Guideline of the European Central Bank of 1 December 1998 on the statistical reporting requirements of the European Central Bank in the field of balance of payments and international investment position statistics (ECB/1998/17)
Date: 1998-12-01
Institutions: European Central Bank
Subjects: EU statistics, European Central Bank, balance of payments, financial statistics, foreign market

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II

(Acts whose publication is not obligatory)

EUROPEAN CENTRAL BANK

GUIDELINE OF THE EUROPEAN CENTRAL BANK

of 1 December 1998

on the statistical reporting requirements of the European Central Bank in the
field of balance of payments and international investment position statistics

(ECB/1998/17)

(1999/294/EC)

THE GOVERNING COUNCIL OF THE EUROPEAN
CENTRAL BANK,

Having regard to the Statute of the European System of
Central Banks and of the European Central Bank (herein-
after referred to as the ‘Statute') and in particular to
Articles 5.1, 12.1 and 14.3 thereof,

(1) Whereas, for the fulfilment of its tasks, the Euro-
pean System of Central Banks (ESCB) needs to
compile comprehensive and reliable monthly,
quarterly and annual balance of payments statistics
and annual international investment position statis-
tics showing the main items affecting monetary
conditions and exchange markets in the partici-
pating Member States, when the latter are seen as
one economic territory;

to collect either

(2) Whereas the Statute requires the European Central
Bank (ECB), assisted by the national central banks
(NCBs),
from the competent
national authorities or directly from economic
agents the statistical information necessary in order
for it to undertake the tasks of the ESCB; whereas
Article 5.2 of the Statute stipulates that the NCBs
shall carry out, to the extent possible, the tasks
described in Article 5.1 of the Statute;

(3) Whereas, as stipulated in recital 12 of the Council
Regulation (EC) No 2533/98 of 23 November 1998
concerning the collection of statistical information
by the European Central Bank, in the early years of
the single currency area cost-effectiveness may
require the ECB’s statistical reporting requirements

to be satisfied through transitional procedures due
to existing constraints on the collection systems;
whereas this may imply in particular that, in the
case of the financial account of the balance of
payments, data on cross-border positions or trans-
actions of the participating Member States seen as
one economic territory may be compiled using all
positions or transactions between residents of a
participating Member State and residents of other
countries;

(4) Whereas the present data on positions and transac-
tions in the assets and/or liabilities of residents of
participating Member States vis-(cid:133)-vis residents of
other participating Member States will continue to
be reported after the start of Stage III of Economic
and Monetary Union in accordance with national
requirements or established practices; whereas this
information is necessary, in the early years of the
single currency area, for the fulfilment of the ECB’s
statistical
this does not
create an additional
reporting burden on the
reporting population;

requirements; whereas

(5) Whereas in some Member States, according to
established national practices, the actual reporting
population does not report to the NCB but to
another competent national statistical authority;
whereas, in order to meet the statistical require-
ments of the ECB, the NCBs of these Member
States and the other competent national statistical
authorities shall cooperate with each other as laid
the European
down in the recommendation of

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Central Bank of 1 December 1998 on the statistical
reporting requirements of the European Central
Bank in the field of balance of payments and inter-
national
(ECB/
investment position statistics
1998/NP21);

(6) Whereas the transmission from the NCBs to the
ECB of confidential statistical
information shall
take place to the extent and in the detail necessary
for the exercise of the tasks of the ESCB; whereas
the confidentiality regime is laid down in Article 8
of Council Regulation (EC) No 2533/98;

(7) Whereas, in accordance with Articles 12.1 and 14.3
of the Statute, ECB guidelines form an integral part
of Community law,

HAS ADOPTED THIS GUIDELINE:

Article 1

Definitions

For the purposes of this guideline:

(cid:190) ‘participating Member State' shall mean a Member
State which has adopted the single currency in
accordance with the Treaty,

(cid:190) ‘resident' and ‘residing' shall mean having a centre of
economic interest
in the economic territory of a
country, as described in Annex A to the Council
Regulation (EC) No 2533/98,

liabilities

(cid:190) ‘cross-border transaction' shall mean any transaction
that creates or redeems, in full or in part, claims or
debts or any transaction that implies the transfer of a
right over an object between residents of participating
Member States seen as one economic territory and
residents of non-participating Member States and/or
residents of third countries.
‘Cross-border positions'
shall mean the stock of financial claims on and finan-
cial
to residents of non-participating
Member States and/or residents of third countries.
Cross-border positions also encompass land, other real
property and other
immovable assets physically
located outside the economic territory of the partici-
pating Member States and owned by residents of
participating Member States and/or located inside the
economic territory of the participating Member States
and owned by residents of non-participating Member
States
and
monetary gold and special drawing rights (SDRs)
owned by residents of participating Member States.
However, until 31 December 2005,
to the extent
necessary for the compilation of the direct and port-
folio investment accounts and the investment income
account within balance of payments and international
investment position statistics covering the economic
territory of the participating Member States, the terms
‘cross-border positions' and ‘cross-border transactions'

third countries;

residents of

and/or

also comprise positions and transactions in the assets
and/or liabilities of residents of participating Member
States
residents of other participating
vis-(cid:133)-vis
Member States,

