OVERVIEW OF CONCEPTS AND DEFINITIONS

Transcription

1 OVERVIEW OF CONCEPTS AND DEFINITIONS Venkat Josyula Developing and Improving Sectoral Financial Accounts Algiers, January 20-21, 2016 The views expressed herein are those of the author and should not necessarily be attributed to the IMF, its Executive Board, or its management

2 Outline SNA: Basic Framework (3-13) Key Components (14-56) Institutional Sectors and sub-sectors Financial instruments SNA classification - additional groupings /details - currency and maturity dimension Aggregation and consolidation principles in SNA Flows and stocks From-whom-to-whom accounts (57-69) 2

3 SNA: Basic Framework 3

4 National Accounts Framework Balancing items are n italics 4

5 National Accounts Framework Shows economic processes and their relationships Column shows transactions: Production generates income; Income not spent on consumption is saving; Saving can be used to finance acquisition of financial and nonfinancial assets incurrence of liabilities allows acquisition of more assets; If saving greater than investment in nonfinancial assets, there is net lending Other changes in revaluations and revaluations not transactions Shows stocks and flows and their relationships Row shows stock-flow identities: Beginning value + transactions + other flows = Ending value 5

6 Balance Sheet and Accumulation Accounts (1) Balance Sheet and Accumulation Accounts (1) Transactions in financial assets/liabilities Recorded in the financial account IMF Statistics Department All entries relating only to financial transactions Explains how net lending or net borrowing arises Explains how financial assets owned by one unit are put at the disposal of another Recorded as net acquisition of assets or net incurrence of liabilities by instrument over an accounting period Lead to financial asset/liability positions 6

7 Balance Sheet and Accumulation Accounts (2) Positions in financial assets/liabilities Recorded in the balance sheet Refer to a particular point in time Show values of assets and liabilities at that time Record gross values of assets and liabilities on the balance sheet date Changes in positions occur due to Transactions Revaluation (holding gains and losses) Other changes in volume of assets Opening position + transactions + revaluation + other changes in volume = closing position 7

8 Balance Sheet and Accumulation Accounts (3) Revaluation of financial assets/liabilities Recorded in the revaluation account Measures changes in the value of financial asset and liabilities due to Changes in their prices Exchange rates Recorded as net revaluation of assets or liabilities by instrument over an accounting period 8

9 Balance Sheet and Accumulation Accounts (4) Other changes in volume of financial assets/liabilities Recorded in the other changes in volume of assets account Measures changes in the value of financial asset and liabilities due to Changes in classification Type of financial asset or sector Write-off of debts by creditors Uncompensated seizures and catastrophic losses Changes in pension entitlements and insurance reserves due to changes in model assumption or imposition Recorded as net changes in the value of assets or liabilities by instrument over an accounting period 9

10 National Accounts Framework Framework not just applicable to national accounts (GDP and other macro-aggregates) but also SECTORAL ACCOUNTS 5 main sectors and a quasi-sector Financial corporations Nonfinancial corporations Households Nonprofit institutions serving households General government Rest of the World Shows how different parts of the economy behave and interact. Different motivations and functions 10

11 Financial Account Total economy Total Economy Total Economy S1 S1 Assets Liabilities Net lending(+) / Net borrowing(-) Total F1 Monetary gold and SDRs - 89 F2 Currency and deposits F3 Debt securities F4 Loans F5 Equity and investment fund shares F6 Insurance, pension and standardized guarantee schemes F7 Financial derivatives and employee stock options F8 Other accounts receivable/payable 39 Balance sheet version is the same (different numbers and codes) 11

12 Financial Account by sectors Assets Liabilities Nonfinancial corporations Financial corporations General government Households +NPISH Total Economy Nonfinancial corporations Financial corporations General government Households +NPISH Total Economy S11 S12 S13 S14/S15 S1 S11 S12 S13 S14/S15 S1 Net lending(+) / Net borrowing(-) Total F1 Monetary gold and SDRs F2 Currency and deposits F3 Debt securities F4 Loans F5 Equity and investment fund shares F6 Insurance, pension and standardized guarantee schemes F7 Financial derivatives and employee stock options F8 Other accounts receivable/payable Same as the previous slide with information on sectors 12

