comparisons with previousperiods are used to assess plausibility. Again,reporting agents are asked for clarification inthe event of discrepancies being detected.

Once both formal and plausibility controls havebeen completed, a first �round up� ofpreliminary results is made for the referenceperiod. Any discrepancies detected at a laterstage are only included in the revision process(see Sub-section 3.8). After three years,individual reports are destroyed for reasons ofconfidentiality.

3.8 Revision policy

Regular revisions as of the reporting periodJanuary 1998:

Monthly (b.o.p.) data on a cash basis areproduced and published without subsequentrevision. The monthly key items data are usedmainly as a source of quickly availableinformation which is aimed at providing a roughassessment of trends based on theaccumulation of monthly data actually given.This type of data is not usually subject to majorcorrections. More detailed information on atransactions or an accruals basis is onlyincorporated in the quarterly and annual data.Consequently, the data for the three months donot add up to the quarterly data. Quarterly andannual data are published with a time-lag ofthree months in a �provisional� version.

Quarterly data are usually revised when datafor another quarter from the same referenceyear is published. This means that, for example,the publication of the data for the fourthquarter of a reference year coincides with arevision of the data for the first three quarters.These revisions of quarterly and annual dataare completed in June (T + 6 calendar months)of the following calendar year. At this point intime the latest available figures or estimates onreinvested earnings, trade credits and all otherrevisions that might have occurred for thereference year are incorporated. Then the datafor the reference year have the status of revisedfigures and are not changed for the following 12months. The last revision of quarterly andannual data is completed 18 calendar monthsafter the end of the reference year. Then thedata have the status of final figures. The mainreasons for the revisions are updates of figuresconcerning trade credits and direct investmentbased on information from the latest availablesurveys.

More frequent revisions of historical data:

New requirements, changes of the underlyingb.o.p. concepts or general improvements in thereporting and compilation system lead to morefrequent revisions of historical data. The lengthof the revision period may vary depending onthe circumstances.

3.9 Publication

The OeNB publishes monthly b.o.p. data on acash basis as well as revised quarterly andannual data on a transactions basis, includingtrade figures and investment income on anaccruals basis.

The titles of the publications produced by theOeNB on b.o.p. statistics are listed in Sub-section 13.1.

The main user of b.o.p. and i.i.p. data within theOeNB is the Economic Analyses Division, whichuses them for the purpose of general economicanalyses and for the compilation of financialaccounts.



In Austria b.o.p. and i.i.p. data are mainlyrelevant for the following institutions withwhich the OeNB exchanges data on a regularbasis:� the Austrian Statistical Office (Statistics

Austria) for the purpose of the System ofNational Accounts;

� government ministries and othergovernment institutions;

� the Chamber of Commerce, Chamber ofLabour and similar official institutions thatplay a major role in Austria�s social andeconomic system; and

� private research institutes (i.e. WIFO andIHS) for analysis and forecasting purposes.

The data sent to the WIFO are included in adatabase maintained by this research institutewhich is publicly accessible and which is seen asan important source of economic informationwithin Austria.

Apart from those main clients, data aredelivered upon request and/or on a regularbasis to students, private companies andcommercial banks. The latter mainly use thedata for the purpose of drafting brochures forpromoting Austrian bonds.

The main clients abroad are the ECB, theEuropean Commission (Eurostat), the IMF, theOECD and the BIS. Of particular importanceare the time series for Austria published on theBIS database.

Statistical data from the OeNB are available onthe Internet at the following address: http://www.oenb.co.at. This OeNB homepage includesall the b.o.p. and i.i.p. data that are published inthe monthly statistical bulletin and additionalb.o.p. data, in particular data concerning thecurrent account, travel and direct investment.Press releases from the Balance of PaymentsDivision are also available on the Internet.

Since the OeNB has committed itself tofollowing the rules of the Special DataDissemination Standards (SDDS), release datesare published in advance.

4 Monthly key items


In January 1998 (reporting date) the OeNBstarted to provide the EMI/ECB with aggregatedb.o.p. data according to the monthly key itemsdefined by the EMI document entitled�Statistical requirements for Stage Three ofMonetary Union � Implementation Package�.National monthly data are published six weeksafter the reference period. Since the mostserious timeliness problems relate to trade ingoods statistics, current account data areavailable on a settlement basis. Data for tradecredits are not available on a monthly basis, butare available on a quarterly basis.

The OeNB has decided to reduce the numberof items in the breakdown of the monthly b.o.p.due to the timeliness of six weeks which isrequired by the Implementation Package.Therefore, the checking procedures will bereduced for monthly data but will be expandedfor quarterly revised data. The OeNB compiles acountry-by-country geographical breakdownwith the same timeliness as the aggregatefigures, which is integrated into the overall dataprocessing work. The OeNB is in a position toprovide a euro area/non-euro area split forcurrent account data and to prepare an assets/liabilities euro area/non-euro area breakdownfor Stage Three of EMU.

Significant delays in the reporting ofrespondents, which would require estimatesdue to a lack of overall coverage of reporteddata, occur very rarely. No regular estimates orcorrections due to respondents� delays aretherefore necessary. Timeliness of respondents�reports is a much smaller problem than that ofthe correctness of reports. Revisions followinginquiries by the compiler, or followingcorrections sent by respondents themselves,can be substantial.




items


Since the official trade statistics of StatisticsAustria are not available within 30 workingdays, as required, the OeNB is using settlementdata for exports and imports derived from itsgeneral reporting system. These data are notentirely comparable with official trade statistics.Among other things, the settlement datainclude services components which cannot beseparated from the commodities component.

Settlement figures are always available on timeowing to the nature of the general b.o.p.reporting system and no further estimates haveto be made to calculate trade in goods figures atthe national level. The geographical breakdown,however, is estimated on the basis of the latestavailable trade statistics for former comparableperiods (mainly the same quarter of theprevious year). This geographical estimation iscarried out according to the consignmentprinciple and delivers data on a country-by-country basis. As far as trade statistics are used,the data apply the �special trade� concept.

The monthly trade in goods data (and thequarterly and annual data) are not seasonallyadjusted. Owing to the preliminary nature ofthe settlement data, c.i.f. to f.o.b. adjustmentsare not carried out either.

As is the case for all the monthly key items,monthly trade in goods figures are not revised.All additional information, including the tradestatistics of Statistics Austria for the referenceperiods, is only incorporated into the quarterlydata.

Data on trade in goods on a monthly basis,according to the definition given above (on asettlement basis), are available from thereference period January 1992 onwards andhave been published by the OeNB since thebeginning of 1998.


On a monthly basis, investment income isprimarily calculated on a cash basis, with theexception of direct investment income. Inaccordance with the requirements of theImplementation Package, reinvested earningsare included for the monthly data sent to theECB. This does not apply to the correspondingmonthly data published in Austria. The Balanceof Payments Division is of the opinion thatmonthly data should represent pure cash dataand that the inclusion of reinvested earningsleads to a bias in the data.

The flows are settlement data taken from thegeneral reporting system, which also provides acountry-by-country geographical breakdownfor all components. These data are alwaysavailable on time.

For portfolio investment income, the monthlyflows represent actual interest paymentsrecorded in the reference period. Noestimations are necessary for this area. Ageographical allocation (country-by-country)according to the issuer principle (actualcounterpart) is automatically derived on thecredit side of portfolio investment income byusing a comprehensive securities database. Allsecurities transactions are reported with theISIN number of the respective security. If asecurity does not have an ISIN number, thereporting agent can use an �internal� numberand give additional details on the security (typeof security, quotation, interest rate, etc.) in aspecial report. The connection with thesecurities database and a companies databasedelivers the country of the issuer of the securityfor the reported credit transaction. On thedebit side the country of settlement is used forthe geographical allocation of portfolioinvestment transactions. Essentially, the samegeographical allocation methods are used forportfolio investment income on a quarterly andannual basis, although the data are calculatedon an accruals basis for quarters and years.

Direct investment income is calculatedaccording to the accruals principle since it



includes estimates of reinvested earnings. Theseestimates are derived from the annual surveysof direct investment (mainly balance sheet dataof direct investment companies), from flows(dividend payments) taken from the settlementsystem and from the latest available informationconcerning general economic indicators andprofit and business expectations of enterprises.The estimates include a country-by-countrygeographical breakdown. The same data arealso used for quarterly direct investment income.

The monthly investment income data can bebroken down into the same sub-components asthe corresponding quarterly data. Portfolioinvestment income and offsetting entries in thefinancial account on an accruals basis arebasically calculated on a monthly basis.However, this is only done in the course of thecompilation of quarterly data and the finalresult is only available as a quarterly figure.


The offsetting entries for the estimates ofreinvested earnings (see investment incomeabove) are included.


Data for portfolio investment are settlementdata collected on a security-by-security basis inthe context of the general reporting system. Noother statistics are used to compile the data. Thegeographical allocation by issuer on the assetsside is derived in the same way as for portfolioinvestment income credits (see investmentincome above). On the liabilities side, thecountry of settlement is available as ageographical allocation.


No estimation methods for monthly data.


Trade credits are not included in the monthly keyitems, because only quarterly information is available.

There are no further estimation methods orother specific features for the remaining items ofthe monthly key items.

5 Investment income


5.1.1 General

All the data used for investment income areessentially part of the general reporting system(see Sub-sections 3.1 and 3.2). In order toobtain data on an accruals basis and with thedesired geographical allocation, several specialfeatures have been implemented for directinvestment income and portfolio investmentincome.

Concerning the estimation of reinvestedearnings for direct investment income and thegeographical allocation of portfolio investmentincome (i.e. actual counterpart for credits andcountry of settlement for debits), all thedescriptions given for monthly key items in Sub-section 4.2 also hold true for quarterly andannual data.




Portfolio investment income on an accrualsbasis is calculated on a security-by-securitybasis using the monthly security stocks reportsand a securities database which includes all therelevant information, such as exchange rates ofcurrencies, issuers, quotations, maturities,nominal values, outstanding amounts, interestrates and classification of the securities.Issuance and redemption prices are consideredin the accruals calculation in order to also treatzero bonds and deep discounted paperscorrectly. The accruals calculation is based onmonthly data, but the results are only availableon an aggregated level and suitable forpublication for quarterly data, which is alwayssummed up to produce the correspondingannual data. The result of the accrualscalculation cannot be considered an estimatedvalue, since it is based on in-depth calculationsand reported data. Revisions only occur whenthe underlying stocks and securities data arerevised or updated. For more information on



the use of the securities database, please refer toSub-section 8.1.

A sectoral breakdown for the offsetting entriesof accruals in portfolio investment (financialaccount) is derived from a companies databasewhich includes information about the sector ofthe issuer of a security. This information isautomatically processed in the security-by-security collection and calculation.



5.2 Definitions

In principle, the OeNB intends to follow therecommendations of the BPM5 and theharmonisation proposals agreed upon by theECB�s Working Group on Balance of Paymentsand External Reserves (the former Task Forceon Financial Flows and Stocks Statistics).

The following geographical allocation principlesare used in the area of investment income:� actual counterpart for portfolio investment

credits and for direct investment creditsand debits;

� country of settlement for portfolioinvestment debits and for other investmentcredits and debits.

A complete geographical breakdown (country-by-country) is achieved by using theseprinciples both for monthly and for quarterlydata.

The accruals principle for portfolio investmentincome has only been applied to quarterly andannual data from the first quarter of 1997onwards. Income on equity is derived from thegeneral reporting system and does not need anyfurther special processing. It also includesincome on investment in collective investmentinstitutions (CIIs) on an accruals basis. Incomeon bonds and notes and on money marketinstruments is calculated, entirely on anaccruals basis, from stocks (see Sub-section 5.1). The securities database used in thiscalculation comprises all kinds of securities,

with the necessary information for everysecurity. Average stocks in the periods underconsideration are used for the accrualscalculations. This is based on the assumptionthat securities are bought or sold, on average, inthe middle of the period.

Reinvested earnings are included in monthlyand quarterly/annual direct investment incomedata from 1992 onwards. The monthly data onreinvested earnings are exclusively compiled forthe purposes of the ECB. Estimates of reinvestedearnings are usually revised at least twice forquarterly/annual data, on the basis of the latestavailable information from direct investmentsurveys and other sources of data (see Sub-section 4.2). Once the final direct investmentsurvey for the reference year is completed(usually at T + 18 months), the correspondingfigures for reinvested earnings are alsoconsidered to be final.

Direct investment income on debt can also beautomatically identified by connectinginformation from reported flows (foreign/Austrian counterparts of the interesttransactions) with the companies database whichincludes information about direct investmentrelationships. Indirect relationships betweendirect investment enterprises are not included atpresent and interest on loans between theseindirectly affiliated enterprises cannot bedistinguished from other interest payments.

Other investment income mainly comprisesincome from deposits, loans between non-affiliated enterprises and other capital (i.e.arrears, real estate, etc.) both from banks andfrom non-banks. The interest share in financialleasing is also part of other investment income,since financial leasing operations are recordedas loans for which interest payments are alwaysfully covered.

All these other income figures are part of thegeneral reporting system, which also includesreports concerning deposits by non-banks withforeign financial institutions. Payments for suchdeposits are divided into capital and interest



components. Once a year stocks data on thosedeposits are received and reconciled with thereported flows.

Income on trade credits is not recorded withinother investment. It is indistinguishably includedin settlement figures for exports and imports ofgoods. However, it is assumed that the amountof interest on trade credits is not significant.

Income generated from reserve assets, asreported by the Accounting Division of theOeNB, is also recorded under other investmentincome. On a quarterly basis these data arecalculated according to the accruals principle.


Income on debt from indirectly affiliatedenterprises is recorded under other investmentand not under direct investment income.

5.4 Gaps

There are no gaps concerning investmentincome data.


The issue of income on debt from indirectlyaffiliated companies is currently underconsideration for possible improvements. Noexact deadline can currently be foreseen for thepossible resolution of this issue.


No estimation methods are used within the areaof investment income. The main sources for allthe data are reports from the settlement systemof the OeNB. Accruals for portfolio investmentare calculated security-by-security on the basisof stocks data, using a securities database.Accrual figures cannot therefore be consideredto be estimations.

6 Capital account


Part of the general reporting system (see Sub-sections 3.1 and 3.2).

6.2 Definition

In principle, the OeNB follows therecommendations set out in the BPM5 and theharmonisation proposals agreed upon by theECB�s Working Group on Balance of Paymentsand External Reserves (the former Task Forceon Financial Flows and Stocks Statistics).

The distinction between current and capitaltransfers is laid down in the general reportingguidelines of the OeNB, in accordance with theBPM5 definitions. Items such as debtforgiveness, migration and other capitaltransfers are all reported separately. Thereforeprivate sector capital transfers as well as theacquisition and disposal of non-produced non-financial assets can be clearly identified.

For public sector transfers, the coverage anddistinction of capital and current transfers isalso partly based on the general reportingsystem. In addition, information regularlyreceived from the Federal Ministry of Finance isused to record capital transfers vis-à-vis EUinstitutions. Data on current transfers are alsoprovided by the Federal Ministry of Finance.


As of January 1998 there are no major deviations.

6.4 Gaps

Migrants� transfers are generally difficult tocapture. Data are only partially available formigrants� transfers in other sectors and theacquisition/disposal of non-produced non-financial assets. The main problem in thecontext of migrants� transfers is the transfer ofportfolio deposits in connection with migration.The relevant flows information cannot besupplied by the reporting system ontransactions. However, in the course of thereconciliation of flows and stocks of securities,significant cases can be identified and correctedin the flows statistics as well. This is animportant improvement compared withprevious reporting years.


None.



7 Direct investment


The inclusion of the collection of data on directinvestment flows as an integral part of thegeneral settlement reporting system leads togood coverage and high-quality directinvestment data. In addition to settlement data,annual surveys of direct investment stocks andan up-to-date companies database are usedto check and clearly identify transactionsbetween affiliates. In order to achieve a correctgeographical allocation according to the countryof the actual counterpart, the reporting agentsare often contacted directly in order toinvestigate major transactions in the area ofdirect investment. This quality of coverage in thearea of direct investment is available both formonthly and for quarterly data from 1992onwards.

Data on trade credits are obtained fromenterprise surveys. It is not possible, however, toidentify trade credits between affiliatedenterprises.

7.2 Definition

In principle, the OeNB complies with therecommendations set out in the BPM5 and theharmonisation proposals made by the WorkingGroup on Balance of Payments and ExternalReserves (the former Task Force on FinancialFlows and Stocks Statistics).

The OeNB applies the 10% criterion and thedirectional principle to direct participations andhas started to develop a mechanism forcompiling data on indirect relationships.

Direct investment figures comprise transactionson equity, reinvested earnings and other capital(short and long-term) with the exception oftrade credits. Significant equity contributions inthe form of real or financial assets withoutpayments are usually included by directlycontacting and questioning the enterprisesconcerned. With regard to the issue oftransactions in equity securities, it is possible todistinguish clearly between direct investment

and portfolio investment based upon theinformation in the securities and companiesdatabases.

Special purpose entities are not subject to adifferent treatment since they are not significantin Austria.


Problems arise as a result of the separation oftrade credits between linked enterprises; tradecredits are available as a lump sum on aquarterly basis and are recorded under otherinvestment.

7.4 Gaps

None � the implementation of the methodologyfor reinvested earnings is based on theproposals made by the EMI�s Sub-group onestimation methods for direct investment.


None.


For information on the estimation of reinvestedearnings, see Sub-sections 4.2 and 5.2.



A comprehensive and reliable compilationsystem is used for portfolio investment flowsand stocks. The system is based on datacollection on a security-by-security basis usingthe International Securities IdentificationNumber (ISIN). The compilation system wasdeveloped during 1988-89 in order to improvethe reliability of portfolio investment data.Experience showed that instructions toreporting agents regarding the classification ofsecurities for b.o.p. purposes were proving tobe increasingly complicated in fast developinginternational financial markets. Therefore, thereporting by banks of transactions and of stocksof securities is now based on the ISIN code foreach individual security. Austrian banksappreciated this change, since ISIN codes were



already used for the settlement of securitiestransactions. Based on the reported ISIN codein connection with the securities database, allnecessary b.o.p. and i.i.p. classifications (byfinancial instrument, sector, country) and thereconciliation of flows and stocks (see Sub-section 3.2) are made.

This change in the compilation system made itnecessary for the OeNB to develop andmaintain a securities database. The mainexternal information contained in this so-calledmaster file is purchased from the Austrian andGerman National Numbering Agencies, i.e. theOesterreichische Kontrollbank (OeKB) and theGerman Wertpapiermitteilungen. While the OeKBprovides data on domestic securities andAustrian schilling or euro-denominatedforeign securities traded in Austria, theWertpapiermitteilung primarily delivers data onforeign securities and domestic securitiesdenominated in currencies other than theAustrian schilling or euro. Moreover, theAustrian banks reporting portfolio stocks andtransactions also have to supply informationconcerning �internal� securities which � to thebest of their knowledge � do not have an ISINcode. If information on the same security isreceived by more than one institution, then theOeKB data are usually given preference.Quotation information is obtained from theTelekurs. These external securities databasesform the starting-point for the internal masterfile constructed for b.o.p. purposes.

The Statistics Department generates an internalmaster file from these sources and fromadditional information provided by Austrianbanks. The internal master file used by theOeNB for the compilation of portfolioinvestment flows and stocks contains around150,000 debt securities and some 50,000equity securities, thus covering around 99% ofthe securities traded with Austrian residents ona cross-border basis. Not all the securities in thedatabase are actually involved in cross-bordertrading. Stocks and transactions are usuallyreported for approximately 50% of all thesecurities in the database for a certain period of

time. The database is updated on a weekly basis.Comprehensive quality checks andamendments are made by the Balance ofPayments Division in order to render theinformation received from external sourcessuitable for statistical purposes. These checkingprocedures comprise formal controls(completeness of information), as well asplausibility checks. The main source of qualityproblems regarding the information received onsecurities is the fact that the NationalNumbering Agencies maintain their databasesfor their customers (banks), and that the latteruse the information for their own businessneeds, which differ from those of statisticalcompilers. Therefore data fields which areparticularly important for statistical purposes(i.e. outstanding amount) are not always of thedesired quality and have to be checked in detail.

As for the compilation of harmonised euro areaportfolio investment aggregates, the OeNB is ofthe opinion that a securities database (masterfile) for statistical purposes should be generatedand maintained centrally for all EU MemberStates. Owing to the time-consuming qualitycontrols carried out on commercially availableinformation on securities, a centralised checkingprocedure would be most effective. Thiscentralised database should containinformation useful for all statistics required bythe ECB and not only those data necessary forb.o.p. purposes. Agreement should be reachedon a common definition of the content of such acentralised master file. The main advantages ofthe ISIN compilation system for portfolioinvestment flows and stocks are seen in theincreased accuracy and the higher degree offlexibility for adapting the compiled aggregatesto the new requirements, often without theneed to address further requests to thereporting agents.

8.2 Definition

The OeNB mainly applies the recommendationsset out in the BPM5 when compiling statisticson portfolio investment. The OeNB is in aposition to provide a country-by-countrybreakdown of portfolio investment.



The use of the securities database allows ageographical allocation of portfolio investmentassets according to the country of the actualcounterpart (issuer). On the liabilities side, thecountry of settlement is used for this purpose,because there is no information available onthe real holder of the security. As aconsequence, the transactions on the liabilitiesside are largely attributed to countries wheremajor international clearing houses areresident. The geographical breakdowndescribed is available on a monthly basis fromJanuary 1992 onwards. Offsetting entries inportfolio investment for the accruals calculatedin investment income are available on aquarterly basis, as from the first quarter of1997 (see Sub-sections 5.1 and 5.2).

The sectoral breakdown of portfolio investmentflows is achieved by using information from thesecurities database and from portfolio stocksreports. On the assets side, only the monthlystocks reports provide reliable informationabout the domestic sectoral composition ofportfolio investment data for a certain period.Portfolio transactions between domestic sectorsare not usually covered by the reporting systemfor flows, since no cross-border payments areinvolved. These flows can only be derived fromstocks data.

Service charges, fees and commissions are notincluded in portfolio investment if separatepayments are made for such components. Inmost cases, the reporting agents are able toidentify and label such payments correctly. Ifthey are indistinguishably included in paymentsfor portfolio investment capital, then noseparation is possible.

Trading in assets other than securities (particularlyloans) is not recorded under portfolio butunder other investment.


In principle, the OeNB aims to comply with therequirements set out in the BPM5 and theharmonisation proposals agreed upon by theECB�s Working Group on Balance of Payments

and External Reserves (the former Task Forceon Financial Flows and Stocks Statistics).

8.4 Gaps

None.


None.


There are no estimations included in portfolioinvestment.



Financial derivatives are largely covered by thegeneral reporting system for flows and stocks. Itdistinguishes between derivative instrumentsthat are issued as securities (with an ISIN code)and other derivative transactions (mainly over-the-counter (OTC) deals).

The former are reported as normal securitytransactions (and stocks) and are treated in thesame way as securities recorded under portfolioinvestment (see Sub-section 8 for informationon the use of a securities database to distinguishportfolio investment from derivatives and to derivea correct geographical and sectoral allocationfor financial derivatives, etc.).

The latter, i.e. other derivative transactions, arereported as special items in the context of thesettlement system. Reporting agents have todistinguish between financial derivatives withunderlying interest and financial derivativeswith underlying capital. They are also requiredto report the country of the actual counterpartand the domestic partner of the derivativestransaction in case this is not the reportingagent itself. This information is used inconnection with the companies database tocompile a sectoral breakdown.

9.2 Definitions

The recommendations set out in the BPM5 andthe proposals of the Working Group on Balance



of Payments and External Reserves (the formerTask Force on Financial Flows and StocksStatistics) are followed, apart from theexceptions mentioned in Sub-section 9.3.

For interest rate swaps, all three payments areusually recorded: the actual interest paymentand both swap payments with the country ofthe foreign swap partner. Fees and commissionsin connection with financial derivatives can beidentified separately and are recorded underfinancial services. Initial margin payments foroptions and futures are recorded under othercapital. Variation margins are recorded asfinancial derivatives. It is not possible to makethe distinction between options-style andfutures-style variation margins.

A geographical breakdown according to thecountry of the actual counterpart as well as asectoral breakdown are available on a monthlybasis. For financial derivatives without an ISINcode, the sectoral breakdown may not be totallyreliable where the domestic swap partnercannot be identified correctly. The followingdistinctions between instruments are possible:swaps of domestic bonds and notes (currencyand interest rate swaps), OTC deals, financialderivatives with an ISIN code. These categoriescan be subdivided further into derivatives withunderlying interest and derivatives withunderlying capital.

Data are available on a gross basis where thefinancial derivatives have been issued assecurities and have ISIN codes. In these casesfinancial derivatives with domestic issuers areconsidered to be liabilities and securities withforeign issuers are considered to be assets. Forderivatives without ISIN codes (mainly OTCdeals), only net figures are recorded and theseare allocated to the assets/credit side by default.


All deviations concerning the treatment offinancial derivatives have been removed withthe beginning of the year 2000. Consistenthistorical data back to 1992 are also available.

9.4 Gaps

Coverage of financial derivatives can beconsidered complete as from the beginning of1997. Currency and interest rate swaps, whichare thought to be the only significant kinds oftransactions in this context, are, in particular,very well covered.


None.


No estimation methods are used in the field offinancial derivatives.

10 Other investment


These items are part of the general reportingsystem (see Sub-sections 3.1 and 3.2). Recordedactual flows are used for the b.o.p. These flowsare extensively checked and reconciled withstocks.

All required geographical, sectoral, maturityand instrumental breakdowns are available on amonthly basis. This also applies to back datafrom January 1999 onwards. For the most part,the breakdowns are derived directly from thereports. Some sectoral breakdowns areachieved by linking the reported data (includingthose on the domestic counterpart) to acompany database.

For trade credits, quarterly and annual surveysare conducted. Trade credits are therefore notavailable on a monthly basis. Initial quarterlyfigures are often revised once the morecomprehensive annual survey is concluded.Owing to the nature of the surveys, the timingprinciple for trade credits is the change ofownership. No maturity breakdown is availablefor trade credits.

Transactions carried out through the TARGETpayment system are reported according to theguidelines of the general reporting system(particularly the Devisentableaumeldungen),



which also provides the basic rules for thereporting of payments carried out through allkinds of clearing or payment systems (i.e. EBA,TARGET, etc.). Due to the nature of everyclearing or payment system (i.e. carrying outpayments indirectly through as system or apaying agent), a substantial proportion of theTARGET transactions is consequently reportedwith neutral codes. If necessary, the residentbank that ordered or received the payment (ontheir own behalf or on behalf of theircustomers) is obliged to give detailedinformation on the economic nature of thesettlement via a supplementary report.

10.2 Definition

The OeNB generally applies the recommendationsset out in the BPM5.

Other investment figures also include foreigncurrency notes, financial leasing, bond lendingand repos. Concerning repos, there is nodetailed information available on the nature ormaturity of such transactions. In addition, it isnot possible to distinguish between repoactivities and collateralised loans.

Short and long-term loans between affiliatedenterprises can be identified and are recordedunder direct investment according to thedirectional principle.

Trading of loan portfolios is recorded underother investment, although the amounts inquestion have not been significant in recentyears.


All trade credits are included under otherinvestment (see Sub-section 7 on directinvestment).

10.4 Gaps

None.


None.


Trade credits are estimations based onquarterly (smaller sample) and annual (fullrange) surveys. Initial quarterly results can beconsidered to be estimations. The results of theannual survey are considered to be the finaloutcome for the reference year.

11 Reserve assets


Part of the general reporting system (seeSub-sections 3.1 and 3.2). The AccountingDepartment of the OeNB essentially makes thesame reports as the banking sector. These areused for all parts of the b.o.p. on a monthlylevel. Special quarterly reports on stocks andflows are received to enable recording on anaccruals basis and to improve the breakdown ofreserve assets. The regular monthly and specialquarterly reports are both incorporated in thequarterly b.o.p. The quarterly data only coverthe area of reserve assets.

11.2 Definition

In principle, the recommendations of the BPM5are applied for the recording of reserve assets.

A reliable instrumental breakdown is availableon a quarterly basis. Experience has shown thatsuch a breakdown is not always possible on amonthly level with a 30-day time-lag.

Financial derivatives within reserve assets aretheoretically available on a gross basis; however,no such transactions have yet been recorded.Gold swaps are recorded as repos.

Market prices are used for valuation. Theconversion into euro is carried out usingaverage monthly exchange rates.


None.

11.4 Gaps

None.




The OeNB is awaiting the outcome of thediscussions to be held within the ECB�s WorkingGroup on Balance of Payments and ExternalReserves and the ECB�s Statistics Committee.Proposals for harmonisation should also becarried out in such a way as to co-ordinateclosely with the work on the relevantaccounting issue.



Data for the i.i.p. are collected within thegeneral reporting system (see Sub-sections 3.1and 3.2). The securities database is used forportfolio investment stocks data in the sameway as for portfolio investment flows(geographical, sectoral and instrumentalallocation on a security-by-security basis, seeSub-section 8.1). The coverage and concept arein line with the quarterly/annual b.o.p./i.i.p.position of the financial account.

Pure stocks data are used for portfolioinvestment stocks and reserve assets. Acombination of stocks and accumulated flows isused for other investment (approximately 90%pure stocks data). The stocks data for otherinvestment is mainly derived from thesettlement system with the exception of tradecredits, which are based on quarterly andannual surveys.

Financial derivatives are also a combination ofstocks and accumulated flows (approximately20% pure stocks data).

In the case of direct investment, stocks of realestate are exclusively compiled by usingaccumulated flows (approximately 7% on theassets side and 2% on the liabilities side ofoverall assets and liabilities of direct investmentstocks, respectively). Additionally, since the finalresults of direct investment surveys onlybecome available after 18 months, accumulatedflows are used for the provisional version ofdirect investment stocks available after six to

nine months. This provisional version iscompiled as the sum of the stocks data of theprevious reference year plus the accumulatedflows (including reinvested earnings) of thereference year. For the final version of directinvestment stocks (T + 18 months), the purestocks data from the survey (also includingreinvested earnings) are used.

The required sectoral and instrumentalbreakdowns are covered by the collectionsystem for all parts of the i.i.p. from thereference year 1997 onwards.