(cid:190) ‘balance of payments' shall mean the statistical state-
ment that reports with the appropriate breakdown
cross-border transactions during the monthly, quar-
terly or annual calendar period under review,

(cid:190) ‘international

investment position' shall mean the
the stock of cross-border

annual balance sheet of
financial assets and liabilities at a reference date.

Article 2

Statistical obligations of the NCBs

The NCBs shall make available to the ECB the
1.
cross-border positions and the cross-border transactions
necessary to enable the ECB to compile the aggregated
balance of payments and international investment posi-
tion of
the participating
Member States.

the economic territory of

2.
The required statistical information shall be made
available to the ECB as laid down in Annexes I, II and III
to this guideline, which conform to current international
standards, notably the fifth edition of the International
Monetary Fund (IMF) Balance of Payments Manual
(BPM5).

The required statistical information shall be made
3.
available on the balance of payments for monthly, quar-
terly and annual calendar periods and on the international
investment position as at the end of the calendar year
under review.

Article 3

Timeliness

1. Key items in the monthly balance of payments of
the economic territory of the participating Member States
shall be made available to the ECB by the close of busi-
ness on the 30th working day following the end of the
month to which the data relate.

2.
The quarterly detailed breakdown for the balance of
payments of the economic territory of the participating
Member States shall be made available to the ECB within
three months of the end of the quarter to which the data
relate.

The annual data of an aggregated balance of
3.
payments of the economic territory of the participating
Member States shall be made available within three
months of the end of the year to which the data relate
with the same breakdowns as for the quarterly data.

4.
The data on the international investment position
shall be made available to the ECB within nine months of
the year-end date to which the data relate.

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The national collection of these data shall be or-

5.
ganised with a view to meeting these deadlines.

monitor the quality and reliability of statistical informa-
tion made available to the ECB.

Article 4

Transmission standard

1.
The required statistical information shall be made
available to the ECB in a form which meets the require-
ments as laid down in Annex IV to this guideline.

The NCBs shall use the facility provided by the
2.
ESCB, which relies upon the
telecommunications
network (‘ESCB-Net'), for the electronic transmission of
investment
the balance of payments and international
position statistical information required by the ECB. The
statistical message format developed for this electronic
exchange of statistical
information is the ‘Gesmes/CB'
format. This requirement does not prevent the use of
some other means of transmitting statistical information
to the ECB as an agreed fall-back solution.

2.
This process may include the transmission of revi-
sions made by the NCBs, first, in order to include the
latest assessment of the statistical information, thereby
improving the quality, and, second, to ensure as far as
possible consistency between the corresponding balance
of payments items for each of the different frequencies.

Article 6

Final provisions

This guideline is addressed to the national central

1.
banks of participating Member States.

This guideline shall be effective as of 1 January

2.
1999.

This guideline shall be published in the Official

3.
Journal of the European Communities.

Article 5

Done at Frankfurt am Main, 1 December 1998.

Quality of the statistical information

1. Without prejudice to the ECB’s monitoring tasks as
laid down in Annex V to this guideline, the NCBs shall

On behalf of the Governing Council of
the ECB

Willem F. DUISENBERG

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ANNEX I

STATISTICAL REQUIREMENTS OF THE EUROPEAN CENTRAL BANK

1. Balance of payments and international investment position statistics

The ECB requires balance of payments statistics at three different frequencies: monthly, quarterly and
annually in respect of the corresponding reference calendar periods.

1.1. Monthly balance of payments statistics (cid:190) key items

O b j e c t i v e

The objective is a monthly balance of payments of the economic territory of the participating Member
States showing the main items affecting monetary conditions and exchange markets.

R e q u i r e m e n t s

It is essential that the data are suitable for use in the calculation of the balance of payments of the
economic territory of the participating Member States.

For the purposes of monetary policy and foreign exchange operations, the ECB’s requirement for
monthly balance of payments statistics is confined to broad categories of transactions or ‘key items' (see
Annex II, Table 1). The short deadline for the provision of the monthly key items, their highly aggregated
nature and their use for monetary policy purposes and foreign exchange operations allow some departure
from international guidelines, where unavoidable. Recording on a full accruals’ or transactions’ basis is
not required. In agreement with the ECB, national central banks (NCBs) of the participating Member
States may provide data on the current and financial account on a settlement basis. Where necessary to
meet the deadline, estimates or preliminary data will be accepted.