13 Financial Account Sectoral Accounts + From-Whom-To-Whom Nonfinancial corporations Financial corporations Net acquisition of financial assets: General government Households +NPISH Rest of World Total Net inc. of liabilities: S11 S12 S13 S14/S15 S2 Nonfinancial corporations Financial corporations General government Households + NPISH Rest of World Total Columns expanded to matrix. Numbers in italics not from 2008 SNA. 13

14 Key Components 14

15 Institutional sectors Institutional sectors made up of institutional units Individual decision-making entities in the economy Households; legal and social entities Borderline cases artificial subsidiaries, holding companies vs. headquarters, special purpose entities, unincorporated branches, land ownership, quasicorporations Proper identification necessary to avoid gaps and doublecounting Institutional sectors combine units with common motivations and behavior 5 main sectors and a quasi-sector 15

16 Financial corporations Financial Corporations 9 subsectors Central bank Deposit-taking corporations except CB (DTC) Money market funds Non-money market investment funds Other financial intermediaries except insurance corporations and pension funds Financial auxiliaries Captive financial institutions and money lenders Insurance corporations Pension funds 16

17 Financial Corporations: Sub-sectors Central bank: National financial institution exercising control over key aspects of the financial system Typical central bank functions: Currency issue International reserves management Transacting with the IMF Lender of last resort Government fiscal agent Supervising financial system 17

18 Financial Corporations: Sub-sectors Deposit-taking corporations except the CB (DTC) Corporations, except the central bank, that have financial intermediation as their principal activity They have liabilities in the form of deposits, or financial instruments that are close substitutes for deposits The liabilities of deposit-taking corporations are typically included in measures of money broadly defined 18

19 Financial Corporations: Sub-sectors Units that might be classified as DTCs include: Merchant banks Commercial banks Offshore banks Specialized banks (savings, agricultural, credit unions) Finance companies Micro finance companies Credit unions and cooperatives 19

20 Financial Corporations: Sub-sectors Money market funds (MMF) Collective investment schemes Raise funds by issuing shares Invest in money market instruments (MMI) MMF shares may be transferred by check or other means MMI are short-term debt securities or deposits very low risk 20

21 Financial Corporations: Sub-sectors Non-MMF investment funds Collective investment schemes Raise funds by issuing shares Assets are not MMI debt, equity, nonfinancial assets Liabilities are not substitutes for deposits 21

22 Financial Corporations: Sub-sectors Other financial intermediaries except insurance corporations and pension funds -- financial intermediaries, but their liabilities are not deposits or substitutes Securitization companies Security and derivatives dealers (own account) Lending and leasing Clearing houses Specialized financial corporations 22

23 Financial Corporations: Sub-sectors Financial auxiliaries Brokers Guarantors Exchanges Financial regulators Fund managers Foreign exchange bureaus 23

24 Financial Corporations: Sub-sectors Captive financial institutions & money lenders Most of their financial assets or liabilities are not transacted on open financial markets Transact with a limited number of units or subsidiaries of the same corporation or entities that provide loans from own funds/one sponsor Basically two distinct groups Captive financial institutions Trusts, estates; holding corporations; special purpose entities Money lenders with a full set of accounts 24

25 Financial Corporations: Sub-sectors Insurance corporations Mutual and other financial entities providing life and/or non-life insurance to individual units or groups of units Pension funds Provide retirement benefits for specific groups of employees Own assets/liabilities and transact on own account Separate from the units that have created them Employee and/or employer contribution Social security schemes are NOT included here 25

26 Grouping of sub-sectors of the FCs Financial Corporations Sector Monetary Financial Institutions Insurance corporations and pension funds Other Financial Corporations Central bank (S121) Deposit taking corporations except CB (S122) MMFs (S123) Insurance corporations (S128) Pension funds (S129) Non-MMFs (S124) Other financial intermediaries (S125) Financial auxiliaries (S126) Captive fin institutions (S127)

