Outcomes of Meeting of IMF Committee on Balance of Payments Statistics, June 27 – July 1, 2005

Outcomes of BOPCOM’s discussions Migrants’ transfers Migrants’ transfers Personal effects not be recorded as transaction Personal effects not be recorded as transaction Reclassification of financial assets and liabilities arising from change of residence “other changes” Reclassification of financial assets and liabilities arising from change of residence “other changes” Change of residence usually only applies to persons but may apply to some corporations, e.g., societas europea Change of residence usually only applies to persons but may apply to some corporations, e.g., societas europea AEG agreed AEG agreed

Outcomes of BOPCOM’s discussions Technical assistance Technical assistance Technical assistance represents supply of services by donor to recipient, funded by transfer Technical assistance represents supply of services by donor to recipient, funded by transfer Debt instruments indexed to foreign currency Debt instruments indexed to foreign currency To be classified as denominated in foreign currency To be classified as denominated in foreign currency Recommended currency of account and currency of settlement be clearly distinguished Recommended currency of account and currency of settlement be clearly distinguished AEG agreed AEG agreed

Outcomes of BOPCOM’s discussions Interest and index-linked debt instruments Interest and index-linked debt instruments Retain present treatment of 1993 SNA (para ) all changes arising from indexation equal interest Retain present treatment of 1993 SNA (para ) all changes arising from indexation equal interest AEG’s view: AEG’s view: Where linked to broad price index (CPI, GDP deflator, etc.): interest, as per 1993 SNA Where linked to broad price index (CPI, GDP deflator, etc.): interest, as per 1993 SNA Where linked to other types of index, use rate on comparable “plain vanilla” issue as interest component, and excess as other changes Where linked to other types of index, use rate on comparable “plain vanilla” issue as interest component, and excess as other changes

Outcomes of BOPCOM’s discussions Reinvested earnings Reinvested earnings Continue present practice Continue present practice “Income” not well defined or treated consistently create income expert group, not limited to balance of payments including national accountants and financial statisticians “Income” not well defined or treated consistently create income expert group, not limited to balance of payments including national accountants and financial statisticians

Outcomes of BOPCOM’s discussions Retained earnings of mutual funds Retained earnings of mutual funds Follow AEG’s position (accept ESA95 treatment) Follow AEG’s position (accept ESA95 treatment) Need for further work on defining “collective investment schemes” Need for further work on defining “collective investment schemes” Financial gold Financial gold “Unallocated” gold: financial asset “Unallocated” gold: financial asset “Allocated” gold: commodity “Allocated” gold: commodity Further work required to determine instrument for “unallocated” gold Further work required to determine instrument for “unallocated” gold Not discussed by AEG but indications of approval Not discussed by AEG but indications of approval

Outcomes of BOPCOM’s discussions Fee on securities lending and gold lending Fee on securities lending and gold lending On securities lending and “unallocated” gold: property income (AEG agreed, treat as interest) On securities lending and “unallocated” gold: property income (AEG agreed, treat as interest) On “allocated” gold: service (AEG saw as trivial) On “allocated” gold: service (AEG saw as trivial) Fee on securities lending can be paid directly to custodian but represents a short-circuiting of two transactions: property income payable to lender, and service provided by custodian to lender Fee on securities lending can be paid directly to custodian but represents a short-circuiting of two transactions: property income payable to lender, and service provided by custodian to lender Further work by IMF and OECD to determine type of financial service by custodian to lender Further work by IMF and OECD to determine type of financial service by custodian to lender

Outcomes of BOPCOM’s discussions Traded loans: criteria to become security Traded loans: criteria to become security Absence of consensus, status quo obtains Absence of consensus, status quo obtains AEG agreed, following elaboration of criteria in External Debt Guide AEG agreed, following elaboration of criteria in External Debt Guide Goods for processing Goods for processing Consistent treatment necessary (at present, varies, depending on circumstances) Consistent treatment necessary (at present, varies, depending on circumstances) Views divided Views divided Extra data on fees, materials, finished goods Extra data on fees, materials, finished goods AEG: No change of ownership to be imputed. Discussion of implications for supply and use tables; reflection of globalized world AEG: No change of ownership to be imputed. Discussion of implications for supply and use tables; reflection of globalized world

Outcomes of BOPCOM’s discussions Merchanting Merchanting Need to reflect global production and marketing process properly Need to reflect global production and marketing process properly Concern about deviating from change of ownership principle but also grossing up goods transactions Concern about deviating from change of ownership principle but also grossing up goods transactions Set up working group Set up working group AEG: further work required (participation in working group) AEG: further work required (participation in working group)

Outcomes of BOPCOM’s discussions Guarantees Guarantees Premature to recognize guarantees prior to activation Premature to recognize guarantees prior to activation Considered untenable preliminary AEG position (at December 2004, guarantee activation = capital transfers in all cases). Considered untenable preliminary AEG position (at December 2004, guarantee activation = capital transfers in all cases). BOPCOM’s preference “other changes” in all cases, but accept alternative, on case-by-case basis: (i) capital transfers, (ii) financial claims, and (iii) other changes BOPCOM’s preference “other changes” in all cases, but accept alternative, on case-by-case basis: (i) capital transfers, (ii) financial claims, and (iii) other changes In July 2005, AEG decided on case-by-case approach, but accepted TFHPSA proposal recognizing financial derivatives-type and insurance-type guarantees as asset at inception In July 2005, AEG decided on case-by-case approach, but accepted TFHPSA proposal recognizing financial derivatives-type and insurance-type guarantees as asset at inception