The requirement for each broad category of transaction is assets and liabilities (or credits and debits for
current account items). This requires NCBs of the participating Member States, within external transac-
tions, to distinguish between transactions with residents of other participating Member States and
transactions outside the economic territory of the participating Member States, and each NCBs of the
Member State shall do so consistently. NCBs in the participating Member States are required to
implement this change when participation of further Member States is decided.

In order to permit a meaningful aggregation for the economic territory of the participating Member States
on a monthly basis in the area of portfolio investment and direct investment, a split is required between
transactions in securities and other financial flows issued by residents of participating Member States and
securities and other financial flows issued by residents of all other countries. For the purpose of making
this distinction, it is necessary to identify separately whether or not the issuer of the security is a resident
of a participating Member State. The net transactions in portfolio and direct investment assets of the
economic territory of the participating Member States are compiled by aggregating reported net transac-
tions in securities issued by non-residents. Net transactions in portfolio and direct investment liabilities
of the economic territory of the participating Member States are compiled by aggregating reported net
transactions in securities issued by residents of the economic territory of the participating Member States.

1.2. Quarterly and annual balance of payments

O b j e c t i v e

The objective of the quarterly and annual balance of payments of the economic territory of the
participating Member States is to provide more detailed information to permit further analysis of external
transactions. These statistics will notably contribute to the financial account in preparation and to the
joint publication of EU/MU balance of payments in cooperation with the Commission of the European
Communities (Eurostat).

R e q u i r e m e n t s

Quarterly and annual balance of payments statistics required by the ECB conform to the greatest extent
possible to the standards set in the BPM5 (see Article 2(2) of this guideline). The breakdown of quarterly
and annual balance of payments statistics required by the ECB is presented in Annex II, Table 2. Special
European harmonised concepts and definitions of the capital and financial account are set out in Annex
III to this guideline.

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The breakdown of the quarterly/annual current account is similar to the requirement for the monthly
figures. Only key items are required for goods, services and transfer payments. For income, a detailed
breakdown is needed.

For the financial account, the requirements of the IMF standard components of the BPM5 are followed
with the following adjustments:

(cid:190) for direct investment only a split between inward and outward investment is needed,

(cid:190) the other investment item is simplified. This simplification includes the removal of a distinction
between loans and deposits on each side of the balance sheet, the removal of the maturity breakdown
and a change in the presentation of the breakdown (i.e. sector as first priority). This sectoral
breakdown is compatible but not identical with the BPM5 where instruments have priority.

Member States are expected to distinguish in their quarterly and annual balance of payments statistics
between transactions with other participating countries and all other external transactions. As for the
monthly data, a split between transactions in securities and other financial flows issued by residents of
participating Member States and securities and other financial flows issued by residents of all other
countries is required for quarterly and annual data in the areas of portfolio and direct investment.

For the balance of payments of the economic territory of the participating Member States, accrued
investment income data are required on a quarterly basis. In line with the System of National Accounts,
the BPM5 recommends that interest should be recorded on an accruals’ basis. This recommendation
affects the current account (investment income) as well as the financial account. Recording on an
accruals’ basis requires some national central banks in the participating Member States to develop new
calculation and estimation methods.

2.

International investment position statistics

Objective

The objective is an annual statement of the external assets and liabilities of the economic territory of the
participating Member States as a whole, for monetary policy and exchange market analysis. The ECB
requires international investment position statistics in respect of end-of-calendar-year stocks level. This
statistical information may also assist in the compilation of balance of payments flows.

Requirements

The international investment position data required by the ECB conform to the greatest extent possible
to the standards set in the BPM5. The ECB compiles the international investment position for the
economic territory of the participating Member States as a whole. The breakdown of the international
investment position for the economic territory of the participating Member States is presented in Annex
II, Table 3.

The ECB may require items of particular significance for the conduct of monetary policy, specifically
those items within the other investment account which are currently provided to the Bank for Inter-
national Settlements (BIS) for its statistics on international banking, on a quarterly basis.

The international investment position shows financial stocks at the end of the reference period, valued at
end-period prices. As such, part of the change in the value of stocks during the reference period will be
due to the financial transactions that have taken place and been recorded in the balance of payments.
Likewise, part of the changes in positions at the beginning and at the end of a given period will be caused
by changes in the prices of the financial assets and liabilities shown. In the event that stocks are
denominated in currencies other than the unit of account used for the international investment position,
changes in the exchange rates vis-(cid:133)-vis other currencies will also affect the values of those stocks. Finally,
any other change in stocks which is not due to the aforementioned factors will be considered as other
adjustments.

