Presentation on theme: "Classification of Financial Instruments 1993 SNA Chapter 11 MFSM Chapter 4."— Presentation transcript:
Classification of Financial Instruments 1993 SNA Chapter 11 MFSM Chapter 4
Background Review undertaken for BPM update. Decisions are the result of consultation with compilers and users: Requests for additional detail. Developments in financial markets and analysis. Desire to bring BPM5 more fully into line with other manuals on detail and terminology. Compatible with existing SNA (changes only in presentation and detail). but wish to advise AEG; some could be taken up in SNA.
1993 SNA/MFSM Classification F.1 Monetary gold and SDRs F.2 Currency and deposits Currency Deposits Transferable deposits Other deposits F.3 Securities other than shares F.4 Loans F.5 Shares and other equity F.6 Insurance technical reserves Net equity of households in life insurance reserves Net equity of households in pension funds Prepayment of premiums and reserves against outstanding claims F.7 Financial derivatives [ADDED IN 2000] F.8 Other accounts receivable/payable Trade credit and advances Other
Question 1 – Broad Outline of Classification Interest in DEBT INSTRUMENTS as a grouping. Major and growing area of economic analysis (debt has different implications for financial soundness and vulnerability; “balance sheet approach”). BPM5 already uses equity/debt/other grouping. Strong and increasing analytical interest in debt as an grouping. Publication of External Debt Guide in 2003; link to total and domestic debt would be useful. Possibility to introduce debt concept explicitly in the SNA? Already implicit. Include definition?; Show as an “of which” item under Total Financial Assets/Liabilities in the SNA instruments classification? If so, any comments on specific instruments to be included under debt and other headings?
Question 1 – Broad Outline of Classification Securities other than shares (1993 SNA term) Debt securities (BPM5 term) Some financial derivatives are securities, so the 1993 term became inaccurate after the exclusion of financial derivatives in 2000. “Other” is not informative. No mention of debt, although these instruments all involve debt.
Question 1 – Broad Outline of Classification Links between instrument and corresponding type of income: Useful for rate of return analysis. Shows link between balance sheets and income parts of accounts. See table in issues paper. Note: SNA version would be different. Presentational, no change in substance. Possibly useful in SNA? Just a suggestion.
Question 2 – Shares and other equity: Possible additional components Mutual funds as a standard or supplementary item under shares and other equity or separately? Different role in financial process to the rest of equity because they have an intermediary role. More like other collective investment schemes (pensions and life insurance) which are already shown as separate instruments. Rapid growth in recent years. A supplementary item is used here to cover an item that is defined and discussed in the manual, but that is voluntary, to be included, or not, according to national circumstances.
Question 2 – Shares and other equity: Possible additional components Money market mutual funds (MMMF) as standard or supplementary item? Role in monetary statistics Although equity, highly liquid and included in money supply.
Question 2 – Shares and other equity: Possible additional components Any other issues?
Question 3 Financial derivatives: Possible additional components Interest in additional information on a supplementary basis. Possibly classified by instrument type: Forwards (including, e.g., futures and swaps) Options Possibly classified by underlying risk category: Interest-generating (deposits, loans, debt securities) Equities Money market and other investment funds shares/units Other financial units Commodities
Question 4 Other Trade-related credit as supplementary item: trade credit (credit from the seller) is already identified separately. trade-related credit (credit from an associated entity or government) is not. Any other changes?
Additional issues There are additional papers on some specific financial instrument classification issues, which are dealt with in separate papers: Reverse transactions; Traded loans - whether and when they should be reclassified as securities; Loans and deposits – the borderline between them; and Nonmonetary gold and/or gold accounts – whether and when these are financial assets.