A geographical allocation between euro areaand non-euro area data is possible to asubstantial extent. Essentially, geographical dataare collected on a country-by-country basis.However, the geographical breakdown will behighly incomplete or not available at all in thefollowing areas:� trade credits within other investment;� accumulated flows (for the most part)

used for other investment stocks;� real estate within direct investment; and� portfolio investment liabilities.

Austria participated in the Co-ordinatedPortfolio Investment Survey of the IMF for 1997,providing all the mandatory items. The datarequested for this survey could be compiledregularly on a quarterly basis with a timelinessof T + 6 months. Pure stocks data would beused for this task.

The data for the i.i.p. would also be availablequarterly. Technically these data are calculatedautomatically with a time-lag of three months.However, the procedures for checking andcorrecting data which are necessary to achievea quality comparable to annual data would takeat least six months.

12.2 Definitions

12.2.1 General

The recommendations and definitions set out inthe BPM5 are applied in the compilation of thei.i.p.




The directional principle is strictly applied inthe area of direct investment stocks. Reinvestedearnings also form part of the stocks data.Reconciliation adjustments between flows andstocks pose a problem for direct investment inparticular, because book values are primarilyused for stocks and market values for flows.Therefore, other adjustments (in the sense ofresidual adjustments) can be very high. Priceadjustments and other adjustments (in thesense of reclassifications) can be identified to alimited extent. Exchange rate adjustments arecalculated on the basis of average monthlyexchange rates for transactions and end-of-month exchange rates for stocks.

To the extent that accumulated flows are used(real estate and remaining provisional data aftersix months), market valuation can be largelyassumed for direct investment stocks. As soonas final results of surveys are available (T + 18months), only book values are used for directinvestment in the i.i.p., with the exception ofreal estate components. Market valuation fordirect investment stocks based on an �earning-method estimation� is compiled for a separatestatistical publication, but these figurescannotbe used for the i.i.p.


Stocks data on portfolio investment includeaccruals (calculated on a security-by-securitybasis). In that context, it is important to notethat interest rate components derived fromdiscount prices and redemption at higher pricesare included in the accruals calculation andtherefore in the stocks. This mechanism wasespecially designed for zero-coupon bonds, butit also works for all other kinds of short andlong-term securities.

Stocks and flows are closely reconciled.Exchange rate and price adjustments arecalculated security-by-security, using informationfrom the securities database (mainly quotationsand exchange rates). Other adjustments (sectoraland instrumental reclassifications) are alsoidentified automatically in this context. The

remaining differences are calculated as residualadjustments. Portfolio investment stocks arevalued at market prices.

On the liabilities side of portfolio investmentstocks, no geographical information is available(as opposed to flows, where the country ofsettlement can be used for geographicalallocation). On the assets side, portfolio investmentstocks can be allocated geographically accordingto the debtor principle, using the securitiesdatabase (see Sub-section 8.1).


Financial derivatives stocks mainly compriseaccumulated flows which largely consist ofOTC-style derivatives. For these instruments, noclear valuation principle can be identified, butthe result should be close to market values.Remaining financial derivatives stocks are basedon pure stocks of derivative securities withISIN codes. These stocks are highly reliableand are calculated at market prices. No otherkinds of financial derivatives are included inthe stocks data. The stocks are mainly attributedto the asset side by default, since there are nofully reliable stocks data available on a grossbasis.


As described in Sub-section 3.1, flows andstocks for accounts relevant for otherinvestment are combined in one report andtherefore have to be reconciled by thereporting agents (in the original currency).Price adjustments (mainly relating to assettrading), other adjustments (reclassifications)and residual adjustments (reporting errors orstock corrections) can be taken directly fromthe reports. Exchange rate adjustments arecalculated using average monthly exchangerates for transactions and for reportedadjustments, and end-of-month exchange ratesfor stocks. The same adjustment calculationscan be made for accumulated flows within otherinvestment. Other investment assets andliabilities are based on nominal values.




Reserve assets are directly reported by theAccounting Department of the OeNB in theform of special quarterly reports. These reportscomprise stocks, transactions and all kinds of adjustments. The data are taken directly fromthe accounting database. Stocks andtransactions of currency and deposits withinreserve assets are not included in the specialquarterly reports since they are alreadycovered by the regular monthly reports whichare carried out according to the guidelinesof the general reporting system. Discrepanciesbetween accounting principles and b.o.p./i.i.p.concepts are seen as being insignificant.The valuation is executed according to marketvalues using closing market prices for gold andclosing mid-market exchange rates.


The treatment of trade credits deviates fromrequested definitions, because trade creditsbetween affiliated enterprises are included inother investment.

12.4 Gaps

Gaps exist in the area of financial derivatives,which are only partly available.


None.


Accumulation of flows is used in the area ofdirect investment to obtain provisional stocks

data after six to nine months and to obtain stocksdata on real estate. Accumulated flows are alsoused to a small extent in other investment forloans and other assets/liabilities which arebelow the thresholds for direct reporting.

13 Administration


Statistical BulletinsStatistische Monatshefte, Monatsbilanz invorläufiger Rechnung (monthly)Focus on Austria (quarterly)Annual Report of the OesterreichischeNationalbank (annual)

13.2 Contributors

This country information was drafted by theBalance of Payments Statistics and ExternalReserves Division of the ECB and subsequentlyamended and agreed with Austria. Enquiries ofa general nature should be addressed to thePress Division of the ECB. Enquiries specific toAustria should be addressed to:

Mr. Robert ZorziOesterreichische NationalbankBalance of Payments DivisionOtto-Wagner-Platz 3A - 1011 WIENAustria

Tel.: (0043) 1 404 20 5413Fax: (0043) 1 404 20 5499

240ECB EU


ethods � Novem

ber 2000

Ch

apter 4.11 P

ortu

gal

1O


Banco de Portugal

Governor

Board of Directors

Advisory Board Board of Auditors

Off ice of the Governor and of

the Board

Secretar iatto the Board

BankingSupervisionDepartment

EconomicRes earch

Department

Markets and ReserveManagem entDepartment

Paymentsystems

Department

Statist icsDepartment

Treasury andIssue

Department

Control andAccounting Department

InternationalRelations

Department

Hum anResources

Department

LegalServices

Department

Organisation and Information

Department

AuditDepartment

SupportServices

Department

Balance of PaymentsStat istics Division

Monetary and FinancialStatist ics Division

National and FinancialAccounts Divis ion

Methodologiesand StatisticalAnalysis Unit

Statist icalProduction

Management Unit

BankReporters

Unit

DirectReporters

Unit

� statist icalmethodologyapplicable toBOP and IIP

� stat istical andeconom icanalysis of data

� management of theBOP/IIP informationsystem

� process ing andcompilation ofBOP/IIP statistics

� reports to internationalorganis at ions

� process ing ofinform ation reportedby direct reporters

� validation� quality control

� process ing ofinform ationreported bybanks and of inform ationconcerningportfolioinvestm ent

� validation� quality contro l

General Statist ics Division


Chapter 4.11 Portugal


2.1 Introduction

The Banco de Portugal has been responsible forcompiling and producing the Portuguesebalance of payments (b.o.p.) statistics since1963. Between 1948 and 1962 the Inspecçãodo Comércio Bancário para as InstituiçõesBancárias (Banking Supervisory Authority) wasresponsible for their collection. Further to thefull liberalisation of foreign exchange regulationsand the commitment by Portugal with regard tostatistical harmonisation at the European level,a new methodological and statistical productionsystem was introduced in 1993 in close co-operation with the banking community.


The legal basis for the compilation of b.o.p.transactions is the Organic Law of the Banco dePortugal (Law No. 5/98 of 31 January 1998).This law allows the Banco de Portugal torequest information from any public or privatebody for statistical purposes.

The Banco de Portugal is authorised to collectdata from both banks and non-banks (directreporters and official sector) and Decree LawsNos. 13/90 of 13 January 1990 and 176/91 of14 May 1991, as amended by Decree Law No.170/93 of 11 May 1993and Notice No. 5/93 of15 October 1993, impose a general obligationon banks and non-banks to report b.o.p. transactions.


The Balance of Payments Statistics Divisionwithin the Statistics Department of the Bancode Portugal is in charge of the methodology,compilation, production and analysis of theb.o.p, the i.i.p. and the template on internationalreserves and foreign currency liquidity. Itconsists of four units: the Methodologies andStatistical Analysis Unit, the Statistical ProductionManagement Unit, the Bank Reporters Unit andthe Direct Reporters Unit, together with anauxiliary Secretariat.

The Methodologies and Statistical Analysis Unitis responsible for the development of the

statistical methodology applicable to thePortuguese b.o.p., the i.i.p. and the internationalreserves template, and for the statistical andeconomic analysis of the data. It has four staffmembers.

The Statistical Production Management Unit isresponsible for the development andmanagement of the b.o.p./i.i.p. informationsystem, the processing of the information, thefinal stage of the compilation and the maintenanceof the Statistical Information Database (which isused for data dissemination). It has a staff of six.

The Bank Reporters Unit deals with theprocessing, validation and quality control ofboth information reported by banks andinformation on portfolio investment. It haseighteen staff members divided into eight teams.Data received from banks account for 75% ofthe monthly b.o.p.. Most of the information isreported via a file-transfer system. Only a fewbanks still send data on disks (diskettes).Around 1.5 million records are received everymonth.

The Direct Reporters Unit comprises elevenstaff members (in four teams) who are in chargeof the processing, validation and quality controlof statistical reports received from around1,000 direct reporters and of data on stockssurveys, i.e. direct investment and trade credits.The reporters send data to the Banco dePortugal on disks and by e-mail, but also onprinted forms in the case of small companies.The Oporto branch is also involved in thereception and validation of both data on directreporting companies and data on stock surveys,with a staff of seven.


Several institutions provide the Banco dePortugal with supplementary information onsome b.o.p. items. The Instituto Nacional deEstatística (INE National Institute of Statistics)supplies trade figures corresponding to physicaltransactions involving merchandise, on thebasis of which estimates are made for the goodsitem in the current account. The INE and the



Direcção-Geral do Turismo (Directorate-Generalfor Tourism) provide additional data for the travelitem. The Bolsa de Valores de Lisboa (LisbonStock Exchange) provides the Banco de Portugalwith information on quotations for listedsecurities, which is useful for the foreign portfolioinvestment item. The Direcção-Geral do Tesouro(Treasury) supplies data on the externaltransactions of general government sector.

2.5 Users

The Banco de Portugal maintains regularcontacts to users such as the Ministry of Financeand the Conselho Superior de Estatística(Higher Council for Statistics), which isresponsible for the co-ordination of statisticsproduced in various areas, e.g. between theBanco de Portugal and the INE. Regularcontacts are maintained to users/suppliers ofdata through bilateral meetings. The b.o.p. isalso used in the production of the nationalaccounts by the INE, particularly the ROWitem, and in the production of the nationalfinancial accounts, by the Banco de Portugal.

Data in compliance with the standardcomponents of the 5th edition of the IMFBalance of Payments Manual (BPM5) are suppliedto international organisations, such as the ECB,the European Commission (Eurostat), the IMF,the OECD, the BIS and the United Nations, on aregular basis.



The Portuguese data collection system is basedon a �settlements system�, with transaction-by-transaction reporting, covering credit and debitflows that affect the country�s external position,being applied by banks and direct reporters.

This reporting system is complemented byother sources of information, some of which arevery important for the elaboration of the b.o.p.on a transaction basis:� trade statistics are obtained from the INE;� estimates for the travel item are derived

from tourism statistics provided by theINE and the Direcção-Geral do Turismo;

� security-by-security databases both ondomestic and on foreign securities ensurecompliance with the accruals principleregarding portfolio investment income;

� reinvested earnings are obtained fromsurveys on direct investment stocks;

� a security-by-security reporting sub-system on portfolio transactions is thesource used in the compilation of theportfolio investment item;

� a monthly survey is the source used forcompiling the financial derivatives item;

� monthly trade credits are estimated fromquarterly surveys among key Portugueseexporters/importers.

Banking statistics on the banks external positionsare used for compiling data on the monetaryfinancial institution (MFI) sector within the otherinvestment component. The accounting registersof the Banco de Portugal are used to derive dataon reserve assets and on the Monetary Authoritysector within the portfolio investment and theother investment items.


(i) Banks are required to report the followingtypes of external transactions: those carried outon behalf of their resident and non-residentcustomers or on their own account, whetheracting as an intermediary between a non-resident (bank or non-bank) and anotherresident bank, or carrying out interbankoperations affecting an external position. Banksmust also report the opening and closingbalances of accounts they have abroad (assets)and accounts held in Portugal, by non-residents(liabilities), including a breakdown by currencyand country.

(ii) Direct reporters: general direct reportersreport all transactions with non-residents,whether settled through a resident bank or not.Residents holding accounts abroad must reportsettlements via non-resident banks. Residentsholding current accounts with non-residentsmust report all settlements cleared through



Table 1

Reporting scheme for b.o.p. and i.i.p. data collection for PORTUGAL


reference period)

MFIs, enterprises n n N External Transactions n n nN Detailed external N Monthly n nN 10 working days(GDR) N Reporting, External n n n n nNflows and positions n n n n n n n n n n n n N

Positions Reporting n n n n n N

Enterprises, individuals NStatistical formsn Deposits abroad, loans, nMonthly n nN 10 working days n direct investment, real n n

N estate investment, n n NN nettingn n n N

MFIs N MFI�s balance sheet N Monthly external n n n nMonthly n nN 10 working dayspositions N

MFIs, depository n n N Integrated System for N All portfolio investment Monthly n 12 working daysinstitutions, enterprises n Securities Statisics N transactions on aN mindividuals N security by security m

basis N n n n n n N

MFIs, insurance n n n N FDI surveys N FDI stocks N Biennially n nN30 days after n nNcompanies, non- n n n nN receiving the n nNfinancial enterprises n nN questionnaire n nnNNational Statistics n n n Estimate on trade n nN Monthly n nN 35 days (5 weeks)Institute N statistics N

Non-financial n n N N Trade credits n n n N Quarterly n nN 60 days (2 months)enterprisesn n n n n n n n n N

MFIs N Financial derivatives survey Financial derivatives NMonthly n nN 10 working days

Banco de Portugal N Daily external positions Daily n n n nN 1 day N

those accounts. Data are also collected forenterprises/households on external credits andloans, inward and outward direct investmentand real estate investment.

(iii) Enterprises: data on stocks surveys fordirect investment, both abroad and in Portugal,and trade credits are collected from enterpriseswith external relations in these areas.

(iv) Securities custodians: Resident securitiescustodians provide information about portfolioinvestment transactions/positions on domestic

securities on behalf of their non-resident clientsand on foreign securities on behalf of theirresident clients. MFIs are also compelled toreport transactions/positions on their ownaccount. Investors operating through non-resident custodians have to report directly theirtransactions and stocks data.

(v) Other sources:the Direcção-Geral do Tesouro (Treasury)reports data on the external transactions ofgeneral government;



the Instituto Nacional de Estatística � (INENational Institute of Statistics) reports overallstatistical data on international trade (goods);

the Banco de Portugal supplies data on itsexternal operations (Accounting and OperationalDepartments) and on MFI�s external positions(Statistics Department � Monetary and FinancialStatistics Division).

3.3 Thresholds

A general simplification threshold of EUR 5,000(approximately PTE 1 million) is set, belowwhich some information may be optional (suchas the transaction country or type oftransaction), although the case-by-case reportingsystem is still compulsory. Transactions belowEUR 5,000, which are not classified, aregrouped and distributed according to thedistribution of the current and capital accounttransactions between EUR 5,000 and EUR12,500.

The portfolio investment collection system hasa simplification threshold of EUR 500 million(approximately PTE 100,000 million). Allreporting institutions whose monthly transactionsdo not reach EUR 500 million (approximatelyPTE 100,000 million) and, at the same time,have less than EUR 500 million (approximatelyPTE 100,000 million) in outstanding amountsreport only once a year.


The Banco de Portugal compiles and producesa monthly Portuguese b.o.p. on a transactionsbasis, with a large detailed sectoral andgeographical breakdown for some items, whichis first released on the Web site of the Banco dePortugal and subsequently published in theStatistical Bulletin. A less detailed b.o.p. on amonthly basis is also available and published inthe Monthly Economic Indicators.

3.5 Timeliness

The reporting agents have ten working daysfrom the end of the reporting period (month)within which to submit data to the Banco dePortugal. For the portfolio investment collection

system, the deadline is the twelfth working day.The Balance of Payments Statistics Division hasuntil the tenth working day of the followingmonth to produce the reports for the variouspublications. Monthly b.o.p. data (on atransactions basis) are available within sixweeks. They include estimates for tradestatistics, which are received from the INE witha delay of five to six weeks (preliminary statisticson external trade are sent to the Banco dePortugal within ten weeks), for the travel item,for the accruals of portfolio investment income,for trade credits and for reinvested earnings ofdirect investment.


The Portuguese b.o.p. on a transactions basis iscompiled on a monthly basis.

3.7 Data controls

For the information reported via the settlementsystem and the portfolio investment system,there are different levels of checking controls.First, data are checked for errors concerningthe protocol and label (e.g. file name, recordingmonth or number of records) by means of anautomatic procedure for data sent by filetransfer, and on a PC for data sent on disk or inpaper form (after being entered on a PC).

Second, quality controls are incorporated inboth procedures in order to validate codingerrors, such as account, statistical classification,currency and country; there is also an implicitplausibility check known as �meaningfultransaction�. Other controls are carried out inorder to achieve consistency between flows andpositions, to check transactions involving twoor more resident banks, to validate data frombanks and companies for those enterprises withthe status of a direct reporting company oraccounts held abroad, and to check settlementsfrom banks with portfolio investment data fromcustodians. Additional checks are made in orderto control the evolution of a time series fora specific item (within a specific bank).Amendments are made whenever reporterssend further corrections.



Regarding trade in goods and MFI�s transactions,data on settlements are also used for checkingpurposes.

Data from the other sources are checked inorder to identify any inconsistencies within theinformation, with the other items of the b.o.p.,and in relation to their evolution. In addition,other external sources, such as securities clearinghouses, securities national institutions, otherstatistics, newspapers, banks� and companies�accounting reports and reports of associationsin the economic sector are used for qualitycontrol purposes. The BIS database is used tocheck the quality of data obtained from the reportingsystem on deposits held abroad by residents.

3.8 Revision policy

Monthly data are revised on a quarterly basis, atthe end of each quarter and at the end of theyear. The data for the first six months arerevised once more at the end of the first half ofthe year. For example, in March data for bothJanuary and February will be revised, in Junedata for January to May will be revised, and inDecember data for all months of the year will berevised (as well as data for the previous year, ifnecessary). The annual b.o.p. becomes definitiveafter three years.

3.9 Publication

Data on the b.o.p. are published monthly andannually. The titles of the publications producedby the Banco de Portugal on b.o.p. statistics arelisted in Sub-section 13.1. Before thedissemination of those publications, a firstdisclosure of b.o.p. statistics is made on theInternet (Web site: www.bportugal.pt). Usually,users are informed in advance of the date onwhich publications will be made available. The�Statistical Bulletin� regarding a certain monthcontains b.o.p. data for the previous month,while in the �Monthly Economic Indicators�,b.o.p. data refer to two months before. TheBanco de Portugal (B.o.p. Division) also has acommitment to the IMF�s Special DataDissemination Standards (SDDS) regarding thedissemination both of b.o.p. and i.i.p. statisticsand of the template on international reserves

and foreign currency liquidity .

B.o.p./i.i.p. data users within the Banco dePortugal include the unit in charge of financialaccounts (for the production of new statistics)in the Statistics Department, the EconomicResearch Department (regarding the economicanalysis) and the International RelationsDepartment (in the field of co-operation withthose African countries where Portuguese is anofficial language). The b.o.p. statistics producedby the Banco de Portugal are also useful for theactivities of some ministries, such as theTreasury and the Ministry of the Economy, andfor private economic agents (e.g. banks,companies and universities).

4 Monthly key items


The Banco de Portugal can provide full b.o.p.key items data in line with the timelinessendorsed by Guideline ECB/2000/4 of 11 May2000. A euro area/non-euro area breakdown ispossible for all the items in the b.o.p. statistics.

In the case of delays by the respondents, whichdo not occur often, estimates are produced bythe B.o.p. Division.


items

The monthly key items include estimations oftrade in goods, travel, insurance, portfolioinvestment income, reinvested earnings andtrade credits.

4.2.1 For trade in goods and services

Data on trade in goods are obtained from theINE. The figures on imports and exports relatedto intra-EU trade are derived from the dataobtained within the Intrastat system; for extra-EU trade, data are derived from customsdeclarations. The reference time underlyingthese statistics is the time of the physicaltransaction in the goods. The INE providespreliminary estimates of international tradewithin five to six weeks, in compliance with the



SDDS requirements. These estimates allow theBanco de Portugal to provide a first draft of theb.o.p. within a six-week period.

The estimates provided by the INE are based ondata submitted by a set of major exporters/importers, which broadly represents 70% of thetotal trade within the euro area. A furtheradjustment is made by the Banco de Portugal,with the aim of approaching �definitive� data,which consists in applying the monthlypercentage change over the same period in theprevious year to the figures provided by the INE.

Regarding the compilation of the b.o.p., importsreported by the INE are also adjusted toproduce figures on a f.o.b. basis. For thisadjustment, an estimate is made of the implicitc.i.f./f.o.b. margin and of the split betweenresident and non-resident transport andinsurance enterprises. Those componentsestimated to have been carried out by non-resident transport and insurance companies areadded to imports of merchandise transport andinsurance services.

Geographical allocation is derived from the INE,according to the consignment country principle.However, estimates reported within five to sixweeks are made available without ageographical allocation. In that case, the Bancode Portugal applies the structure of countriesfor the same month in the previous year.

The INE compiles trade statistics according tothe �special trade� principle.

Data on the trade in goods included in thePortuguese b.o.p. are fully compliant with BPM5standards.

For data on travel, although no real indicators(e.g. tourist inflows, rate of hotel roomoccupancy) or prices of tourist activity areavailable at the time the monthly b.o.p. iscompiled, small adjustments are made on travelreceipts reported on a settlement basis, inrelation to compliance with the transactionsprinciple. This procedure is carried out on a

monthly basis, relying on the year-on-year rateof change in the settlement figures applied tothe previous year�s transactions data. Halfyearly, adjustments based on the availablephysical indicators are then made.

An estimated split is made between the serviceand the transfer components of insurance.

Estimates are included in services, as a result ofthe procedure undertaken to value imports ona f.o.b. basis.


Monthly data on investment income are beingproduced, making substantial use of theaccruals principle. The breakdown into sub-components (direct investment income,portfolio investment income and otherinvestment income) is available for monthlydata. In the geographical split between euroarea/non-euro area for portfolio investmentincome, the issuer principle is applied for theassets side of the portfolio investment (i.e.credits of portfolio investment income) and thefirst known counterpart principle for theliabilities side of the same investment (i.e.debits).

For direct investment income, excludingreinvested earnings, monthly flows are mainlyobtained from settlements data, while a mixedapproach based on stocks data and/orsettlements data is being used for portfolioinvestment income. For other investmentincome, settlements data are mainly applied.

Regarding compliance with the accrualsprinciple, estimates of both direct and portfolioinvestment income are produced on a monthlybasis.

Reinvested earnings are estimated from thestocks surveys on foreign direct investment inPortugal and Portuguese direct investmentabroad. These surveys are launched bienniallyand in alternate years. An estimate of the annualfigure is produced, with account being taken ofthe results of the previous survey and of the



impact of the year-on-year rate of change in thegross domestic product (GDP) of the countriesof destination, regarding the credits side, and ofPortugal, for the debits. Once this annual valueis obtained, monthly figures are estimated,taking into account the dividends collectedthrough the settlement system. These figures arerevised only after the results of the next surveyare available, at which time they becomedefinitive. An offsetting entry in the financialaccount, in the respective direct investmentitem, is also made.

Debits from portfolio investment incomeinclude, monthly, the interest due or payable (onan accruals basis), as derived from data oninterest rates and stocks of securities issued byresidents and held by non-residents in thatmonth. A similar procedure is applicable to thecredit entries, although it is based on estimatesfor the stocks value of securities issued by non-residents and held by residents in each month.

Dividends included in investment income arecompiled on a settlement basis, i.e. they areregistered in the month in which they arepaid.


Monthly estimates are produced for thereinvested earnings component (according tothe description presented in Sub-section 4.2.2on investment income).


The portfolio investment component of thefinancial account includes a componentestimated on a monthly basis as a result ofcompliance with the accruals principle.

For the geographical allocation procedure, theissuer country applies for the assets side andthe first known counterpart for the liabilitiesside.


Financial derivatives are, at present, compiledfrom a monthly survey of the resident bankingsystem.


Trade credits are estimated from a quarterlysurvey of major exporters and importers.Monthly figures are obtained by applying themonthly weights of exports and imports, asreported by the INE, to the quarterly valuesderived from the surveys.

5 Investment income


5.1.1 General

The accruals principle is applied to almost allinvestment income components. The onlyexception concerns other investment, for whichdata on a settlement basis are obtained from thegeneral reporting system. Data derived fromstocks surveys are used to make estimates offigures accrued. Given that the surveys arecarried out on an annual basis, monthlyestimates are produced. Those estimates arerevised once the results of the surveys areavailable, at which time they become definitive.

Within investment income, a breakdown intosub-components is available on a monthly basis.The criterion applied for geographicalallocation differs for each type of investmentincome:

(i) for direct investment income, excludingreinvested earnings, flows are allocated to thecountry of settlement; for reinvested earnings,data are allocated to the country of residency ofthe actual counterpart (debtor/creditor principle),according to the structure of countries given bythe annual surveys;

(ii) for portfolio investment income, flows areallocated to the country of residency of thesecurity issuer, in the case of credits, and to thecountry of the first known counterpart for thedebits side, both being fully in line with theentries registered under the respective financialaccount assets/liabilities;

(iii) for other investment income, the country



of settlement is used to allocate flowsgeographically.

A geographical allocation is also available foraccrued historical data compiled monthly forthe period 1996-98.


Under direct investment income, reinvestedearnings are accrued. The main sources for dataon reinvested earnings are stocks surveys ondirect investment activities performed abroadby residents and in Portugal by non-residents.These stocks are compiled every two years toproduce annual data. Given the statisticalrequirements regarding the production of theb.o.p. on both a monthly and a quarterly basis,estimates are made on this issue. Thoseestimates are initially made on an annual basis,taking into account the year-on-year rate ofchange in the GDP of those countries which aremajor recipients of direct investment fromPortugal (for credits) and of Portugal (fordebits) applied to the previous companies�results compiled from the survey. Monthlyfigures are subsequently obtained by dividingthe estimate by twelve and by deducting therespective monthly dividends. Any revisionstake place before the release of the definitivedata, which occurs at the same time as thedisclosure of the results of the surveys.

For the compilation of income on debttransactions between direct investmentcompanies, settlements data are being used.


In accordance to the description in Sub-section8.1, a new system for portfolio investmentdata was introduced in the first quarter of 2000.During a transitional period, which is stillrunning and in which the results of this systemare being tested, the accruals on portfolioinvestment income are being estimated onthe basis of, for the debit side, monthlystock data and, for the credit side, monthlyposition estimates derived from annual stocksurveys. This procedure is applied to all typesof securities, with the exception, given its

minor significance, of income on equity(collective investment institutions) paid to non-residents.

The new portfolio collection system will allowcompliance with the accruals principle for alltypes of securities, based on security-by-security databases both for domestic and forforeign securities. Moreover, end-of-periodpositions on a security-by-security and investor-by-investor basis are collected quarterly, eitherfor foreign or for domestic securities.


Interest on loans between enterprises without adirect investment relationship is compiled fromsettlements data.

Deposits of private individuals/enterprises heldwith non-resident financial institutions arereported to the Banco de Portugal through thegeneral reporting system, with the interest onsuch deposits being compiled on a settlementbasis.

The figures for income on reserve assets areprovided by the accounting system of the Bancode Portugal. For the time being, data arecompiled on a settlements basis.

5.2 Definitions

The Banco de Portugal mainly applies therecommendations of the BPM5 for investmentincome.


The accruals principle is not fully applied toinvestment income. Within portfolio investment,income paid to non-residents on investmenttrust units issued by residents is not accrued.No other investment income components areaccrued.

5.4 Gaps

None.


Before the end of the current year, incomederived from reserve assets will, in principle, be



accrued, on a monthly basis, implying revisionson data as from January 1999.


No quarterly estimates are produced. Allestimates are made on a monthly basis andaggregated to obtain the quarterly figures.

6 Capital account


Please refer to the information on the generalreporting system (see Sub-section 3.2).

6.2 Definition

The Banco de Portugal has implemented therecommendations of the BPM5, in accordancewith the harmonisation proposals made by theECB. In this context, only transfers which reflecta change in the stocks of assets of one or bothparties involved in the transaction are includedas capital transfers. The classification of transfersas public or private primarily takes into accountthe criterion of the institutional sector of theresident. Thus, transfers involving thePortuguese State are registered as publictransfers and those that involve other residentsectors are classified as private transfers.

Within the transfers data received from the EUinstitutions, a split is made between capital andcurrent transfers. Additional details reportedby the Treasury are useful in this field. Thecriterion applied respects, above all, theEurostat recommendation, which was adjustedin accordance with the final destination of theEU funds transferred to Portugal. Thebreakdown applied was based on the purposesof the EU funds with reference to the period1993-97. Those EU transfers used to financeinfrastructure projects are recorded as capitaltransfers, namely: the Cohesion Fund (100%),the Specific Program for the Development ofPortuguese Industry (100%), the ERDF (85%),the EAGGF-Guidance (80%) and the FIFG(55%). All the other funds are recorded undercurrent transfers.


None.

6.4 Gaps

Data relating to certain capital transfers, such asmigrants� transfers (excluding workers�remittances), investment grants in kind, anddebt forgiveness by companies, are difficult toobtain, as the b.o.p. statistical collection systemmainly relies on settlements data reported byresident banks, which might not cover thesesubjects properly.


Some improvements regarding capital transfers �both public and private � are to be introduced.Within EU transfers, the criterion used to makethe split between capital and current transferswill be redefined on an ongoing basis, and a clearrule will be established for private transfers,regarding the allocation between current andcapital transfers, mainly for emigrants�/immigrants� transfers.