27 General Government Sector General Government Exercises legislative, judicial, or executive authority over other institutional units within a specified area; has authority to impose taxes, provide goods and services free of charge or at prices that are not economically significant, redistribute income Motivation is policy rather than commercial Subsectors Central government State government Local government Social security funds alternative structure where social security funds at each level of government are included at that level NPIs engaged in non-market production and are controlled by government are part of General Government sector 27

28 Public Sector Not the same as the general government sector Composition: 1. General government 2. Public Non-financial corporations 3. Public Non-financial sector (1+2) 4. Public financial corporations 5. Public sector (1+2+4) 28

29 Financial Instruments 2008 SNA Classification Monetary gold (asset side only) and SDRs Currency and deposits Debt securities Loans Equity and investment fund shares Insurance, pension and standardized guarantee schemes Financial derivatives and employee stock options Other accounts receivable/payable Sequence based broadly on liquidity 29

30 Monetary Gold Monetary gold is gold to which the monetary authorities (or others who are subject to the effective control of the monetary authorities) have title and is held as a reserve asset. Gold bullions Purity at least of 995 parts per thousand Monetization and demonetization Unallocated gold account 30

31 SDRs International reserve assets SDR holdings Created by the IMF Allocated to members to supplement official reserves Represent unconditional rights to obtain foreign exchange or other reserve assets from IMF members SDR allocation Contra-entry to SDRs provided by the IMF Classified as a debt liability to nonresidents SDR value Calculated daily on the basis of a basket of major currencies 31

32 Currency Currency consists of notes and coins that are of fixed nominal values and are issued or authorized by the central bank or government Exceptions Gold coins Commemorative coins Central bank or central government holdings of unissued or demonetized currency Separate categories for denomination in National currency Foreign currency 32

33 Deposits Transferable deposits comprise all deposits that: are exchangeable for bank notes and coins on demand at par and without penalty or restriction; and are directly usable for making payments by cheque, draft, giro order, direct debit/credit, or other direct payment facility. Interbank positions Other transferable deposits Other deposits All other claims that are represented by evidence of deposit Currency of denomination 33

34 Debt Securities Debt securities are negotiable instruments serving as evidence of a debt Original maturity Remaining maturity Currency of denomination Examples Bills, bonds, asset-backed securities, stripped securities, indexlinked securities Valuation issues 34

35 Loans Loans are financial assets that: are created when a creditor lends funds directly to a debtor, and are evidenced by documents that are not negotiable. Further classifications Original maturity Remaining maturity Currency of denomination Valuation issues 35

36 Equity and Investment Fund Shares Equity comprises all instruments and records acknowledging claims on the residual value of a corporation or quasi-corporation after the claims of all creditors have been met. Investment funds are collective investment undertakings through which investors pool funds for investment in financial or non-financial assets or both. 36

37 Insurance, Pension and Standardized Guarantee Schemes Non-life insurance technical reserves consist of prepayments of net non-life insurance premiums and reserves to meet outstanding non-life insurance claims. Life insurance and annuities entitlements show the extent of financial claims policyholders have against an enterprise offering life insurance or providing annuities. 37

38 Insurance, Pension and Standardized Guarantee Schemes Pension entitlements show the extent of financial claims both existing and future pensioners hold against either their employer or a fund designated by the employer to pay pensions earned as part of a compensation agreement between the employer and employee. Provisions for calls under standardized guarantees consist of prepayments of net fees and provisions to meet outstanding calls under standardized guarantees. 38

39 Financial Derivatives and Employee Stock Options Financial derivatives are financial instruments that are linked to a specific financial instrument or indicator or commodity, through which specific financial risks can be traded in financial markets in their own right. 39

40 Financial Derivatives and Employee Stock Options An employee stock option is an agreement made on a given date (the grant date) under which an employee may purchase a given number of shares of the employer s stock at a stated price (the strike price) either at a stated time (the vesting date) or within a period of time (the exercise date) immediately following the vesting date. 40

