Opinion of the European Central Bank at the request of the Luxembourg Minister of Finance under Articles 109l (2) and 109f (6) of the Treaty establishing the European Community and Article 5.3 of the Statute of the European Monetary Institute on draft regulations by the "Institut belgo-luxembourgois du change" on the recording of foreign payments and on the establishment of the balance of payments (CON/98/45)
Date: 1998-11-05
Institutions: European Central Bank
Subjects: Belgo-Luxembourg Economic Union, Luxembourg, balance of payments, data collection, national law, statistics

OPINION OF THE EUROPEAN CENTRAL BANK

at the request of the Luxembourg Minister of Finance under Articles 109l (2) and 109f (6) of the

Treaty establishing the European Community and Article 5.3 of the Statute of the European

Monetary Institute on draft regulations by the “Institut belgo-luxembourgois du change” on the

recording of foreign payments and on the establishment of the balance of payments

1.  On  15  September  1998  the  European  Central  Bank  (ECB)  received  a  request  from  the

Luxembourg Minister of Finance for an ECB Opinion on draft regulations by the “Institut belgo-

luxembourgois  du  change”  (hereinafter  referred  to  as  “IBLC”)  on  the  recording  of  foreign

payments  and  on  the  establishment  of  the  balance  of  payments  (hereinafter  referred  to  as  the

“Draft Regulations”).

2.  In  accordance  with  Article  1091(2)  of  the  Treaty  establishing  the  European  Community

(hereinafter  referred  to  as  the  “Treaty”),  the  ECB  has  taken  over  the  advisory  functions  of  the

European  Monetary  Institute  (EMI),  which  went  into  liquidation  upon  the  establishment  of  the

ECB on 1 June 1998. The ECB’s competence to deliver an opinion is based on Article 1.1, third

indent, of the Council Decision (93/717/EC) of 22 November 1993 on the consultation of the EMI

by the authorities of the Member States on draft legislative provisions, as the Draft Regulations

contain  provisions  concerning  the  collection,  compilation  and  dissemination  of  monetary,

financial,  banking  and  balance  of  payments  statistics.  In  accordance  with  Article  17.5,  first

sentence,  of  the  Rules  of  Procedure  of  the  ECB,  this  ECB  Opinion  has  been  adopted  by  the

Governing Council of the ECB. 

3.  The ECB notes that the objective of the Draft Regulations is to update the existing regulations of

the IBLC regarding the collection of the statistical information necessary for the production of the

balance  of  payments  of  the  Belgian-Luxembourg  Economic  Union  and  the  current  account  of

Luxembourg.

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4.  The ECB welcomes the Draft Regulations since the definitions and classification principles given

in  the  proposed  Draft  Regulations  are  compliant  with  the  IMF  Balance  of  Payments  Manual

(5th edition) released in October 1993 and the harmonisation proposals defined by the EMI. This

relates in particular to the residence criterion,  the  principles  underlying  the  classification  of  the

resident entities, and the breakdown by instruments. At the same time, the ECB would like to put

forward the following important technical points.

5.  In Draft Regulation L3, the definitions for a “paiement avec l’étranger” and for the “pays de la

contrepartie  non  résidente”  might  be  confusing.  It  is  understood  that  the  reporting  of  payments

between  residents,  which  are  neither  to  be  compiled  within  the  balance  of  payments  nor  in  the

international investment position, may be requested for checking purposes. Nonetheless, it should

be  stressed  that  the  corresponding  data  must  be  clearly  isolated  from  those  recorded  in  the

statistics (see neutral codes in Annex 1 to proposed Draft Regulation L3).

6.  In Annex 1 of proposed Draft Regulation L3, options are included amongst portfolio investment,

while  other  derivatives  are  recorded  in  another  chapter,  which  is  not  fully  compliant  with  the

agreed harmonisation proposals on derivatives and might also be confusing. It has to be stressed

that,  since  a  change  in  international  standards  as  defined  by  the  IMF  may  be  made  in  the  near

future, derivatives may soon have to be isolated as a separate item of the financial account.

7.  No specific information is requested in Draft Regulation L2 regarding transactions of Monetary

Financial  Institutions  with  their  branches  and  subsidiaries  abroad.  This  should  not  reduce  the

ability  of  the  IBLC  to  identify  transactions  between  direct  investors  and  direct  investment

enterprises, as requested in Chapter 18 of the 5th edition of the IMF Balance of Payments Manual.