7 Direct investment


The Banco de Portugal collects data on inwardand outward direct investment flows via theExternal Transaction Report (COE) registerssubmitted by the resident banking community.The Banco de Portugal also receives detaileddata on direct investment transactions aboveEUR 250,000 (PTE 50 million) via the DirectInvestment Statistical Declaration, i.e. dataregarding the identification of the resident andnon-resident parties to the transaction, adescription of the transaction, and supplementaryinformation on the equity participation.Whenever transactions are performed via anon-resident bank, the resident must reportdirectly the transaction settlement which takesplace abroad to the Banco de Portugal.

Definitive direct investment statistics are alsobased on the results of annual stocks surveys onboth Portuguese direct investment abroad and



foreign direct investment in Portugal. Thesesurveys are the source used for recordingreinvested earnings. For foreign directinvestment in Portugal, the survey was firstlaunched to gather data for end-1995. ForPortuguese direct investment abroad, databased on a stocks survey began to be availablefrom 1996 onwards. Historical estimates ofreinvested earnings for the years before 1996can be made available.

7.2 Definition

The new version of the Nomenclature ofExternal Operations has complied with the 10%rule since the introduction of Decree Law No.321/95 of 28 November, which took intoaccount the international recommendationsregarding foreign direct investment. The directinvestment item in the Portuguese b.o.p.includes short-term transactions between directinvestors and direct investment companies.

Data provided by stocks surveys are also beingused to improve the coverage of long-term/short-term loans between enterprises with adirect investment relationship. Equity contributionswithout payment (provision of real or financialassets) are also covered by those surveys.

The distinction between direct investment andportfolio investment is possible using data onstocks acquired by investors through secondarymarkets. The 10% rule is mainly applied to thispurpose.

Special Purpose Entities are treated, both forinflows and outflows, in accordance with theBPM5 and OECD benchmark recommendations,i.e. they are included if short-term transactionsbetween banks or other financial intermediariesare not involved.


The current operating performance concept isnot fully applied for the valuation of directinvestment income. Instead, the Banco dePortugal has been using the net results ofcompanies, which are easily available.

Financial derivatives between foreign directinvestment enterprises are not separatelyidentified.

Trade credits between affiliates are included, inprinciple, in the other investment item.

7.4 Gaps


Consolidated balance sheets have beenrequested for 1997 and 1998 in the surveys onforeign direct investment in Portugal. Animprovement in the coverage of group-relatedenterprises� operations and of those ofindirectly owned companies is expected as aresult of the new layout of the FDI survey.


There are no quarterly estimates in the field ofdirect investment. Only those estimatesdescribed above for monthly data, regardingreinvested earnings, are made for this item.



The Statistics Department introduced a newportfolio investment collection system in thefirst quarter of 2000 that is used to collectinformation for purposes of the b.o.p., monetaryand financial and the financial accountsstatistics, in one single report. This system is stillbeing tested. It is not expected to be fullyoperational before the end of the year.

It is a full-automated system whereby domesticsecurities custodians provide information aboutportfolio investment transactions in domesticsecurities on behalf of their non-resident clientsand in foreign securities on behalf of theirresident clients. MFIs must also report transactionson their own account. Investors operatingthrough non-resident custodians must reporttheir transactions and stocks data directly. Thisis a security-by-security and an investor-by-investor system. Resident investors are identifiedby their fiscal number or by their institution



number in the case of pension or investmentfunds. Non-resident investors must have beenpreviously identified in the system (using aspecific type of record within the reporting file),with exception of households that must beidentified by the ISO code for their country oforigin (PRT if they are residents, other countrycodes if they are non-residents). Identificationincludes the country of residence and theinstitutional sector of the non-resident investor.

The investor or custodian must report monthlystatistical information on transactions andquarterly data on end-of-period positions.However, they may choose to report bothtransactions and stocks on a monthly basis. TheISIN codes are used in the codification of thesecurities reported to the Banco de Portugal.Moreover, the existence of a centralisedsecurities database may contribute to a furtherharmonisation of international statistics in thisdomain.

The geographical allocation criteria are basedon the country of residence, on the assets side,of the issuer of the security (debtor) and, on theliabilities side, on that of the first knowncounterpart, for both flows and stocks. Thegeographical breakdown is possible for monthlyflows and stocks. An euro area/non-euro areaassets split is possible for historical data.

COE registers and MFI balance sheets are usedfor checking and quality control purposes.

8.2 Definition

The Banco de Portugal mainly applies therecommendations of the BPM5 for portfolioinvestment.

Service charges, fees and commissions areexcluded from the specific reporting of securities.These transactions are compiled through thereporting system for external operations basedon COE, with different codes in each category.

The money market instruments that may beidentified are Treasury bills, commercial paper,negotiable certificates of deposit (with original

maturities of one year or less) and other short-term securities.

As explained in the section on portfolioinvestment income, the offsetting entry foraccrued interest in securities portfolios isrecorded under portfolio investment. Thisprocedure is carried out on a monthly basis.


The geographical allocation approach appliedto portfolio transactions is the debtor principlefor assets and the first-known counterpartprinciple for liabilities. The first-knowncounterpart may be the final client or thebroker engaged in the securities operation.

8.4 Gaps

The major difficulties in the portfolio collectionsystem concern the capture of securitiestransactions not deposited with residentcustodians and the coverage of private placements.


None.


Until this system is fully operational, portfolioinvestment transactions and stocks data will beestimated, combining historical data and newdata from those reporters already consideredtested and of good quality.



A new system for the collection of data forfinancial derivatives was implemented. This newsystem is based on a monthly survey, among themore important banks in this domain, on bothflows and positions for assets and liabilities. Thisnew survey takes into account the recentrecommendations of the ECB and the IMF.

Financial derivatives transactions were essentiallycaptured through the settlements system, whichhas a specific code for this type of transaction.



Banks have to report both their own positionsand positions opened by their clients (mainlyenterprises and individuals). The Banco dePortugal (Operations Department) reports datafor the monetary authority sector. Data for thegeneral government sector will have to becompiled from other sources, namely theTreasury. Monthly data are available with abreakdown by institutional sector of the residentcounterpart to the transactions.

A breakdown of data by inflows and outflows isavailable. This breakdown is consistent with therecommendations of the IMF that, if compilersare unable, because of market practices, toimplement this approach (that is, a separationbetween assets and liabilities according to themarket value of the contract), all cashsettlement receipts be recorded as a reductionin financial assets and all cash settlement paymentsbe recorded as a decrease in liabilities.

The recording of the net stream of settlementflows associated with interest rate derivatives(forward rate agreements, interest rate swapsand the income component of the cross-currency interest rate swaps) is made underfinancial derivatives.

The instrument breakdown available is basedon the type of instrument and the market risk, inaccordance with the structure defined in theBPM5 for �Selected Supplementary Information�.The instruments available are futures, options,swaps, forward transactions and others (aresidual figure that might include, for example,credit derivatives). The possible market risks areforeign exchange, single currency interest rate,equities, commodities and others (a residual figure).

The criteria for the geographical allocation ofthe counterpart are based on the country ofresidence of the clearing house, in the case ofcontracts traded in organised markets, and onthe country of the counterpart, in the case ofover-the-counter (OTC) contracts.

9.2 Definitions

The recording of margin payments for optionsand futures is carried out according to the ECBrecommendations, i.e., initial margins and option-style variation margins are compiled through thesettlements system and registered as �Currencyand deposits� under other investment, and thefutures-style variation margins are to becompiled through the above-mentioned newsurvey and recorded under financial derivatives.


The identification of the country of thecounterpart in the case of OTC contracts maynot always be conducted on the basis of the riskexposure, but may in some cases be based onthe country of settlement, booking or trading.

9.4 Gaps



None.


None.

10 Other Investment


The collection system for other investmentrelies mainly on the information reported viaCOE registers. Data regarding the externalloans and borrowings of the general governmentare provided by the Treasury.

Actual flows of other investment, and not thechange in stocks, are registered in the b.o.p,except for transactions concerning the MFI andMonetary Authority sectors.

Geographical breakdowns of historical dataconcerning other investment are available asfrom January 1996.

Sectoral, instrument and original maturitybreakdowns are available, in the other investmentcategory, on a monthly basis.



Trade credits are estimated on a monthly basisusing the answers to a quarterly survey of majorexporters and importers, asking for accountinginformation on suppliers� and clients� creditsand purchases and sales of goods and services.The time of recording of trade credits is thetime of the change of ownership of the items,based on the time of registration in the accountingbooks of the companies involved in these operations.

B.o.p. flows for the MFI sector are derived fromMFIs� balance sheet at the beginning and end ofperiod. Differences are calculated in foreigncurrency and converted into Euro by using therespective monthly average exchange rates.

In order to separately identify those transactionswhich are carried out through TARGET, MFIsreport these transactions with a �neutral� code.Finally, the Banco de Portugal, which carries outthe real payments, supplies these data as cross-border transactions, so that they are allocatedto the Monetary Authority sector.

Transactions recorded under the sub-item �otherassets/other liabilities� mainly relate to residualfinancial operations, which are still underevaluation in order to obtain a proper classification.

10.2 Definition

In principle, the Banco de Portugal hasimplemented the recommendations of theBPM5 and the harmonisation proposals madeby the ECB.

Short-term claims and liabilities betweenaffiliated enterprises are recorded under directinvestment.

Foreign currency notes and coins and financialleasing are included in �loans/currency anddeposits� within other investment.

Repurchase agreements, sell/buy-back transactionsand bond lending should not be very significantin Portugal. However, since January 1999 newcodes have been introduced in the ExternalOperations Nomenclature, in order to collectdata on these kinds of transactions within theother investment category.


Securities dealings involving some sell/buy-backtransactions may be in portfolio investment,instead of other investment.

10.4 Gaps

None.


None.


None.

11 Reserve assets



11.2 Definition

The Banco de Portugal follows therecommendations of the BPM5 and those of theECB regarding the definition of the reserves ofthe Eurosystem.

All instruments have been identified separatelywithin the monthly reserve assets figure,irrespective of their being financial derivatives,as available since December 1999. Dailytransactions are calculated through the changein stocks, valued at market prices and convertedto euro using daily market exchange rates,except regarding �monetary gold�, for whichmonthly external transactions are reported.


There are no significant deviations in thePortuguese b.o.p. data available for reserve assets.

11.4 Gaps

None.


None.





Once the figures on direct investment, tradecredits and financial derivatives were madeavailable, a complete i.i.p. was produced, for thefirst time in Portugal, in September 1999,regarding end-1997 and 1998 stock data. Oncethey become definitive, statistics for i.i.p.components are mostly compiled using purestocks data. The Banco de Portugal publishes inthe Statistical Bulletin, on a monthly basis, thelast complete annual i.i.p. made available anddetailed end-of-quarter figures for the maincomponents of the Portuguese i.i.p. (assets andliabilities), namely for direct investment,portfolio investment, other investment, financialderivatives (on a net basis) and reserve assets.

12.2 Definitions

12.2.1 General


Data on stocks statistics are available throughthe Foreign Direct Investment in PortugalQuestionnaire (first data concerning 1995), andthrough the Portuguese Direct InvestmentAbroad Questionnaire (1996 data were firstmade available), which are conducted inalternate years (biennially). Data supplied to theBanco de Portugal are based on book values,which are supposedly revalued according toaccounting principles at current prices.Estimates are produced through a quarterlymixed stocks data/accumulation of flowsprocedure over the following year, in whichpure stocks data are not immediately available.A full geographical allocation can be provided.


Pure stocks statistics are produced. A specificform was used to capture stocks data onPortuguese holdings of foreign securities untilthe end of 1999. Detailed annual informationwas provided on the identity of the investor, thecustodian, the denomination of the security (ona security-by-security basis), the codification ofthe security (e.g. ISIN), the type of security, the

identity of the issuer and the valuation of stocks(physical quantity, currency and quotation ofsecurities). Additional items, such as thecurrency of denomination of the securities andthe sector of both the investor and the issuer,which were not included in the IMF 1997 Co-ordinated Portfolio Investment Survey, wererequested. A complete geographical allocationwas available according to the country ofresidence of the security issuer.

Until the end of 1999, data on stocks ofdomestic securities held by non-residents wereproduced on a monthly basis, through thereports collected from custodians (concerningphysical quantities and nominal values ofsecurities deposited in non-resident dossiers)and from the stock exchange (concerningprices). A complete geographical allocation wasavailable, based on the country of residence ofthe first known counterpart.

From 2000 onwards, stock data for both asstsand liabilities are collected quarterly, on asecurity-by-security basis, using the ISIN codeas the security identifier. A complete geographicalbreakdown is available, based on the country ofresidence of the security issuer (assets) or of thefirst known counterpart (liabilities).


Options, futures and interest rate derivativesare valued at market prices. In the case offutures, the market practice usually involves adaily settlement of gains and losses (variationmargin), implying that their market value is zero.


Data on the monetary authority�s assets andliabilities are derived from the Banco dePortugal�s balance sheet. Data on the GeneralGovernment assets and liabilities are collecteddirectly from the Treasury. Data on banks� assetsand liabilities are collected through externalpositions of the banks� balance sheets. A mix ofBIS figures and an accumulation of flows wasused to compile deposits of resident non bankswith non-resident banks until 1997; accumulationof flows have been used since then. Stock figures



on loans are derived from the accumulation offlows based on pure stocks of 1994. A quarterlysurvey of major exporters/importers is used toproduce stocks data on trade credits.


The balance sheet of the Banco de Portugal isthe source of these data. It is available, for thispurpose, on a monthly basis.


Book values, supposedly revalued at currentprices according to accounting principles, areapplied to the stocks figures on directinvestment, instead of pure market values. Thefirst disclosure of data is based on mixed stocksdata/accumulation of flows. After the results ofthe surveys are made available, in principle twoyears after the reference period, the figuresbecome definitive, the final data being based onpure stocks statistics.

The first known counterpart criterion is appliedto split stocks on portfolio investment liabilities.

In the case of financial derivatives, contracts for hedgingpurposes are not always valued at market prices.

12.4 Gaps

None.


None.


None.

13 Administration


The titles of the publications produced by theBanco de Portugal on b.o.p. statistics are:Statistical Bulletin � on a monthly basis;Monthly Economic Indicators � on a monthlybasis;Economic Bulletin � on a quarterly basis;Annual Report � on an annual basis.

13.2 Contributors

This country information was drafted by theECB�s Balance of Payments Statistics andExternal Reserves Division and subsequentlyamended and agreed with Portugal. Enquiries ofa general nature should be addressed to thePress Division of the ECB. Enquiries specific toPortugal should be addressed to:

Ms Ana Margarida de AlmeidaBanco de PortugalStatistics DepartmentBalance of Payments Statistics DivisionMethodologies and Statistical Analysis UnitAv. Almirante Reis, 71 � 3º1150 012 LISBOAPortugal

Tel.: (00351) 21 312 8374Fax: (00351) 21 355 6749

258ECB EU


ethods � Novem

ber 2000

Ch

apter 4.12 F

inlan

d

1O


Suomen Pankki - Finlands BankStatistics Department

Balance of PaymentsDivision

Harri KuussaariHead of Division

Financial InstitutionSurveys

Surveys on DirectInvestment

Enterprise Surveys

Other Data Collection

Information ManagementDivision

Jorma HilpinenHead of Division

BOP Compilationand Dissemination

Information Management

Statistical Methods

Statistics Desk(Information Services)

Monetary and FinancialStatistics Division

Laura VajanneHead of Division

Money and BankingStatistics

Securities Statistics

Government FinanceStatistics

Financial AccountsStatistics

Martti LehtonenHead of Department

(Unoff icial translation)


Chapter 4.12 Finland


2.1 Introduction

Suomen Pankki has been responsible forcompiling Finnish balance of payments (b.o.p.)statistics since 1948. This responsibility wasseen as natural because exchange controlswere carried out by Suomen Pankki. The systemfor compiling statistics has altered over time toreflect the changing stance of exchangecontrols and, finally, the liberalisation process,which took place during the 1980s; exchangecontrols in Finland were abolished in full in1991.


Residents are obliged under Section 28 of theAct on the Bank of Finland (214/1998), whichentered into force on 1 January 1999, to reportall international transactions they undertake toSuomen Pankki. Failure to report suchtransactions may result in a fine.


Since 1 June 1999 the compilation of the ESCBstatistics at Suomen Pankki has been centralisedin the new Statistics Department, withpersonnel of 48. Some 25 members of staff workin the field of b.o.p. statistics. They are dividedinto teams for the processing of data on banksand other financial institutions as well assecurities trading (seven), data on the corporatesector (four), direct investment data (five) andthe compilation, estimation and informationservice (eight). A separate team (three) providesgeneral data processing expertise for allstatistical areas.


There is a close relationship between SuomenPankki, Statistics Finland and the NationalBoard of Customs in the compilation of variousstatistics. Statistics Finland prepares, inter alia,the National Accounts and data on priceindices. Suomen Pankki focuses its statisticalactivities on the statistics compiled for the ECB.With regard to the b.o.p. and the internationalinvestment position (i.i.p.), this means that theemphasis is on the production of the financial

account and income data. Suomen Pankki andStatistics Finland liaise closely in thecompilation of data for the current accountitems. The responsibility for producing detailedstructural b.o.p. data on international trade inservices, mainly for the European Commission(Eurostat), has been taken over by StatisticsFinland. The official foreign trade statisticsproduced by the National Board of Customsare used in the b.o.p. as well as in the nationalaccounts.

2.5 Users

Data in line with the standard components ofthe IMF Balance of Payments Manual (5thedition, BPM5) are supplied to internationalorganisations, such as the ECB, the EuropeanCommission (Eurostat), the OECD, the IMF andthe BIS, on a regular basis.

At the national level b.o.p. and i.i.p. data areused by Statistics Finland in its nationalaccounts. In addition, Statistics Finland and theResearch Institute of the Finnish Economy(ETLA) operate as data distributors in that theydistribute b.o.p. data, for instance, via theircommercial economic databases. The data arealso supplied to various organisations, such asthe Ministry of Finance, research institutes anduniversities.



The current data collection system for the b.o.p.and the i.i.p. was introduced in 1991. It is a puresurvey-type system as the collection of data onsettlements ceased at the beginning of 1999. Forthe financial account, surveys have been thesource of information since 1991; for thecurrent account, time series methods havereplaced the settlement data in the preliminarystatistics, except in the case of, first, tradestatistics, which are compiled on a monthlybasis by the National Board of Customs and,second, investment income data, which arebased on surveys.



Suomen Pankki uses various estimationmethods to compile the monthly and quarterlypreliminary figures of the foreign trade inservices. Statistics Finland will produce the finaland structural data of services. The traditionalsurveys carried out by Suomen Pankki concernthe foreign financial assets and liabilities (stocks,flows, valuation items and income) ofenterprises, banks, other financial institutionsand the general government as well as directinvestment, securities trading and custodianservices. An essential element in conductingsurveys is the use of various targeted registersas a frame for selecting respondents.

The Finnish b.o.p. compilation system is basedon monthly frequency. Since 1994 it has beencompliant with the BPM5, and has beenreported to international organisations. Between1994 and 1998 Suomen Pankki compiledcurrent account data according to the SNA(1968 edition) standards for domestic usage.Data on most of the b.o.p. components arecollected on a monthly basis, e.g. trade accountdata, investment income data and data onmost items in the financial account, includingreserve assets. As the collection of settlementsceased on 1 January 1999, data related tointernational trade in services, current transfers,compensation of employees and the capitalaccount are only available on a quarterly or anannual basis.

Financial stocks are produced simultaneouslywith the monthly b.o.p. The monthly stocks dataalso serve as an important quality control tool forthe registration of international capital flows,which allows the consistency between flows andstocks to be monitored.

The Finnish b.o.p. compilation process isdescribed in figure 1.

The data sources as well as the estimation andcompilation methods are described in moredetail in Sub-sections 4 to 12.


(i) Enterprises, households, general governmentand financial institutions

The official register of enterprises andestablishments is received from StatisticsFinland on an annual basis. It containsinformation on around 200,000 undertakings.The frames for various b.o.p. surveys are,however, structured on the basis of otherinformation. The commodity trade registermaintained by the National Board of Customsincludes some 12,000 exporters and 17,000importers. A balance sheet database withinformation on 7,000 largest enterprises inFinland is used for the purposes of the frame.The official register contains a subset of 700consolidated enterprises, including Finnishenterprises in foreign ownership. In addition,Suomen Pankki monitors mergers andacquisitions in order to keep the targeted directinvestment registers up to date.

For detailed monthly information on stocks,flows, valuation items and income of financialitems, including separate data on inter-companyfinancial items (equity capital, loans and tradecredits), Suomen Pankki conducts surveys onbanks, other financial institutions and generalgovernment agencies. All banks, most otherfinancial institutions and general governmentagencies are covered. Non-probability samplesurveys are used for the corporate sector.

Approximately 100 consolidated enterprisesare surveyed for financial flows and stocks.Around 60 enterprises respond to the surveyon banks and other financial institutions and tothat on securities brokers. Securities brokersreport the foreign securities trade affected bythe domestic sectors. Data on statisticallyimportant international mergers andacquisitions which are not covered by themonthly surveys are requested from the Finnishcounterparts to the transactions.

Suomen Pankki conducts annual directinvestment surveys in order to collect the dataon reinvested earnings and direct investment



Table 1

Reporting scheme for b.o.p. and i.i.p. data collection for FINLANDTarget respondent Name of reporting Contents of reporting Frequency of Timeliness (numberpopulation form form reporting of days for(e.g. MFIs, submission afterenterprises, etc.) the end of the

reference period)

MFIs RSV Foreign assets and Monthly 15 banking daysliabilities

Other financial RSV Foreign assets and Monthly 15 banking daysinstitutions liabilities

Enterprises YSV Foreign assets and Monthly 15 banking daysliabilities

Central government VSV Foreign assets and Monthly 15 banking daysliabilities

Local government KSV Foreign assets and Monthly 15 banking daysliabilities

Securities brokers APK Securities trade between Monthly 15 banking daysresidents and non-residents

stocks, especially stocks of equity assets. Thecoverage of direct investment data in themonthly surveys is also improved by the annualsurveys. The breakdowns of direct investmentby geographical location and economic activityare likewise based on the annual surveys. Thesample for the annual survey of directinvestment abroad consists of around 100consolidated enterprises. The annual samplesurvey of direct investment in the domesticeconomy consists of some 600 respondents.The direct investment surveys are carried outevery five years as a census. The samedefinitions and concepts are used in themonthly surveys and in the annual directinvestment surveys.

For trade credits, a larger number of enterprisesmust be surveyed at intervals of a few years inorder to check the levels of data.

There are no major gaps in the reportingsystem. However, since the data collection isbased mainly on non-probability sample

surveys taken from a changing reportingpopulation, it is possible that the coverage interms of respondents is insufficient. Themaintenance of the frame is the most difficultproblem facing the system. Larger surveys inwhich all potential respondents are includedmust be conducted systematically in order tofind the appropriate grossing-up coefficients.

In 2000, large frame surveys were conductedfor the monthly survey system and for theannual direct investment surveys. The frameconstructed from the returns is the basis for theselection and/or sampling of the respondents infuture surveys. For the monthly survey, the non-probability selection, with frequent (annual orevery other year) benchmark surveys, seems tobe a very appropriate procedure in the nearfuture as well. (A report on detailed results ofthe frame surveys is forthcoming.)

(ii) Monetary authoritySuomen Pankki reports on the externalmonetary position.



Suomen PankkiSurveysMonthly surveys:− Investment income (excluding

reinvested earnings on directinvestment)

− Direct investment (excludingreinvested earnings and stocksof equity assets)

− Portfolio investment− Other investment− Financial derivativesAnnual surveys:

− Direct investment (includingreinvested earnings and stocksof equity assets)

Data by transaction:− Direct investment (mergers and

acquisitions)

Balance of payments compilationMonthly b.o.p. and i.i.p:− Summarising of the available

information− Estimation of missing data:• Adjustment terms for trade• Service account• Current transfers• Capital account• Reinvested earnings• Geographical breakdown

Quarterly b.o.p. and i.i.p:− Summarising of the available

information− Estimation of missing data:• Reinvested earnings• Service account (other services)• Geographical breakdown (other

services)

Annual b.o.p and i.i.p:Summarising of the information

Suomen PankkiAccountingMonthly data− Foreign reserves

National Board of CustomsMonthly data on trade in goods:− Sums (available after 6 weeks)− Composition and geographical

breakdown (available after 10weeks)

Statistics FinlandQuarterly data:− Services (transport and

travel)− Current transfersAnnual data:− Services (other services)− Capital account

European Central Bank Other Data Distribution

Figure 1: The Finnish b.o.p. compilation process.



(iii) Customs and INTRASTATThe commodity trade data are based on theofficial foreign trade statistics produced by theNational Board of Customs. The Board ofCustoms publishes the monthly globalcommodity trade figures within six weeks andgeographical details within ten weeks. Thismeans that the split between the euro area andother countries must be estimated for the firstpreliminary b.o.p. data to be reported to theECB. A more timely provision of the euro area/non-euro area split is being developed at theBoard of Customs. The f.o.b.-f.o.b. calculationsare based on detailed historical data and theupdate of this information is forthcoming.

3.3 Thresholds

None.


B.o.p. statistics with a euro area/non-euro areabreakdown have been available on a monthlybasis since January 1999; however there is nofurther breakdown on a country-by-countrybasis. Historical data according to the BPM5 areavailable as from 1975, except for financialderivatives (these data are available only from1994 onwards).

3.5 Timeliness

The respondents are obliged to reply by the15th banking day after the end of the referencemonth. The processing of the financial surveydata takes just below three weeks. The NationalBoard of Customs delivers its preliminary tradestatistics approximately six weeks after the endof the reference month. All in all, there are onlya few days for the overall quality assessment ofthe monthly data. The first preliminary data arepublished at the national level after submissionof the data to the ECB.


The Finnish b.o.p. is compiled on a monthlybasis.

3.7 Data controls

Survey data relating to major enterprises arecompared with balance sheets and news on

international mergers and acquisitions. Bilateralcontacts with these enterprises have beenintensified during recent years. Similarly, theb.o.p. banking data are compared with thebanks� balance sheet data. Procedures for thecomparison of MFI banking data with the b.o.p.data have been introduced. An understandingof the behaviour of firms and banks and theirbalance sheet statements is a necessaryprecondition for an effective quality control ofsurveys. Moreover, time series methods arewidely employed in quality control. Finally, thestatistical properties of the errors and omissionsare tested.

3.8 Revision policy

Data previously published can be revised.Monthly preliminary data are revised during thefollowing month and thereafter on a quarterlybasis. Quarterly data are revised when the datafor the next quarter are published. Followingthis, the revision timetable adheres to that of theNational Accounts.

3.9 Publication

Suomen Pankki disseminates the monthly b.o.p.and net i.i.p. six weeks after the end of therespective month. Data are available in monthlystatistical bulletins as well as on the Web site(www.bof.fi) and in the Statistical Review of theBank. More detailed data on the b.o.p., net i.i.p.and net external debt, including a separateannual publication on direct investment, arepublished at quarterly and annual intervals.Detailed data are available from public andcommercial databases (Statistics Finland andthe Research Institute of the Finnish Economy(ETLA)). Details of the data users are given inSub-section 2.5.

Both the publishing and the revision timetablesare available in advance on the Web site ofSuomen Pankki (http://www/bof.fi), StatisticsFinland (http://www.stat.fi) and in the IMF�sSDDS (http://dsbb.imf.org/sdds.htm).

The titles of the publications produced bySuomen Pankki on b.o.p. statistics are listed inSub-section 13.1.



4 Monthly key items


Suomen Pankki can provide all monthly b.o.p.key items data within 30 working days after theend of the month to which the data relate.

Most of the monthly key items are based on thesame sources as the quarterly and annual dataowing to the monthly b.o.p. collection system.The response rate in the monthly survey isnearly 100%. Exceptions are the data relating tointernational trade in services, compensation ofemployees, current transfers and the capitalaccount. Monthly information on reinvestedearnings is based on estimates.

The euro area/non-euro area breakdownwas implemented in the survey system at thebeginning of 1999. For commodity trade data,a full breakdown by country is available,but only after a 10-week delay. Therefore,the monthly euro area/non-euro areabreakdown is estimated by Suomen Pankki forthe preliminary figures. Estimation is also appliedto the geographical breakdown of the othercurrent account data in the monthly key items.


items

4.2.1 For the current account in general

The National Board of Customs is responsible forthe compilation of the Finnish foreign tradestatistics. The trade statistics are based on the f.o.b.-c.i.f. (exports-imports) principles. For the b.o.p.statistics, Suomen Pankki adjusts trade data to thef.o.b.-f.o.b. basis. In addition, Suomen Pankkimakes preliminary estimations of the euro area/non-euro area breakdown of the monthly b.o.p.

The National Board of Customs publishes bothextra and intra-EU15 trade data according tothe final-destination/country-of-origin principle.However, consignment data are also collectedfor imports. Suomen Pankki introduced theconsignment principle to imports as from thebeginning of 2000, with backdata from 1998onwards. Data are not seasonally adjusted.

The Board of Customs publishes monthly datain several steps. The preliminary aggregate tradestatistics, excluding both country and industrybreakdowns, are published approximately sixweeks after the end of the month to which theyrelate. Monthly statistics, including country andindustry-level information, are publishedapproximately ten weeks after the month towhich they relate. The data are revised bymonth several times in the course of the year.The final annual data become available in May.

Suomen Pankki estimates the monthly adjustmentitems for f.o.b.-f.o.b. conversion on the basis ofhistorical data. In the late 1990s BPM5-basedexports have exceeded the merchandise values ofcustoms by approximately 0.5%. In imports BPM5values have been approximately 4.5% lower thanthe customs values in general and approximately6% lower for extra-euro area imports.

The preliminary monthly data on internationaltrade in services are based on estimations bySuomen Pankki. Statistics Finland compilesquarterly statistics on transportation and travelas well as annual statistics on other services.

The preliminary monthly figures produced bySuomen Pankki are based on quarterly forecastswhich are produced on the basis of structural timeseries models (STMs). The quarterly values for theother services are estimated on the basis of theirhistorical share in total international trade inservices. The estimated quarterly figures arecompared with the forecasts made by theEconomics Department. In addition, system(multivariate) time series modelling is applied inthe process to judge the recent development ofthe trade in services. Relevant quantitative andqualitative indicators are used as explanatoryvariables in the system modelling. The aggregatedquarterly estimates on services are interpolated tothe monthly level using the cubic spline method.1

1 The cubic spline finds the monthly path which fits bestbetween quarterly data points, constraining the sum of thethree individual months to the published quarterly total.This generates a �smooth� series without any jumps whichcould occur between quarters if, for instance, a monthlyseries were derived simply by dividing each quarter intothree equal months.