A proper reconciliation between the financial flows and stocks of the economic territory of the partici-
pating Member States would require these changes in value owing to price, exchange rate changes and
other adjustments to be reflected separately. However, for practical reasons, at the start of Stage III of
Economic and Monetary Union, these changes will be shown together as a lump sum under a single
heading and the international investment position will be compiled on a net basis relying on aggregate
national data. In addition, specific rules may be applied for the valuation of equity capital in direct
investment, notably in the case of unquoted shares.

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Coverage of the international investment position is as close as possible to that for quarterly/annual
balance of payments flows. The concepts, definitions and breakdowns are in line with those used for
quarterly/annual balance of payments flows. However, for the direct investment account a further
breakdown into equity and other capital is requested. Stocks compiled for the economic territory of the
participating Member States’ international investment position are requested to be compatible with other
statistics such as money and banking statistics and financial accounts, which are also compiled by the
ECB, and national accounts. These stocks encompass direct investment position data compiled by the
Commission of the European Communities (Eurostat).

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ANNEX II

REQUIRED BREAKDOWNS

Table 1

Monthly key items for the balance of payments of the economic territory of the participating
Member States

(Credits and debits in current and capital account, assets and liabilities in financial account separately)

I. Current account (credits and debits)

Goods

Services

Income

Current transfers

II. Capital account

III. Financial account (assets and liabilities)

Direct investment

(cid:190) abroad

(cid:190) in the reporting economy

Portfolio investment

(cid:190) equity securities

(cid:190) debt securities

of which: (cid:190) bonds and notes

(cid:190) money market instruments

Other investment

(cid:190) MFIs (excluding Central Banks)

of which: (cid:190) long-term
(cid:190) short-term

(cid:190) general government

(cid:190) monetary authorities

(cid:190) other sectors

Financial derivatives (net)

Reserve assets

Errors and omissions (adjustments resulting from imbalances)

Table 2

Quarterly and annual balance of payments of the economic territory of the participating Member
States

(Credits and debits in current and capital account, assets and liabilities in financial account separately)

I. Current account (credits and debits)

Goods

Services

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Income

Compensation of employees

Investment income

(cid:190) direct investment

income on equity

income on debt (interest)

(cid:190) portfolio investment

income on equity (dividend)

income on debt (interest)

bonds and notes

money market instruments

(cid:190) other investment

Current transfers

II. Capital account (credits and debits)

(No further breakdown requested)

III. Financial account (assets and liabilities)

Direct investment

(cid:190) direct investment abroad

(cid:190) direct investment in the reporting economy

Portfolio investment

Assets

(cid:190) equity securities

monetary authorities

general government

MFIs (excluding central banks)

other sectors

(cid:190) debt securities

bonds and notes

monetary authorities

general government

MFIs (excluding central banks)

other sectors

money market instruments

monetary authorities

general government

MFIs (excluding central banks)

other sectors

Liabilities

(cid:190) equity securities

MFIs (excluding central banks)

other sectors

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(cid:190) debt securities

bonds and notes

monetary authorities

general government

MFIs (excluding central banks)

other sectors

money market instruments

monetary authorities

general government

MFIs (excluding central banks)

other sectors

Other investment

Assets

(cid:190) monetary authorities

loans/currency and deposits

other assets

(cid:190) general government

trade credits

loans/currency and deposits

other assets

(cid:190) MFIs (excluding central banks)

loans/currency and deposits

other assets

(cid:190) other sectors

trade credits

loans/currency and deposits

other assets

Liabilities

(cid:190) monetary authorities

loans/currency and deposits

other liabilities

(cid:190) general government

trade credits

loans

other liabilities

(cid:190) MFIs (excluding central banks)

loans/currency and deposits

other liabilities

(cid:190) other sectors

trade credits

loans

other liabilities

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Financial derivatives (net)

(cid:190) monetary authorities

(cid:190) general government

(cid:190) MFIs (excluding central banks)

(cid:190) other sectors

Reserve assets

monetary gold

special drawing rights

reserve position in the International Monetary Fund

foreign exchange

currency and deposits

with monetary authorities

with MFIs (excluding central banks)

Securities

equity

bonds and notes

money market instruments and financial derivatives (1)

Other claims

Errors and omissions (adjustments resulting from imbalances)

Annual international investment position of the economic territory of the participating Member
States

Table 3

1. Direct investment

1.1. Abroad

1.1.1. Equity capital and reinvested earnings

1.1.2. Other capital

1.2. In reporting economy

1.2.1. Equity capital and reinvested earnings

1.2.2. Other capital

2. Portfolio investment

2.1. Assets

2.1.1. Equity securities

(i) Monetary authorities

(ii) General government

(iii) MFIs (excluding central banks)

(iv) Other sectors

(1) The possibility to report on financial derivatives in a separate item within reserve assets is discussed at the IMF level

and within the ECB Statistics Committee.

