Filipa Lima Deputy – Head | Statistics Department
COMPILATION PROCEDURES:
REST OF THE WORLD
Banque d’Algérie IFC seminar on Developing and Improving Sectoral Financial Accounts
Session 5: The non-resident sector
Algiers, 21 January, 2016
2 IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
1. Main definitions
2. Linkages between RoW and BoP/ IIP
3. BoP and IIP Statistics – Regulatory framework
4. BoP and IIP Statistics – Definitions, data sources and compilation
5. Methodology of compilation
6. Internal consistency between different sources
7. Statistics on foreign financial claims of Portuguese banks
OUTLINE
3 IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
1. Main definitions
2. Linkages between RoW and BoP/ IIP
3. BoP and IIP Statistics – Regulatory framework
4. BoP and IIP Statistics – Definitions, data sources and compilation
5. Methodology of compilation
6. Internal consistency between different sources
7. Statistics on foreign financial claims of Portuguese banks
OUTLINE
4
The rest of the World account (RoW) [in National Accounts]
The rest of the world sector (S.2) is a grouping of units without any
characteristic functions and resources; it consists of non-resident units
insofar as they are engaged in transactions with resident institutional
units, or have other economic links with resident units. Its accounts provide
an overall view of the economic relationships linking the national economy
with the rest of the world (ESA 2010 - §2.131)
1. Main definitions
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
5
Balance of Payments (BoP)
The balance of payments summarizes transactions between residents and
nonresidents during a period. It consists of the goods and services account,
the primary income account, the secondary income account, the capital
account, and the financial account (BPM6 - §2.12)
International Investment Position (IIP)
The IIP is a statistical statement that shows at a point in time the value of:
financial assets of residents of an economy that are claims on nonresidents
or are gold bullion held as reserve assets; and the liabilities of residents of
an economy to nonresidents (BPM6 - §2.8)
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
1. Main definitions
6 IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
1. Main definitions
2. Linkages between RoW and BoP/ IIP
3. BoP and IIP Statistics – Regulatory framework
4. BoP and IIP Statistics – Definitions, data sources and compilation
5. Methodology of compilation
6. Internal consistency between different sources
7. Statistics on foreign financial claims of Portuguese banks
OUTLINE
7
The rest of the world account covers transactions between resident and
non-resident institutional (balance of payments) units and the related
stocks of assets and liabilities (international investment position)
BUT Rest of the world plays a role in the accounting structure similar to that of
an institutional sector from the perspective of non-residents (with the
counterparty in the domestic economy)
The balance of payments / international investment position is from the
perspective of the resident sectors (with the counterparty in the domestic
economy)
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
2. Linkages between RoW and BoP/ IIP
8
A resource for the rest of the world is a use for the resident economy and
vice versa:
In Balance of Payments
BoP surplus is a surplus of the resident economy and a deficit
of the rest of the world (national accounts)
BoP deficit is a deficit of the resident economy and a surplus of
the rest of the world (national accounts)
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
2. Linkages between RoW and BoP/ IIP
9
An asset of the rest of the world is a liability of the resident economy and
vice versa:
In International Investment Position
Positive IIP is a positive financial net worth of the resident
economy and a negative financial net worth of the rest of the
world (national accounts)
Negative IIP is a a negative financial net worth of the resident
economy and a positive financial net worth of the rest of the
world (national accounts)
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
2. Linkages between RoW and BoP/ IIP
10
Accounting principle:
Rest of the world sector uses a quadruple-entry* (each transaction involving
two institutional units is recorded twice by each unit)
Balance of payments / international investment position uses a double-
entry** accounting system (each transaction is recorded as consisting of two
entries and the sum of the credit entries and the sum of the debit entries is
the same)
* the activity of either two residents or a resident and a non-resident is recorded.