Data are revised in two stages. The firstrevisions are made when the quarterly databecome available. The preliminary estimatesrelating to transportation and travel arereplaced by the actual data, and estimatesconcerning other services are revisedaccordingly. The other revision occurs whenthe annual data on other services becomeavailable.

The data concerning compensation of employeesare available from Statistics Finland only on anannual basis. The monthly and quarterly figuresare estimated by Suomen Pankki, on the basis ofhistorical data. Owing to the small weight ofcompensation of employees in the Finnish b.o.p.the simplest possible technique is used:compensation of employees is expected to beon the same level as in the previous year.Neither trend nor seasonal effects arecalculated.

The euro area/non-euro area breakdown isbased on historical data.

The monthly preliminary estimation of currenttransfers is performed separately for private andpublic current transfers. Owing to the smallweight of private current transfers, the simplestpossible technique is used: private currenttransfers are expected to be on the same levelas in the previous year. Neither trend norseasonal effects are calculated. Data concerningpublic current transfers (central governmentonly) are available from the Ministry of Financeand the central accounting function of theTreasury on a monthly basis.

The euro area/non-euro area breakdown ofprivate current transfers is based on historicaldata. It is possible to obtain the geographicalbreakdown of public transfers by area.

4.2.2 For the income account

For investment income, see Sub-section 5.

4.2.3 For the direct investment account

See Sub-section 3.2 for a general description ofthe system and Sub-sections 7 to 12 for detailed

information on the compilation of data ondirect investment, portfolio investment, financialderivatives, other investment and reserve assets.

4.2.4 For the portfolio investment account

4.2.5 For the financial derivatives account

4.2.6 For the other investment account

5 Investment income


5.1.1 General

The collection of Investment income data isbased on monthly surveys directed atenterprises, monetary financial institutions(MFIs), central government, local governmentand securities brokers. The AccountingDepartment is responsible for the data relatedto Suomen Pankki. The monthly data onreinvested earnings are based on estimations.Final data are derived from annual surveys. Inaddition, the accruals on government bondsand the geographical breakdown of portfolioincome debits are based on estimations.Quarterly and annual data are aggregatedmonthly information.

Reporting agents identify monthly investmentincome flows, and income on interest-bearinginstruments is recorded on an accruals basis.On the assets side, a breakdown into income oneuro area and non-euro area assets is available.Reporting agents are instructed to apply thecreditor/debtor principle in the surveys.

According to an empirical study, thephenomenon of a bias towards an under-recording of credits does not seem to beapparent in the Finnish data. When comparingthe investment income credits to the stock ofassets, the derived implicit interest rate isconsistent with market rates.

The geographical breakdown (euro area/non-euro area) for investment income has been in a



readily available format on a quarterly basissince 1994.2 However, this information(excluding direct investment income) is basedon settlement data, so that the creditor/debtorprinciple cannot be applied. Instead, thecountry of settlement is used, which may bemisleading and distorts the allocation in favourof major international financial centres.

Investment income is broken down further into:� direct investment income � equities and

debts;� portfolio investment income � equities

and debts (bonds and notes, moneymarket instruments); and

� other investment income.

The definitions applied conform to the BPM5.


Direct investment income data with a euro area/non-euro area breakdown of inward andoutward investment are compiled on a monthlybasis. Preliminary data on distributed dividendsand interest on inter-company loans on anaccruals basis are derived from the monthlysurveys on foreign assets and liabilities.Reinvested earnings and dividends distributed byforeign-owned enterprises in Finland are basedon estimates by Suomen Pankki, before the datafrom the annual direct investment surveysbecome available. The preliminary results of thesurveys are available within six months of theend of the reference year and the quality-controlled results within nine months. The finalfigures for direct investment income are basedon the annual direct investment surveys.

Quarterly and annual income data areconsistent with monthly data. Annual incomedata are available by economic activity of Finnishinvestor/Finnish investee and by country ofimmediate foreign investee/foreign investor.


Reporting agents identify income on equities/CIIs on a cash basis and income on bonds, notes

and money market instruments on an accrualsbasis. A breakdown by sector is available for allinstruments.

Income on equities:For credits, reporting agents covered by thesurvey of securities brokers identify monthlyincome on the foreign assets (equities and CIIs)in their custody. Other reporting agents identifyincome on their own foreign assets. The incomeon CIIs is also reported on a cash basis, as theamounts are negligible. Reporting agents arefurthermore required to divide the incomeaccording to the euro area/non-euro area split.

For debits, the amounts reported in the surveyof brokers are negligible, except in March andApril when most Finnish companies pay outtheir dividends. Estimation methods forproducing the euro area/non-euro area split arecurrently under consideration.

Income on bonds and notes and on moneymarket instruments:For credits, reporting agents in the survey ofbrokers identify monthly income on the foreignassets in their custody. Other reporting agentsidentify income on their own foreign assets.Bonds/notes and money market instruments arereported separately in the surveys, and a euroarea /non-euro area split is required.

For debits, reporting agents in the survey ofbrokers identify monthly investment incomedebits on the foreign liabilities in their custody.Other reporting agents identify debits on theirown foreign liabilities. In the case of the surveyof brokers, estimation methods are applied toderive accruals (see Sub-section 5.6).

The accruals principle (based on stocks) isapplied to both credits and debits on all debtinstruments. For bonds/notes, reporting agentsare instructed to accrue interest on their stocksmonthly, taking into account discounts/premiums on the issue price. Thus, accruedinterest is based on effective (historical cost)interest rates, and flows/stocks are reported atmarket price (dirty price). The difference

2 In principle, the split is available for backdata from 1986onwards.



between the issue price and the nominal pricein the case of zero-coupon instruments is alsoaccrued during the life of the instrument. In thesurvey of brokers transactions are to bereported at market value, thus including interestaccrued since the last coupon. Reporting agentsalso identify interest on a cash basis for qualitycontrol purposes.

Implied interest on repo transactions (or netinterest in the case of coupon washing) isimpossible to identify in the current reportingsystem, but there is reason to believe that thisfactor is not very significant in the Finnishb.o.p. Nevertheless, a project concerning theimportance of repos in the Finnish b.o.p. isunder way.


The respondents report interest on an accrualsbasis for all types of assets, including interest onloans to non-affiliated enterprises. The surveysystem does not collect information from privateindividuals because the amount ofother investment income flows arising from thehousehold sector is considered to be insignificant.

Leasing payments made according to theagreement are considered to include in theprincipal both repayments and interest, andthey are reported in the monthly survey asdescribed in the agreement. Income on tradecredits is not recorded because, in practice,trade credits are payable without interest.

5.2 Definitions

Suomen Pankki primarily applies therecommendations of the BPM5 for investmentincome.


None.

5.4 Gaps

None.


In the annual direct investment surveysrespondents are requested to report both the

total profits of direct investment enterprisesand, separately, the capital gains and lossesincluded in the total profits. In practice, it isdifficult to control the quality of reported dataon capital gains and losses. Suomen Pankki will,however, use this information to exclude capitalgains and losses from reinvested earnings forthe final 1998 figures and subsequent ones.


Direct investment:The preliminary results of the surveys areavailable within six months of the end of thereference year and the quality controlled resultswithin nine months. Suomen Pankki estimatesthe yearly results of the direct investmententerprises. The figures related to the results ofenterprises for the previous year are consideredto be a proxy for the results in the current year.The developments in the global economy andany noteworthy changes in the population ofdirect investment enterprises are taken intoaccount in the estimation as well. The monthlyestimates of the results are calculated bydividing the yearly estimates by twelve. Themonthly estimates of reinvested earnings arecalculated by deducting monthly dividendpayments from the monthly estimates of theresults of direct investment enterprises.

Since the preliminary data from the annualsurveys for the previous year are available withinsix months, the estimates of reinvested earningsfor the first four months of the current year arebased on the annual survey two years earlier. Theestimates are revised for the first time in June,once the preliminary results of the survey for theprevious year have been processed, and thesecond revision takes place on the basis of themore controlled survey data in September forthe figures for the period from January to August.At the same time, when the monthly estimates ofreinvested earnings for the current year arerevised, the monthly data on all the directinvestment income items for the previous yearare revised to correspond to the annual data.

As for the dividends distributed by foreign-owned enterprises in Finland, the monthly



surveys are not very extensive. For this reason,Suomen Pankki estimates the dividends offoreign-owned enterprises for May and June(traditionally, dividends are distributed in thesemonths), using the annual survey of foreigndirect investment in Finland, with the previousyear serving as a reference year.

Accruals on government bonds:The State Treasury cannot report accruedinterest on domestic currency-denominatedbonds held by non-residents as the ultimatecreditor is unknown. Therefore, the accruals onthese serial bonds have to be estimated bySuomen Pankki.

The data on which the estimation are based arestocks held in custody, as reported in the surveyon brokers. The estimation method is the historicalcost method, as presented by the EMI. Thismethod takes into account discounts/premiums inthe issue price of a tranche, and thus implies theuse of effective interest rates when calculating theaccrued interest. Empirical evidence, as well as thepracticality of the method, provided strongarguments in favour of adopting this approach forFinnish b.o.p. purposes.

The actual calculations based on the historicalcost method are carried out using two files, oneof which is designed to maintain a register of alltenders for any of the serial bonds in themarket. The other file contains a record of theinterest accrued on every individual tranche ona month-by-month basis. The interest accrued iscalculated as compound interest, and thus takesinto account the time which has elapsed sincethe last coupon payment.

The euro area/non-euro area split of portfolioinvestment income debits is based on the use ofthe ISIN codes of government bonds. In theFinnish b.o.p. government bonds account forapproximately 70% of the entire portfolioinvestment debt securities, which, given theobvious limitations of the method, implies thatthe method should provide a good estimate ofthe euro area/non-euro area split for portfolioincome debits.

6 Capital account


Statistics Finland is responsible for the collectionof capital account data. The data only partiallycover the capital transfers of central governmenton a quarterly basis. Preliminary quarterlyfigures are adjusted if necessary when finalannual figures become available.

6.2 Definition

Current and capital account classificationsfollow the recommendations of the BPM5. Thecentral government data are compiled on thebasis of the State�s annual accounts, whichmakes it possible to identify current, capital andfinancial transfers between Finland and the EU.Debt forgiveness by the central government isrecorded by the Ministry of Foreign Affairs.

The euro area/non-euro area breakdown isbased on current information.


None.

6.4 Gaps

As from 1999 data on capital transfers by thecentral government are available on a quarterlybasis. No estimation methods for preliminarydata have been developed owing to the smallamounts involved and the high level of volatility.


None.

7 Direct Investment


Flows and stocks of inward and outward directinvestment are compiled on a monthly basis.The preliminary figures are based on themonthly surveys of foreign assets and liabilitiesand on the data on statistically importantinternational mergers and acquisitions (purchaseor selling price of at least EUR 10 million) whichare not covered by the monthly surveys. Beforethe results of the annual surveys are available,



reinvested earnings and exchange rate and othervaluation changes in equity assets are estimated.

The data from the annual direct investmentsurveys is used to improve the coverage of thepreliminary monthly flows and stocks figures. Inother words, the annual surveys provideSuomen Pankki with information on the stocksof inter-company loans and trade credits fromthe respondents not covered in the monthlysurveys, and the corresponding flows of theseitems are estimated as a change in stocks. Allthose Finnish direct investors and foreign directinvestment enterprises that, according topublicly available information, have been involvedin an international merger or acquisition duringthe year are included in the annual survey. Inthis way, it is possible to check that all relevantmergers and acquisitions have been recorded inthe flows figures.

Quarterly and annual flow data are consistentwith monthly data. The monthly stock figuresare calculated by accumulating monthly flows,exchange rate and other valuation changes tothe year-end stocks.

Annual flows and stocks data are available byeconomic activity of the Finnish investor/investee and by country of the immediateforeign investee/investor within around ninemonths of the end of the reference year.Monthly and quarterly data have been compiledwith a euro area/non-euro area breakdown asfrom the beginning of 1999. The geographicalbreakdown of historical monthly data can beestimated using the annual geographical data.

7.2 Definition

Suomen Pankki applies the 10% principle forthe direct or indirect ownership of the equity ofan enterprise as the criterion for directinvestment. So-called special purpose entitiesare defined as direct investment enterprises.Direct investment capital transactions arerecorded on a directional basis.

The components of direct investment capitalare equity capital, reinvested earnings and other

capital. The item other capital consists of inter-company loans and trade credits. Trade creditshave been recorded in direct investment asfrom the beginning of 1999. Earlier they wererecorded under other investment.

Owing to the survey-based data collection,equity contributions without payment (i.e. theprovision of real or financial assets) are alsocovered.

Both short-term and long-term inter-companyloans are included in direct investment capital.To be more precise, the respondents are askedto report promissory note loans, leasing credits,subordinated loans equivalent to equity andthose deposits in intragroup accounts that therespondent classifies as inter-company assetsand liabilities in its own accounting as inter-company loans.

In the annual direct investment surveys,Suomen Pankki collects stocks data on thepossible inter-company debt securitiesoutstanding at the end of the year. Reportedinter-company debt securities have beeninsignificant in value and are therefore notincluded in the direct investment figures.

In the annual direct investment surveys data arealso collected on any cross-participations of lessthan 10% existing at the end of the year. So far,there are few foreign direct investmententerprises which own shares in Finnish directinvestor enterprises. Stocks of equity assets arebased on the balance sheets of directinvestment enterprises, i.e. the stocks are valuedat book value.


None.

7.4 Gaps

None.


In the annual direct investment surveys therespondents are requested to report both thetotal profits of direct investment enterprises



and, separately, the capital gains and lossesincluded in the total profits. In practice, it isdifficult to control the quality of the datareported on capital gains and losses. SuomenPankki will, however, use this information toexclude capital gains and losses from reinvestedearnings for the final 1998 figures andsubsequent ones.

Suomen Pankki will also implement the methoddescribed in Sub-section 6 for distinguishing directinvestment from investment in shares listed inFinland. This change will be implemented for thefinal 1998 figures and subsequent ones.


See Sub-section 5.6 for the estimation methodsfor reinvested earnings.

Estimation of monthly exchange rate and othervaluation changes in equity assets:Suomen Pankki estimates monthly exchangerate changes in equity assets of outwardinvestment using the annual data on thegeographical breakdown of stocks of equityassets abroad. In addition, any large valuationchanges originating from individualinternational mergers and acquisitions areestimated using the purchase or selling price ofthe shares and the latest balance sheet value ofthe shares.

The estimation of direct investment in shares listedin Finland:Suomen Pankki will use the same data source asfor other international mergers and acquisitions,i.e. publicly available information. There is a lotof information available, especially oncompanies listed in Finland. On the Web site ofthe Helsinki Exchanges the stock exchangebulletins of companies listed in Finland areavailable. In these bulletins the companies are toreport on all mergers and acquisitions.According to the Finnish Securities Market Act,the companies also have to report if theownership or voting power of an individualshareholder exceeds or falls below 5%, 10%,20%, 33%, 50% or 66%. If the date and thepurchase or selling price are not mentioned in

these bulletins, Suomen Pankki contacts thecompany. The market prices of shares can beused as estimates in the case of gradualinvestments. In addition, with regard to theannual direct investment surveys, the annualreports of all companies listed in Finland inwhich foreign ownership is at least 10% areexamined (information provided by the FinnishCentral Securities Depository).

In their annual reports companies publish thelists of their major shareholders at the end ofthe financial year. In this way, it is possible tocheck that all the relevant direct investment isincluded. Suomen Pankki aims to cover onlytransactions of at least EUR 100 million.

In the monthly data collection the respondentsreport all the data on purchases and sales ofshares listed in Finland under portfolioinvestment. In order to avoid double recording,Suomen Pankki deducts the direct investmenttransactions in question from the portfolioinvestment figures.



The collection of portfolio investment data ispart of the general reporting system (see Sub-section 3.2), which is based almost entirely onend-investor surveys (directed at non-financialcompanies, financial institutions and generalgovernment) and surveys of brokers. The highlyconcentrated nature of the Finnish banking andsecurities markets implies that good quality dataare available from a relatively small sample. Thewide variety of CIIs constitutes an exception,though, and certain estimation methods have tobe applied (see Sub-section 8.6). It is also worthnoting that the reconciliation of stocks andflows is inherent in the surveys.

The ISIN code is not used directly for thecompilation of the Finnish b.o.p., althoughreporting agents use it when identifyingsecurities for the euro area/non-euro area split.There is no ISIN security database available at



the national level, and some reporting agents inthe survey of brokers have encounteredconsiderable difficulties in implementing theeuro area/non-euro area split for certaininstruments. This has been due to the ambiguityof the ISIN code regarding the issuer in the caseof debt instruments. Therefore, a centralisedsecurities database which is available to thereporting agents would be most welcome forthe purposes of the Finnish b.o.p.

The euro area/non-euro area split is availablefor all portfolio investment assets,3 but not forliabilities. Reporting agents are required tobreak the assets in the surveys down accordingto the creditor/debtor principle on a monthlybasis.

In the banking sector the monthly balancesheets of banks are used for quality controlpurposes.

8.2 Definition

Suomen Pankki primarily applies therecommendations of the BPM5 for portfolioinvestment. The portfolio investment statisticsinclude shares/participations in funds, bondsand money market instruments. Privateplacement loans are classified as loans and notas portfolio investment. Portfolio investment isbroken down by sector and by euro area/non-euro area issuer, but not by country. Moneymarket instruments were introduced intosurveys at the beginning of 1994.

The reconciliation adjustment between stocksand flows takes place through exchange ratechanges and other changes in the surveys. Theitem other changes includes price changes andit can be calculated as a residual item. Allinstruments (both flows and stocks) are to bereported at market value (dirty price in the caseof bonds), and the offsetting entry for accruedinterest is recorded monthly under portfolioinvestment in accordance with BPM5recommendations. Recording practices for debtinstruments take into account premiums/

discounts on the issue price. Reporting agentsare instructed to exclude service charges, feesand commissions.

As far as the Finnish money markets areconcerned, banks� certificates of deposit (CDs)are by far the most popular instrument, but theyare mainly used in the domestic interbankmarket. From the Finnish b.o.p. point of view,Finnish government Treasury bills are the mostimportant instrument, as they are activelytraded in the secondary market. Moreover,commercial paper programmes issued byenterprises are apparent in the Finnish b.o.p.There are no significant problems regardingmoney market instruments in the Finnish b.o.p.


None.

8.4 Gaps

None.


None.


Accrued interest on government bonds:The accrued interest calculated according tothe principles described in Sub-section 5.6(together with the accrued interest on foreignbonds, as reported by the State Treasury) isrecorded monthly in the current account/investment income debits, with an offsettingentry in the portfolio investment credits. Whenthe coupon is paid (reported in the survey ofbrokers in the case of serial bonds and by theState Treasury in the survey on governmentassets and liabilities in the case of foreignbonds), it is deducted from the b.o.p. bondstocks through portfolio investment debits.Finally, it is worth noting that the processproduces not only quarterly and annual, butalso monthly estimates of the accrued interestin the Finnish b.o.p.

Treatment of mutual funds:Owing to the large number and, so far, smallsignificance of CIIs in the Finnish b.o.p., the3 The assets split is not available for backdata.



capital movements pertaining to mutual fundsare based on the monthly mutual funds reportspublished by the Helsinki Stock Exchange.However, certain adjustments to these figureshave to be made each month to adapt them forb.o.p. purposes. This adjustment methodology isrevised semi-annually, according to the �MutualFunds Guide� published by the FinnishAssociation of Mutual Funds, to accommodatechanges in mutual funds� portfolio allocationstrategies. Furthermore, as mutual fundsenhance their popularity among Finnishinvestors, and as an increasing number of fundsalter their portfolio allocation policies to allowfor more investments inside the euro area, it isnecessary to recognise the need to monitor thisparticular market carefully in the future.

Estimating the government bond stock:The end-of-month government bond stockscomprise two elements:(i) the end-of-month foreign bond stocks, asreported by the State Treasury in the survey ongovernment assets and liabilities. These stocksare given at market value and take account ofthe interest accrued/paid;(ii) the serial bond stocks reported by brokers/custodians in the survey of brokers. The initial,reported stocks are given in terms of nominalvalue and do not take account of repos. Thefollowing two aspects have to be consideredwhen estimating the ultimate adjusted stocks:� the initial nominal stocks have to be

converted to market value according tothe maturity distribution of the stocks;

� in the Finnish repo market serial bondsare usually used as collateral. As residentbanks are traditionally net creditors in therepo market, and as the bonds used ascollateral are deducted by banks�accounting systems from the reportedliability stocks vis-à-vis non-residents, anestimate4 by Suomen Pankki of theamount of serial bonds used as collateralhas to be added to the initial stocks

reported by brokers. The figure calculatedin this way is then adjusted for the netflows reported by brokers each month.

It is also worth noting that the reported stocksin custody also include certain tranches issueddirectly abroad through syndication (andalready reported by the State Treasury). Thesetranches have to be subtracted from the stocksin custody to avoid double-counting. When allthese adjustments to the initial stocks have beenmade, the adjusted stocks can be calculated. Thetotal Finnish government bond stocks can thenbe derived by adding up the adjusted stocksand the foreign bond stocks.



The collection of financial derivatives data isbased on monthly surveys directed at non-financial companies, monetary financialinstitutions, other financial institutions (includinginsurance companies), general government andsecurities broking firms (see Sub-section 3).Special survey forms have been developed forthe purposes of collecting data on derivatives.

In the �end-investor� surveys (directed at non-financial companies, financial institutions andgeneral government) respondents are requiredto provide data on both flows (net cashpayments pertaining to derivatives contractsentered into with non-residents) and stocks (netvalue and gross market values of outstandingcontracts). Net payments are classifiedaccording to the direction of the payments (toor from non-resident counterparties). Flows andstocks have to be reconciled by therespondents, so that information on valuationchanges for the reporting month is alsoincluded in the reports.

In the survey directed at securities broking firmsonly flows data are collected. These flows datacover, on the one hand, net payments related toderivative contracts entered into by residentson non-resident derivatives exchanges,

4 A separate enquiry to the reporting institutions concerningtheir repo transactions is under consideration. Meanwhile,however, the estimation method is used.



classified according to the direction of thepayments and the domestic sector involved. Onthe other hand, the data also cover netpayments related to derivatives contractsentered into by non-residents on residentderivatives exchanges, classified according tothe direction of the payments.

In line with the ECB recommendations, flowdata for derivatives are collected on a net basisonly. Payments related to derivatives assets arenot distinguished from those related toderivatives liabilities in the surveys. Stocks dataare, however, basically collected on a grossbasis. The net value of outstanding contracts atthe end of the reporting month is broken downinto gross positive market value (assets) andgross negative market value (liabilities).

The information collected for derivatives coversboth exchange-traded and bilateral, OTC-typederivatives (e.g. options, warrants, subscriptionrights, futures, forward contracts, foreignexchange swaps and currency swaps). Interestrate instruments are, in principle, included inderivatives (and not in investment income). Therespondents report only aggregated data ontheir derivatives transactions and stocks, and nobreakdowns by instruments are provided. Basedon earlier observations and experience,however, it is known that currency swaps linkedto individual assets or liabilities have been themost common instrument category, especiallyfor central government. As from 1999,instruments such as forward contracts andinterest rate swaps have also become significantin the data (earlier they were excluded fromderivatives). If considered necessary, specialinquiries directed at the most important respondentsare occasionally conducted to ascertain thebreakdown of their derivatives by instrument.Geographical breakdowns are not available.

Regarding the issue of residency in the contextof derivatives contracts, identifying theresidency of the counterpart should pose nodifficulties for respondents in the case ofbilateral contracts. In the case of exchange-traded derivatives the decisive criterion has

been stipulated as the residency (location) ofthe derivatives exchange in question.

As for margin payments, respondents have beeninstructed to report all non-repayable marginpayments as derivatives transactions (to beincluded in net payments) if these can bedistinguished. All repayable margin payments(including initial margins and option-stylevariation margins) and collateral deposits must,as stipulated, be reported as transactions indeposits. If repayable and non-repayable marginpayments cannot be separated by therespondent, they will most likely be reported astransactions in deposits.

9.2 Definitions

Suomen Pankki follows the basic conceptualframework and methodology originally set outin the BPM5 and subsequently revised by theIMF. Nowadays both exchange-traded derivativesand OTC-type derivatives are included. Paymentsrelated to interest rate swaps and forward rateagreements (FRAs) are classified as transactionsin financial derivatives (and are not recorded ininvestment income flows).

Regarding practical compilation, Suomen Pankkiapplies the ECB recommendations, according towhich derivative flows should be recorded on a netbasis. Asset and liability flows are not separated; alltransactions are aggregated into one figure.

Transactions in derivatives cover, in principle, allpayments related to option contracts as well asforward-type contracts (including swaps):payments at inception (option premiums),during the life of and at the close of contracts.Secondary market trades in marketablederivatives are included. The difference betweenthe contract (or strike) price and the prevailingmarket price in the case of delivery of theunderlying instrument in a contract is alsoclassified as a transaction in derivatives. Non-repayable margin payments are included to theextent possible (see Sub-section 9.1).

The valuation of stocks positions for derivativesis based on gross market values. Assets are



defined as the sum of contracts with a positivemarket value (including purchased options),and liabilities as the sum of contracts withnegative market value (including writtenoptions).


There are no deviations from agreed definitionsat the conceptual level, because the surveyinstructions for respondents are based on thesedefinitions. In practice, however, it may not alwaysbe possible for respondents to follow theinstructions in full. For example, in the case ofdelivery of the underlying instrument in acontract, some respondents find it very difficultto report the difference between the contract (orstrike) price and the prevailing market price as atransaction in derivatives. Margin paymentsrepresent another example (see Sub-section 9.1).

9.4 Gaps

None.


None.


None.

10 Other investment


Data are obtained via monthly surveys (seeSub-section 3.2). The respondents reportmonthly data on stocks (at the start and at theend of the reporting month), net changes,exchange rate changes and other valuationchanges (not significant) during the reportingmonth. The compilation of quarterly and annualstatistics is also based on data derived from themonthly surveys.

The stocks of import-related supplier creditsand import advances are grossed up by acoefficient calculated on the basis of the resultsof a special enterprise survey. This survey iscarried out every few years in order to checkthe possible changes in the coefficient. The net

changes for these trade credit items arecomputed as differences between stocks afterthe grossing-up procedure.

Quarterly data is based on monthly surveydata.

10.2 Definition

Suomen Pankki applies the recommendations ofthe BPM5. Other investment includes loans,trade credits, currency and deposits, and otherassets and liabilities.

Loans include promissory note loans (includingprivate placements), financial leasing andrepurchase agreements.

Trade credits include import-related suppliercredits, export advances, import advances andexport claims.

Credit accounts of companies are classifiedunder other assets and liabilities, except forinter-company accounts, which are classifiedunder direct investment. Short-term claims andliabilities between affiliated enterprises are alsorecorded under direct investment.

In the Finnish b.o.p. genuine repos and sell/buy-back transactions are recorded undercollateralised loans. Under the currentreporting system, reporting agents are notrequired to separate repos from other short-term activities.

As far as the Finnish repo market practices areconcerned, the instruments used in repotransactions are usually Finnish governmentbenchmark bonds. Sell/buy-back transactionsare more commonly used than outright ones,but it has to be noted that there seems to be noclear distinction between the two in back-officeconfirmations. Thus, a crucial feature is thattraders agree on the price, so that theambiguous definitions do not cause confusion.Moreover, some market participants discouragetheir repo dealers from trading in bonds with acoupon due during the repo period.



When the Finnish repo markets were thinner,maturities were largely dictated by settlementday aspects, but now the need for various(longer) repo periods has grown. The popularityof one-week repos, in particular, has increased,but periods of one month or longer are not yetcommon.


None.

10.4 Gaps

None.


None.


None.

11 Reserve Assets


Data collection forms part of the generalreporting system (see Sub-section 3.2). TheAccounting Department reports the data onreserve assets stocks monthly. The flows arederived from this data.

11.2 Definition

According to the BPM5, the reserve assetscomprise gold, special drawing rights (SDRs),the reserve position in the IMF, foreign exchangeand other claims. This definition and the ECBrecommendations of the Working Group onBalance of Payments and External ReservesStatistics are followed. The breakdown byinstrument is available monthly for reporting tothe ECB, but is not yet published nationally.


At the moment, the market prices of derivativecontracts are very difficult to obtain from theaccounting data and are therefore missing fromthe data reported by the AccountingDepartment. This will be amended in the future,since there is an intention to investigate thematter in greater depth.

In the monthly data the valuation cannot bedone by applying the market price principle,since the accounting data is used. Theaccounting principles of the ESCB�s Accountingand Monetary Income Committee (AMICO) arefollowed. However, the valuation using marketprices is performed quarterly. The sameproblem also applies to the exchange rateswhich are converted into euro in the monthlydata using the average rate. A system taking intoaccount the changes in exchange rates andother valuation items will be implemented in thefuture.

11.4 Gaps

The derivative contracts are missing from thedata, but will be added as soon as possible.


There is an intention to further develop therecording of reserve assets. Common guidelinesof the ESCB on how to adjust the accountingdata for b.o.p. purposes would be welcomed.



Data related to the international investmentposition (i.i.p.) are collected together with theflows data via monthly surveys. See Sub-section3.2 for a general description of the datacollection system of Suomen Pankki and Sub-sections 7 to 11 for specific descriptions ofdirect investment, portfolio investment, financialderivatives, other investment and reserve assetsdata collection.