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2.1.2. Debt securities

2.1.2.1. Bonds and notes

(i) Monetary authorities

(ii) General government

(iii) MFIs (excluding central banks)

(iv) Other sectors

2.1.2.2. Money market instruments

(i) Monetary authorities

(ii) General government

(iii) MFIs (excluding central banks)

(iv) Other sectors

2.2. Liabilities

2.2.1. Equity securities

(iii) MFIs (excluding central banks)

(iv) Other sectors

2.2.2. Debt securities

2.2.2.1. Bonds and notes

(i) Monetary authorities

(ii) General government

(iii) MFIs (excluding central banks)

(iv) Other sectors

2.2.2.2. Money market instruments

(i) Monetary authorities

(ii) General government

(iii) MFIs (excluding central banks)

(iv) Other sectors

3. Other investment

3.1. Assets

3.1.1. Monetary authorities

3.1.1.1. Loans/currency and deposits

3.1.1.2. Other assets

3.1.2. General government

3.1.2.1. Trade credits

3.1.2.2. Loans/currency and deposits

3.1.2.3. Other assets

3.1.3. MFIs (excluding central banks)

3.1.3.1. Loans/currency and deposits

3.1.3.2. Other assets

3.1.4. Other sectors

3.1.4.1. Trade credits

3.1.4.2. Loans/currency and deposits

3.1.4.3. Other assets

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3.2. Liabilities

3.2.1. Monetary authorities

3.2.1.1. Loans/currency and deposits

3.2.1.2. Other liabilities

3.2.2. General government

3.2.2.1. Trade credits

3.2.2.2. Loans

3.2.2.3. Other liabilities

3.2.3. MFIs (excluding central banks)

3.2.3.1. Loans/currency and deposits

3.2.3.2. Other liabilities

3.2.4. Other sectors

3.2.4.1. Trade credits

3.2.4.2. Loans

3.2.4.3. Other liabilities

4. Financial derivatives

4.1. Assets

4.1.1. Monetary authorities

4.1.2. General government

4.1.3. MFIs (excluding central banks)

4.1.4. Other sectors

4.2. Liabilities

4.2.1. Monetary authorities

4.2.2. General government

4.2.3. MFIs (excluding central banks)

4.2.4. Other sectors

5. Reserve assets

5.1. Monetary gold

5.2. Special drawing rights

5.3. Reserve position in the International Monetary Fund

5.4. Foreign exchange

5.4.1. Currency and deposits

5.4.1.1. With monetary authorities

5.4.1.2. With MFIs (excluding central banks)

5.4.2. Securities

5.4.2.1. Equities

5.4.2.2. Bonds and notes

5.4.2.3. Money market instruments and financial derivatives (1)

5.5. Other claims

(1) The possibility to report on financial derivatives in a separate item within reserve assets is discussed at the IMF level

and within the ECB Statistics Committee.

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ANNEX III

CONCEPTS AND DEFINITIONS TO BE USED IN THE BALANCE OF PAYMENTS AND
INTERNATIONAL INVESTMENT POSITION STATISTICS TO BE REPORTED TO THE
EUROPEAN CENTRAL BANK

In order to construct meaningful aggregated balance of payments statistics for the economic territory of the
participating Member States, concepts and definitions have been defined in the field of balance of payments
statistics (capital and financial accounts) and international investment position. These requirements are based
on the so-called Implementation Package (July 1996) and additional documents endorsed by the Governing
Council of the ECB in September 1998. Current international standards, such as the IMF Balance of
Payments Manual (BPM5), have been used as reference in formulating these concepts and definitions. The
most important harmonisation proposals are listed below. Further guidance is available in the corresponding
reports to which reference codes are provided in brackets. These useful references do not form part of the legal
text.

1. Concepts and definitions of investment income and items in the financial account

1.1. Investment income (ST/SC/BP/INCO9801)

D e f i n i t i o n

Investment income incorporates income derived from a resident entity’s ownership of a foreign financial
asset and, symmetrically, income derived from a non-resident entity’s ownership of a domestic financial
asset.

C o v e r a g e

Investment income includes receipts and payments on direct investment, portfolio investment and other
investment income and receipts on reserve assets. For monthly key items the ECB will require only a
total of income (comprising investment income and compensation of employees). The quarterly and
annual balance of payments requirements are almost identical to IMF standard components as defined in
the BPM5. The main difference is that the ECB will not require a breakdown of direct investment income
on equity into distributed and undistributed profits.

T i m e o f

r e c o r d i n g

Interest income is recorded on an accruals’ basis (this is not required for the monthly data). Dividends are
recorded as of the date on which they become payable.

1.2. Capital account (STA/WGS/BOP/CAPITAL96)

D e f i n i t i o n

The new definition of the capital account covers capital transfers and the acquisition/disposal of non-
produced non-financial assets. Current transfers are to be recorded in the current account.