Outcomes of BOPCOM’s discussions Financial instrument classification Financial instrument classification Accepted for BOP purposes broad split of instrument and associated income, with additional split on supplementary basis Accepted for BOP purposes broad split of instrument and associated income, with additional split on supplementary basis Equity Finance (equity securities (of which mutual funds, and of which money market mutual funds), reinvested earnings, other equity (not including insurance technical reserves) Equity Finance (equity securities (of which mutual funds, and of which money market mutual funds), reinvested earnings, other equity (not including insurance technical reserves) Debt (debt securities (long/short), loans, currency and deposits, accounts receivable/payable (trade credit and advances, other) other debt instruments Debt (debt securities (long/short), loans, currency and deposits, accounts receivable/payable (trade credit and advances, other) other debt instruments Other (monetary gold, SDRs, net equity in insurance technical reserves and pension funds), financial derivatives (forwards and options) and employee stock options Other (monetary gold, SDRs, net equity in insurance technical reserves and pension funds), financial derivatives (forwards and options) and employee stock options

Outcomes of BOPCOM’s discussions Distinction between deposits and loans Distinction between deposits and loans Useful distinction but Useful distinction but Blurred in some instances, but not prescribe criteria Blurred in some instances, but not prescribe criteria Further work by ECB Further work by ECB AEG agreed with above AEG agreed with above

Outcomes of BOPCOM’s discussions Valuation of direct investment equity Valuation of direct investment equity Reassertion of market price principle Reassertion of market price principle Split between quoted and unquoted: supplementary Split between quoted and unquoted: supplementary Deemed acceptable: Deemed acceptable: Recent transaction Recent transaction NAV, including intangibles and goodwill NAV, including intangibles and goodwill NAV, excluding intangibles and goodwill NAV, excluding intangibles and goodwill Apportioning global value of group to local unit, using appropriate indicator Apportioning global value of group to local unit, using appropriate indicator Own funds at book value Own funds at book value Capitalization ratios Capitalization ratios PIMs (or equivalent) PIMs (or equivalent)

Outcomes of BOPCOM’s discussions Valuation of direct investment equity (cont) Valuation of direct investment equity (cont) Further work, showing pros and cons Further work, showing pros and cons No consensus on ranking. Further work on descriptions No consensus on ranking. Further work on descriptions Less acceptable/inferior Less acceptable/inferior Use of stock price indices to revalue accumulated flows Use of stock price indices to revalue accumulated flows Historic or acquisition cost Historic or acquisition cost Summing of transactions Summing of transactions Bilateral/CDIS Bilateral/CDIS

Outcomes of BOPCOM’s discussions Land and buildings leased by nonresidents Land and buildings leased by nonresidents Also to cover other natural resources Also to cover other natural resources Needs clarification in new bop manual Needs clarification in new bop manual Where effective change of ownership, create notional resident unit (in same manner as outright purchase) Where effective change of ownership, create notional resident unit (in same manner as outright purchase) Treat as equity Treat as equity Valuation of acquisition of lease during its life not discussed Valuation of acquisition of lease during its life not discussed

Outcomes of BOPCOM’s discussions Institutional sector holding companies Institutional sector holding companies If HC has no resident subsidiaries, then OFI If HC has no resident subsidiaries, then OFI If resident subsidiaries, views divided. Status quo (assumes “predominant” activity of subsidiaries): subject to AEG views (January 2006) If resident subsidiaries, views divided. Status quo (assumes “predominant” activity of subsidiaries): subject to AEG views (January 2006) Recognize problems with classification where resident and nonresident subsidiaries Recognize problems with classification where resident and nonresident subsidiaries Recognize potential conflict with currency union Recognize potential conflict with currency union Activity classification also to be discussed by ISIC Activity classification also to be discussed by ISIC

Outcomes of BOPCOM’s discussions Nonresident SPVs linked to general govt Nonresident SPVs linked to general govt Felt TFHPSA proposal incompatible with residence concept Felt TFHPSA proposal incompatible with residence concept Rationale also applies to nongovernment units Rationale also applies to nongovernment units Recognize need to resolve GFS problem, but not place residence at risk Recognize need to resolve GFS problem, but not place residence at risk Supported further work in wider context Supported further work in wider context AEG: provided for information only: Initial indications of concern. Support for alternative presentation (e.g., use of reconciliation account, satellite account) AEG: provided for information only: Initial indications of concern. Support for alternative presentation (e.g., use of reconciliation account, satellite account)

Outcomes of BOPCOM’s discussions Maturity and instrument split Maturity and instrument split Split on instrument in direct investment “other capital”, consistent with instrument split in 1993 SNA, to be recommended on supplementary basis Split on instrument in direct investment “other capital”, consistent with instrument split in 1993 SNA, to be recommended on supplementary basis Maturity split (short/long) also on supplementary basis Maturity split (short/long) also on supplementary basis Note meaning of these distinctions in many cases not clear between direct investor and direct investment enterprise Note meaning of these distinctions in many cases not clear between direct investor and direct investment enterprise

Outcomes of BOPCOM’s discussions Concessional debt Concessional debt See separate presentation See separate presentation No consensus for inclusion of transfer in standard presentation but supplementary basis agreed No consensus for inclusion of transfer in standard presentation but supplementary basis agreed IMF to consider whether current or capital IMF to consider whether current or capital

Outcomes of BOPCOM’s discussions Rescheduling Rescheduling Rescheduling should not lead to whole instrument being rescheduled Rescheduling should not lead to whole instrument being rescheduled Rescheduling of future interest payable/receivable could lead to transactions in new instruments Rescheduling of future interest payable/receivable could lead to transactions in new instruments Need to clarify definition of rescheduling Need to clarify definition of rescheduling For HIPC grant, when granted irrevocably, asset of recipient For HIPC grant, when granted irrevocably, asset of recipient