12.2 Definitions

12.2.1 General









12.4 Gaps



13 Administration


Statistical BulletinsFinland�s b.o.p.; monthly and annual (13 issuesper year)B.o.p. and i.i.p.; quarterly (4 issues per year)Direct investment in Finland�s b.o.p.; annual(one issue per year)

Statistical ReviewFinancial Markets; monthly (12 issues per year)Releases of charts and time series on theInternet (www.bof.fi)Releases of time series in the databases ofStatistics Finland and the Research Institute ofthe Finnish Economy

13.2 Contributors

This country information was drafted by theECB�s Balance of Payments and ExternalReserves Division and subsequently amendedand agreed with Finland. Enquiries of a generalnature should be addressed to the PressDivision of the ECB. Enquiries specific toFinland should be addressed to:

Mr. Jorma HilpinenSuomen Pankki - Finlands BankBox 160SnellmaninaukioFIN - 00101 HELSINKI 10Finland

Tel.: (00358) 9 183 2402Fax: (00358) 9 662 546

Mr. Harri KuussaariSuomen Pankki - Finlands BankBox 160SnellmaninaukioFIN - 00101 HELSINKI 10Finland

Tel.: (00358) 9 183 2403Fax: (00358) 9 662 546


Chapter 4.13 Sweden


General CouncilSven Hulterström,

chairmanJohan Gernandt, deputy

Audit Unit

Pengar i Sverige AB

AB Tumba Bruk

Executive BoardUrban Bäckström, Governor

Lars Heikensten, First Deputy GovernorEva Srejber, Second Deputy Governor

Villy Bergström, Kerstin Hessius, Lars Nyberg,Deputy Governors

Secretariat of theExecutive Board

Robert Sparve

ResearchDepartmentAnders Vredin

AdministrationDepartment

Agneta Rönström

ITDepartment

Staffan Wallén

InformationDepartmentLeif Jacobsson

InternationalDepartment

Gustaf Adlercreutz, tf

Internal AuditingDepartmentMarie Rudberg

Risk ManagementDepartment

Kristina Åkerberg

Financial StabilityDepartment

Martin Andersson

Market OperationsDepartment

Christina Lindenius

Monetary PolicyDepartment

Claes Berg

Sveriges Riksbank

Division forFinancial Market

AnalysisJaviera Aguilar

Division forMacro Economic

AnalysisHans Lindblad

Division forInternational

AnalysisPernilla Meyersson

Division forModels and

MethodsMårten Blix

Division forBalance ofPaymentsStatistics

Anders Lindström


Chapter 4.13 Sweden


2.1 Introduction

Sveriges Riksbank (the Riksbank) is accountableto the Swedish Parliament as stated in theConstitution Act. This means that the Riksbank�sactivities are governed by laws enacted byParliament, in particular the Sveriges RiksbankAct. The Riksbank is administered by itsGoverning Board. The different departments ofthe Riksbank are supervised by the Board ofDirectors.


The regulations on statutory reporting to theRiksbank for balance of payments (b.o.p.)statistics are laid down in Article 9, of theSveriges Riksbank Act (1988:1385). Thereporting obligations are set out in theRiksbank�s Statute Book, which lays down therules for statutory reporting to the Riksbank forb.o.p. statistics. It is possible for the Riksbank tomake changes to the Statute Book at shortnotice. The current reporting obligations (RBFS1997:4) became effective on 1 October 1997,the date on which the Riksbank�s rules onstatutory reporting to the Riksbank ceased tobe effective (RBFS 1992:16, A:73). The newreporting obligations were adapted to thechanges to the reporting system due in October1997.


The Riksbank has a new organisation effectivefrom 1 June 2000. The new organisationcomprises the following operational departments:the Monetary Policy Department, which isresponsible for overseeing and analysingmonetary stability, in addition to compiling andpublishing b.o.p. statistics; the Financial StabilityDepartment, which is responsible foroverseeing and analysing payment systemstability, as well as for compiling and publishingmoney and banking statistics; the MarketOperations Department, which manages theRiksbank�s foreign exchange reserves and thepayment system, and which also implementsmonetary and exchange rate policy; and theAdministration Department. There are seven

other departments that are unchanged after thereorganisation (Secretariat of the ExecutiveBoard, Information, International, IT, RiskManagement, Research and Internal Auditing.

The production of b.o.p. statistics takes place inthe Monetary Policy Department (MPD). Thereare 73 staff in the MPD, 25 of whom currentlywork on the b.o.p. statistics. The production ofthe b.o.p. statistics is undertaken by the Balanceof Payments Division (with 17 staff members). Inaddition, the greater part of the work relating tothe methodology, publication and some ITsupport is divided up between other divisions ofthe MPD.


For b.o.p. statistics purposes, the Riksbank co-operates closely with other authorities inSweden, but retains overall responsibility fortheir production. The Riksbank and StatisticsSweden (the Swedish National Institute ofStatistics) liaise to compile data for the currentaccount and, in particular, the trade in goodsitems, including trade credits and transportation.The official foreign trade statistics collected byStatistics Sweden have always been used in theb.o.p., as well as in the national accounts. Thetwo organisations discuss methodological issuesand the development of the statistics in jointtask forces. One of the most important tasksperformed over the past few years has been thefull harmonisation of definitions between thenational accounts and the b.o.p. In addition,data exchange takes place between theRiksbank and Statistics Sweden, which arelinked electronically.

There is regular co-operation with the NationalAudit Bureau with regard to EU and othercentral government transactions. Co-operationalso takes place with the National Institute forEconomic Research, as the Riksbank suppliesforecasts on income and travel statistics as wellas calculations for the national budget. TheRiksbank is consulted by the Ministry of Financein relation to economic forecasts and statisticalsupport. In addition, there is regular contactwith data providers, especially with large banks


Chapter 4.13 Sweden

and enterprises, and with data users, such asmarket players and analysts. Close and regularcontacts are maintained with other Europeancentral banks, in particular those of the otherNordic countries (Sweden, Finland, Iceland andNorway); these contacts include annual�Nordcap� meetings on b.o.p. issues.

2.5 Users

B.o.p. data are sent to the following internationalorganisations: the Statistical Office of theEuropean Communities (Eurostat), the ECB, theInternational Monetary Fund (IMF) and theOrganization for Economic Cooperation andDevelopment (OECD). The data sent to theBank for International Settlements (BIS) for theInternational Banking Statistics are provided bythe Financial Stability Department. Data areexchanged with other OECD countriesconcerning the sale and purchase of banknotesto and from the public. These data form thebasis for the correction of gross travel flows.



In October 1997 the Swedish b.o.p. wasbrought into line with the 5th edition of the IMFBalance of Payments Manual (BPM5). In order toachieve this, substantial changes were made tothe collection system. The Swedish b.o.p. datacollection system could be described as a directreporting system supported by settlement data.The thresholds applied for direct reporting areadapted according to the different types oftransactions and sectors, etc. Players below thethresholds are covered by settlement data. Eventhough settlements are used only to a minorextent for the compilation of the b.o.p.,settlement data are important since they form acontinuously updated register of the targetpopulation.

The Swedish b.o.p. collection system started offas an open settlement system, which wasoriginally created for the purpose of foreignexchange controls. In the new system,settlement reporting covers payments settled

with domestic banks as intermediaries and issupplemented by the direct reporting ofpayments settled in netting systems (clearing)and via foreign bank accounts. Domesticsettlements in foreign currency and banks� ownsettlements are excluded from reportingobligations. Instead, the system is closed bymeans of banks reporting on a transaction basis.In total, around 70,000 active reporting agentscarry out foreign transactions in the registerbased on settlements.

In the final b.o.p. compilation process, mostsettlement data are replaced by informationreceived by means of direct reporting, i.e. fromso-called general direct reporting companies(GDRs), and from other �special� directreporting companies (DRCs). The monitoring ofthe survey populations for direct reporting isongoing, using the enterprise register based onsettlement data.

The GDRs report monthly information on alltheir financial and current account transactionsto the Riksbank. For financial transactions, therelated stocks at the beginning and end of thereporting period are also reported. Currentaccount transactions are reported with monthlyaggregates adapted to the sector of therespondent; data are broken down by country.GDRs comprise all insurance companies,Monetary Financial Institutions (MFIs) andmajor players within the manufacturing andcontracting sectors (12-15 groups). 11reporting forms are used by GDRs to providethe Riksbank with monthly data.

The DRCs report detailed informationconcerning b.o.p. areas falling within thecategory of their �main activity� to the Riksbankon a monthly basis. This mainly covers financialtransactions, but also includes any currentaccount transactions identified in reporting onnetting and foreign bank accounts. Thereporting requirements are identical to thosefor GDRs. The population of DRCs is selectedby the Riksbank according to the magnitude oftheir cross-border transactions, which areevaluated from general settlement reports. In


Chapter 4.13 Sweden

total, around 30 forms are used for monthlyreporting by DRCs. The number of DRCsinvolved varies from 10 to 300, depending onthe b.o.p. item concerned.

As a result, the financial account is compiledalmost entirely from reports sent directly to theRiksbank; settlement data are only used forsmall and medium-sized enterprises (SMEs) andhouseholds. In the current account, settlementsstill represent an important source for servicesdata, whereas data on goods, freight, travel andtransfers are based on other sources; mainlydirect reporting and Statistics Sweden.


The Riksbank has been receiving the followingb.o.p. reports since October 1997:

(i) Settlements � banksUnder the Sveriges Riksbank Act, banks arerequired to report all transactions effected onbehalf of their customers. There is a generalexemption for individual transactions below athreshold of SEK 100,000.

Banking institutions report all incoming andoutgoing payments effected on behalf ofcustomers on a monthly basis; informationabout the purpose of payment is indicated bymeans of a code.

Other intermediaries are required to reportthese payments if the total annual volumeamounts to more than SEK 10 million. Inaddition, monthly reports are required for tradein foreign currency with the non-banking public(there is no applicable exemption threshold).

(ii) Direct reportingUnder the Sveriges Riksbank Act, enterprisesand individuals are obliged, upon request, toreport all transactions with non-residentsdirectly to the Riksbank on a monthly basis. Inaddition, there is a reporting requirement(travel) for credit card enterprises both on theuse of credit cards by Swedish legal entitiesabroad and by individuals who are Swedishresidents, as well as on the use of credit cards in

Sweden by foreign legal entities and byindividuals who are not resident in Sweden.

Direct reporting consists of data being suppliedby general and other direct reportingenterprises, depending on the scale of theenterprises� foreign operations; the GDRssupply reports on all their current account andfinancial transactions, whereas the DRCs reporton b.o.p. transactions for selected areas. Thepopulations for direct reporting are targeted bymeans of settlement data. Enterprises areidentified by means of an identification number.The following direct reports are collected.

Major players and all Monetary FinancialInstitutions (MFIs) supply data on financialtransactions as well as on stocks and investmentincome on an accruals basis (approximately150 reporting agents). (Stock data on their ownissues of interest-bearing securities in domesticcurrency are based on custody reports.)

Data on secondary market trade in securities arereported by intermediaries, including banks.These agents also supply data on debt securitiesheld in their custody (60 to 70 reporting agents).Major players, other than intermediaries, reporttheir trade with foreign counterparts directly, aswell as stock data on securities not held inSwedish custody (75 to 100 reporting agents).

Data on financial derivatives are reported byMFIs and other major players (approximately120 reporting agents). The reports cover flowsand stocks. Derivatives within foreign directinvestment (FDI) relationships are not reportedseparately.

Major players report financial transactions anddividends paid within direct investmentrelationships (approximately 100 reportingagents). Other companies report singletransactions in equities (acquisitions, disposals,issues, contributions, etc.) directly to theRiksbank. For this category of respondents, loantransactions, etc. are collected from thesettlement system; financial derivatives are notincluded.


Chapter 4.13 Sweden

Table 1Reporting scheme for b.o.p. and i.i.p. data collection for SWEDEN


reference period)

MFIs, insurance m Capital m Portfolio investment/ m Monthly m 15 mcompanies, enterprises, m liabilities, lending/ mNational Debt Office m borrowing, other m

investment and income

MFIs, brokers, insurance Trade in equities m Trade in portfolio mm Monthly m 15 mcompanies m equities on the m

secondary market m

MFIs, brokers, insurance Trade in interest-bearing m Trade in interest- m Monthly m 15 mcompanies m securities m bearing securities on the

secondary market m

MFIs, National Debt m Financial derivatives m Flows and stocks from Monthly m 15 mOffice, enterprises m financial derivatives, m

including interest mtransactions from mderivatives m

Enterprises, MFIs m Direct investments m Direct investment in m Monthly m 15 mSweden and abroad, mincluding interest mincome and dividends m

Custodians m Custody holdings and m Interest-bearing securities Monthly m 15 mredemption m held in Swedish custody.

Both domestic and mforeign securities m

In addition to the above- Monthly m 15 mmentioned reporting mforms, Sweden also hasreporting on accountsheld abroad, repopositions, netting,primary trade in equity,etc.


Chapter 4.13 Sweden

The use of Swedish credit cards abroad and offoreign credit cards in Sweden is reported bycredit card companies (approximately 15reporting agents). Sales and purchases ofbanknotes and travellers� cheques are reportedby banks and other companies which trade incurrencies with the non-bank public(approximately 50 reporting agents).

The settlement data collected by the bankingsector are supplemented by enterprises� directreports of gross payments settled in nettingsystems (clearing) and via foreign bank accounts;only bank accounts with an annual turnoverexceeding SEK 100 million are reported. Intotal, there are around 40 reporting agents fornetting transactions and approximately 250reporting agents for foreign bank accounts.

Direct investment stocks and reinvestedearnings are calculated on the basis of anannual sample survey. Residents� holdings offoreign portfolio shares are surveyed annually.

(iii) Other reporting agentsStatistics Sweden provides the following data:� merchandise data on a monthly basis;� data on sea transport, based on a

quarterly questionnaire;� calculated adjustments of the basic trade

statistics (Intra-Community TradeStatistical System (Intrastat) and Extrastat)on a quarterly basis (calculated by theNational Accounts Section of StatisticsSweden);

� quarterly data on trade credits, which arebased on a sample survey designed for thefinancial accounts system. These data arebroken down into intragroup credits andothers, using 50% ownership as acriterion (no geographical breakdown isavailable); and

� information on stocks of Swedish sharesheld by non-residents on the basis of anannual survey.

The Swedish International Development Co-operation Agency (SIDA) provides informationon development aid.

The National Audit Bureau provides monthlydata on EU transactions.

The Riksbank reports on the external monetaryposition and monthly flows.

3.3 Thresholds

For settlements, there is a general exemption forindividual transactions below a threshold ofSEK 100,000.

For accounts held abroad, gross information ontransactions and the balances of accounts withan annual turnover in excess of SEK 100million are to be reported.

For financial transactions � mainly for loans �an informal threshold is applied to select DRCs,i.e. a monthly report is required for enterpriseswith stocks of loans exceeding SEK 150 million.


Complete monthly, quarterly and annual b.o.p.data are available.

3.5 Timeliness

The Riksbank compiles monthly b.o.p. datawithin six to seven weeks of the end of thereporting period. Some items are estimated,mainly reinvested earnings, for which data arereceived from an annual survey after a 10-month time-lag.


The Swedish b.o.p. is compiled on a monthlybasis.

3.7 Data controls

Data go through numerous checking processesbefore being published. There are ordinarychecks on format and integrity, etc. for all datareceived. In addition, there are several forms ofregular quality controls on the data: currentcontacts with the respondents; comparisonsbetween income and the correspondingstocks; the comparison of transactions andcorresponding changes in stocks (e.g. securitiesand loans); and the comparison of settlementsand transactions. Comparisons are also made


Chapter 4.13 Sweden

with other sources, e.g. banking statistics andnewspapers.

3.8 Revision policy

For the current year, revisions are made as soonas updated data become available. Revisions forearlier years are normally made once a year.Revisions may be made more frequently withregard to the size and nature of the new data.

3.9 Publication

The b.o.p. statistics are presented andcommented on by the Monetary PolicyDepartment in four different publications. A fullaccount of the b.o.p., with short comments, ispublished monthly, as are data on cross-bordertrade in securities. In addition, statistics withstocks data on non-residents� holdings and therepo position of Swedish interest-bearingsecurities are published monthly. Statisticsrelating to Sweden�s external assets andliabilities are published biannually and a moredetailed b.o.p. with monthly and annual timeseries is also published monthly. For directinvestment, statistics with comments on stocksdata on inward and outward direct investmentand direct investment income are publishedannually.

The titles of publications produced by theRiksbank concerning b.o.p. statistics are listedin Sub-section 13.1.

4 Implementation


Monthly b.o.p. statistics contribute to theanalysis of monetary, exchange rate and generaleconomic developments. In order to improvethe analytical value of these statistics � as wellas to comply with international standards �several conceptual and presentational changeshave been introduced. The liberalisation ofinternational transactions in 1989 called formajor statistical revisions. Turbulence on thefinancial markets in 1992 and 1994 led to anincrease in public interest, both in Sweden andabroad, in capital flows.

Sveriges Riksbank very rarely estimates missingfigures owing to late reporting. The estimationmethods described below are used to complywith the BPM5.


items

4.2.1 For trade in goods and services

Goods: Statistics Sweden collects and compilesmerchandise trade from customs data (extra-EU) and Intrastat. A survey of approximately1800 intra-EU traders (75% of the total intra-trade value) is carried out on a monthly basis.This survey enables Statistics Sweden to fulfilthe timeliness requirements for the reporting ofglobal trade data.

For extra trade: imports are classified accordingto the country of consignment and exportsaccording to the country of final destination.For intra trade: imports are classified accordingto the Member State of consignment andexports according to the Member State ofdestination.

In order to comply with internationalrecommendations, the valuation of imports isconverted from a c.i.f. to an f.o.b. figure.

Services: brokerage fees are calculated monthly,based on reports of trade in equity fromSwedish brokerage firms. No such calculation ismade for trade in interest-bearing securities.


Reinvested earnings: the main source concerningreinvested earnings is an annual survey ofprofits from direct investment income.Reinvested earnings are transferred to the yearin which they have been earned and distributedover the months.

4.2.3 For capital account



See Sub-section 4.2.2 above.


Chapter 4.13 Sweden


A monthly estimate is made of accrued couponinterest on Swedish krona-denominatedinstruments on the basis of detailed informationfrom custodians.




Trade credits: the data concerning trade creditsare available from Statistics Sweden only on aquarterly basis. The monthly figures areestimated by Sveriges Riksbank.

4.3 Monthly key items � implementation plan

A table showing details of the implementation ofthe monthly key items is shown on the followingpage. A distinction is made between currentdata availability and future implementationrequirements for Sweden.


Most of the adaptations needed to comply withthe BPM5 took place in October 1997. Someparts of the adaptation are to be developedfurther at a later stage, namely the freight andmerchandise items (f.o.b./f.o.b. adjustment). Forboth items, Statistics Sweden will develop newmethods, which are more in line with the BPM5requirements. Furthermore, the �full� geographicalbreakdown for financial transactions wasimplemented in January 1999, with the exception ofthat for debt securities issued by residents, whichwill not be distributed by the country of creditor.Data on financial transactions are being collectedthrough the direct reporting system with abreakdown into at least 20 countries as of this year.

Earlier periods have been revised and adaptedto comply � to a limited extent � with theBPM5. For the current account, comparisonswill be possible at an aggregated level. As aresult, most b.o.p. data series before and afterOctober 1997 are not comparable.

Difficulties concerning the implementation ofthe BPM5 are experienced in the followingareas:

� the automation of the reportingprocedure on a large scale; and

� the inclusion of construction in FDI,according to the European System ofAccounts (ESA) 95.


annual

The presentation of the Swedish b.o.p. complieswith the IMF standard components (5thedition).

5 Investment income


5.1.1 General

Income on financial assets and liabilities isbroken down according to the standardcomponents in the BPM5.


This component includes all income on assetsand liabilities between parties in a directinvestment relationship and is broken downaccording to:� dividends;� interest; and� reinvested earnings.

Reinvested earnings are calculated as thedifference between total profit after tax anddividends. While dividends are reported at thetime of payment, reinvested profits aretransferred to the year earned and distributedevenly over the months. Interest rates havebeen reported on an accruals basis sinceOctober 1997.

The main sources of data on direct investmentincome are direct reporting from major playersand an annual survey of profits of directinvestment companies. Moreover, someinformation on interest on loans is collectedfrom settlement data.

Since total profits on direct investment income,and consequently reinvested earnings, are


Chapter 4.13 Sweden

Table 2Implementation of the Monthly key items

SWEDEN Current data availability

Key item Timeliness for national Timeliness for geographical Timetable fordata breakdown on a country- implementing the euro

by-country basis area/non-euro area split

credits/ debits/ credits/ debits/ credits/ debits/assets liabilities assets liabilities assets liabilities

Current account 6 weeks 6 weeks 6 weeks 6 weeks available availableGoods 6 weeks 6 weeks 6 weeks 6 weeks available availableServices 6 weeks 6 weeks 6 weeks 6 weeks available availableIncome 6 weeks 6 weeks 6 weeks 6 weeks available available

on direct investment 6 weeks 6 weeks 6 weeks 6 weeks available availableon portfolio investment 6 weeks 6 weeks 6 weeks n.a available �on other investment 6 weeks 6 weeks 6 weeks 6 weeks available available

Current transfers 6 weeks 6 weeks 6 weeks 6 weeks available availableCapital account 6 weeks 6 weeks 6 weeks 6 weeks available availableDirect investment 6 weeks 6 weeks 6 weeks 6 weeks available available

Equity capital 6 weeks 6 weeks 6 weeks 6 weeks available availableReinvested earnings 6 weeks 6 weeks 6 weeks 6 weeks available availableOther capital 6 weeks 6 weeks 6 weeks 6 weeks available available

Portfolio investment 6 weeks 6 weeks 6 weeks 6 weeks available availableEquity securities 6 weeks 6 weeks 6 weeks n.a available �Debt securities 6 weeks 6 weeks 6 weeks n.a available �

bonds 6 weeks 6 weeks 6 weeks n.a available �money market instruments 6 weeks 6 weeks 6 weeks n.a available �

Financial derivatives 6 weeks 6 weeks 6 weeks 6 weeks available availableOther investment 6 weeks 6 weeks 6 weeks 6 weeks available available

Monetary authorities 6 weeks 6 weeks 6 weeks 6 weeks available availableGeneral government 6 weeks 6 weeks 6 weeks 6 weeks available availableMFIs 6 weeks 6 weeks 6 weeks 6 weeks available available

long-term 6 weeks 6 weeks 6 weeks 6 weeks available availableshort-term 6 weeks 6 weeks 6 weeks 6 weeks available available

Other sectors 6 weeks 6 weeks 6 weeks 6 weeks available availableReserve assets 6 weeks 6 weeks n.a. n.a. available �

calculated with a considerable time lag,forecasts have to be made.


This sub-item is broken down by:� dividends;� interest;� bonds; and� money market instruments.

Equity income is reported on a settlement basis,while interest is recorded on an accrual basis.

Statistics are based on monthly reports andsettlements data. An estimate is made ofaccrued coupon interest on Swedish krona-denominated instruments on the basis ofdetailed information from custodians.


Interest on loans has been reported primarilyon an accruals basis since October 1997. Thesources are monthly direct reporting by majorplayers supplemented with settlement data.


Chapter 4.13 Sweden

Data on income on financial derivatives iscollected solely via monthly direct reporting.

5.2 Definitions

In principle, the Riksbank has implemented therecommendations of the BPM5 and theharmonisation proposals made by the TaskForce on Financial Flows and Stocks Statistics,which has now been succeeded by the WorkingGroup on Balance of Payments and ExternalReserves Statistics.


Some of the Swedish data on interesttransactions are based on settlement data andare thus not compiled on an accruals basis. Atpresent, less than 15% of the data on interesttransactions are compiled on a settlement basis.

Sweden records the interest part of financialderivatives as income. With regard to recordingpractices for financial derivatives, EU harmonisationproposals are still under discussion. Whilewaiting for final recommendations, Swedenprefers the initial recording practice as definedin the BPM5 and the System of NationalAccounts (SNA) 93/ESA 95, i.e. recording theinterest as property income in the currentaccount, instead of as financial account transactionsin financial derivatives, as proposed.

5.4 Gaps

None.


None.


None.

6 Capital account


The Riksbank collects data on the capitalaccount both from the settlement systems andvia direct reporting; the latter covers the capitalflows of aid to developing countries.

6.2 Definition



The Riksbank claims that significant volumesare only involved for some items of the capitalaccount, namely general government/other;other sectors/migrants� transfers. Among thesesignificant items, data on migrants� transfers willbe available only for transactions in cash andnot in kind.

6.4 Gaps

None.


Sweden expects to receive good quality data oncapital (and current) transfers between EUinstitutions and Member States as a consequenceof intensive co-operation with other Swedishauthorities, including Statistics Sweden.

7 Direct investment


The Riksbank collects data on direct investmentflows and stocks from three different sources:(i) monthly direct reporting, which covers allFDI transactions from respondents withconsiderable stocks and transactions regardingloans, etc. The selection of respondents is basedmainly on the annual sample survey on FDIstocks. The samples for the annual surveys arebroken down by size and sector. Classificationby size is based on simulated direct investmentassets computed as the most recent survey datafor the direct investment asset plus theaccumulated net flow up to the measurementdate. All the largest companies as well as allbanks and insurance companies are included inthe survey. In addition, single transactions inequity are reported directly to the Riksbank;


Chapter 4.13 Sweden

(ii) information on stocks and reinvestedearnings is obtained from an annual survey; and(iii) settlement data, which are used for FDItransactions by enterprises not reportingdirectly; settlements data are also used to obtaininformation on private, non-commercial realestate investment.

The current method of calculating reinvestedearnings has remained essentially unchanged inthe new b.o.p. compilation system (i.e. monthlyestimates, ex post information from the annualsurvey).

7.2 Definition

The combination of the three data sourcesleads to a good coverage and quality of directinvestment data. The 10% criterion is applied.The directional principle is used, but data arealso compiled according to the assets/liabilitiesprinciple.


Deviations remain for intra group financialderivatives which are not included in the FDIconcept applied, but which are recorded inportfolio investment/financial derivatives. Inaddition, for intra group trade credits, a 50%ownership criterion is applied instead of the10% criterion.

All FDI data are in line with the BPM5 as fromOctober 1997, with some minor deviations.

7.4 Gaps

None.


Some additional improvements will beimplemented with regard to geographicalallocation, information on dividends paid andincome on real estate.

The Riksbank will take account of the discussionon appropriate estimation methods held withinthe Working Group on Balance of Payments andExternal Reserves Statistics.


None.



In the new b.o.p. data compilation system, datarelating to the portfolio investment account arebased entirely on monthly direct reporting, i.e.banks and brokers report aggregatedtransactions in which they have acted asintermediaries on behalf of customers and forthemselves; major players report aggregateddirect transactions with customers abroad, i.e.transactions executed without the intermediationof Swedish banks and brokers, aggregatedtransactions in securities issued abroad by themajor players themselves, and information onrepo transactions; custodians report monthlyinformation on stocks and redemptions.

8.2 Definition

A full breakdown by instrument of the portfolioinvestment account, in line with the BPM5, wasintroduced in October 1997.

For repurchase agreements, bond lending andrelated instruments, the Riksbank compiles onlyso-called genuine repos as collateralised loans.Other related instruments � so-called non-genuine repos � are recorded as portfolioinvestment.


At present, no geographical breakdown isavailable for portfolio investment liabilities. Forassets, a geographical breakdown is available asfrom January 2000.

8.4 Gaps

No data are available on bond lending.


A harmonisation of banks� accounting practicesis desirable.

The ISIN code and its use for harmonisationamong the EU Member States are being


Chapter 4.13 Sweden

considered as a possible tool for identificationpurposes. In the longer term the ISIN code mayprove to be necessary for a full geographicalbreakdown and for a full breakdown into intra-EMU (debtor) sectors.


None.



The Riksbank has been collecting data onfinancial derivatives since March 1995. The dataare collected via monthly direct reporting byMFIs and other major players, among them theSwedish clearing house OM. As from January1999 a full geographical breakdown based onthe country of the counterpart has beenincluded.

The transaction data are broken down by:(i) option premiums; (ii) the realised value ofderivative contracts redeemed/matured; and(iii) net flows of interest rate swaps and forwardrate agreements (FRAs) and the interest part ofcross-currency interest rate swaps (CCIRS).

The data on financial derivatives are collectedin a highly aggregated form. Therefore, Swedenis not in a position to produce a breakdown byinstrument other than those outlined in items ito iii above.

The data are collected and recorded on a grossbasis according to the recommendations of theBPM5, i.e. net of all derivative instruments whichindicate a realised profit for the reporting agentare reported as credits. Accordingly, allinstruments which indicate realised losses arereported as debits.

Margin payments are included in the reporteddata, but data are not collected separately.Furthermore, the Riksbank is not in a positionto distinguish between options-style andfutures-style variation margin payments.

9.2 Definitions



Derivatives within FDI relationships are includedin the data, but are not reported separately.

Sweden records the interest part of financialderivatives (item iii above) as income onfinancial derivatives. With regard to recordingpractices for financial derivatives, EU harmonisationproposals are still under discussion. Whilewaiting for final recommendations, Swedenprefers the initial recording practice as definedin the BPM5 and the SNA 93/ESA 95, i.e.recording the interest as property income in thecurrent account, instead of recording these asfinancial account transactions in financialderivatives, as proposed.

9.4 Gaps

None.


With regard to recording practices for financialderivatives, EU harmonisation proposals are stillunder discussion. For interest rate swaps andforward rate agreements, Sweden prefers theinitial recording practice as defined in the BPM5and the SNA 93/ESA 95, i.e. recording them asproperty income in the current account, insteadof as financial account transactions in financialderivatives, as proposed.


None.

10 Other Investment


The Riksbank collects data on other investmentflows and stocks from three different sources:


Chapter 4.13 Sweden

monthly direct reporting by banks and othermajor players is used for aggregatedtransactions and stocks, including accruedinterest; settlement data are used for SMEs andhouseholds; and data on trade credits aresupplied by Statistics Sweden.

Data on trade credits are based on a quarterlysample survey designed for the financialaccounts system conducted by StatisticsSweden. Data are broken down into intra grouptrade credits (to be recorded under directinvestment) and others using the 50%ownership criterion.

For repos, bond lending and other relatedinstruments, see Sub-section 8.

The flows of the MFI sector are reported byMFIs as real transactions which should beadjusted from the impact of foreign exchangerate changes.

10.2 Definition



None.

10.4 Gaps

Monthly figures on trade credits are estimatedby the Riksbank.


None.


None.

11 Reserve assets


Data on reserve assets are recorded on atransaction basis, using the Riksbank�saccounting records. Income is recorded on anaccruals basis.

11.2 Definition

According to the new BPM5, reserve assetscomprise gold, special drawing rights (SDRs),the reserve position in the IMF, convertiblecurrency claims and the sum in ECU receivablefrom the ECB.


None.

11.4 Gaps

None.


None.