** the activity of only one transactor is recorded: the resident entity (with a non-resident entity).
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
2. Linkages between RoW and BoP/ IIP
11
Complete concept and classification concordance between balance of payments /
international investment position and the rest of the world account as bop / iip form
an integral part of the national accounts (although the extent of cross-classifications
may differ between the two systems)
Similarities between the two systems:
Identification of resident producers / consumers
Definition of the economic territory and centre of economic interest
Valuation principles of market prices and accrual accounting
In the rest of the world financial account the instrument of investment is the
primary classification, whereas in the bop/ iip financial account classification is given
by functional category
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
2. Linkages between RoW and BoP/ IIP
12 IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
1. Main definitions
2. Linkages between RoW and BoP/ IIP
3. BoP and IIP Statistics – Regulatory framework
4. BoP and IIP Statistics – Definitions, data sources and compilation
5. Methodology of compilation
6. Internal consistency between different sources
7. Statistics on foreign financial claims of Portuguese banks
OUTLINE
13
Organic Law of Banco de Portugal (BP) – Law nº 5 / 98, of 31 January, assigns to BP
the responsibility for the compilation and production of balance of payments and
international investment position and the power of require to any public or private
entity the provision of information necessary to comply with that referred in the
previous item
Instruction No. 27/2012 of Banco de Portugal, Statistics on the Foreign transactions
and positions
Instruction No. 31/2005 of Banco de Portugal, on Securities Statistics – Transactions
and positions
Decree-Law No. 295/2003 of 21 November, which regulates the legal regime of
economic and financial transactions with foreign countries and foreign exchange
operations
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
3. BoP and IIP Statistics – Regulatory framework
14
Guideline of the ECB of 31 May 2007 (ECB/2007/3) concerning ECB statistical
requirements in the field of external statistics
Recommendation of the ECB of 31 May 2007 (ECB/2007/4) and Regulation (EC) No
184/2005 of the European Parliament and the Council of 12 January concerning
Community statistics on balance of payments, international trade in services and foreign
direct investment
At the European Union and Monetary Union level, the Eurostat and ECB divided the
responsibility for compilation of BoP and IIP statistics:
Eurostat is responsible for current and capital account (excluding investment income);
collection of information on direct investment with detailed geographical and sectoral
breakdown (economic activity); international trade statistics
European Central Bank is responsible for monthly bop / iip compilation for the Monetary Union; financial account (including investment income) and quarterly IIP statistics
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
3. BoP and IIP Statistics – Regulatory framework
15 IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
1. Main definitions
2. Linkages between RoW and BoP/ IIP
3. BoP and IIP Statistics – Regulatory framework
4. BoP and IIP Statistics – Definitions, data sources and compilation
5. Methodology of compilation
6. Internal consistency between different sources
7. Statistics on foreign financial claims of Portuguese banks
OUTLINE
16
BoP / IIP presentation follows functional category approach
Direct Investment
Portfolio Investment
Other Investment
Reserve assets
Financial Derivatives
BoP / IIP
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
4. BoP and IIP Statistics – Definitions, data sources and compilation
17
Direct Investment
It is a category of cross-border investment associated with a resident in one economy
having control (> 50% of the voting rights) or a significant degree (between 10% and
50% of the voting rights) of influence on the management of an enterprise that is
resident in another economy
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
4. BoP and IIP Statistics – Definitions, data sources and compilation
18
Direct Investment
Data sources, on a monthly basis:
COPE – communication of external operations and positions (for transactions in equity, loans and direct investment income settled)
SSIS – collected from custodians processed on a security-by security basis (foreign securities in portfolios held by residents: transactions, outstanding amounts and related income)
Immigration and borders service – real estate investment
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
4. BoP and IIP Statistics – Definitions, data sources and compilation
19
Direct Investment
Data sources, on a monthly basis:
COPE – communication of external operations and positions (for transactions in equity, loans and direct investment income settled)
SSIS – collected from custodians processed on a security-by security basis (foreign securities in portfolios held by residents: transactions, outstanding amounts and related income)
Immigration and borders service – real estate investment
Data sources, on an annual basis:
IES – Simplified Corporate Information (for equity, reinvested earnings and structure of the economic group)
On an monthly basis, estimates are produced for equity and reinvested earnings
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
4. BoP and IIP Statistics – Definitions, data sources and compilation
20
Portfolio Investment
Portfolio investment is defined as crossborder transactions and positions involving
debt or equity securities, other than those included in direct investment or reserve
assets and should be negotiable, giving the investor the ability to quickly compose its
portfolio
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
4. BoP and IIP Statistics – Definitions, data sources and compilation
21
Portfolio Investment
Data sources
SSIS - collected from custodians processed on a security-by security basis (foreign securities in portfolios held by residents: transactions, outstanding amounts and related income)
COPE - communication of external operations and positions (for portfolios held by residents and located in custodians abroad)
Market and Reserve Management Department for additional details of securities
Residual approach - liabilities are calculated as the difference between the total amounts outstanding of all securities issued by residents and the holdings of such securities by residents
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
4. BoP and IIP Statistics – Definitions, data sources and compilation
22
Financial Derivatives and Employee Stock Options
Negotiable financial instrument linked to, although autonomous, another financial
instrument, indicator or commodity that presents financial risk
Data sources
Financial derivatives surveys (provided on a monthly basis)
COPE - communication of external operations and positions (for financial derivatives
contracted with banks abroad)
Direct report of the Portuguese Treasury and Debt Management Agency (IGCP, E.P.E.) on
positions in financial derivatives
Market and Reserve Management Department for additional details of securities
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
4. BoP and IIP Statistics – Definitions, data sources and compilation
23
Other Investment
Residual category, including transactions that do not fit into the other
functional categories
Positions are valued at nominal value (pragmatic concerns about data
availability and the need to maintain symmetry between debtors and
creditors)
This value includes accrued income that has not yet been paid.