8.  Article  15  of    Draft  Regulation  L2  makes  a  special  case  of  holding  companies  that  follow  the

rules of the law of 31 July 1929. This special treatment is welcome as long as it allows the correct

identification and recording of transactions with non-residents by this category of institutions.

9.  The  annex  of  Draft  Regulation  L2  is  not  exactly  identical  to  the  annex  of  the  Kingdom  of

Belgium’s Regulation B2. In particular, commercial loans are not distinguished, which may give

rise to difficulties in establishing the quarterly breakdown on instruments (including trade credits)

as requested by the EMI’s report entitled “Statistical Requirements for Stage Three of Monetary

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Union  –  Implementation  Package”  (July  1996),  hereinafter  referred  to  as  “the  Implementation

Package”, approved by the ECB Governing Council in September 1998.

10.  Although  the  Implementation  Package  does  not  request  any  country  breakdown,  it  states  this

question  is  not  resolved  yet,  as  regards  the  quarterly  and  annual  balance  of  payments.  In

accordance with recent discussions on this topic, the ECB would be in favour of leaving open the

possibility to request this kind of information from reporting agents. Draft Regulation L1 states in

its article 5 that residents will have to report this type of information to the credit institution in

charge of the payments, and Draft Regulation L2, article 7 paragraph 2 requests this information

from credit institutions for their own transactions. However, it is noted that the information which

credit institutions should report on their own assets and liabilities, as described in Article 17 of

Draft Regulation L2, does not include such a country breakdown. 

11.  The  classification  of  the  Monetary  Financial  Institutions  (hereinafter  referred  to  as  “MFIs”)  is

important  not  only  due  to  their  role  in  the  collection  system  in  Luxembourg,  but  also  for  the

sectoral breakdown requested for the quarterly and annual balance of payments and for the annual

international investment position. The classification must comply with the definition of MFIs for

statistical purposes and the criteria set out in  Annex  4  of  the  General  Documentation  on  ESCB

monetary policy instruments and procedures published by the ECB in September 1998. A list of

MFIs for statistical purposes is now available for information on the ECB’s internet site. In this

regard, the branch of the National Bank of Belgium in Luxembourg will no longer exist as from

the end of December 1998, which may be mentioned in the Draft Regulations. Financial services

of  Post  and  Telecommunications  should  not  be  considered  as  MFIs,  but  as  part  of  the  General

Government sector. The sectoral breakdown (including the MFIs) applies to portfolio investment

and  other  investment  in  the  financial  account.  Moreover,  the  MU/non-MU  split  for  direct

investment abroad and for portfolio investment (assets and liabilities) is also a major requirement

for the ECB’s “monthly key items”. The ECB is pleased to note that the economic and sectoral

classifications  given  in  Annex  1  and  2  to  the  proposed  Draft  Regulation  L3  appear  to  be

compliant with both requirements on sectoral breakdown and MU/non-MU split.

12.  The ECB is pleased to note that the timeliness required (Draft Regulation L1 article 5 paragraph

7, Draft Regulation L2 article 4 paragraph 1, Draft Regulation L4 article 3, Draft Regulation L5

article 5) is fully compliant with the deadlines described in the Implementation Package, approved

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by  the  ECB  Governing  Council  last  September,  for  monthly,  quarterly  and  annual  balance  of

payments as well as for the annual international investment position.

13.  Article  2  of  Draft  Regulation  L4  states  that  individual  answers  to  the  survey  are  not  to  be

disseminated  outside  the  IBLC  and  the  “Service  Central  de  la  Statistique  et  des  Etudes

Economiques”  (STATEC).  This  should  not  prejudice  the  possibility  for  the  ECB  to  be

communicated  information  made  available  to  these  institutions,  under  the  conditions  prescribed

by Community law.

14.  Finally,  the  ECB  notes  that,  as  opposed  to  the  project  submitted  recently  by  the  Kingdom  of

Belgium, no mention has been made of the possibility of enforcing adequate verification. Such a

regulation would in the view of the ECB be a useful means of ensuring the quality of the reporting

on balance of payments transactions. 

15.  The  ECB  confirms  that  it  has  no  objection  to  this  ECB  Opinion  being  made  public  by  the

competent national authorities at their discretion.

Done at Frankfurt am Main on 5 November 1998.

The President of the ECB

[signed]

Willem F. Duisenberg