Sweden�s i.i.p. is compiled by the Riksbank andpublished semi-annually with a time lag of sixweeks. Published data are revised continually inconnection with the monthly publication of theb.o.p. At the time of the first publication estimatesare made for direct investment assets andliabilities, portfolio equity and trade credits.Definitions of the various instruments, etc.coincide wholly with those applicable to the b.o.p.

The Swedish i.i.p. consists almost entirely ofpure stock data. Data on loans from SMEs areproduced using the accumulation of flows data.These calculated loans account for less than10% of the total stocks of loans. Stocks in theform of life and pension savings are alsocalculated on the basis of accumulatedtransactions.

The i.i.p. is reported broken down byinstrument and by domestic sector.


Chapter 4.13 Sweden

The Riksbank collects the majority of thestatistics via monthly direct reporting from themajor players and via annual surveys.Information on foreign holdings of Swedishshares and on trade credits is also obtainedfrom Statistics Sweden. Data collection issupplemented by calculations for certain items.

The Swedish i.i.p. statistics were adapted to thenew international nomenclature (BPM5) inOctober 1997. Owing to insufficient underlyingmaterial, retrospective adjustment of data hasonly been possible to a very limited extent,which means that there is a break in the timeseries.

Most of the items of the Swedish i.i.p. are brokendown geographically as from January 1999. Atpresent portfolio investment liabilities andforeign exchange reserves are not allocatedgeographically.

12.2 Definitions

12.2.1 General


Stock information on direct investment refersmainly to book values. However, the Riksbankhas developed a method of market valuationwhich is based on the Price/Earnings ratio oflisted companies with similar business structure.Stock information at market value waspublished for the first time in August 1999, assupplementary information to the official bookvalues. The definitions of direct investmentstocks are the same as those for the transactiondata. This means, for example, that the 10%criterion and the directional principle areapplied.

Statistics for direct investment are mainly basedon three sources:� a sample survey;� calculations by the Riksbank; and� Statistics Sweden.

Sample surveyThe Riksbank carries out an annual sample

survey to measure direct investment stocks inthe form of:� equity capital; and� loans and other capital provided and

received in a direct investmentrelationship.

The survey also measures total profits fromdirect investment abroad and in Sweden inorder to calculate reinvested earnings.

The results of the survey are presented in aspecial publication.

The outcome of the sample questionnairebecomes available after a time lag of around 11months. Statistics are therefore supplementedwith forecasts, mainly based on previous stockdata supplemented with transaction data andadjusted for some valuation changes.

Calculations � private non-commercial real estatePrivate non-commercial real estate is includedin the concept of direct investment, accordingto the international nomenclature. The statisticsare mainly based on settlements data, which isaccumulated to provide stocks figures. Theseare adjusted to take account of both inflationand � with regard to private real estate abroad� exchange rate fluctuations.

Statistics Sweden � trade creditsInformation on trade credits within directinvestment relationships is obtained fromStatistics Sweden, which bases the informationon quarterly surveys.

As the information is obtained after a three-month lag, stocks are forecast by projecting themost recently available outcome.


Foreign equityEvery year the Riksbank carries out a surveywith the aim of measuring the size of Swedishassets abroad in the form of foreign equity.Holdings of both individual shares and shares inforeign unit trusts are included in the results ofthe study.


Chapter 4.13 Sweden

For compilations produced at times whensurvey results are not available, forecasts aremade on the basis of previous stocks andtransaction data, which are adapted to takeaccount of changes in foreign stock prices andexchange rates.

Swedish equityInformation about the size of foreign holdings ofSwedish equities is obtained from StatisticsSweden, which sends an annual questionnaireto the Swedish National Numbering Agencyand Swedish deposit managers. Forecasts aremade in the same way as for foreign equity.

Foreign interest-bearing securitiesInformation about Swedish holdings of interest-bearing securities with foreign issuers is basedon monthly reports from Swedish depositmanagers and from players holding paperdeposited abroad. Data are stated in terms ofmarket values.

Swedish interest-bearing securitiesStatistics on the foreign holdings of interest-bearing securities with Swedish issuers arebased on monthly reports from players whohave issued securities abroad. This informationis completed by using monthly reports fromdeposit managers on Swedish krona-denominated securities that are held in Swedishcustody. Finally, securities that serve ascollateral in repo agreements are added to thestock.

Information from custodians regarding Swedishkrona-denominated securities is valued atnominal amounts, while other data are valued atmarket value. A method to calculate marketvalues for all interest bearing securities denominatedin Swedish kronor has recently been developed.


Stock information for financial derivatives isbased on monthly reports from the largestplayers and is recorded on a market valuationbasis. Information is reported in aggregate, i.e.not broken down by the type of instrument.

The data are reported on a gross basis, asrecommended in the IMF manual.

From January 1999 onwards, a full geographicalbreakdown by counterpart country is collected.

Financial derivatives within direct investmentrelationships are recorded under financialderivatives and not under direct investment.


Trade creditsStatistics Sweden compiles statistics on tradecredits on the basis of a quarterly survey.Intragroup trade credits are reported underdirect investment.

Loans, etc.Data on loans, etc. (including deposits, financialleasing and repos) are based on monthlyreports from major players. Stock data for SMEsare calculated on the basis of settlement data.

OtherInterim items (transactions contracted, but notsettled), certain assets and liabilities in relationto international organisations and insurancesaving are reported under the sub-item other.

The sub-item is based on monthly reports, andon accumulated settlements.

Insurance savingSaving in the form of life and pension savingsis calculated on the basis of accumulatedtransactions, corrected for exchange rate andstock exchange price movements and the levelof interest rates.


Data on reserve assets are based on theRiksbank�s report on holdings of gold andforeign assets. These data are available on amonthly basis. All items, including gold, arerecorded at market prices.


None.


Chapter 4.13 Sweden

12.4 Gaps

None.


None.


None.

13 Administration


B.o.p. statistics (texts in Swedish and in English):Sweden�s Balance of Payments (monthly statistics);Sweden�s Balance of Payments, Tables (tables ofdata for the past eight years and for the past 24months;Sweden�s external assets and liabilities (half-yearly statistics with commentary);Cross-border trade in securities (monthlystatistics with commentary);Direct investment companies (annual statisticswith commentary).

All the reports are available free of charge inSwedish and English and can be orderedfrom the Riksbank�s Information Centre;the data are also available on the URL

http://www.riksbank.se. Some information isalso published by Reuters.

Data on the following are available but are notpublished:� non-residents� holdings of Swedish interest-

bearing securities (monthly stocks data);and

� non-residents� repo positions in Swedishinterest-bearing securities (monthlystocks data).

13.2 Contributors

This country information was drafted by theECB�s Balance of payments & External ReservesDivision and subsequently amended and agreedwith Sweden. Enquiries of a general natureshould be addressed to the Press Division of theECB. Enquiries specific to Sweden should beaddressed to:

Mr. Anders LindströmSveriges RiksbankMonetary Policy DepartmentS - 10337 STOCKHOLMSweden

Tel.: (0046) 878 705 60Fax: (0046) 8 245 348


Chapter 4.13 Sweden

296ECB EU


ethods � Novem

ber 2000

Ch

apter 4.14 T

he U

nited

Kin

gdo

m

1O


Bank of England

Monetary & Financial Statistics Division

Head of DivisionAdviserInternational Standards,

Statistical Development, ONS Liaison & Work Programme

DomesticBankingStatistics

Manager

MonetaryStatistics

Manager

ExternalFinanceStatistics

Manager1

Financial Stability

Statistics

Manager

Financial MarketStatistics

Manager

IT and Admin

Manager

Reserves & Research(3)

Database &Publications(3)

1 Chair of ONS Monthly BOP Technical Board

MFIs� Current &Financial Accounts(3)



ovember 2000

297

Ch

apter 4.14 T

he U

nited

Kin

gdo

m

1 Chair of ONS Monthly BOP Programme Board

National Statistics

Trade in Goods

Head o fBranch

Monetary FinancialInstitutions

Head of Branch

Non-Monetary Financial

Institutions Branch

Head o f Branch

BPM5/ESA95Research andDevelopment

Members ofBranch

Economic Statistics DirectorateDirector

Balance of Payments and Financial Sector Divis ionDivisional Director1

Trade in Servicesand Transfers

Head of Branch

Development ofMonthly Services

Estim ates

Trade in Servicesand Transfers

Manager

BOP Co-ordination &Financial Accounts

Head o f Branch(Monthly BOP Programme Manager)

Financial Account Co-ordinator &Pink Book Editor

Development & analysisof Monthly BOP

Development of Geographical BOP& International Issues

Co-ordinator

Monthly BOPProgramme Co-ordinator


Chapter 4.14 The United Kingdom


2.1 Introduction

The compilation of the United Kingdom�s balanceof payments (b.o.p.) is carried out on the basisof data submitted to both the Office forNational Statistics (ONS) and the Bank ofEngland, with the ONS responsible for compilingthe overall aggregates. The ONS collects datafrom non-bank financial institutions and is thegovernment agency responsible for compiling,analysing and disseminating most of the UnitedKingdom�s economic, social and demographicstatistics, including the national accounts, retailprice index, trade figures and labour marketdata, as well as a periodic census of the populationand health statistics. The Bank of Englandcollects data from UK banks and is responsiblefor compiling banking and money supply data.


(i) ONSThe ONS was formed in April 1996 following amerger of the Central Statistical Office and theOffice of Population Censuses and Surveys. On7 June 2000 the United Kingdom launched�National Statistics� as the new framework underwhich economic and business data would becollected for statistical purposes only, under theStatistics of Trade Act. This Act sets out the needfor timely and accurate data. Statutory penaltiesare available, where necessary, under theStatistics of Trade Act. Data on trade in goodsare collected by the Board of Customs andExcise and supplied to the ONS.

The ONS has a �Code of Practice� which setsout the common good practices establishedover many years by statisticians in a wide rangeof government departments and agencies. Thecode is of a general nature and is designed topromote high standards and to maintain publicconfidence in all official statistics and analyses.The Bank of England has adopted a similar codewhich adapts the same basic principles to thespecific circumstances of the central bank.

(ii) Bank of EnglandThe Bank of England Act 1998, which came into

force on 1 June 1998, gives the Bank the powerto obtain information (principally fromMonetary Financial Institutions (MFIs)) for thepurposes of its functions in relation to monetarypolicy. The scope of information relevant for thispurpose is set out in secondary legislationpursuant to the Act. In essence, the coverage isthe same as in the previous, long-standing,voluntary arrangements to supply data formacroeconomic purposes, including datarelated to the money supply and the b.o.p., andfor the preparation of the national accounts.The Act also allows the UK regulatory body, theFinancial Services Authority (FSA), to requiresupervised institutions to report prudentialsupervisory information to the Bank acting onits behalf. As with the Statistics of Trade Act (seeabove), statutory penalties are available, wherenecessary, under the Bank of England Act.

The arrangement between commercial banks,as represented by the British Bankers�Association, and the Bank of England to supplyfinancial statistics originated following widespreadacceptance within the financial community ofthe 1959 report by the Parliamentary Committeeon the Working of the Monetary System (knownas the Radcliffe Report). The report contained arecommendation regarding the publication ofstatistical information necessary for anunderstanding of the financial positions of themain sectors of the economy. A regime ofregular statistical reporting by commercial banksto the Bank of England was introduced in 1963and was based on a quarterly (now monthly)balance sheet.


(i) GeneralThe ONS and the Bank of England work closelytogether on a number of issues. The relationshipexists not only with respect to the b.o.p., whichis part of a larger overall process culminating inthe production of the UK national accounts, butalso in relation to macroeconomic issues. TheONS and the Bank of England have jointstatistical work programmes and there are bothformal and informal mechanisms which enablethis co-operation to work successfully.



The formal mechanism is the �Firm Agreement�,which was drawn up to define clearly theresponsibilities of both institutions, includingtimetables, deadlines and joint representation atinternational meetings.

The informal mechanism involves high levels ofcommunication in terms of frequent liaisonmeetings between representatives of the ONSand the Bank. The two institutions exchangeinformation regularly and discuss their respectivework programmes in detail.

(ii) ONSThe ONS is the official b.o.p. compiler for theUnited Kingdom. The collection and compilationof statistics are carried out separately. TheNewport office of the ONS (Prices & BusinessGroup (PBG)) is responsible for the preparationof surveys and for the actual data collection. TheBalance of Payments and Financial Sector(BoPFS) Division of the ONS, located in London,is responsible for producing and developingstatistics for the Rest of the World (RoW) andthe financial sectors of the national accounts,including the compilation and publication ofb.o.p. statistics. In addition, the BoP Co-ordination Branch within the BoPFS Division isresponsible for taking the lead for the UnitedKingdom in liaison with the EuropeanCommission (Eurostat), the ECB and theInternational Monetary Fund (IMF) on b.o.p.issues in general. In particular, its Head ofBranch is a UK representative in the WorkingGroup on Balance of Payments and ExternalReserves (WG BP&ER), together with arepresentative from the Bank of England.

The BoPFS Division is part of the NationalAccounts Group (NAG) within the EconomicStatistics Directorate (ESD), which isresponsible for the national accounts. As theb.o.p. forms an integral part of the nationalaccounts, the BoPFS Division of the ONS co-operates very closely with other Divisionswithin the NAG. There are both formal andinformal links between the NAG and the PBG,with many shared work programmes.

(iii) Bank of EnglandThe Bank of England collects the data on thebanking sector used in the b.o.p. and in thenational accounts. The Bank also supplies b.o.p.data on reserve assets and official liabilitiesobtained from administrative sources within theBank.

The Monetary and Financial Statistics Division(MFSD) of the Bank of England is responsible forproviding statistics. The External FinanceStatistics Group deals specifically with b.o.p.statistics for the MFI sector (current accountand direct and portfolio investment in thefinancial account) and for reserve assets andofficial liabilities. The remainder of thecontribution of the MFI sector to the UK b.o.p.is drawn from data processed elsewhere in theDivision primarily for other purposes. The Bankalso liaises with the FSA, for example, in theevent of the repeated late submission of surveyforms.

The Bank of England provides the ONS withsupport both in discussions on data for thebanking sector, the provision of data and adviceon capital markets, and in its attendance atinternational b.o.p. meetings, for example atmeetings organised by the ECB and theEuropean Commission (Eurostat).


The ONS is an executive agency independentof any other government department and isaccountable to the Chancellor of theExchequer. Under the new framework ofNational Statistics, it works in partnership withother entities within the Government StatisticalService (GSS) located in many governmentdepartments. The overall objective of the ONSis to provide Parliament, the Government andthe wider community with the statisticalinformation, analyses and advice needed toimprove decision-making, stimulate researchand inform debate.

The reporting burden for data suppliers is keptto a minimum. To this end, extensive use is madeof some external data suppliers:



(i) Bank for International Settlements (BIS) dataare used to estimate bank accounts (depositsand borrowing) abroad (for the non-banksector);(ii) government official records are used toprovide information on government servicesand transfers; and(iii) some bilateral counterparty data are usedto provide information on private transfers.(iv) Data for private sector loans from theEuropean Investment Bank (EIB) are sentdirectly to the ONS.

2.5 Users

The ONS and the Bank of England both supplydata to the Government (mainly HM Treasury,but also other government departments), Cityanalysts, universities (for research), forecasters,etc. The ONS supplies data to internationalorganisations such as the Organisation forEconomic Co-operation and Development(OECD), the European Commission (Eurostat),the IMF and, via the Bank of England, to the ECBand the BIS. The data supplied to the EuropeanCommission (Eurostat), the OECD and the IMFare used in analysis of direct investment databy country and by industry, and for otherpurposes as well. These institutions alsoproduce publications in which UK data arequoted and comparisons are made with datafrom other countries. The Bank of England alsosupplies data to the BIS and publishes theinternational reserves and liquidity Template onits website.



The United Kingdom�s economic datacollection system can be broadly described asan �enterprise survey system� (as defined inparagraphs 131 and 132 of the CompilationGuide in the 5th edition of the IMF Balance ofPayments Manual (BPM5)). In a survey systementerprises are surveyed using registers. Thesurveys cover all units in the population insome areas. In other areas, different techniques

are used for grossing-up which are generallybased on either the population counts or anindependent variable such as historicalturnover held on the register. In the UnitedKingdom the b.o.p. surveys are completelyintegrated into the statistical system for theeconomic accounts (national accounts). Samplesurveys keep inquiry costs to a minimum bothfor the Government, in terms of processing, andbusiness, in terms of filling-in forms. They alsolead to a quicker delivery of inquiry results thanmight be the case with a census. The surveys arebased on paper forms which are sent, dependingon the survey, to either the enterprise or thehead of the enterprise group within the UnitedKingdom, in which case consolidated informationfor the group as a whole is requested.

The enterprise survey system used by theUnited Kingdom includes stocks statistics; i.e.some balance sheet data are collected on thesurveys. Data extracted from a securitiesdatabase system are used to compile estimatesof non-resident transactions in bonds and noteswithin portfolio investment in the UnitedKingdom. Data from the BIS database are usedto compile estimates of non-banks� transactions,balance sheets and earnings from the rest of theworld.


Inquiries are geared to different sectors of theeconomy and the responding agents areselected on the basis of registers. The maingroups of respondents are summarised below.

(i) Banking sector: banks are authorisedinstitutions as defined under the Banking Act1987. Resident banks are required to reportbalance sheet and other returns, including thefollowing b.o.p.-related forms:Form DQ: total derivatives business in

banks� trading and bankingbooks (quarterly inquiry);

Form P1: security transactions affectingthe UK b.o.p. (quarterly inquiry);

Form QX: foreign direct investmenttransactions � inward andoutward (quarterly inquiry);



Table 1Reporting scheme for b.o.p. and i.i.p. data collection for the UNITED KINGDOM


Enterprises m INTRASTAT m Monthly m 10 working days

Enterprises Custom declarations Continuous Immediate

Enterprises International Trade in Quarterly 28Services Inquiry Annually 70

Travelling public International Passenger Approx. 260,000 Immediate � respondentsSurvey interviews carried complete the survey as they

out on most days are either arriving in orof the year departing from the United

Kingdom (face-to-face interviews)

UK ship owners Chamber of Shipping Inquiry Quarterly 50Annual 140

Airlines Civil Aviation Authority Annual 45Inquiry

Road haulage firms DETR International Road Continuous Quarterly delivery to theHaulage Survey ONS

Companies with A&M Inquiry Share dealings and Continuous Form requests return byforeign links (greater funding 4 weeks after despatch.than 10%) 1st reminder 4 weeks after.

2nd reminder 6 weeks after.

Companies with Quarterly Inward Inquiry Earnings and flows Quarterly Form request return byforeign links (greater 4 weeks after quarter end.than 10%) 1st reminder 4 weeks after.


Companies with Quarterly Outward Inquiry Earnings and flows Quarterly Form requests return byforeign links (greater 4 weeks after quarter end.than 10%) 1st reminder 4 weeks after.


Companies with Annual Inward Inquiry Earnings, flows and Annual Form requests return byforeign links (greater levels, including 4 weeks after despatch.than 10%) geographical break- 1st reminder 10 weeks after.

down 2nd reminder 14 weeks after.

Companies with foreign Annual Outward Inquiry Earnings, flows and Annual Form requests return bylinks (greater than 10%) levels, including 4 weeks after despatch.

geographical breakdown 1st reminder 10 weeks after2nd reminder 14 weeks after

Companies with foreign Annual Outward Inquiry Earnings, flows and Annual Form request return bylinks (greater than 10%) levels, including 4 weeks after despatch.

geographical breakdown 1st reminder 10 weeks after.2nd reminder 14 weeks after.

Banks Balance sheet (BT) Includes levels of Monthly 6/7deposits, loans andinvestment.

Supplementary data (QX) Levels of direct and Quarterly 18/20portfolio investmentand direct investmentflows

Security transactions Portfolio investment Quarterly 30/31affecting the UK balance flowsof payments (P1)

Country analysis of UK Levels of loans and Quarterly 18/20external claims (CC) advances, CDs and

CP, equity and securities

Country analysis of UK Levels of deposits Quarterly 18/20external liabilities (CL)

Transactions with non- Income on direct, Quarterly 49residents: interest, portfolio and otherdividends and income (BP) investment and trade

in services

Total derivatives business in Derivatives levels and Quarterly 20banks� trading and banking flows, mostly on anbooks (DQ) experimental basis.

Only swaps & FRAsdata are currently available

Levels of direct investment Levels of direct investment Annual 84with non-residents (HIL) with a geographical

breakdown

Transactions with non- Income on direct Annual 60residents: interest, dividends investment and tradeand other income by in servicesgeographic location (BG)



Form H1(L): an annual census of foreigndirect investment levels (inwardand outward);

Form BP: transactions with non-residents� interest, dividends and otherearnings (quarterly or annualinquiry, depending upon the sizeof the bank);

Form BG: transactions with non-residents� interest, dividends and otherincome (country analysis; annualinquiry); and

Forms CC and CL: a country analysis of UKexternal claims and liabilities(quarterly inquiry).

Data on banks� deposit liabilities and lendingvis-à-vis non-residents are taken from the corebalance sheet return which is primarily used forthe compilation of the domestic monetary andcredit aggregates.

Equivalent data, to the extent that they arerelevant, are collected from building societies(which are also MFIs) by the Building SocietiesCommission. Aggregate data are passed to theONS for inclusion in the b.o.p.

(ii) Government sector: information is providedby the various government departments. Mostof the government services and transfers areobtained as a by-product of the compilation ofgovernment accounts and from official records.

(iii) Securities dealers are all firms dealing insecurities in the United Kingdom that are notauthorised institutions under the Banking Act1987. The target population is supplied by theregulator, the FSA, and securities dealers arerequired to report via the Quarterly Inquiry ofLiabilities and Assets, the Quarterly Inquiry ofTransactions in Securities, and the QuarterlyInquiry of Income and Expenditure.

(iv) Insurance companies are all authorisedinsurers in the United Kingdom and allcompanies authorised in other EU countriesthat have places of business in the UnitedKingdom. The inquiries to be completed are the

following: Quarterly Income and Expenditure,Quarterly Transactions in Financial Assets,Annual Income and Expenditure, and theAnnual Balance Sheet. All inquiries arestatutory. In addition, all insurance companieswith foreign subsidiary or parent companies arerequired to report on the Annual ForeignDirect Investment (outward) Inquiry and theAnnual Foreign Direct Investment (inward)Inquiry. These two inquiries collect details oftransactions with foreign subsidiary andassociate companies, the capital and reserves offoreign subsidiaries and associates, andtransactions with foreign branches and agents.

(v) Pension funds are all self-administeredpension funds located in the United Kingdom.The requirement to report on the threeinquiries Quarterly Transactions in FinancialAssets, Quarterly Income and Expenditure, andAnnual Balance Sheet is statutory. Theinformation is used to compile the current andfinancial accounts within the national accounts.It is also included in the b.o.p. account and as acomponent of both insurance and pensionfunds.

(vi) Investment trusts are those companies in theUnited Kingdom which are published in theDirectory of Trusts by the Association ofInvestment Trust Companies. This is a panelsurvey for which a fixed panel of contributors isselected. These companies are required toreport on the Quarterly Return of Transactionsand the Annual Return of Liabilities and Assets.The information is supplied on a statutory basis.

(vii) Unit/property trusts are those set up underthe Financial Services Act 1986. This list ispublished in the Financial Times Unit TrustsYearbook. The two inquiry forms, the QuarterlyReturn of Transactions and the Annual Returnof Liabilities and Assets, collect balance sheetinformation on the short-term assets andliabilities of collective investment schemes andtheir transactions in various long-term financialinstruments. This information is supplied on astatutory basis.



(viii) Private non-financial corporations are surveyedon trade in services and direct investment. Forboth quarterly and annual data, sample surveysare based on stratified designs and includesamples of smaller enterprise groups. Theservices inquiries are primarily focused onconsultancy and business services; insurancebrokers; fund management; education services;merchanting; and film and television services.Royalties are reported as a separate product inthe services inquiry. For direct investment,enterprise groups receive inquiries on directinvestment capital and earnings.

(ix) Households: some inquiries are specificallyaimed at the household sector, such as theInternational Passenger Survey (IPS).

(x) Customs and Intrastat data: data oninternational merchandise trade outside the EUis collected via customs returns. Intra-EU tradeis collected via Intrastat.

(xi) Transport sector: the transportation accountcovers sea, air and other transport. It includesthe movement of passengers and freight, andother related transport services.� Sea transport: statistics relating to UK

operators are provided by the Chamberof Shipping (CoS) which conductsinquiries into its members� participationin foreign trade. Since 1995, the CoS hassurveyed all its members annually.Estimates of passenger fares paid to non-resident shipping operators are derivedmainly from the results of the IPS.

� Air transport: the transactions of UKairlines are derived from returns suppliedby the airlines to the Civil AviationAuthority. Fares paid by UK passengers tonon-resident airlines is derived from theIPS.

� Other transport: this covers the movementof passengers and freight, and otherrelated transport services, by rail, roadand pipeline. Information is provided byLe Shuttle and Eurostar, the InternationalRoad Haulage Survey and a survey ofNorth Sea oil and gas companies.

3.3 Thresholds

In general, the United Kingdom does not applythresholds for reporting since the data arecollected through surveys. The ONS surveyforms request data in pounds sterling in millionsto one decimal place, although the option tocomplete the forms in Euro is also available. TheBank of England collects data in pounds sterlingin thousands. All survey results are grossed upfor sampling fractions and non-response.


The UK b.o.p. is available on a quarterly basis.There are some surveys specific to the b.o.p. Ingeneral, the surveys are designed so as toproduce high quality national estimates.However, a geographical breakdown by 42countries and international organisations isavailable for the current account total, which isbroken down into trade in goods, trade inservices, transfers and investment income. Aseparate research project is under way withrespect to the compilation of monthly b.o.p.statistics.

3.5 Timeliness

Timeliness varies from inquiry to inquiry. Ingeneral, the data become available eight weeksafter the end of a quarter. There is a four-weekturnaround time. Estimates are made for lateresponses or in the absence of a response eitherthrough the grossing procedure or byimputation. Publication of the quarterly b.o.p.accounts takes place 13 weeks after the end ofthe quarter.


The UK b.o.p. is compiled on a quarterly basis,although data on trade in goods and servicesare available on a monthly basis.

3.7 Data controls

The Statistics of Trade Act used by the ONScontains provisions relating to the provision ofinaccurate, false or misleading information.In particular, it is an offence to provide falseor misleading information in certaincircumstances.



Possible anomalies as a result of inconsistency,implausibility and inconsistencies betweenreporting schemes are detected by computerprograms and/or manual checking by the ONSand the Bank of England. These are usuallyfollowed up with the reporting company/bankthe following day. The quality of the datareceived is checked using a combination ofvalidation, auditing and credibility checks,which have been devised over time and whichare considered to be appropriate to theultimate use of the data.

Response rates and reminder procedures areset for each ONS survey. Response rates are setas ONS targets. For banks, the response rate isclose to 100%.

Users need to be provided with reliable data assoon as possible after the period to which thedata relate. Possible anomalies are detected asearly as possible and the reporters concernedare notified by telephone. Queries and resultingamendments to data are initially carried outover the telephone and changes to data whichhave been reported are annotated andprocessed immediately. Persistent problems mayresult in a visit to the responding company/bank to assist in identifying data problems. Latereporters are initially contacted by telephoneand subsequently by letter if the informationrequired is not forthcoming. Enforcementaction is taken in cases of persistent nonresponse.

3.8 Revision policy

The ONS and the Bank of England aim toprovide accounts that are timely, reliable andinternally consistent. Therefore, a balance has tobe struck between the need to take account ofrevisions to component series and the need forcoherent accounts. Normally, when the nationalaccounts figures are being prepared forpublication in the �Blue Book� and �Pink Book�each year, the estimates for the past fourcomplete years (t-4) are reassessed in the�annual round� and balanced with the input-output framework for years up to t-2. Aninternal Task Force decides whether and, if so,

which revisions should be introduced andensures that all relevant sectors are informed.After publication of the annual figures, the datafor all the quarters of the past year covered andthose for subsequent quarters only arereassessed in each �quarterly round� (similarly,monthly data are only revised for the years inquestion). The accounts for periods earlier thanthose to which reference is made are notusually re-opened in the relevant round. (Adetailed description of the revisions in thenational accounts is provided in the articlesentitled �Handling Revisions in the NationalAccounts�, by David Wroe, Economic Trends,No. 480, October 1993 and �Revisions to theUK Balance of Payments�, by Stuart Brown andTim Jones, Economic Trends, No. 518,December 1996.)

3.9 Publication

The UK b.o.p. forms an integral part of thenational accounts and this is reflected in thecompilation process and the revision policy.Data used to compile the b.o.p. are collectedwithin the framework of the national accounts.Within the national accounts the differentaccounts (including the RoW account) mustbalance.

The ONS Pink Book is a b.o.p. publicationwhich is prepared by the BoPFS Division of theONS in collaboration with other divisionswithin the ONS, other government departmentsand the Bank of England. Comments on thenature of the publication from various externalbodies are welcome.

Only a small and restricted number of officialsat the Bank of England see the complete b.o.p.data immediately prior to their publication, onthe same day. Prior to that, analysts in the MFSDsee only those sections of the sector accountsdata to which banks contribute directly, inorder to assure the quality of those data inrelation to data on other sectors. Published datamay not reveal, either directly or throughresidual values, statistics relating to individualinstitutions unless the prior consent of the latterhas been obtained.



The titles of the publications produced by theUnited Kingdom on b.o.p. statistics are listed inSub-section 13.1.

4 Implementation


The BoPFS Division of the ONS manages amajor programme of projects developed toprovide b.o.p. monthly key items to the ECB aspart of the United Kingdom�s agenda of widerpreparations prior to entering EMU if a decisionis taken to do so. The programme is sponsoredby the Head of the EMU policy team at HMTreasury and by the Head of Monetary andFinancial Statistics Division at the Bank ofEngland.

A key element of the programme is to ensurethat all possible means to estimate the monthlydata within existing resources are utilised.Monthly data will be used where available,monthly proxy indicators where appropriate,and forecasting techniques elsewhere toestimate a monthly path from quarterly data. Aspart of its quality assurance programme theONS has initiated consultation with the ECB toexamine the quality and use of all the monthlydata.

Trade in goods statistics are derived fromIntrastat returns for trade within the EU, andfrom HM Customs and Excise returns for tradewith the RoW. The best method found forestimating EU trade figures at the six-week stageis using ARIMA models on the monthly timeseries to forecast the required month. This hasbeen carried out at the six-week deadline sinceJuly 1997. EU trade in goods accounts foraround 55% of total trade in goods.

Trade in services statistics are derived from avariety of sources, the majority of which areeither monthly or quarterly sample surveys. Insome cases, these are supplemented by morecomprehensive annual surveys or censuses.Monthly estimates have been produced since

1997, and are published within the monthlyTrade First Release around eight weeks after theend of each month.

Investment income data are published quarterlyby the ONS. The main data sources arequarterly surveys, but some use is made ofmonthly balance sheet data collected by theBank of England. For each of the investmentincome groups, both credits and debits arebroken down to a lower level of aggregation toenable monthly data and estimates from theBank of England to be incorporated whereappropriate. Where data are available only at aquarterly frequency, ARIMA methodology isapplied to calculate a quarterly forecast; a cubicspline is then used to interpolate the quarterlydata and thus produce monthly estimates.

The Bank of England also supplies data forinclusion in the financial account (includingreserve assets). The Bank of England has aslightly different approach to that of the ONS,owing to its different expertise and differingcollection system. The b.o.p. collection system isa sub-set of the money and banking statisticsdata collection system. For those series forwhich it is not possible to find a suitable proxyor a soundly based estimate, the reportingbanks will be asked to collect the data on amonthly basis if the United Kingdom joinsMonetary Union. A form has been preparedwhich includes b.o.p. items as a possible annex.

Quarterly estimates for the financial account,which covers flows of investment, are generallybased on the same data sources as investmentincome, i.e. quarterly and annual data. Thedevelopment of a methodology for monthlyestimates will therefore follow a path similar tothat for investment income. The flows series arevery erratic and it is hard to find a suitableARIMA model. For those series where nosatisfactory data projection method is found,data will have to be collected on the Bank�sEMU form; however, this will only cover thoseseries supplied by the Bank of England. The draftform will be introduced only if the UnitedKingdom joins Monetary Union.



The initial development of estimates for themonthly key items has focused on nationaltotals vis-à-vis the rest of the world. Asignificant, and challenging, next step in theprogramme will be to derive a split betweenintra and extra-EMU flows on a monthly basis. Itis likely, in the first instance, that this will bebased on quarterly estimates of the EU/non-EUsplit of the current account that have beenpublished alongside global data sinceSeptember 1997.

The United Kingdom commenced delivery ofmonthly key items to the ECB in December1999 and the process was described in moredetail in an article by Claire Kennard entitled�Experimental monthly balance of payments� inthe December 1999 edition (No. 553) of theONS publication �Economic Trends�. The articlealso gave outside users the opportunity tocomment on the approach and the methodsadopted to derive monthly key items, andstressed that research into improvedmethodology was continuing. While the UnitedKingdom is not participating in Stage Three ofEMU, data provided to the ECB are supplied onthe basis that they are experimental and for theinternal use of the ECB�s Directorate Statisticsonly.


items


The basic sources of data on trade in goods arecustoms declarations (SADs � i.e. SingleAdministrative Documents) for trade with non-EU countries and Intrastat forms(Supplementary Declarations) for trade with EUcountries. The statistics are compiled inaccordance with the �general trade� system, asdescribed in the UN�s �InternationalMerchandise Trade Statistics: Concepts &Definitions�. Imports are classified according tothe country from which goods are consignedand exports according to the country ofconsignment, as identified at the time of export.For statistical purposes, the customs data usethe valuation bases recommended in the UN�s

�International Merchandise Trade Statistics:Concepts & Definitions�, namely exports valuedon a f.o.b. basis and imports valued on a c.i.f.basis. However, in order to comply with theIMF�s BPM5 a number of adjustments to thesebasic source data are made by the ONS. One ofthese adjustments is the conversion of thevaluation of imports from c.i.f. to f.o.b. Otheradjustments are made in order to includecertain transactions not reported to customsand to exclude others that do not involve achange of ownership. The time series for tradewith the rest of the world are available monthlyon a BPM5 basis from 1980, with a split of themonthly data between EU and non-EUcountries on a BPM5 basis available from 1988.These data are available both seasonallyadjusted (using X11ARIMA) and not seasonallyadjusted.

Monthly data on a BPM5 basis are publishedabout four weeks after the end of the month towhich the data relate for trade with non-EUcountries and about eight weeks after the end ofthe month to which the data relate for tradewith EU countries. Thus, at the six-week stage,when ECB requires monthly data, non-EU dataexist, but there are no actual data for EU trade.The best method found for estimating thesefigures for total trade with the EU is usingARIMA models on the monthly time series toforecast the required month. In order to derivea split between euro area and non-euro areaMember States, it is intended to use proportionsderived from published data for trade withindividual Member States on a BPM5 basis.

Obviously, these forecasts will be replaced withpublished data with the next delivery of data tothe ECB. Customs data are subject to revisionfor some months after they are first published,so that, for example, final data from that sourcefor the months of 1998 will not be availableuntil September 1999. In addition, there may befurther revisions, generally of a minor nature, tothe adjustments made to convert this data to aBPM5 basis. Typically, in 1999 the ONS revisionspolicy will permit such revisions to be madefrom the start of 1997.



4.2.2 For trade in services

Monthly estimates are produced at a high levelof disaggregation, using models, where no actualor proxy data exist, to produce estimates at thesix-week stage. The most volatile contribution tothe monthly profile is the travel item. Thetimeliness of this item has been improved tomeet the six-week deadline.

Components for which monthly data areavailable comprise some 25% of trade in servicescredits and 40% of debits, mainly travel datacollected via the IPS, as well as some insuranceservices data. For the remainder, other monthlydata sources have been examined to see if theyprovide a good correlation with existingquarterly series and might be used as proxies,for example, monthly data on UK airline trafficand passengers on overseas aircraft. Where nomonthly data or proxies are available, statisticaltechniques are used to extrapolate a quarterlyestimate and interpolate a monthly path fromthe existing sources. Simple techniques such aslinear regression are generally preferred, butARIMA models have been used where a clearperformance gain could be made.

The results are considered to be good. Forcredits, the monthly estimates predicted the firstpublished quarterly figure to within 2.5% inseven of the nine quarters for which resultswere produced. For debits, monthly results in allbut one of the nine quarters predicted thequarterly figure to within 2.5%. The quality ofthe estimates continues to be monitored withthe move to the BPM5 presentation.


Monthly estimates have been produced usingstatistical models (usually ARIMA) with a smallelement of monthly data from the Bank ofEngland based on rates of return.

ARIMA models have been used where theyprovide a better forecast than repeating theprevious quarter: a quarterly estimate isextrapolated and then a cubic spline providesthe monthly path. The models are reviewedregularly, as the behaviour of certain series

might change significantly over time.Identification of ARIMA models and compilationof monthly estimates has been carried out usingSASTM. In general, estimates of income fromdirect investment, non-banks� portfolioinvestment and other investment are derivedusing forecast and spline methodology.

4.2.4 For current transfers

Components for which monthly data areavailable comprise around 40% of total currenttransfer credits and debits. For the remainder,other monthly data sources will be examined tosee whether they provide a good correlationwith the existing quarterly series (such asmonthly insurance premia data from Lloyds ofLondon). For those series with no monthly dataor acceptable proxies, statistical modelling isused to extrapolate a quarterly estimate andinterpolate a monthly path. As the majority ofthe volatility in the current transfers data isdriven by those series that are available on amonthly basis, it is hoped that this methodologywill provide good predictions of the quarterlyoutturns.

4.2.5 For the capital account

Components for which monthly data areavailable comprise up to around 50% of totalcapital account credits. For the remainder, othermonthly data sources will be examined to seewhether they provide a good correlation withthe existing quarterly series. For those serieswith no monthly data or acceptable proxies,statistical modelling is used to extrapolate aquarterly estimate and interpolate a monthlypath.


The ONS maintains a continuous database ofreported cross-border acquisition and mergerdeals, the results of which are being used asproxies for that part of quarterly directinvestment. The residual part of the investmentseries is modelled using ARIMA modelling. It hasbeen found that use of the acquisitions andmerger data significantly improves the quality ofthe forecast compared with modelling alone.




Monthly portfolio investment data are notavailable from ONS or Bank of England surveys,but data from banks� balance sheets are used asproxies in the modelling of some series,together with counterparty equity values ofmajor acquisition and merger deals.


Both the Bank of England and the ONS havebeen collecting information on financialderivatives on a quarterly basis since 1998.Such a short time series means thatconventional estimation techniques of the kindused elsewhere for monthly key items cannot beused here. The methodology will be reviewed asexperience is gained of the data collected.


Monthly other investment data are not availablefrom ONS surveys. Estimation of these series isgenerally via ARIMA modelling and interpolation.However, the Bank of England produces a monthlyfinancial account of other investment transactionsfor banks, using monthly balance sheet levels, andthese monthly data are used to inform OI estimates.Until the introduction of the supplementaryreporting arrangements, the distinction betweentransactions with the euro area and the rest of theworld, and the split into short-term and long-termdebt, will have to be estimated.

4.3 Monthly key items � implementation

plan

A table showing details of the implementation ofthe monthly key items is shown on the followingpage. A distinction is made between currentdata availability and future implementationrequirements for the United Kingdom.


B.o.p. accounts for the United Kingdom areconsistent with the BPM5. The fullimplementation took place in September 1998,and included the production of extensivedetailed historic quarterly data on a consistentbasis going back to 1987: for the key economicindicators, data have been re-estimated in linewith the BPM5 for almost 50 years.

The adoption of the BPM5 has required anumber of complementary activities, such as theinterpretation of the new framework within theUK context and the identification of new datasources for concepts and transactions notpreviously identified. Inevitably, some parts ofthe new accounts are more firmly based thanothers. For instance, where new information hasbeen required, this has been more readilyavailable for recent periods than for the moredistant past.

Currently the ONS publishes the currentaccount inclusive of income from interest rateswaps (although all data sent to the ECB willeventually be consistent with the revised BPM5classification, in which these have to beredefined as settlement flows, once the UnitedKingdom�s domestic accounts have beenrealigned in 2001). The ONS plans to change itspublished accounts in line with the nationalaccounts, as and when the ESA 95requirements are changed. A key priority of theONS is that the UK economic accounts,including the b.o.p. and national accounts, arecompiled in an integrated fashion and that thedata published are fully in alignment.

In order to produce a full and consistent set ofBPM5 accounts, the ONS and the Bank ofEngland had to undertake numerous initiatives.As the United Kingdom uses a survey-basedsystem, this meant changing the inquiry forms inorder to collect new information which was notpreviously required. A prime example was thequarterly inquiry into trade in services wherethere was a greater need for product detail.

The Bank of England also implemented changesto its inquiries in conjunction with its BankingStatistics Review. These changes were fullyimplemented early in 1998. All changes toinquiries are discussed with respondents.

One of the major changes to the coverage ofthe accounts was the removal of the offshorecentres, i.e. the Channel Islands and the Isle ofMan. With this change to the �definition� of theUnited Kingdom, the b.o.p. is being brought



into line with the rest of the national accountsas specified in the Council Directive of 13February 1989 on the harmonisation of thecompilation of gross national product at marketprices (89/130/EEC).

Investigations have been carried out into datasources for investment on the part of thehousehold sector, but surveys are relativelyineffective. The possible shortfall in coveragemust be kept in perspective; there is little

tradition in the United Kingdom of individualsholding foreign-issued securities directly. Mostfinancial investment by households in the RoWsector is undertaken through collectiveinvestment media (i.e. unit and investmenttrusts).


annual

From September 1998 onwards data have beencompiled and presented on a BPM5 basis.

Table 2Implementation of the Monthly key items

UNITED KINGDOM Current data availability

Key item Timeliness for national Timeliness for geographical Timetable fordata breakdown on a country- implementing the euro

by-country basis area/non-euro area split

credits/ debits/ credits/ debits/ credits/ debits/assets liabilities assets liabilities assets liabilities

Current account 6 weeks 6 weeks n.a. n.a. � �Goods 6 weeks 6 weeks n.a. n.a. � �Services 6 weeks 6 weeks n.a. n.a. � �Income 6 weeks 6 weeks n.a. n.a. � �

on direct investment 6 weeks 6 weeks n.a. n.a. � �on portfolio investment 6 weeks 6 weeks n.a. n.a � �on other investment 6 weeks 6 weeks n.a. n.a. � �

Current transfers 6 weeks 6 weeks n.a. n.a. � �Capital account 6 weeks 6 weeks n.a. n.a. � �Direct investment 6 weeks 6 weeks n.a. n.a. � �

Equity capital n.a. n.a. n.a. n.a. � �Reinvested earnings n.a. n.a. n.a. n.a. � �Other capital n.a. n.a. n.a. n.a. � �

Portfolio investment 6 weeks 6 weeks n.a. n.a. � �Equity securities 6 weeks 6 weeks n.a. n.a. � �Debt securities 6 weeks 6 weeks n.a. n.a. � �

bonds 6 weeks 6 weeks n.a. n.a. � �money market instruments 6 weeks 6 weeks n.a. n.a. � �

Financial derivatives n.a. n.a. n.a. n.a. � �Other investment 6 weeks 6 weeks n.a. n.a. � �

Monetary authorities n.a. n.a. n.a. n.a. � �General government 6 weeks 6 weeks n.a. n.a. � �MFIs 6 weeks 6 weeks n.a. n.a. � �

long-term n.a. n.a. n.a. n.a. � �short-term n.a. n.a. n.a. n.a. � �

Other sectors 6 weeks 6 weeks n.a. n.a. � �Reserve assets 6 weeks 6 weeks n.a. n.a. � �



5 Investment income


Estimates for investment income are largelybased on quarterly and annual surveysundertaken by the ONS and the Bank ofEngland. The Bank of England conductsquarterly surveys covering UK banks� earningson portfolio investment abroad (credits), UKbanks� earnings on borrowing and lending(within other investment credits and debits) andUK banks� direct investment earnings (bothcredits and debits). Surveys conducted by theONS cover direct investment earnings bysectors other than banks (both credits anddebits), portfolio investment earnings (creditsonly) by insurance companies and pensionfunds and other financial intermediaries. Insome instances earnings are estimated byapplying appropriate rates of return to stocksdata.

The ONS has not observed a bias towards theunder-recording of credits in the incomeaccount. No adjustments are made betweenannual, quarterly and monthly figures; nor isany reconciliation undertaken betweenestimates and outcome.

The ONS has been publishing a quarterly EU/non-EU breakdown of income consistent withthe BPM5 since March 1999. Furthermore, anannual country breakdown of the mainaggregates of the b.o.p. current account, whichclosely approximates level three of theEuropean Commission�s (Eurostat�s) �Vade-mecum�, has been published since 1996. Compilationsystems which produce the quarterly andannual geographic split will be used to provideestimates of investment income with EUMember States not participating in MonetaryUnion. Quarterly back data will be availablefrom the first quarter of 1996 onwards.

Investment income estimates for both creditsand debits are allocated to countries using theresidency of the actual counterpart, i.e. thecreditor/debtor principle. There are, however, anumber of conceptual and practical limitations

associated with the collection of geographicaldata on investment income. In particular, flowsthrough financial intermediaries are harder toallocate correctly to an individual country.These estimates should be seen as a broadindication of the earnings on investmentbetween the United Kingdom and overseaseconomies.

In general, revisions are carried out as a resultof the annual surveys, which are morecomprehensive in terms of the sample size andthe detail of the questions asked than thequarterly surveys. Moreover, historical quarterlyseries are revised in line with UK nationalaccounts revisions policy each quarter. Thisusually means that up to seven recent quartersare liable to be revised on the basis of latereturns and corrections to the quarterly survey.

5.2 Definitions

In principle, the United Kingdom complies withthe recommendations of the BPM5 and theharmonisation proposals made by the WorkingGroup on Balance of Payments and ExternalReserves (the former Task Force on FinancialFlows and Stocks Statistics). Investment incomeconsists of direct investment income, portfolioinvestment income and other investmentincome. Earnings on reserve assets are includedas a separate category for domestic publications,but are included in other investment, as specifiedby the BPM5, in the data supplied to the ECB.

5.2.1 Direct investment income

Earnings from direct investment could, forexample, take the form of a dividend or intereston an outstanding loan. The information iscollected in annual and quarterly samplesurveys which include grossing to thepopulation. Earnings data are collected on:� the profit or loss attributable to the

parent company;� interest payments and receipts between

related; and� branch profits (currently collected on an

all-inclusive basis for branches of financialinstitutions).



Rates of return can be calculated from theabove data, e.g. earnings as a percentage ofstocks held at the end of the period. Reinvestedearnings are calculated as profits earned duringthe period less dividends paid, both for inwardand outward investment. Interest payments andreceipts between related concerns as a result ofinter-company loans are recorded quarterlyand annually.

5.2.2 Portfolio investment income

Although income data for banks are collectedseparately and are not derived from levels, theyare also checked against stocks for plausibility.

5.2.3 Other investment income

Although income on loans and deposits bybanks are collected separately and are notderived from levels, data are also checkedagainst stocks for plausibility.


Interest-rate swaps are still included withinportfolio investment in the current account.

5.4 Gaps

None.


ONS intends to transfer interest-rate swapsfrom the current account to the financialaccounts in the Pink Book 2001.


See Sub-section 5.1 above for a summary of theestimation methods. Income data are collectedon an accrued basis on ONS and Bank ofEngland survey forms. All the requirements setout in the document entitled �Statisticalrequirements for Stage Three of MonetaryUnion � Implementation package�(Implementation Package) would be met ontime.

6 Capital account



6.2 Definition

In principle, the United Kingdom complies withthe recommendations of the BPM5.


None.

6.4 Gaps

None.


The United Kingdom has published estimatesfor the capital account routinely in the b.o.p.First Release and Pink Book since September1998.

Sales and purchases of non-produced non-financial assets have been identified from theextended quarterly inquiry into trade inservices and estimates were included for thefirst time in the 1998 Pink Book.

7 Direct investment


Extensive use is made of commercial databases(e.g. Dun & Bradstreet and Worldbase) in orderto maintain a company register as the basis forthe sample framework.

The Bank of England collects data on directinvestment by banks. These data coverinterbank direct investment. If the directinvestment crosses a sector boundary (i.e. if abank invests in a non-financial enterprise), thecentral bank liaises with the ONS in Newport.

The surveys are based on paper forms whichare generally sent to the head of the enterprisegroup within the United Kingdom and withwhich consolidated information for the group



as a whole is requested. In view of the nature ofdirect investment, the questionnaires used arerelatively complex. Therefore, over the years,there have been a number of changes to theforms to improve consistency and coherence.The latest change concerns the move to thenew ESA 95 and the BPM5. In the b.o.p. thehistorical series have been amended in order toovercome the discontinuity problems.

A geographical breakdown of investment iscollected only as part of the annual inquiry. Theanalysis of inward investment is based on thecountry of ownership of the immediate parentcompany. Thus, inward investment in a UKcompany may be attributed to the country ofthe intervening overseas subsidiary, rather thanto the country of the ultimate parent. Similarly,the country analysis of outward investment isbased on the country of ownership of theimmediate subsidiary. For example, to theextent that overseas investment in the UnitedKingdom is channelled through holding companiesin the Netherlands, the underlying flow ofinvestment from this country is overstated andthe inflow from originating countries is understated.

Quarterly estimates by country based onannual breakdowns are available for investmentearnings going back to the first quarter of 1996.

7.2 Definition

Data include the investors� share of thereinvested earnings of the subsidiary orassociated company, the net acquisition of shareand loan capital, changes in the inter-companyaccounts and changes in branch/head officeindebtedness. All short-term and long-termloans between affiliated enterprises (includingtrade credits) are included in the figures forinter-company loans, except for those betweenaffiliated banks and financial intermediaries.Real assets in the sense of investment in land,structures or equipment are recorded in theannual and quarterly surveys.

In the United Kingdom, for the purposes of thestatistical inquiry, direct investment is based ona holding of 10% or more in the foreign

enterprise. The inquiries cover investment insubsidiaries, associate companies and branches.They do not cover cross-border investment bypublic corporations or investment in property.These are regarded as direct investment in thenational accounts, however, and figures for thatactivity are added to inquiry totals when theyare used in the b.o.p. and national accounts.

The definitions used to compile direct investmentinformation are based on international guidelines.These include the BPM5, the OECD BenchmarkDefinition of Foreign Direct Investment (thirdedition) and the ESA 95. They also take account ofcorporate accounting practices in the UnitedKingdom through periodic reviews, which includeconsultation with contributors.

Direct investment and portfolio investment aremeasured independently.

It is not possible to identify direct investmentspecifically from the portfolio investmentinquiries, mainly because they do not collectinformation on ownership. The directinvestment inquiries include special purposeentities in the form of holding companies.


The United Kingdom does not completely usethe fully consolidated system for recordingdirect investment. On the outward side,contributors are asked to consolidate thefigures for each of the directly owned subsidiariesand associates with the indirectly ownedbusinesses, but � if that is not possible � datafor indirect subsidiaries and associates shouldbe reported separately. On the inward side, theUnited Kingdom generally approaches the headof the UK part of the group and asks forconsolidated figures for the group as a whole. Ifrequested to do so by the group, the UnitedKingdom approaches individual enterprises.

Direct investment inquiries record earnings netof tax, but tax is added on for national accountspurposes. Earnings of financial institutionsare compiled on an all-inclusive basis, ratherthan according to the current operating



performance concept, but the latter concept isapplied to non-financial enterprises.

7.4 Gaps

All sectors are covered, either by the ONS orby the Bank of England, via sample survey data.Monthly data are not collected, except forreturns on cross-border acquisitions and mergers.


Information on withholding tax is beingdeveloped in order to move closer to thecurrent operating performance concept.Moreover, monthly series are being developed,using modelling techniques.


Estimates for individual concerns not selectedfor the annual inquiries are produced using theactual returns to the inquiry. Quarterlyaggregates are produced by projecting forwardannual figures using the quarterly inquirysample.



For banks, outward portfolio investment iseffectively covered by the total outwardportfolio investment survey carried out by theBank of England.

UK banks� investment in money marketinstruments issued by the RoW are reporteddirectly to the Bank of England as part ofmonthly/quarterly surveys, and include debtsecurities, described as �money market paper�in the ECB�s Banking Statistics CompilationGuide, and debt securities with similarcharacteristics but issued with an originalmaturity of over one year. Portfolio investmentalso includes a significant volume of transactionsassociated with the securitisation of loanportfolios.

For non-banks, information on outwardinvestment is obtained from the Annual BalanceSheet Inquiry form which the ONS sends to

pension funds, insurance companies, assetfinancing companies, non-bank credit grantors,unit trusts and investment trusts. The actualpopulation varies for each inquiry. The inquiriesare all conducted on a statutory basis.

The ONS calculates estimates of transactions inforeign-issued securities on the basis ofintegrated quarterly inquiries which haveseparate questions on securities issued by non-residents and by UK residents. Estimates ofholdings are based on similar but less frequent(e.g. annual) inquiries. Financial companiesreport transactions directly (acquisitions anddisposals), while those of non-financialcompanies are estimated from changes inbalance sheet values. Estimates of UKinvestment in money market instruments issuedby non-residents are obtained from quarterly/annual surveys carried out by the ONS.

Investment in UK government securities iscalculated by the ONS as the differencebetween net new issues and net investmentfrom UK domestic sources, including thebanking statistics. The correct sectorisation ofholdings is complicated by the widespread useof nominees. To address the latter problem, theBank and the ONS conduct a periodic surveyinto the beneficial ownership of Britishgovernment securities.

Investment in UK company bonds is calculatedby the ONS as the difference between net newissues and net investment from UK domesticsources. The sectorisation of these bonds iscurrently based on the crude assumption thatUK banks� and other sectors� liabilities to non-residents are roughly in proportion to theirpercentage of the total company bonds issuedthat quarter. A similar methodology is used toestimate non-resident acquisitions or disposalsof government foreign currency bonds.Purchases by non-residents are assumed to bethe residual value after accounting for acquisitionsand disposals by UK banks and non-banks.

Estimates of investment in ordinary shares ofUK companies are derived from quarterly



inquiries conducted by the ONS and the Bankof England and from Stock Exchange data.These data are then adjusted to take account oftotal stocks of non-resident investment inordinary shares collected in the ONS�s triennialShare Register Survey (SRS). The last SRS,covering the period to end-1998, was publishedby the ONS in March 2000. Estimates are alsoincluded for investment in unquoted shares.Estimates for non-resident investment in moneymarket instruments issued by UK banks arederived by the Bank of England from monthly/quarterly surveys. Estimates of non-bank moneymarket instrument liabilities are predominantlyderived from residual values after accountingfor all net issues and net purchases. Thisresidual estimation method is used, in particular,to estimate non-resident investment incommercial paper and sterling Treasury bills.

In common with many other countries, theUnited Kingdom has problems compilingaccurate information on the geographicalallocation of tradable inward portfolio investment(including equities, bonds and money marketinstruments) when the securities can be sold onin secondary markets � as the issuer of thesecurity may not be aware of the current holder.

It is not possible to identify direct investmentspecifically from the portfolio investmentinquiries, mainly because they do not collectinformation on ownership.

8.2 Definition

Estimates of non-resident investment in UKcompany bonds are obtained by assuming thatany net transactions in UK securities notattributed to the domestic sectors (using all thesources of information available) areattributable to non-residents.

Geographical analysis of assets is based onbalance sheets (stocks) on a quarterly basis forbanks and annually for non-banks.

Fee and commission earnings for banks arecollected on Form BP (see Sub-section 3.2), andare included (on a gross basis) in he trade in

services component of the current account �and are therefore not included within portfolioinvestment income.


None.

8.4 Gaps

The United Kingdom does not currentlyproduce portfolio investment income with amaturity breakdown.


Within the framework of the continuing reviewof the Banking Statistic, the possibility of acountry analysis, currency breakdown andinstrument split for the assets side could beinvestigated. For the liabilities side, there is noseparate regime concerning the financialtransactions of banks.


See Sub-section 8.1 for a description of theestimation methods. Quarterly estimates areproduced for portfolio investment.

Inquiries for pension funds, insurancecompanies and securities dealers use commonmethods for compiling quarterly estimates. Ineach case the information is collected from asample of companies. The data are then grossedup using auxiliary information, which isavailable for the complete population of theindustry. The samples are broken down in stratathat group together companies with similarcharacteristics. Any unusual returns will bevalidated and abnormally large returns will begiven a reduced weight in the estimationprocess.



No estimates of publishable quality for financialderivatives have yet been produced by theUnited Kingdom for inclusion in the b.o.p. TheBank of England has collected quarterly data on



the derivatives activity of banks since the fourthquarter of 1997 and has published abreakdown of positions outstanding by product,risk category and sector of the counterparty(including separate identification of non-residents) since the second quarter of 1998.TheONS has collected information from the majornon-bank financial institutions since the firstquarter of 1998. Full publication will commenceonce the consistency and quality of the datahave been confirmed. The ONS intends topublish separate derivative information in thePink Book 2001.

For banks, all data are collected on a quarterlybasis, using a survey-based system that collectsboth the value of outstanding contracts and theassociated flows. Premia on options areincluded within these flows, as are non-repayable variation margin payments associatedwith exchange traded activity. Repayablemargins, including initial margins on exchangetraded activity, are not recorded as transactionsin derivatives. The Bank of England collectsdetailed information according to product type(swaps, forwards, FRAs and options), riskcategory (interest rate, foreign exchange orcommodity/equity), sector of the counterparty,currency and (for stocks only) by country ofcounterpart.

For non-bank financial institutions, additionalquestions have been added to the existing ONSinquiries to collect annual balance sheetinformation and quarterly transactions data. Inaddition, for the securities dealers� sample, thequarterly transactions and balance sheetinquiry includes some additional questions onthe product and sectoral breakdown of thecounterparties. The sectoral breakdown iscollected on a quarterly basis. Respondents areasked to provide a split between transactionsand positions held with central banks, banks,building societies, other financial institutions,non-financial institutions and the RoW. Theinstrument breakdown requested on the formsis swaps, FRAs and other derivative instruments.The process of estimation is the same for eachinstrument specified. No geographical

breakdown is collected other than resident/non-resident.

9.2 Definitions

Data are collected according to the internationalstatistical standards, using the normal residencycriterion (country of incorporation of thecounterparty). Although stocks are collected ona gross basis, transactions in derivatives arecollected on a net basis, i.e. transactions in assetsare not separately identified from transactions inliabilities.


The United Kingdom does not currentlypublish comprehensive data on financialderivatives, although the net streams of interestpayments on interest rate swaps and FRAs arecurrently included within the portfolioinvestment part of the current account, pendinga formal revision to the ESA 95 standard.However, data supplied to the ECB and theEuropean Commission (Eurostat) will be on therevised basis, with interest rate swaps includedin the financial account when the domesticaccounts are revised in 2001. When thedecision is made to reclassify interest rate swapsin its published accounts, this will be done inco-ordination with the presentation of thedomestic sector accounts in the nationalaccounts.

9.4 Gaps

No geographical breakdown is available fornon-bank financial institutions and, except inthe case of security dealers, the instrument andcounterparty sector breakdowns are limited:investigations are continuing into whether theinformation can be compiled at the level ofdetail requested. It is not possible to distinguishbetween option-style variation margins andfuture-style variation margin payments.


None.


Some banks approximate the split betweenresident and non-resident transactions in



derivatives. In addition, a full geographicanalysis of transactions is not currently possible,and any split between euro area/non-euro areacountries will need to be estimated from stocks.

All the inquiries that collect derivatives data,including pension funds, insurance companiesand securities dealers, will use common methodsfor compiling quarterly estimates. These inquiriesare linked to those collecting information onportfolio investment (see Sub-section 8.6). Theestimation of a geographical breakdown willprobably be based on experience with the datacollected for the banks.

10 Other investment


Other investment estimates are largely basedon stocks data, although actual flows areavailable for some components. Geographicaldata for other investment for non-banks are notavailable.

Information on the assets and liabilities of thegeneral government sector are derived from theofficial records of government departments. Theforeign currency borrowing and lending of banksis calculated from the end-quarter balances ofclaims and liabilities reported to the Bank ofEngland by all UK resident banks and similarinstitutions. Estimates for sterling borrowing andlending abroad are also derived from changes inthe external balances from the banking statisticsproduced by the Bank of England.

