Handbook on National Accounting: Financial Production, Flows, and Stocks

1. Draft Handbook on National Accounting “Financial Production, Flows and Stocks in the System of National Accounts” OECD WP on National Accounts 25-28 October 2011, Paris, France Herman Smith UNSD/DESA

2. Outline of the presentation • Context and purpose of the handbook • Structure • Comments on the handbook • Way forward

3. Context and purpose (i) • Joint publication of the UNSD and the Directorate General Statistics of the ECB • Drafting of the Handbook was initiated in 2004 as part of the United Nations series of handbooks on national accounts • Work on the Handbook was delayed by further discussions on the measurement of financial services. • A draft of the Handbook was only circulated in May 2011 to a number of experts for a first review

4. Context and purpose (ii) • Aims to provide a comprehensive guide on the compilation of the full set of the sequence of integrated economic accounts for all sub-sectors of the financial corporations sector, and where applicable also guidance on estimating financial production for moneylenders in the household sector. • The Handbook includes guidance on the compilation of the interrelationship of the financial stocks and flows for all the institutional sectors and rest of the world (From-Whom-to-Whom approach).

5. Context and purpose (iii) • Intended audiences: • National statistical offices, • National central banks, • International organisations, • Other institutions engaged in collecting, compiling and disseminating national accounts data on financial corporations, and • Users who require a better understanding of these data

6. Structure (i) Chapter 1 (The SNA architecture) • Overview of the 2008 SNA accounting framework • Valuation and recording principles • Sequence of accounts by institutional sector

7. Structure (ii) Chapter 2 (Financial corporations within the SNA framework) • Description of sub-sectors of financial corporations sector within 2008 SNA framework • Guidance on other ways to group sub-sectors • Monetary policy purposes • Financial intermediaries, financial auxiliaries, and other financial institutions • Control (public, private, and foreign controlled)

8. Structure (iii) Chapter 3 (Financial production and income) • Nature of financial services and measurement of output • Four main ways in which financial services are provided and charged • Explicit charges • Interest charges on loans and deposits • Acquisition and disposal of financial assets and liabilities in financial markets • Insurance and pension schemes • A number of worked examples to illustrate (b), (c), and (d), and computation of price and volume measures • Property income of financial corporations

9. Structure (iv) Chapter 4 (Financial assets and liabilities) • Conceptual treatment of financial assets, claims, and liabilities • Classification of financial assets and liabilities by • Type of financial instrument • Negotiability • Type of income • Type of interest rate • Maturity • Currency

10. Structure (v) Chapter 5 (Valuation and accrued interest) • Valuation of financial assets and liabilities in 2008 SNA • Valuation of stocks • Revaluations • Other changes in volume of assets and liabilities • Valuation of financial transactions • Accrued interest • Debtor approach and creditor approach of recording • Worked examples

11. Structure (vi) Chapter 6 (From a table on financing and investment to from-whom-to-whom accounts) • Basics and principles of three-dimensional “from-whom-to-whom” framework • Allows full articulation of accounts • Counterparties of transactions can be identified

12. Structure (vii) Chapter 7 (Data sources for compiling financial accounts and balance sheets by institutional sector) • Existing data sources as building blocks • Need for new data sources • Compilation of institutional sector accounts

13. Structure (viii) Chapter 8 (Presentation of the accounts) • Tables and charts to present accounts under “from-whom-to-whom” framework • Presentation of two types of tables on assets and liabilities • Without any counterpart information • With full counterpart information • Presentation of data in flow charts or networks

14. Structure (ix) Chapter 9 (Use of institutional financial account and balance sheets) • Use of accounts under “from-whom-to-whom” framework for policy and other purposes including • Monetary and financial analysis • Analysis of financial structures • Macro-prudential and financial stability analysis • Examples of quarterly sector accounts

15. Structure (x) Chapter 10 (Financial corporations within an economic or a monetary union) • Compilation of accounts under “from-whom-to-whom” framework within an economic or a monetary union • Moving from national accounts to economic or monetary union accounts • Compilation of rest of the world accounts

16. Meeting in July 2011 • Constructive comments were received from the reviewers of the Handbook and from the participants at the meeting • Confirmed the need for compilation guidance on the topics covered by the Handbook. • The importance of consistency between the guidance provide in the Handbook and the recommendations of the 2008 SNA, BPM6, MFSM, GFSM and related manuals was stressed • More examples and references to source material were requested. • The outcome of the ISWGNA Task Force on FISIM should also be included in the Handbook

17. Way forward • Incorporate the comments on the Handbook and to circulate the revised draft by the end of 2011. • Set up mechanism for ensuring consistency in the guidance provided in the areas where the Handbook and the MFSM overlap • The ISWGNA to monitor the updating of the MFSM and the finalisation of the Handbook. • To incorporate the recommendations of the FISIM Task Force when they become available during 2012. • To finalise Handbook by the end of 2012

18. Thank you