41 Other Accounts Receivable/Payable Comprises trade credit for goods and services extended to corporations, government, NPISHs, households and the rest of the world, and advances for work that is in progress or is to be undertaken. Trade credit and advances Other accounts receivable/payable 41

42 Financial Instruments additional grouping Additional grouping for analysis: Debt: Liabilities only F1 + F2 + F3 + F4 + F6 + F8 That is: all but equity and investment fund shares, financial derivatives and ESOs Of particular interest because of vulnerability External Debt Database; Public Sector Debt Database External Debt Guide; Public Sector Debt Guide 42

43 Financial Instruments additional details F2 Currency and deposits F21 Currency F22 Transferable deposits F221 Interbank positions F229 Other transferable deposits F29 Other deposits F5 Equity and investment fund shares F51 Equity F511 Listed shares F512 Unlisted shares F519 Other equity F52 Investment fund shares/units F521 Money market fund shares/units F522 Non MMF investment fund shares/units 43

44 Financial Instruments additional details F6 Insurance, pension and standardized guarantee schemes F61 Non-life insurance technical reserves F62 Life insurance and annuity entitlements F63+F64+F65 Retirement entitlements F63 Pension entitlements F64 Claim of pension fund on pension managers F65 Entitlements to non-pension benefits F66 Provisions for calls under standardized guarantees 44

45 Financial Instruments additional details F7 Financial derivatives and employee stock options F71 Financial derivatives F711 Options F712 Forwards F72 Employee stock options F8 Other accounts receivable/payable F81 Trade credits and advances F89 Other accounts receivable/payable 45

46 Financial instruments Currency and maturity Domestic currency (national currency) Foreign currency Some instruments mix both Important for analysis: Exposure to exchange rate risks Currency mismatch 46

47 Financial instruments Currency and maturity Original maturity (a) Short-term (payable on demand or with a maturity of one year or less) (b) Long-term (a maturity of more than one year) Remaining maturity for long-term (b1) With remaining maturity of one year or less (b2) With remaining maturity of more than one year Remaining maturity basis Short-term = (a) + (b1); Long-term = (b2) Maturity important for analysis: Exposure to liquidity risks Liquidity mismatch 47

48 Aggregation Aggregation is the simple sum of the values. The aggregation of data on financial accounts can be done both for institutional sectors and for financial assets and liabilities. e.g.: S121 + S122 + S S129= S12 F61+F62+F F66=F6 48

49 Consolidation Consolidation consists of eliminating transactions in financial assets and liabilities within institutional units, between institutional units in the same sub-sector, or between sub-sectors in the same sector. Some consolidation necessary but SNA recommends compilation of non-consolidated data Intra-entity and intra-sector consolidation Narrow consolidation: artificial subsidiaries of same company; different agencies of central government Broad consolidation: the financial corporations sector SNA recognizes that consolidated data may be useful in some cases 49

50 Flows and stocks Flows refer to the economic actions and effects of events during an accounting period - transactions -other flows Stocks refer to the position in, or holding of assets and liabilities at a point in time

51 Relationship between stocks and flows Transaction: Goods and services account Production account Value added/gdp Other flows: Revaluation Other volume changes Generation of income account Operating surplus Primary distribution of income account National income Key: Name of account SNA Balancing item Opening balance sheet Secondary distribution of income account Disposable income Use of income account Saving Accumulation accounts: Closing balance sheet Nonfinancial assets Capital account Other changes in nonfinancial assets Nonfinancial assets Net lending / net borrowing Financial assets and Other changes in financial Financial assets and Financial account liabilities assets and liabilities liabilities Net worth Net lending / net borrowing Net other changes Net worth Arrows represent the contribution of assets to production and generation of income. 51

