1. Challenges of the Financial Corporations sub-sectors. Joint WPFS-WPNA Workshop: SNA Implementation Presenter: Dr Robert Dunn (Head of ESA 10 Implementation Branch) Email: Robert.Dunn@ons.gov.ukRobert.Dunn@ons.gov.uk Tel: +44 1633 455347

2. Content The Financial Corporations sub-sectors within the SNA & ESA Data Sources Challenges in the classification of Investment Funds Resident vs non-resident units Classification of REITs as non-MMFs Investment Funds Challenges in identifying Special Purpose Entities SPE activities Gathering data from SPEs As an Institutional Unit

3. Content Further Work Business Register Improvements Review of ONS Financial Surveys Further use of administrative data

4. Financial Corporations sub-sectors within the SNA & ESA S.121Central Bank. S.122 Deposit-taking Corporations except the Central Bank. S.123Money Market Funds (MMF) S.124Non-MMF Investment Funds S.125Other Financial Intermediaries except Insurance Corporations and Pension Funds

5. Financial Corporations sub-sectors within the SNA & ESA S.126Financial Auxiliaries S.127Captive Financial Institutions and Money Lenders S.128Insurance Corporations S.129Pension Funds

6. Challenges in the Classification of Investment funds. Resident vs non-resident units Majority of investment funds are legally domiciled overseas Fund manager located in London; Around 34 sterling MMFs identified with a total value of c.£114bn, only one of which is legally domiciled in UK.

7. Challenges in the Classification of Investment funds. Classification of Real Estate Investment Trusts as Non-MMFs Investment Funds. REIT is a company that manages a portfolio of real estate to earn profit for shareholders 1 st January 2007 - Launch UK REITs REITs very tax efficient as company pays no corporation tax or capital gains tax on profits from property investments. A number of property management companies convert into REITs. (Is this a true change of activity?) Not directly supervised by the Financial Services Authority (FSA). Under ESA/SNA REITs are classified as non-MMF investment trusts Companies on Business Register classified to various industries, all non-financial (S.11).

8. Challenges in Identifying Special Purpose Entities. Activities of SPEs: Securitisation Risk sharing Asset transfer Property investing

9. Challenges in Identifying Special Purpose Entities. Gathering data from SPEs: Identification Little physical presence »Country of registration used to determine residency. They have no or few employees »Impacts survey response burdens. »Grossing of survey results

10. Challenges in Identifying Special Purpose Entities. As an Institutional Unit. Entitled to own goods and assets in its own right Able to take economic decisions and engage in economic activities Able to incur liabilities on its own behalf Able to draw up a complete set of accounts Otherwise unit is consolidated with parent.

11. Further Work Business register improvements Coverage of SPEs Identifying relationships between fund managers and investment funds. Segregating holding companies and head offices Review of ONS financial surveys Further use of administrative data

12. QUESTIONS?