C o v e r a g e

The standard components of the new capital account consist of a sectoral breakdown into the items
general government and other sectors, with a further breakdown thereafter. The ECB will compile only a
lump-sum capital account, within which no breakdown is required. The separation between current and
capital transfers is important and generally depends, in practice, upon the use of the transfer by the
recipient country.

1.3. Direct investment (STA/WGS/BOP/DI95)

D e f i n i t i o n

According to international standards (IMF/OECD),
(direct or, where available, indirect) ownership of
10 % or more of the equity of an enterprise constitutes a direct investment relationship. Member States
using 20 % or another criterion adopt 10 % in significant cases.

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C o v e r a g e

Special purpose entities (SPEs) are considered as regular direct investors and/or direct investment enter-
prises. Those NCBs of the participating Member States which are not in a position to follow this
recommendation provide data on SPEs separately.

In order to avoid discrepancies and in line with both the recommendations of the IMF and Eurostat/
OECD guidelines, direct investment relationships are recorded using the ‘directional' principle. In order
to achieve consistency in the compilation of reinvested earnings, the calculation method and the time of
recording are agreed.

Inter-company financial transactions, including trade credits, are regarded as direct investment capital.

1.4. Portfolio investment (STA/WGS/BOP/PORT95)

D e f i n i t i o n

The following criteria are used to judge whether a financial instrument should be considered as a security;
one criterion alone may not be decisive:

(a) guidelines drawn from the BPM5 and from the System of National Accounts (1993);

(b) provision of an ISIN code;

(c) accounting rules and banking regulations;

(d) market practice (derived from reports by the International Securities Market Association).

C o v e r a g e

Investments in equity securities, debt securities and money market instruments are included, with the
exception of transactions in these instruments which fall into the category of either direct investment or
reserve assets.

T i m e o f

r e c o r d i n g

recording

The recording of transactions in financial items takes place when both creditor and debtor enter the claim
and liability, respectively, in their books (in accordance with the BPM5). Recommendations for methods
of
agreed
(STA/WGS/BOP/ACC9711). For the balance of payments of the economic territory of the participating
Member States, accrued investment income is required only on a quarterly and/or annual basis. Recording
on a full accruals’ basis is not a requirement for the monthly key items balance of payments.

payments

accruals’

balance

been

basis

have

full

the

on

of

a

1.5. Other investment (STA/WG/BOP/OTH95)

D e f i n i t i o n

Other investment is defined as a residual category that includes all financial transactions not covered in
direct investment, portfolio investment, or reserve assets accounts.

C o v e r a g e

Other investment covers trade credits, loans/currency and deposits and other assets/other liabilities (in
accordance with the BPM5). The sectoral coverage/breakdown comprises monetary authorities, general
government, banks and other sectors. The monetary authorities sector is defined as including ‘central
bank institutional units and operations attributed to the central bank but sometimes carried out by other
government institutions, i.e. issues of currency, maintenance of reserves'
(IMF definition). With this
exception,

‘banks' will coincide with the sub-sector monetary financial institutions.

T i m e o f

r e c o r d i n g

The principles of ‘transfer of ownership', ‘time of settlement' and ‘time of payment' all conform with the
IMF recommendations.

In order to achieve consistent aggregate data for the economic territory of the participating Member
States, no distinction is made between loans and deposits within each sector and no maturity breakdown
is used. A sectoral presentation of the breakdown, compatible with the IMF standard components, is used
in quarterly and annual data. Member States may add detail in national statistics.

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For the monthly key items, a split between short-term and long-term flows in the banking sector is
required.

R e p u r c h a s e a g r e e m e n t s a n d b o n d l e n d i n g ( F e b r u a r y 1 9 9 6 )

The accounting practice of banks is the guiding principle for the balance of payments treatment of
repurchase agreements, sell/buy-back transactions and bond lending, rather than the ‘transfer of owner-
ship' criterion. Where there is no accepted international accounting standard, a common practice which
would meet statistical needs is adopted in agreement with the ECB.

This recommendation leads to the recording of genuine repurchase agreements, sell/buy-back transac-
tions and bond lending as collateralised loans.

1.6. Financial derivatives (April 1997, October 1997, April 1998: STA/WG/BOP/SG59802)

D e f i n i t i o n

Financial derivatives are financial instruments that are linked to a specific financial instrument, indicator
or commodity, and through which specific financial risks can be traded in financial markets in their own
right. Transactions in financial derivatives are treated as separate transactions rather than as integral parts
of the value of underlying transactions to which they may be linked.

C o v e r a g e

Transactions and positions in options, futures, swaps, forward foreign exchange contracts, credit deriva-
tives and embedded derivatives are recorded in the balance of payments and international investment
position.

