A knowledge sharing session on sectoral balance sheet data reporting

1. A knowledge sharing session onsectoral balance sheet data reporting By: Malik Muhammad Ashraf malik.ashraf@sbp.org.pk Naseer Ahmad naseer.ahmed@sbp.org.pk and SBP: Statistics Department

2. NameOrganizationResponsibility Introduction SBP: Statistics Department

3. Objective • To introduce: • The data compilation and dissemination standards • Concepts of monetary, financial and flow of funds statistics • Concepts and definitions of the sectoral balance sheet items • Create harmony of understanding the concepts and definitions amongst data providers, compilers and users • To identify the difficulties and issue in reporting • To explore solution to these problems • Step ahead for quality data production SBP: Statistics Department

4. Statistical System’s Strength Triangle-SSST Compilers Users Providers SBP: Statistics Department

5. What is in it for you – WIIIFY? • Why data collection and compilation? • Concepts and Definitions • System of National Accounts 1993 (1993 SNA) • Monetary and Financial Statistics Manual-2000 (MFSM 2000) • