BALANCE OF PAYMENTS WORKING GROUP

Transcription

1 EUROPEAN COMMISSION EUROSTAT Directorate C National accounts, prices and key indicators Unit C2 National and regional accounts production. Balance of Payments 15 October 2013 BP/13/44 BALANCE OF PAYMENTS WORKING GROUP OCTOBER 2013 Ampère Meeting Room, BECH Building Kirchberg, Luembourg Starting: 22 October 2013 at 9.30 Ending: 23 October 2013 at *** Trade in electricity: forward contracts with physical delivery Results of the survey *** Documents are available on CIRCABC at the following address: 1

2 1. Background Germany briefed the BOP WG in April 1 about the problem of trade in electricity that is creating large and increasing discrepancies between German merchandise trade and BoP goods data.the debate in the meeting has shown that countries have different point of views about the correct treatment. Therefore, a questionnaire was launched end of July in order to collect the views of all countries and develop a way forward. 2. Questionnaire on physical delivery of forward contracts 25 out of 31 Countries answered the questionnaire: BE, DE, CZ, IT, HU, CH, SI, DK, GR, NL, LU, IE, SE, NO, AT, ES, EE, RO, PL, FI, FR, LT, HR, MT 2, UK Question 1: Do you acknowledge a change of ownership if a forward contract is settled by the delivery of goods (e.g. electricity, oil)? The opinion among the countries is spitted. 16 Countries acknowledge a change of ownership while 8 countries neglect it. Question 2: If yes, do you record such a transaction solely under derivatives? Only one country (HR) records the physical delivery of forward contracts only under derivatives. Question 3: If no, which constellations of the physical delivery of the underlying good do you record in the current account? 15 countries only record the physical delivery if the goods cross the border, among them also countries who neglect a change of ownership in Questions 1. 3 countries record the physical delivery if the goods cross the border or remain abroad (merchanting). 4 countries record the physical delivery if the goods cross the border, remain abroad (merchanting) or in the compiling economy. Question 4: How do you value the physical delivery of the underlying good? 1 See BP/12/41 and the minutes of November 2012 BoP WG/BP (item 12) and of April BoP WG/BP (item 20). 2 Malta replied that they are not part of the European grid and trade in electricity is therefore not important. 2

3 12 countries record the market price while 9 countries record the price agreed in the forward contract. Question 5: What sources do you use for collecting information about forwards settled physically? The majority of countries just capture the physical delivery of forward contracts if the delivered goods are recorded in the frame of IMTS. Question 6: Do your answers change if the forward contract also has an offsetting contract? Only for Luembourg and Hungary offsetting transactions change the compilation. 3. Summary and Conclusions The answers made obvious that no clear view among countries eist if forwards contracts settled by physical delivery are acknowledged as a change of ownership or not. Although the recommendations of manual seem to be clear (see Anne 1) a further clarification from Eurostat appears necessary. Regardless of whether a country assumes a change of ownership or not (Question 1) forward contracts with the physical delivery of goods are recorded in most countries only if the goods move across the border (Question 3). Conversely this means that forward contracts settled by physical delivery of goods which remain in the country or abroad are not captured in the BOP. This treatment is obviously not in line with the application of the change of ownership principle. However, this does not mean that such a deviation in the case of specific transactions like electricity traded on a common market could result in better figures. The German case points in this direction. Here the strict application of the change of ownership rule has led to an inflation of eport and import values, especially due to the recording of offsetting transactions. Although the majority of countries share theoretically the view of Germany that subsequent offsetting transactions do not justify a different recording (according to Question 6), the outcome undoubtedly distorts the relevant figures and causes analytical problems. To avoid such distortions in the figures for the future it is proposed that Eurostat, assisted by member states, draft a document in which a common EU interpretation of the relevant BPM6 rules is established justifying a deviation from them. Such a proceeding would be in line with a former approach of Eurostat when the Task Force 2 in 1996 was created to develop guidance for the Member States by interpreting the IMF BPM5 recommendations. 3

4 Questions to the delegates Does the BOP-WG see the need for additional guidance by Eurostat in regard to forward contracts with the physical delivery of goods? Does the BOP-WG see a general need to draw up a document like Common Rules for Interpretation of the IMF BPM6? Such a document should focus on points where common problems occur 3 and which have a significant impact on the national and EU BOP. It shall contain proposals for common interpretation and IMF recommendations which cannot be followed. A new Task Force 2 could be mandated to draft such a document. 3 For eample Manufacturing service: How big should the quantity of goods be that must be provided by the principle in order to have processing (is the label enough?). 4

5 Anne 1: German view of the manual regarding the physical delivery of forward contracts Physical delivery of Derivatives BPM 5 402: If an option actually proceeds to delivery, which is not the usual case, the acquisition or sale of the underlying asset (real or financial) is recorded at the prevailing market price in the appropriate balance of payments component BPM : At settlement [of Financial Derivatives], either a cash payment is made or an underlying item is delivered. (a) When a financial derivative is settled in cash, a transaction equal to the cash value of the settlement is recorded for the derivative. In most instances, when a cash settlement payment is received, a reduction in a financial derivative asset is recorded. When a cash settlement payment is made, a reduction of a financial derivative liability is recorded. (b) When an underlying item is delivered, two transactions are recorded: The transaction involving the underlying item is valued at the market price at the time. The entry for the underlying item is recorded under the relevant heading (goods, financial instrument, etc.). The transaction involving the derivative is valued as the difference, multiplied by the quantity, between the market price for the underlying item and the strike price specified in the derivative contract. Recoding in the Goods Account BPM 5 195: In accordance with general balance of payments principles, change of ownership is the principle determining the coverage and time of recording of international transactions in goods. 208: Goods not crossing frontiers should be included in eports or imports if changes of ownership occur. BPM : General merchandise on a balance of payments basis covers goods whose economic ownership is changed between a resident and a nonresident and that are not included in the following specific categories: goods under merchanting (see paragraphs ), nonmonetary gold (paragraphs ), and parts of travel (paragraph 10.94), construction (10.101), and government goods and services n.i.e. (paragraph ). 5

6 Anne 2: Country replies of the questionnaire Do you acknowledge a change of ownership if a forward contract is settled by the delivery of goods (e.g. electricity, oil)? If yes, do you record such a transaction solely under derivatives? If no, which constellations of the physical delivery of the underlying good do you record in the current account? How do you value the physical delivery of the underlying good? What sources do you use for collecting information about forwards settled physically? Do your answers change if the forward contract also has an offsetting contract? Yes No Comments Yes No Goods crossing the border (recorded in IMTS) Goods remain abroad Goods remain in your country Others Market price at time of delivery Price agreed in the forward contract Comments Comments Yes No Comments Austria In principle Goods crossing the border are recorded. But electricity trade is compiled using a model where eporter or importer in Austria is not known and where imports and eports of electricity related to the actual physical delivery of forward contracts cannot be isolated from the rest of the cross border electricity trade. Reports to Oesterreichische Nationalbank in case of financial derivatives do in general not contain information on physical settlement. This kind information has no regulative basis and would have to be collected on a voluntary basis. The actual import/eport of electricity is part of the model run by Statistics Austria to compile goods trade. Beglium X Only if the goods are physically delivered in Belgium. We only record the goods crossing the border Monthly average market price Grid operators: all gas/electricity that crosses the border Croatia direct reporting Czech Republic CZSO uses Intrastat Declarations and Single Administrative Document in Etrastat. For checking purposes of a quantity are used the data from the Czech Energetic Transmitting Net ( The CNB uses quarterly company surveys (including electricity and gas eporters and importers) for monitoring of cross border derivatives (flows and stocks) but in the survey we do not distinguish between physical delivery and/or financial settlement. We ask for payments or receipts from derivatives contracts (if any) and for the difference between an approimate market value at the date of the reporting and pre-agreed value of the contract no matter whether the contract is settled physically or financially. 6