Initial margin payments are regarded as changes in deposits and should be recorded, if identifiable, in the
other investment account. The treatment of variation margin payments depends on the form of the
variation margin: options-style variation margins are regarded, in principle, as changes in deposits and
should be recorded, if identifiable, under the item other investment. Futures-style variation margin
payments are regarded, in principle, as transactions in derivatives and should be recorded in the financial
derivatives account.

In the case of options, the full premium (i.e. the purchase/sale price of the options and the implied
service charge) should be recorded in the financial account.

The net stream of settlement flows associated with interest rate derivatives should be recorded as financial
derivatives.

Embedded derivatives should be recorded together with the underlying financial instrument and should
not be recorded and valued separately in balance of payments statistics and the international investment
position.

The classification of specific instruments of credit derivatives should be decided upon on a case-by-case
basis.

The valuation of financial derivatives should be conducted on a marked-to-market basis.

T i m e o f

r e c o r d i n g

The recording of transactions in financial items takes place when both creditor and debtor enter the claim
and liability, respectively, in their books (in accordance with the BPM5). Owing to practical problems
involved in separating the asset and liability flows in a meaningful way for some derivative instruments,
all financial derivatives transactions in the balance of payments of the economic territory of the
participating Member States are being recorded on a net basis for the time being. Financial derivative
asset and liability positions in the international investment position are recorded on a gross basis.

1.7. Reserve assets

In accordance with the BPM5, reserve assets consist of those external assets issued by non-residents that
are readily available to and controlled by monetary authorities for direct financing of payments imbal-
ances, for indirectly regulating the magnitude of such imbalances through intervention in exchange
markets to affect the currency exchange rate, and/or for other purposes.

The reserve assets of the ESCB consist of the ECB’s reserve assets and the reserve assets held by NCBs of
the participating Member States. The ECB will be provided by the NCBs with foreign reserve assets other
than Member States’ currencies, IMF reserve positions and special drawing rights, up to an amount
equivalent to EUR 50 000 million (adjusted downwards by deducting the shares in the ECB’s capital
subscription key of those EU central banks which will not participate in the euro area from the outset).

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As a result, the composition of reserve assets for Economic and Monetary Union has been agreed: MU
reserve assets are the ECB’s and NCBs’ financial claims denominated in foreign currency on non-resi-
dents of the economic territory of the participating Member States, provided that they meet the liquidity
and marketability criteria required by the aforementioned BPM5 definition plus gold, SDRs and the
reserve positions in the IMF of the participating NCBs.

The pooling of reserve assets will be conducted in the form of outright transfers of ownership.

2. Implementation methods for geographical allocation (STA/WGS/BOP/GEO96)

Difficulties in the compilation of geographically broken-down balance of payments and international
investment position statistics are resolved by means of a step-by-step approach. This approach involves
three steps towards meeting data requirements which are progressively more demanding.

2.1. Direct investment

S t e p 1

Compilation method at the MU level: addition of national total net direct investment transactions/posi-
tions.

(Implemented in 1998).

S t e p 2

Compilation method at the MU level: addition of net transactions/positions in claims issued by or on
non-residents of the economic territory of the participating Member States for direct investment abroad.
Addition of net transactions/positions in total national net direct investment in the reporting economy
and transactions/positions in securities issued by residents for direct
in the reporting
economy. No geographical breakdown into extra-Monetary Union transactions is required.

investment

Data requirements at the NCBs’ level: transactions/positions in direct investment abroad broken down
into transactions/positions in MU investments (securities and other financial instruments issued by
residents of participating Member States) and non-MU investment. To achieve this, it is necessary to
identify the issuer (debtor) of the security or other financial instrument in order to establish whether the
issuer is a resident of the participating Member States or a non-resident. For the item direct investment in
the reporting economy only the national total net transactions/positions are required. A figure for net
transactions/positions in direct investment in the reporting economy originating from other participating
Member States is requested as a memorandum item.

Deadline for implementation: the beginning of Stage III of Economic and Monetary Union, i.e. 1 January
1999, for direct investment flows.

(To be agreed for direct investment stocks).

S t e p 3

Compilation method at the MU level and data requirements at the national central banks’ Member State
level: similar to Step 2 with the addition of a geographical breakdown within extra-MU transactions/posi-
tions. This is only necessary for quarterly and annual statistics.

(Deadline for implementation: to be agreed).

2.2. Portfolio investment

S t e p 1

Compilation method at the MU level: addition of national total net portfolio investment transactions/
positions. No split into assets and liabilities is required.

(Implemented in 1998).

S t e p 2

Compilation method at the MU level: addition of net transactions/positions in securities issued by
non-residents for portfolio investment assets. Addition of net transactions/positions in total national net
liabilities and transactions/positions in securities issued by residents of the participating Member States
for portfolio investment liabilities. No geographical breakdown into extra-Monetary Union transactions is
required.