Nevertheless, transactions should be valued at market prices
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
4. BoP and IIP Statistics – Definitions, data sources and compilation
24
Other Investment
Data sources
COPE – loans / deposits stocks and flows, income
Central Bank – Accounting Plan of Banco de Portugal (Accounting Department); Market and
Reserve Management Department, for additional details of Deposits, with a country and currency
breakdown
MFIs – balance sheet reported for monetary and financial statistics (MFS), with a country and
currency breakdown
Households – COPE, COL, mirror MFS (other EMU countries) and mirror BIS
Other sectors – COPE, ITENF / IES (trade credits)
Other auxiliary information for General Governemnt - Direct report of the Portuguese Treasury
and Debt Management Agency (IGCP, E.P.E.)
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
4. BoP and IIP Statistics – Definitions, data sources and compilation
25
Reserve assets
Valuation: market prices for all tradable instruments; nominal value (for positions) in non-tradable instruments.
Data source: The Information system of the Banco de Portugal (accounting, payment and market operations systems) provides a comprehensive set of information for the compilation of Reserve Assets: positions, flows and related income.
in/in in/out
out/in out/out Reserve assets
country
currency
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
In – inside euro area
Out – outside euro area
4. BoP and IIP Statistics – Definitions, data sources and compilation
26 IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
1. Main definitions
2. Linkages between RoW and BoP/ IIP
3. BoP and IIP Statistics – Regulatory framework
4. BoP and IIP Statistics – Definitions, data sources and compilation
5. Methodology of compilation
6. Internal consistency between different sources
7. Statistics on foreign financial claims of Portuguese banks
OUTLINE
27
Balance of Payments / International Investment position information is reorganized for rest of the world account compilation purposes:
Value type used for the rest of the world compilation:
Stocks – IIP Transactions – BoP Other price changes – IIP Other volume changes – determined by difference (residual approach) but also available in IIP
Information by sector of resident counterpart – information source for other sectors
Aggregation of the counterparty country between Monetary Union and Non-Monetary Union countries
Reorganization of functional categories and instruments
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
5. Methodology of compilation
28
Functional categories vs financial instruments
BoP/IIP
Direct Investment
Portfolio Investment
Financial Derivatives
Other Investment
Reserve Assets
Financial Instruments
Monetary gold and SDR F.1.
Currency and deposits F.2.
Securities other than shares F.3.
Loans F.4.
Shares and other equity F.5.
Insurance technical reserves F.6.
Financial derivatives F.7.
Other accounts receivable/payable F.8.