7 Denmark We do not collect information We do not collect information on how the the forward on how the forward contract is settled. Therefore we do not know if a contract is settled by cash or by delivery of goods. We only register that the forward contract has been terminated (DN) contract is settled. Therefore we do not know if a contract is settled by cash or by delivery of goods. We only register that the forward contract has been terminated (DN) Estonia Finland The net value of the forward contract is reported in the BoP questionnaire, but the questionnaire doesn't separate forward contracts for electricity. There is no connection to the physical delivery of the electricity, which is recorded in the IMTS questionnaire. France No specific information. Under merchanting, forwards settled physically are not isolated. Question of the country of residence of contractors: if a contractor has a long term entity in France, the latter is considered French. Deliveries of gas or electricity that do not cross borders are made to an entity that is located in France, which is assumed a French resident. Germany part of direct reporting system Greece Our primary source of information for the compilation of goods account is the ITRS system and therefore the change of ownership takes place when the good is settled. Forward contracts related to goods are included in the BOP under the derivatives item. More particularly, the acquisition or sale of the underlying asset (good) is recorded at market price in the goods account. The difference between the market price and the price agreed in the forward contract is recorded under derivatives. Hungary Quantity: grid operator data Price: statistical report of trader to the Hungarian Energy Office Ireland Recorded as appropriate Contact with survey respondents in the case of unu- (dependsual items. ing on delivery terms) in Eternal Trade statistics IMTS transactions are recorded according to the cross-border physical movements based on grid operator data. Therefore, if there is no physical delivery, trade is not included in IMTS and thus in the current account. 7

8 Italy The general reference source for cross-border trade of electricity is the information provided to the National Statistical Institute (ISTAT) by Terna, an Italian resident firm that manages the national electricity transmission network, concerning physical cross-border echanges of electrical energy. Terna provides data on quantities, which are transformed in value terms using spot market price indicators. No separate evidence is available about deliveries of energy originating from the settlement of forward contracts. Lithuania Luembourg Nonmonetary gold held at specialized bullion storage (no M or X in the sense of IMTS) IMTS Merchanting transactions could be reported by residents Malta not applicable Netherlands Statistics Netherlands (IMTS) collects information only on physical deliveries from the network company. These physical flows are valued by electricity prices, that are delivered by electricity companies. For the recording of derivatives there is in our opinion no difference between cash settlement or actual delivery. In both cases the profit or loss resulting from the forward contract should be recorded as transaction. The profit or loss is equal to difference between the actual market price at the epiration date and the price agreed in the forward contract. The transfer of underlying goods is recorded in the trade balance. Our colleagues from the NSI are responsible for that part and record that part of the deal at market value (not the strike price). In case the forward contract refers to securities we record them at market value. Norway In Norway the market for forward/future contracts related to electricity is separated from the physical market of delivery of the electricity. The former is organized as a (stock) echange for hedge contracts at a Nordic institution owned by NasdaqOMX, while the physical deliveries of the electricity are organized on the Nord Pool echange and reported to the foreign trade statistics. The transactions in forward contracts is estimated based on direct reports of balance sheet data from domestic enterprises, included in other financial capital (settlements based statistics was replaced by direct survey statistics in Norway in 2005). Poland Trade in goods is recorded based on IMTS. Information about forwards on goods, settled physically: direct reports from Polish entities involved in such contracts. In case of physical settlement of a forward contract, no transactions in financial derivatives are registered. Goods crossing the border (recorded in 8

9 IMTS) Romania None. In the balance of payments are recorded under Financial derivatives, only the transactions related to contracts settled in cash: when a cash settlement payment is received, a reduction in a financial derivative asset (a credit) is recorded. When a cash settlement payment is made, a reduction of a financial derivative liability (a debit) is recorded (source: ITRS system). With respect to contracts settled physically, no transaction under Financial derivatives is recorded Slovenia Goods that are part of FRA agreement and are actually delivered could be recorded in IMTS (if they cross border) or part of merchanting services. Not enough information to determine the value of the physical delivery. The data source for the physical delivery of goods is the trade statistics, which includes no information weather goods were purchased with derivative instrument, so that goods which are an underlying good of a derivative can not be identified separately. The data source for derivatives in the financial account of Balance of payments is the Financial accounts statistics. Spain if included under goods the same as for the rest of derivatives: ITRS/financial or services information systems (Customs data and ITRS/survey from January 2014 onwards). questionnaire from January onwards. We cannot distinguish this specific type among total derivatives Sweden Information on derivatives is collected solely in a separate survey related to the financial account. When a forward settles physically, i.e. offsets a transaction in goods, this transaction is collected in the Intra/etrastat survey. The part of the transaction related to the contract is however not included in Intra/etrastat survey. Swiss Electricity trading companies UK HMRC provide the estimates as part of their IMTS statistics. However they get this information from the grid operators. 9