Classification of financial corporations and of financial

assets

Reimund MinkOECD Working Parties on

Financial Statistics and on National AccountsParis, 10 October 2006

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Structure of the presentation

• Classification of financial corporations– AEG paper on the classification and terminology for

financial corporations– ECB’s proposal for the classification of financial

corporations by sub-sector– ISWGNA’s suggestions based on recent discussions

• Classification of financial assets– Outcome of the world-wide consultation on the

classification of financial assets carried out by the ECB

– ISWGNA’s suggestions based on recent discussions

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Classification of financial corporations

• AEG paper on the classification • AEG generally agreed to the proposals

– Classify financial corporations into five sub-sectors (monetary financial intermediaries (MFI), investment funds (IF), ICPF, miscellaneous financial intermediaries (MiscFI), and financial auxiliaries (FA))

– Present specific terms in the updated SNA

• Several changes to the proposals were made– Money market funds (MMF) to be shifted from MFI into IF and

shown explicitly– Using the same term to describe an instrument and the

controlling institution is confusing– New set of codes as the discretion of the ISWGNA– Distinction between MiscFI and FA– Definition of investment funds issues

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Classification of financial corporations

• ECB’s proposal for the classification– Concerns expressed by the ECB’s STC to

classify MMF with other types of IF– Treatment of institutional units providing

neither financial intermediation nor financial auxiliary services

– Holding corporations and other SPEs

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Classification of financial corporations

• ECB’s proposal for the classificationTable 1: Proposed classification of financial corporations sector by sub-sector *)

Financial corporations (S.12)

1. Monetary financial institutions (S.121) Central bank (S.1211)

Commercial monetary financial intermediaries (including money market funds)

(S.1212)

2. Miscellaneous financial corporations (S.122) Investment funds (without money market funds) (S.1221)

Other financial institutions (intermediaries, auxiliaries, and other institutions)

(S.1222)

3. Insurance corporations and pension funds (S.123) Insurance corporations (S.1231)

Pension funds (S.1232)*) The sector codes used in the table are different to those applied in the 1993 SNA.

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Classification of financial corporations

• ISWGNA’s suggestions based on recent discussions– Nine sub-sectors of financial institutions with

flexibility on aggregation– Discussion of sub-sectors in chapter 4– Use of sub-sectors in chapter 25

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Classification of financial corporations

1. Central bank, as now 2. Deposit-taking corporations other than central bank. This corresponds to “other depository corporations” as now and is a change of terminology only. The change is proposed so that the existing term “depository corporation” can be used in an

enlarged sense as explained below. The present split between deposit money corporations and other other depository corporations now seems unnecessary and could be dropped.3. Money market funds (MMFs)4. Investment funds, other than MMFs5. Other financial intermediaries except insurance corporations and pension funds

(ICPF) Same title as now but excludes investment funds6. Financial auxiliaries7. Other financial institutions, except ICPF. This is a new heading. It would include corporate or quasi-corporate money lenders and may include some SPVs and holding companies8. Insurance corporations (IC)9. Pension funds (PF)

• Nine sub-sectors

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Classification of financial corporations

1 + 2: Depository corporations1 + 2 + 3: MFI3 + 4: IF (including MMF)5 + 6 + 7: 1 + 2 +3 +4 +5: Financial intermediaries except

insurance corporations and pension funds6 + 7: 8 + 9: ICPFs

• Suggested possible combinations

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Classification of financial assets

• Outcome of the world-wide consultation on the classification carried out by the ECB– 53 responses so far– Main outcome:

• Show separately monetary gold and SDRs in one category• Adopt the convention to classify an asset position of a

depository institution as a loan and a liability position as a deposit

• Interbank position as a sub-category of transferable deposits• Split of investment fund shares into money market fund

shares and others as standard, no further breakdown• No further split of financial derivatives by risk category

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Classification of financial assets

• Proposed modified classificationFinancial asset (transaction) SNA code

(transaction)

Monetary gold and special drawing rights (SDRs)

Monetary goldSpecial drawing rights

F.1

Currency and depositsCurrencyTransferable deposits*Other deposits

F.2

Debt securities Short-termLong-term

F.3

LoansShort-termLong-term

F.4

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Classification of financial assets

• Proposed modified classificationFinancial asset (transaction) SNA code

(transaction)

Equity and investment fund sharesEquityQuoted sharesUnquoted sharesOther equity

Investment fund shares/unitsMoney market fund shares/unitsOther investment fund shares/units

F.5

Provisions for insurance, pensions and standardised guarantees Non-life insurance technical provisions Life insurance technical provisions Pension entitlements Provisions for calls under standardised guarantees

F.6

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Classification of financial assets

• Proposed modified classificationFinancial asset (transaction) SNA code

(transaction)

Financial derivatives and employee stock options Financial derivatives

OptionsForwards**

Employee stock options

F.7

Other accounts receivable / payable Trade credit and advances Other

F.8

Memorandum item: Direct foreign investment Equity Loans Other* Interbank positions as subcategory of transferable deposits** Credit default swaps to cover for guarantees to be indicated within this item.

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Classification of financial assets

• ISWGNA suggestions Financial asset (transaction) SNA code

(transaction)

Monetary gold and special drawing rights (SDRs)

Monetary goldSpecial drawing rights

F.1

Currency and depositsCurrencyTransferable deposits Interbank positions Other transferable depositsOther deposits

F.2

Debt securities* Short-termLong-term

F.3

LoansShort-termLong-term

F.4

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Classification of financial assets

• ISWGNA suggestionsFinancial asset (transaction) SNA code

(transaction)

Equity and investment fund shares**EquityListed sharesUnlisted sharesOther equity

Investment fund shares/units*Money market fund shares/unitsOther investment fund shares/units

F.5

Insurance, pension and standardised guarantee schemes Non-life insurance technical provisions Life insurance and annuity entitlements Pension entitlements Provisions for calls under standardised guarantees

F.6

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Classification of financial assets

• ISWGNA suggestionsFinancial asset (transaction) SNA code

(transaction)

Financial derivatives and employee stock options Financial derivatives

OptionsForwards***

Employee stock options

F.7

Other accounts receivable / payable Trade credit and advances Other

F.8

Memorandum item: Direct foreign investment Equity Loans Debt securities Trade credit Other

* The listed/unlisted split is relevant for debt securities and investment funds also.** Reinvested earnings can exist under any of these.*** Credit default swaps to cover for guarantees are included within this item.

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Thank you