52 Accumulation Accounts link flows and stocks Capital accounts Financial accounts Revaluation accounts Other changes in the volume of assets accounts Show how goods and services (and some nonproduced items) are acquired as assets or disposed of (i.e., by TRANSACTIONS) Show how financial assets and liabilities are exchanged or created between institutional units and with the rest of the world (i.e., by TRANSACTIONS) Show changes that are due only to prices, both in absolute and relative terms Show changes (flows) that are due neither to transactions nor to changes in prices 52

53 Balance Sheets: opening to closing 53

54 Valuation For traded instruments, alternative valuations may be available Market value is preferred in SNA definitions Nominal value of non-traded loans and bonds includes accrued interest Face value is common for debtors (often called nominal value) 54

55 Valuation Face value may occur commonly Helpful for linking to business records Limits of market value in crisis May be more useful in deriving transactions Risks of inconsistent recording between debtor and creditor 55

56 Deriving flows from stocks From the formula, total flows can be derived from change in stocks To calculate transactions, need to exclude Other changes in volume (reclassifications, write-offs) Exchange rate effects Other price change In practice? 56

57 FROM-WHOM-TO- WHOM ACCOUNTS The views expressed herein are those of the author and should not necessarily be attributed to the IMF, its Executive Board, or its management

58 Why are they needed? These statistics are designed for analysis of: Spillovers Linkages Contagion Vulnerability Balance sheet in Fund Surveillance (IMF policy paper, June 2015) -- financial balance sheet from whom-to-whom Balance sheet analysis captures the role that financial frictions and mismatches play in creating fragility and amplifying shocks. This is key to understanding the macroeconomic outlook, identifying vulnerabilities, and tracing the transmission of potential shocks and policies. (more on Balance Sheets later) 58

59 Key Features Main objective is to analyze vulnerabilities of sectors and transmission mechanisms Maturity mismatches Between short term liabilities and longer term assets expose borrowers to rollover risk and interest rate risk Unable to finance maturing debt Differential impact on assets and liabilities depending on interest structure Currency mismatches Liabilities are denominated in foreign currency but assets in domestic currency Also exchange rate risk in fixed exchange rate regimes Capital structure mismatches Reliance on debt rather than equity to finance investment Equity provides a buffer in downturn; dividends drop with earnings Debt payments remain unchanged

60 Key Features Key indicators of a sector s vulnerability Net financial position Large negative position may indicate solvency problems, especially if leverage is high (debt as a share of total liabilities) Net foreign currency position Large negative position indicates vulnerability to exchange rate depreciation Net short-term position Large negative position indicates vulnerability to interest rate increases and rollover risk

61 From-whom-to-whom in SNA The core accounting structure of the SNA for financial flows and positions focuses on showing who does what. However, the underlying principles and accounting rules allow compiling and presenting financial flows and positions on a from-whomto-whom basis, showing who does what with whom. Sometimes called flow of funds 61

62 From-whom-to-whom in SNA Chapter 27 of the 2008 SNA describes detailed flow of funds and stocks as an extension of the core accounts. Several countries have substantial experience in or started the compilation of financial flows and positions on a from-whom-to-whom basis. Data for at least some financial corporations available by counterparty sector in almost all cases. 62

63 Financial Account Sectoral Accounts + To-Whom From-Whom Net acquisition of financial assets: Households Nonfinancial corporations Financial corporations General government Rest of World Total +NPISH Net inc. of liabilities: S11 S12 S13 S14/S15 S2 Nonfinancial corporations Financial corporations General government Households + NPISH Rest of World Total

64 From-whom To-whom Add instruments Net acquisition of financial assets: Nonfinancial Financial General Households Rest of corporations corporations government +NPISH World Total Net inc. of liabilities: S11 S12 S13 S14/S15 S2 Nonfinancial corporations Debt securities Loans Equity and investment fund shares Ins, pension and st guar schemes Financial derivatives and ESOs Other accounts payable Financial corporations Monetary gold and SDRs Currency and deposits Debt securities Loans Equity and investment fund shares Ins, pension and st guar schemes Financial derivatives and ESOs Other accounts payable General government Households + NPISH Rest of World Total