Data requirements at the NCBs’ level: transactions/positions in portfolio investment assets broken down
into transactions/positions in MU securities (issued by residents of participating Member States) and
non-MU securities. To achieve this it is necessary to identify the issuer (debtor) of the security in order to

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establish whether the issuer is a resident of one of the participating Member States or a non-resident. For
transactions/positions in portfolio investment liabilities, only national total net figures are required.

Precondition: full harmonisation of breakdowns, coverage, definitions, valuation and timing principles for
portfolio investment flows (as outlined above).

Deadline for implementation: the beginning of Stage III of Economic and Monetary Union, i.e. l January
1999, for portfolio investment flows.

(To be agreed for portfolio investment stocks).

S t e p 3

Compilation method at the MU level and data requirements at the national central banks’ Member State
level: Similar to Step 2 with the addition of a geographical breakdown within extra-MU transactions/posi-
tions. This is only necessary for quarterly and annual statistics.

Precondition: full harmonisation of breakdowns, coverage, definitions, valuation and timing principles for
portfolio investment flows.

(Deadline for implementation: to be agreed).

2.3. Other investment

S t e p 1

Compilation method at the MU level: addition of national total net other investment transactions/posi-
tions.

(Implemented in 1998).

S t e p 2

Compilation method at the MU level: addition of net transactions/positions in other investment with
non-residents for other investment assets and liabilities.

Data requirements at the national central banks’ level: MU/non-MU split distinguishing transactions
between residents of the participating Member States and transactions with residents of other countries
(non-Monetary Union).

Deadline for implementation: the beginning of Stage III of Economic and Monetary Union, i.e. 1 January
1999, for other investment flows.

(To be agreed for other investment stocks).

S t e p 3

Compilation method at the MU level and data requirements at the Member State level: similar to Step 2
with the addition of a geographical breakdown within extra-MU transactions/positions. This is only
necessary for quarterly and annual statistics.

(Deadline for implementation: to be agreed).

2.4. Financial derivatives

S t e p s 1 a n d 2

Compilation method at the MU level: Addition of national total net transactions/positions in financial
derivatives.

(Implemented in 1998).

S t e p 3

A geographical breakdown within extra-MU transactions/positions in financial derivatives. This is only
necessary for quarterly and annual statistics.

(Deadline for implementation: to be agreed).

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ANNEX IV

TRANSMISSION OF THE DATA TO THE EUROPEAN CENTRAL BANK

The exchange of the statistical information needed by the ECB relies upon the facility provided by the
ESCB-Net. All exchanges of data within the ESCB use the same conceptual data model.

National central banks shall observe the recommendations listed below in order to ensure that data transmis-
sion functions satisfactorily, in particular with regard to the following items:

(cid:190) completeness: national central banks shall report all balance of payments series keys. To report no series
keys or non-listed series keys would be considered as incomplete reporting. Should an observation be
missing, the omission shall be recorded using the corresponding observation status flag. In addition, when
revisions are made to only a sub-set within the balance of payments, the validation rules should be applied
to the whole balance of payments,

(cid:190) sign convention: national central banks should apply the agreed sign convention in all data which are to be
reported to the ECB. The IMF standard sign convention was adopted. Under this sign convention, credits
and debits must be reported using the same sign in the current and capital account and in the financial
account (credits are to be marked with a plus sign, debits with a minus sign),

(cid:190) accounting identities of the data: the complete validation rules which were distributed and which are
available on request must be implemented by the national central banks before the data are transmitted to
the ECB.

ANNEX V

MONITORING OF STATISTICAL COMPILATION METHODS

The ECB will monitor the compilation methods used for the reporting on the balance of payments and
international investment position statistics, as well as the concepts and definitions applied on a regular basis
by the Member States participating in the euro area. The monitoring will be carried out in connection with
updating and maintaining of the document entitled ‘European Union Balance of Payments (Capital and
financial account) Statistical Methods'

(BOP Book), and by the six-monthly review procedure.

The BOP Book contains information on the structure of balance of payments statistical data for all EU
countries. There are detailed descriptions of data compilation methods and of the concepts and definitions
applied, as well as information on departures from the agreed definitions for the balance of payments and
international investment position statistics in the Member States.

The BOP Book will be updated on annual basis in close cooperation with the Member States.

The six-monthly review forms part of the process of updating the BOP Book. The six-monthly review
procedure is based on reports to be endorsed by the Governing Council of the ECB covering the statistical
treatment of the investment income account and the financial account in the balance of payments and
international investment position statistics and forms a basis for the ECB to assess the quality of the data
provided to the ECB for the balance of payments statistics.