© BIPE 2003 September 2003 OECD WORKING PARTY ON FINANCIAL STATISTICS 6-7 October 2003 Towards a more precise classification of household financial assets

© BIPE 2003 September 2003 Towards a more precise classification of household financial assets ? the current classification of financial assets is primarily based on the degree of liquidity and the legal characteristics of financial assets but what about the degree of risk of the assets borne by the saver ? more generally, who bears the risks in the economy and what is the precise nature of these risks : a centre stage question for the coming decades

© BIPE 2003 September 2003 The proposals they “slot in” to the headings of SCN 1993/ESA 1995 and do not require to change them anyway they concern only F5 (Shares and other equity) and F6 (Insurance technical reserves)

© BIPE 2003 September 2003 Proposed extension of the classification F.52 Mutual funds shares Classification of financial transactionsCode level 1 Code level 2 Code level 3Code level 4 Shares and other equity F.5  Shares and other equity (excl.MFS) F.51 Quoted shares F.511 Unquoted shares F.512 Other equity F.513  Mutual fund shares F.52 Money market funds F.521 Equity funds and assim. F.522 Bond funds and assim. F.523 Hybrid funds F.524

© BIPE 2003 September 2003 Some comments on the proposal F.52 Mutual funds shares  Money market funds are already often separately identified in the national accounts  the borderline between Equity Funds and Bond funds is mostly very clear in the professional statistics  but what about, for instance, guaranteed funds ?  concerning property funds a separate heading should probably be identified

© BIPE 2003 September 2003 Proposed extension of the classification F.61 Net equity of households in life insurance reserves and in pension funds reserves Classification of financial transactionsCode level 1Code level 2Code level 3Code level 4 Insurance technical reserves F.6  Net equity of households in life insurance reserves and in pension funds reserves F.61 Life insurance reserves F.611 Unit linked vehicles F.6111 Non unit linked vehicles F.6112  Pension funds reserves F.612 Defined contribution funds F.6121 Defined benefit funds F.6122 Hybrid pension funds F.6123  Prepayments of insurance premiums and reserves for outstanding claims F.62

© BIPE 2003 September 2003 Some comments on the proposal F.611 Life insurance reserves  regarding insurance vehicles with a guaranteed rate, the risk is clearly borne by the company  regarding unit linked insurance vehicles, the risk is clearly borne by the subscriber  the question is more complicated concerning unit linked vehicles invested in guaranteed funds

© BIPE 2003 September 2003 Some comments on the proposal F.612 Pension funds reserves  for DB funds the risk is clearly borne by the corporation or by the insurance company, if any  for DC funds the risk is mainly borne by the individual (with however, for instance, the exception of Danish funds which are insured)  a separate heading should probably be created for “Hybrid pension funds”

© BIPE 2003 September 2003 Some final remarks not an easy task : some important questions should be answered for instance, does this new classification make sense for sectors other than Households (S 14) ? the detailed information is sometimes already available, sometimes more difficult to obtain a worthwhile step forward : the new classification would contribute significantly to the analysis of the distribution of risk between the different sectors of our economies