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
5. Methodology of compilation
29
Financial Accounts Monetary gold and SDR F.1
Currency and deposits F.2
Securities other than shares and financial derivatives
F.3
Loans F.4
Shares and other equity F.5
Insurance technical reserves F.6
Financial derivatives F.7
Trade credits and advances F.81
Other accounts except trade credits and advances
F.89
BOP / IIP CONNECTION
Reserve Assets
F.1
F.1
F.2
F.2
F.3
F.7
F.89
Monetary gold
Special drawing rights (SDR)
Reserve position in the IMF
Foreign exchange
Currency and deposits
Debt securities
Financial derivatives
Other assets
Direct Investment
F.5
F.5
F.4
Equity capital
Reinvested earnings
Other capital
Portfolio Investment
F.5
F.3
Shares and other equity
Debt securities
Financial Derivatives F.7
Other Investment
F.2
F.4
F.81
F.5 / F.6 / F.89
Currency and deposits
Loans
Trade credits
Other assets
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
5. Methodology of compilation
30
Revision policy ensures similar revision time spans and are based on the same vintages of the
source data
However there are some methodological differences between the national financial account and
Balance of payments / international investment position that are incorporated:
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
5. Methodology of compilation
31
Revision policy ensures similar revision time spans and are based on the same vintages of the
source data
However there are some methodological differences between the national financial account and
Balance of payments / international investment position that are incorporated:
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
International Investment Position
Asset of the Central Bank
Financial Accounts
Asset of the Central Bank
Liability of the RoW
MONETARY GOLD
5. Methodology of compilation
32
Revision policy ensures similar revision time spans and are based on the same vintages of the
source data
However there are some methodological differences between the national financial account and
Balance of payments / international investment position that are incorporated:
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
International Investment Position
Asset of the Central Bank
Financial Accounts
Asset of the Central Bank
Liability of the RoW
MONETARY GOLD
BoP – (FINANCIAL ACCOUNT BALANCE + ERRORS AND OMISSIONS)
ROW FINANCIAL SAVING
5. Methodology of compilation
33
Revision policy ensures similar revision time spans and are based on the same vintages of the
source data
However there are some methodological differences between the national financial account and
Balance of payments / international investment position that are incorporated:
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
International Investment Position
Asset of the Central Bank
Financial Accounts
Asset of the Central Bank
Liability of the RoW
MONETARY GOLD
– ( INTERNATIONAL INVESTMENT POSITION – MONETARY GOLD POSITION)
ROW NET FINANCIAL ASSETS
BoP – (FINANCIAL ACCOUNT BALANCE + ERRORS AND OMISSIONS)
ROW FINANCIAL SAVING
5. Methodology of compilation
34 IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
1. Main definitions
2. Linkages between RoW and BoP/ IIP
3. BoP and IIP Statistics – Regulatory framework
4. BoP and IIP Statistics – Definitions, data sources and compilation
5. Methodology of compilation
6. Internal consistency between different sources
7. Statistics on foreign financial claims of Portuguese banks
OUTLINE
35
Internal analysis developed on a monthly basis to ensure consistency between rest of the world sector and other sectors´ financial instruments:
Whom to whom analysis:
Debt securities (long term and short term) and Equity instruments Assets and liablities BoP / IIP and SSIS data comparison
in order to fill a whom-to-whom matrix
Integration and use of internal data sources: MFS statistics, SSIS, … Other quality checks to compare the information available in other statistics
Passivos S.11 S.12 S.13 S.14+S.15 S.2 Total
S.11
S.12
S.13
S.14+S.15
S.2
Total
AtivosAssets
Liabilities
BoP / IIP liabilities vis-a-vis other sectors
BoP / IIP assets
vis-a-vis other
sectors
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
6. Internal consistency between different sources
36 IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
1. Main definitions
2. Linkages between RoW and BoP/ IIP
3. BoP and IIP Statistics – Regulatory framework
4. BoP and IIP Statistics – Definitions, data sources and compilation
5. Methodology of compilation
6. Internal consistency between different sources
7. Statistics on foreign financial claims of Portuguese banks
OUTLINE
37
Compiled according to the BIS methodological guidelines in the field of international banking statistics, which comprises:
Locational banking statistics - financial claims and liabilities in the unconsolidated balance sheet of resident banks in Portugal, and are currently published by Banco de Portugal as part of the balance sheet of other monetary financial institutions under monetary and financial statistics Consolidated banking statistics - exposure to risks of banks having their head office in Portugal, particularly to country-risk associated with financial claims (except financial derivatives) held by them in the context of their international activity, including foreign claims of branches and subsidiaries abroad
Foreign financial claims of Portuguese banks on a consolidated basis were published in November 2015
These statistics are also used to compile households deposits abroad using the mirror information provided by the BIS Data source – based on direct report from MFI
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
7. Statistics on foreign financial claims of Portuguese banks
38 IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
7. Statistics on foreign financial claims of Portuguese banks
39 IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015
7. Statistics on foreign financial claims of Portuguese banks
40
Thank you for your attention!
Questions?
Filipa Lima [email protected]
IFC seminar on Developing and Improving Sectoral Financial Accounts
Algiers, 21 January, 2015