65 From-whom To-whom Add maturity Net acquisition of financial assets: Nonfinancial corporations Financial corporations General government Households +NPISH Rest of World Total Net inc. of liabilities: S11 S12 S13 S14/S15 S2 Nonfinancial corporations Debt securities Short-term Long-term Loans Short-term Long-term Equity and investment fund shares Ins, pension and st guar schemes Financial derivatives and ESOs Other accounts payable Financial corporations Monetary gold and SDRs Currency and deposits Short-term Long-term.. 65

66 From-whom To-whom Add currency Net acquisition of financial assets: Nonfinancial corporations Financial corporations General government Households +NPISH Rest of World Total Net inc. of liabilities: S11 S12 S13 S14/S15 S2 Nonfinancial corporations Debt securities 139 Short-term Of which: Domestic currency Long-term Of which: Domestic currency Loans Short-term Of which: Domestic currency Long-term Of which: Domestic currency.. 66

67 From-whom To-whom Multi-dimensional Sectors and subsectors Add instruments 8 main SNA instruments Plus extra detail (e.g., F5 Equity and investment shares; F511 Listed Shares, F512 Unlisted shares, F513 Other equity F521 Money market fund shares, F522 Non-MMF investment fund shares) Add maturity Short-term, long-term; original or remaining Add currency Domestic (national)/foreign (specify euro, USD, etc.?) Add stocks/flows/other flows Stock or flow Stocks at point in time OR Transactions during period. Add time series dimension 67

68 From-whom To-whom : what else? Can enhance further by adding country detail on Rest of the World BIS Banking statistics IMF Coordinated Surveys: Portfolio Investment (CPIS) Direct Investment (CDIS) 68

69 Combining the MFS, GFS, BOP/IIP, many parts of the framework can be filled in IMF Statistics Department Issuer of liability (debtor) Holder of liability (creditor) General Other depository Other financial Nonfinancial Other resident Central bank government corporations corporations corporations sectors Nonresidents 1. SRF 1SR 1. SRF 1SR 1. SRF 1SR 1. SRF 1SR 1. SRF 1SR 1. SRF 1SR Central bank (Liabilities) (Liabilities) (Liabilities) (Liabilities) (Liabilities) (Liabilities) 2. SRF 2SR 2. IIP (Assets) 3. JEDH 1. SRF 1SR 1. SRF 2SR 1. SRF 4SR n.a. 1/ n.a. 1/ 1. IIP General (Assets) (Assets) (Assets) 2. QEDS government 1. SRF 1SR 1. SRF 2SR 1. SRF 2SR 1. SRF 2SR 1. SRF 2SR 1. SRF 2SR Other depository (Assets) (Liabilities) (Liabilities) (Liabilities) (Liabilities) (Liabilities) corporations 2. SRF 2SR 2. IIP (Liabilities) 3. QEDS 1. SRF 1SR 1. SRF 4SR 1. SRF 2SR 1. SRF 4SR 1. SRF 4SR 1. SRF 4SR Other financial (Assets) (Liabilities) (Assets) (Liabilities) (Liabilities) (Liabilities) corporations 2. IIP 3. QEDS 1. SRF 1SR n.a. 1/ 1. SRF 2SR 1. SRF 4SR n.a. 1. IIP Nonfinancial (Assets) (Assets) (Assets) 2. QEDS corporations 3. JEDH 1. SRF 1SR n.a. 1/ 1. SRF 2SR 1. SRF 4SR n.a. 1. IIP Other resident (Assets) (Assets) (Assets) 2. CPIS 2/ sectors 1. SRF 1SR 1. IIP 1. SRF 2SR 1. SRF 4SR 1. IIP 1. IIP Nonresidents (Assets) 2. CPIS (Assets) (Assets) 2. CPIS 2. CPIS 2. IIP 2. IIP 2. IIP 3. CPIS 3. CPIS 3. CPIS 1/ This data gap can in the future be filled with data from the public debt data template (which also covers assets) which is being piloted in some countries. 2/ CPIS data acan be used to derive other resident sector's claims as residual.

70 THANKS! 70