Estimates concerning the assets and liabilities ofother UK residents (non-government, non-banks) come from a variety of sources includingthe ONS, the Bank of England, the EuropeanInvestment Bank and the BIS. Export credits aretaken from the Export Credit GuaranteeDepartment (ECGD), together with long-termsterling assets acquired from UK banks underECGD refinancing agreements. In principle,trade credit is recorded at the time of theextension of credit.

The sectoral breakdown of other investmentproduced by the ONS is limited to a splitbetween MFIs (with banks and building societiesseparately identified), central government,public corporations and other sectors. Theother sectors category consists of insurancecompanies and pension funds, other financialintermediaries, private non-financial corporationsand the household sector, but these sectorscannot be separately identified.

For inward other investment in banks, the UKsees no distinction between loans and deposits .The estimates for foreign loans to UK banks aretherefore included indistinguishably underdeposits. For outward investment, all loans byMFIs are assumed to be short-term and, forinward investment, all loans to UK securitiesdealers are assumed to be short-term.

Flow data for MFIs� deposits from, and lendingto, non-residents are derived from end-periodstocks data adjusted for exchange ratemovements and other identified changes inoutstanding liabilities and claims not arisingfrom �transactions�. Balance sheet positions,reported in sterling equivalent at middle-marketend-period rates are reconstituted in theiroriginal currencies using supplementary returnscovering the currency composition of assetsand liabilities (there is some element ofbrigading of positions in statistically lesssignificant currencies, which may be translatedby an appropriate proxy). The resulting firstdifferences in original currencies are retranslatedinto sterling at average exchange rates for theperiod concerned.

Within the breakdown by domestic sector, thecontribution of the central bank (monetaryauthorities) is subsumed within the aggregatesfor the MFI sector as a whole, of which it forms apart. The central bank completes a full set ofstatistical returns so the data sources are thesame as for other MFIs and positions will berecorded according to the definitions in themonetary statistics. This means, for example,that positions vis-à-vis other central banksarising from its role in TARGET are included in



gross terms within borrowing from, and lendingto, non-residents respectively. This ensurescoherence across the Sector Financial Accountsas a whole. The estimates of flows, as describedabove, are compiled at the level of the MFIsector overall.

10.2 Definition

In principle, the United Kingdom complies withthe recommendations of the BPM5 and theharmonisation proposals made by the WorkingGroup on Balance of Payments and ExternalReserves (the former Task Force on FinancialFlows and Stocks Statistics). Other investmentconsists of trade credit, loans, currency anddeposits and other assets and liabilities. Financeleasing is included within loans and is recordedaccording to standard international guidelines.Foreign currency notes and coin are includedunder currency and deposits.

Repos (i.e. repurchase agreements), and the lesscommon sell/buy-back transactions, are recordedon a collateralised loan basis. The majority ofrepos usually mature within a single month. Loanportfolio trading should, in principle, be recordedindistinguishably within total loans, but � as thedata are not collected separately � it is notpossible to assess its significance.

All acquisitions of bonds are recorded undereither direct or portfolio investment.

Short-term credits and liabilities betweenaffiliated enterprises are recorded as directinvestment and not under other investment,except in the case of banks.


With regard to the classification of monetarygold, the United Kingdom has a derogationfrom the European Commission (Eurostat) until2005. In the United Kingdom gold is traded inthe same way as any other financial asset.According to the SNA/ESA, all monetary gold isheld by the general government. The Bank ofEngland will collect gold data separately, but theUnited Kingdom will treat them in the same wayas any other foreign currency in the b.o.p.

10.4 Gaps

None.


None.


Quarterly estimates are produced for otherinvestment. See Sub-section 10.1 above for asummary of the estimation methods.

11 Reserve assets


The United Kingdom�s reserve assets are theproperty of Her Majesty�s Government and areheld in the Exchange Equalisation Account (EEA),a government account. They are managed by theBank of England on behalf of HM Treasury underagreed procedures. Data for the b.o.p. entry forreserve assets is drawn from administrativesources at the Bank of England (primarily from theinformation systems used in the process ofreserves management). Since July 1999 data onthe UK reserves has been produced inaccordance with the IMF Data Template onInternational Reserves and Foreign CurrencyLiquidity. As a result an instrument breakdown isavailable on a monthly basis (within three workingdays) and a currency breakdown is available (witha two-month lag) on a quarterly basis.

Reserve assets are valued at market prices andconverted into sterling using mid-marketclosing rates at the end of each month. Reserveassets in the United Kingdom are recorded oncontract date basis allowing the incorporationof off-balance sheet items such as swaps andforwards into the reserves.

11.2 Definition

Reserve assets are presented on a BPM5 basis inthe UK balance of payments. Details of theinstrument breakdown are published monthlyon the UK version of the IMF Data Template onInternational Reserves and Foreign CurrencyLiquidity.




None applicable to a non-participating MemberState.

11.4 Gaps

None.


None required at present.



The i.i.p. is published quarterly as part of theUK b.o.p. data set, with a timeliness of threemonths. In general, information on levels ofinvestment is collected on the same forms as areused for flows and income as part of theintegrated data collection for the whole of theUK national accounts. I.i.p. levels are fullyconsistent with the RoW sector accountsbalance sheets.

For banks, data on levels are collected on aquarterly basis with respect to both directinvestment and portfolio investment as welldeposits held with non-residents and loans tonon-residents. All these data include a fullcountry breakdown for each.

For other financial intermediaries, quarterlylevels are based on a combination of purestocks data and accumulated flows. However,with the exception of liabilities for portfolio andother investment, surveys on levels areconducted at least annually. Annual benchmarksurveys � typically with an expanded samplecompared with quarterly inquiries � areconducted for direct investment and portfolioinvestment assets, and take place around 10months after the year-end. Therefore, publishedlevels for the year-end are considered to beprovisional until the release of those datapublished after 12 months. Quarterly levelsbetween benchmark inquiry levels are revisedon the basis of the previous quarterly profile.(Essentially, quarterly flows are pro-rated to the

annual flow and accumulated to the previousyear�s level to bring them into alignment.)

The United Kingdom participated in the 1997IMF Co-ordinated Portfolio Investment Survey(CPIS). Coverage of the survey was limited tomandatory items, except in the case of banks,for which short-term debt instruments wereincluded. Data relating to banking activitieswere collected from standard balance sheetreturns (primarily servicing the BIS internationalbanking statistics) and also included non-mandatory information on money marketinstruments. For financial intermediaries otherthan banks, however, special ministerialapproval was required to extend the coverageof the inquiry from global coverage only to ageographical breakdown.

The 1997 CPIS survey was restricted to end-investors only and did not cover custodiansbased in the United Kingdom acting on behalfof non-residents. This was consistent with theapproach adopted for all ONS inquiries forb.o.p. purposes. While it is recognised that thereis a desire on the part of other countries for UKcustodians to be surveyed, this would not onlybe unnecessary from a UK perspective, but it isalso unclear whether the existing statutoryauthority (the Statistics of Trade Act) wouldcover such an approach, so that it would haveto be done on voluntary basis. It is anticipatedthat it would be more difficult to obtainministerial approval for such an inquiry. Asecond pilot survey is planned for end-2000 inadvance of a full survey in 2001.

The banks� contribution to the i.i.p. is largelyobtained from end-month balance sheetreturns, supplemented by more detailedquarterly and annual data. Data are notcollected by accumulating flows (see Sub-section 3.2 for more details of the reportingforms). Data are collected according tointernational guidelines, and to the same timescale as the b.o.p. (see Sub-section 3.9).

A geographical allocation between euro area/non-euro area countries is possible for data on



banks� assets. However, there are difficulties incompiling a geographical breakdown of theholders of tradable debt securities issued by UKresidents (also see Sub-section 8.1).

12.2 Definitions

In principle, the United Kingdom complies withthe recommendations of the BPM5 and theharmonisation proposals made by the WorkingGroup on Balance of Payments and ExternalReserves (the former Task Force on FinancialFlows and Stocks Statistics).

12.2.1 General

I.i.p. definitions are in line with internationalguidelines, with practices being similar to thoseoutlined in earlier chapters for information onincome.


Direct investment stocks are recorded at bookvalue, equal to historic cost minus allowancesfor depreciation and write-offs. The directionalprinciple is used, and reinvested earnings arealso included.


The United Kingdom estimates the level ofportfolio investment liabilities for equity held bynon-residents directly. The ONS conducts aregular survey of share registers in order toidentify holdings by the domestic sector as wellas the RoW. The Share Register Survey wascarried out annually in respect of end-years1989 to 1994 and again in 1997. In future it isplanned to carry out at least an annual surveyusing data from the electronic CRESTregistration system with a triennial �top-up�survey of manual administrative records. (Morefrequent �top-up� surveys would be dependentupon the availability of resources and funds.)There is a limited geographical breakdownavailable from the SRS; there is none fromCREST. The coverage of the CREST system islikely soon to be extended to include UKgovernment securities (gilts). Otherwise there isno direct measurement of RoW levels for debtliabilities: these are generally deduced from totalUK issues less domestic acquisitions.

Portfolio investment instruments are collectedaccording to international definitions, withmoney market instruments being recorded atthe market, or discounted, price.


The vast majority of stocks data are collectedon a marked-to-market basis, although somebanking book data are collected on an accrualsbasis. This applies to all instrument types �including options, swaps, FRAs and forwards.Data are recorded on a gross basis, meaningthat levels with a positive value are recordedseparately from positions with a negative value.


International guidelines are followed inrecording other investment stocks.


Reserve assets data are recorded at closingmiddle market exchange rates and valued atend-period market prices. Data recorded in thei.i.p. are based on stocks data produced fromadministrative information. Since July 1999 dataon the UK reserves has been produced inaccordance with the IMF Data Template onInternational Reserves and Foreign CurrencyLiquidity. For further information on thecompilation of reserves data, see Sub-section11.


There is currently no reconciliation betweenflows data in the b.o.p. and levels data in the i.i.p.

12.4 Gaps

None.




None.



13 Administration


(i) ONSEconomic Trends (monthly)Financial Statistics (monthly)UK Economic Accounts (quarterly)UK Balance of Payments �The Pink Book�(annual)UK National Accounts �The Blue Book�(annual)

(ii) Bank of EnglandMonetary and Financial Statistics (monthly)Statistical Abstract (annual)

13.2 Contributors

This country information was initially drafted in1996 by the EMI�s BOP Section. It wassubsequently amended and agreed with theUnited Kingdom in 1997 and extensivelyredrafted and expanded by the UnitedKingdom in 1999. Enquiries of a general natureshould be addressed to the Press Division of theECB. Enquiries specific to the United Kingdomshould be addressed to:

Mr. Simon HumphriesOffice for National StatisticsBoP Investment and Co-ordination BranchBoP and Financial Sector Division1 Drummond GateGB - LONDON SW1V 2QQTel.: (0044) 207 533 6075Fax: (0044) 207 533 6061

Mr. Stephen SabineBank of EnglandExternal Finance StatisticsMonetary and Financial Statistics DivisionThreadneedle StreetGB - LONDON EC2R 8AH

Tel.: (0044) 207 601 4382Fax: (0044) 207 601 3208


Annex

5 Annex

5.1 Glossary

The definitions of the terms included in thissection are taken from the IMF Balance ofPayments Manual (5th edition), the EMI�sImplementation Package or from reportsprepared by the EMI�s BOP Financial Flows andStocks Task Force, the forerunner of the ECBStatistics Committee�s Working Group onBalance of Payments and External Reserves Statistics.The terms are shown in alphabetical order.

Accruals principle � a continuous method ofrecording that matches the cost of capital withthe provision of capital. This concept, which isbroader than the actual payment of dividendsand interests (on a cash or settlement basis),covers dividends due for payment, interestaccrued, and unremitted profits (reinvestedearnings) of direct investment enterprises.

Balance of payments (b.o.p.) � the statisticalstatement that systematically summarises for aspecific time period (usually monthly, quarterlyand/or annually) the economic transactions ofan economy with the rest of the world.Transactions between residents and non-residents, consist of those involving goods,services and income; those involving financialclaims on and liabilities to the rest of the world;and those classified as transfers (such as gifts)which involve offsetting entries to balance � inan accounting sense � one-sided transactions.

Bonds and notes � these are securities issuedwith an initial maturity of more than oneyear which usually give the holder: (i) theunconditional right to a fixed monetary incomeor contractually determined variable monetaryincome (payment of interest being independentof the earnings of the debtor); and (ii) theunconditional right to a fixed sum in repaymentof the principal on a specified date or dates.

Capital and financial account � the capitalaccount covers all transactions that involve thereceipt or payment of capital transfers and theacquisition or disposal of non-produced, non-

financial assets, while the financial accountcovers all transactions associated with changesof ownership in the foreign financial assets andliabilities of an economy, including the creationand liquidation of claims on or by the rest ofthe world.

Cash basis � see accruals principle.

C.i.f. (cost, insurance and freight at theimporter�s border) � valuation of the goodsat the market value at the customs border of theeconomy into which they are imported,including in the import value the insurance andtransportation costs.

Credits and debits � a credit in the b.o.p.records the provision of goods or services, adecrease in holdings of a financial asset or anincrease in liabilities. Credits and debits formthe two elements in the simple double-entrysystem used for recording the b.o.p.

Current account � the b.o.p. current accountcovers all transactions between resident andnon-resident entities that involve economicvalues. Also covered are offsets to currenteconomic values provided or acquired withouta reciprocal exchange. The major classificationsare goods and services, income and currenttransfers.

Debtor/creditor principle � foreign assetsare geographically allocated to the country ofthe debtor (issuer), while liabilities are allocatedto the country of the creditor (holder). Thisprinciple is the most appropriate choice if theinterest concerns a change in the geographicaldistribution of the items on the nation�s balancesheet.

Direct investment � the category ofinternational investment that reflects a lastinginterest of a resident entity in one economy inan enterprise resident in another economy. Theresident entity is the direct investor and theenterprise is the direct investment enterprise.The lasting interest implies the existence of along-term relationship between the direct


Annex

investor and the enterprise and a significantdegree of influence by the investor on themanagement of the enterprise.

Direct investment enterprises � anincorporated or unincorporated enterprise inwhich a direct investor, who is resident inanother economy, owns 10% or more of theordinary shares or voting power (of theincorporated enterprise) or the equivalent (ofthe unincorporated enterprise).

Direct investors � these may be individuals,incorporated or unincorporated private orpublic enterprises, associated groups ofindividuals or enterprises, governments orgovernment agencies, or estates, trusts, or otherorganisations that individually own 10% ormore of the ordinary shares or voting power ofan incorporated enterprise or the equivalent ofan unincorporated enterprise in economiesother than those in which the direct investorsreside.

Directional principle � the recording ofdirect investment flows according to thedirectional principle means, in general, that allcapital transactions with foreign directinvestment enterprises are recorded by thecountry of the direct investor as directinvestment abroad; all capital transactions ofresident direct investment enterprises withforeign direct investors are recorded by thecountry of the direct investment enterprise asdirect investment in the reporting country. Thestatus of the resident enterprise (i.e. directinvestor or direct investment enterprise) inrelation to its counterpart in the transaction isessential for the recording of direct investmentflows.

Enhanced Structural Adjustment Facility(ESAF) � through the ESAF, the IMF providesassistance to low-income member countries atconcessionary terms, in support ofmacroeconomic adjustment and structuralreforms, to lay the basis for high and sustainablegrowth and external payments viability. Thisfacility was replaced from 2000 onwards by the

�Poverty Reduction and Growth Facility�(PRGF).

Equity � covers all instruments and recordsacknowledging, after the claims of all creditorshave been met, claims on the residual value ofincorporated enterprises. Shares, stocks,preference stock or shares, participation, orsimilar documents usually denote ownership ofequity. Transactions in shares of collectiveinvestment institutions, e.g. investment funds,are also included.

Euro area � the area encompassing thoseMember States in which the euro has beenadopted as the single currency in accordancewith the Treaty and in which a single monetarypolicy is conducted under the responsibility ofthe ECB. The euro area comprises Belgium,Germany, (Greece, as from 2001), Spain, France,Ireland, Italy, Luxembourg, the Netherlands,Austria, Portugal, Finland, and for statisticalpurposes, the ECB.

Euro area assets � this term means assetsissued by non-residents of the Member Statesparticipating in the euro area which have beenpurchased and/or are held by euro arearesidents.

Euro area liabilities � this term meansliabilities of euro area residents which havebeen purchased and/or are held by non-residents of the Member States participating inthe euro area.

European Central Bank (ECB) � the ECB isthe centre of the ESCB and the Eurosystem andhas legal personality under Community law. Itensures that the tasks conferred upon theEurosystem and the ESCB are implementedeither by its own activities pursuant to itsStatute or through the national central banks.

European System of Central Banks(ESCB) � the ESCB is composed of the ECBand the national central banks of all 15 MemberStates, i.e. it includes, in addition to themembers of the Eurosystem, the national


Annex

central banks of the Member States which didnot adopt the euro at the start of Stage Three ofEMU.

European System of National andRegional Accounts (ESA 95) - this is aninternationally compatible accounting frameworkfor a systematic and detailed description of atotal economy (that is a region, country orgroup of countries), its components and itsrelations with other total economies. TheESA 95 is fully consistent with the SNA 93 (seebelow), but focuses more on the circumstancesand data needs in the European Union. The ESA95 was adopted in the form of a CouncilRegulation dated 25 June 1996.

European Union (EU) � comprises theMember States of the EU and the EUinstitutions. All EU institutions besides the ECBare considered non-euro area resident units.

European Union Member States (EUMember States) � Belgium, Denmark,Germany, Greece, Spain, France, Ireland, Italy,Luxembourg, the Netherlands, Austria, Portugal,Finland, Sweden and the United Kingdom.

Eurosystem � comprises the ECB and thenational central banks of the Member Stateswhich have adopted the euro in Stage Three ofEMU (see also euro area). There are currently11 national central banks (12, as from 2001) inthe Eurosystem. The Eurosystem is governed bythe Governing Council and the ExecutiveBoard of the ECB.

Financial derivatives � financial instrumentsthat are linked to a specific financial instrument,indicator or commodity, and through whichspecific financial risks can be traded in financialmarkets in their own right.

F.o.b. (free on board at the exporter�sborder) � valuation at the market value of thegoods at the customs border of the economyfrom which they are exported, excluding therespective insurance and transportationservices incurred.

General Arrangements to Borrow (GAB)� the GAB enable the IMF to borrow specifiedamounts of currencies from 11 industrialcountries or their central banks, under certaincircumstances, at market-related rates ofinterest.

Goods � covers general merchandise, goodsfor processing, repairs on goods, goodsprocured in ports by carriers and non-monetary gold.

International investment position (i.i.p.)� the statistical statement of the value andcomposition of the stock of an economy�sfinancial assets or financial claims on the rest ofthe world, and of an economy�s financialliabilities to the rest of the world.

Investment income � incorporates incomederived from a resident entity�s ownership of aforeign financial asset (credits) and, symmetrically,income derived from a non-resident entity�sownership of a domestic financial asset (debits).

Key items � consists of the main monthlyb.o.p. categories and closely follows thebreakdown required by the BPM5. The keyitems data are aggregate b.o.p. statistics providedby Member States on a monthly basis within ashort, six-week timeframe and are to be used bythe ECB for the purposes of monetary policyand foreign exchange operations.

Loans/currency and deposits � comprisetransactions in the following financial instruments:loans, i.e. those financial assets created throughthe direct lending of funds by a creditor (lender)to a debtor (borrower) through an arrangementin which the lender either receives no securityevidencing the transactions or receives a non-negotiable document or instrument, deposits;repo-type operations and currency. Includedare, inter alia, loans to finance trade, other loansand advances (including mortgages). In addition,financial leases are covered.

Money market instruments (MMIs) �securities issued with an original maturity of


Annex

one year or less. They generally give the holderthe unconditional right to receive a stated, fixedsum of money on a specified date. Theseinstruments are usually traded, at a discount, inorganised markets; the discount is dependentupon the interest rate and the time remaining tomaturity.

New Arrangements to Borrow (NAB)� the New Arrangements to Borrow becameeffective on 17 November 1998. The NAB are aset of credit arrangements between the IMF and25 members and institutions to providesupplementary resources to the IMF to forestallor cope with an impairment of the internationalmonetary system or to deal with an exceptionalsituation that poses a threat to the stability ofthat system. The NAB do not replace theexisting General Arrangement to Borrow(GAB), which remain in force.

Other assets/other liabilities � sub-item ofother investment which covers all items otherthan trade credits, loans and currency anddeposits.

Other investment � the residual category ofthe b.o.p. which therefore includes all financialtransactions with non-residents not covered indirect investment, portfolio investment, financialderivatives or reserve assets.

Other services � those service transactionswith non-residents which are not coveredunder transportation and travel, such ascommunications services, construction services,insurance or financial services.

Portfolio investment � this coversinvestment in equity securities (quoted shares)and debt securities (bonds and notes, andmoney market instruments). Excluded are anyof these instruments which are included indirect investment or reserve assets.

Poverty and Growth Facility (PRGF) � SeeEnhanced Structural Adjustment Facility(ESAF).

Reinvested earnings � appear in the contextof income on direct investment. They aredefined as the direct investor�s share of the totalconsolidated profits earned by the affiliatedcompany in a certain period (after allowing fortax, interest and depreciation) less dividendsdue for payment in the relevant period, even ifthese dividends relate to profits earned inearlier periods.

Reserve assets � consists of external assetsthat are readily available to and controlled bymonetary authorities for the direct financing ofpayment imbalances, for the indirect regulationof the magnitude of such imbalances throughintervention in exchange markets which affectsthe currency exchange rate and/or for otherpurposes. Reserve assets of the euro area areforeign currency-denominated claims on non-euro area residents which are held by theEurosystem.

Residents � these comprise the generalgovernment, individuals, private non-profitmaking bodies serving households, andenterprises, whose centre of economic interestlies within the territory of a given economy.

Services � consists of transportation, traveland other services.

Settlement basis � the recording of flowsaccording to payments.

Statistics Committee (STC) � an ESCBcommittee which assists in collecting thestatistical information necessary for theperformance of the ESCB�s tasks; in theharmonisation of the rules and practicesgoverning the collection, compilation anddistribution of statistics within its field ofcompetence; and the development andimplementation of ESCB-wide statistical ITapplications.

System of National Accounts of theUnited Nations (SNA 93) � this is theinternational standard for a comprehensive andsystematic framework for the collection and


Annex

presentation of the economic statistics of aneconomy. It encompasses transactions, otherflows, stocks, and other changes affecting thelevel of assets and liabilities from oneaccounting period to another. These guidelineshave been produced under the jointresponsibility of the United Nations, the IMF, theCommission of the European Communities, theOECD and the World Bank.

Trade credits � consist in claims or liabilitiesarising from the direct extension of credit byresident suppliers or buyers, respectively, fortransactions in goods and services and advancepayments for work in progress (or to beundertaken) that is associated with suchtransactions.

Transaction � an economic flow that reflectsthe creation, transformation, exchange, transferor extinction of economic value and involveschanges in ownership of goods and/or financialassets, the provision of services, or the provisionof labour and capital.

Transactions basis � the recording of flowsaccording to the change in ownership and notaccording to settlements. In the context ofsecurities, the term �transactions basis� isidentical to �accruals� principle.

Transactor principle � this principle allocatesa transaction between a resident and a non-resident to the country of the directcounterparty to the transaction. The transactorprinciple provides information on theimmediate direction of flows resulting frominternational settlements.

Transportation � covers all internationaltransportation services (sea, air and other �including land, internal waterway, space andpipeline) that are performed by residents of oneeconomy for residents of another economy andthat involve the carriage of passengers, themovement of goods (freight), rentals (charters)of carriers with crew, and related supportingand auxiliary services. Excluded are passengerservices provided to non-euro area residents by

euro area carriers within the euro areaeconomies, or vice versa (these are includedunder travel).

Travel � comprises the goods and services thattravellers consume from one economy duringvisits of less than one year to that economy. Itdiffers from other components of services inthat it is a demand-oriented activity. Thus, unlikeother services, travel is not a specific type ofservice, but an assortment of services consumedby travellers.

Working Group on Balance of Payments andExternal Reserves Statistics (WG BP&ER)� reports to the Statistics Committee on mattersrelating to b.o.p./i.i.p. statistics.

5.2 Contributors

The individual country information was draftedby the ECB�s Balance of Payments Statistics andExternal Reserves Division and subsequentlyamended and agreed with the countryconcerned. Enquiries of a general nature shouldbe addressed to the Press Division of the ECB.The following list of points of contact within thecentral banks/compiling institutions is includedto help readers direct their country-specificenquiries in the most appropriate way.

BelgiumMr. Guido MelisBanque Nationale de Belgique/Nationale Bank van BelgiëBoulevard de Berlaimont 14B - 1000 BRUXELLESBelgium

Tel.: (0032) 2 221 2170Fax: (0032) 2 221 3144

LuxembourgMr. Germain StammetBanque centrale du LuxembourgBoulevard Royal, 2L - 2983 LUXEMBOURG

Tel.: (00352) 47 74 4279Fax: (00352) 47 74 4920


Annex

Denmark1. Mr. Niels Peter Mortensen

Danmarks NationalbankEconomics and Statistics DepartmentHavnegade 5DK - 1093 COPENHAGENDenmark

Tel.: (0045) 33 63 68 47Fax: (0045) 33 63 71 23

Denmark2. Mr. Tom Christensen

Danmarks NationalbankEconomics and Statistics DepartmentHavnegade 5DK - 1093 COPENHAGENDenmark

Tel.: (0045) 33 63 68 24Fax: (0045) 33 63 71 23

GermanyMr. Wilfried MasselingDeutsche BundesbankWilhelm-Epstein-Strasse 14D - 60431 FRANKFURT AM MAINGermany

Tel.: (0049) 69 9566 8668Fax: (0049) 69 9566 8622

Greece1. Ms Verra Rodis

Head of BOP Compilation SectionBOP Statistics DivisionStatistics DepartmentBank of GreecePanepistimiou Avenue, No 21GR - 10250 ATHENSGreece

Tel.: (0030) 1 320 2379Fax: (0030) 1 323 6035

Greece2. Mr. Andreas Karapappas

Deputy Head of BOP CompilationSectionBOP Statistics DivisionStatistics DepartmentBank of GreecePanepistimiou Avenue, No 21GR - 10250 ATHENSGreece

Tel.: (0030) 1 320 2540Fax: (0030) 1 323 6035

SpainMr. Eduardo Rodriguez TenésBanco de EspañaBalanza de PagosPlaza del Rey 6E - 28004 MADRIDSpain

Tel.: (0034) 1 338 5433Fax: (0034) 1 338 6532

FranceMr. Marc SchweitzerBanque de FranceD.G.E.I � Direction de la Balance dePaiements 51-1465F - 75049 PARIS Cedex 01France

Tel.: (0033) 1 42 92 31 68Fax: (0033) 1 42 92 56 80

Ireland1. Mr. John Fitzpatrick

Central Statistics OfficeBalance of Payments DivisionArdee RoadRathminesIRL - DUBLIN 6Ireland

Tel.: (00353) 1 497 7144Fax: (00353) 1 497 1106


Annex

Ireland2. Mr. John O�Malley

Central Bank of IrelandMonetary Policy and StatisticsepartmentPO Box No 559Dame StreetIRL - DUBLIN 2Ireland

Tel.: (00353) 1 671 66 66Fax: (00353) 1 671 65 61

Italy1. Mr. Francesco Vincenzo Loi

Ufficio Italiano dei CambiStatistics DepartmentVia Quattro Fontane, 123I - 00184 ROMAItaly

Tel.: (0039) 6 466 34 354Fax: (0039) 6 466 34 629

Italy2. Mr. L. Federico Signorini

Banca d�ItaliaResearch DepartmentVia Nazionale, 91I - 00184 ROMAItaly

Tel.: (0039) 6 479 23 713Fax: (0039) 6 474 23 611

The NetherlandsMr. Raymond F. D. D. ChaudronDe Nederlandsche BankStatistical Information and ReportingDepartmentWesteinde 1NL - 1017 ZN AMSTERDAMNetherlands

Tel.: (0031) 20 524 1924Fax: (0031) 20 524 2512

AustriaMr. Robert ZorziOesterreichische NationalbankBalance of Payments DivisionOtto-Wagner-Platz 3A - 1011 WIENAustria

Tel.: (0043) 1 404 20 5413Fax: (0043) 1 404 20 5399

PortugalMs Ana Margarida de AlmeidaBanco de PortugalStatistics DepartmentBalance of Payments Statistics DivisionAv. Almirante Reis, 71 - 3P - 1150 012 LISBOAPortugal

Tel.: (00351) 21 312 8374Fax: (00351) 21 355 6749

Finland1. Mr. Jorma Hilpinen

Suomen Pankki - Finlands BankBox 160SnellmaninaukioFIN - 00101 HELSINKI 10Finland

Tel.: (00358) 9 183 2402Fax: (00358) 9 662 546

Finland2. Mr. Harri Kuussaari

Suomen Pankki - Finlands BankBox 160SnellmaninaukioFIN - 00101 HELSINKI 10Finland

Tel.: (00358) 9 183 2403Fax: (00358) 9 662 546


Annex

SwedenMr. Anders LindströmSveriges RiksbankMonetary Policy Department11 BrunkebergstorgS - 10337 STOCKHOLMSweden

Tel.: (0046) 878 705 60Fax: (0046) 8 245 348

The United Kingdom1. Mr. Simon Humphries

Office for National StatisticsBoP Investment and Co-ordinationBranchBoP and Financial Sector Division1 Drummond GateGB - LONDON SW1V 2QQEngland

Tel.: (0044) 207 533 6075Fax: (0044) 207 533 6061

The United Kingdom2. Mr. Stephen Sabine

Bank of EnglandExternal Finance StatisticsMonetary and Financial Statistics DivisionThreadneedle StreetGB - LONDON EC2R 8AHEngland

Tel.: (0044) 207 601 4382Fax: (0044) 207 601 3208

European Central Bank1. Mr. Jean-Marc Israël

EurotowerKaiserstrasse 29D - 60311 FRANKFURT AM MAINGermany

Tel.: (0049) 69 1344 7686Fax: (0049) 69 1344 7693

European Central Bank2. Ms Silvia von Ledebur

EurotowerKaiserstrasse 29D - 60311 FRANKFURT AM MAINGermany

Tel.: (0049) 69 1344 7662Fax: (0049) 69 1344 7693


Annex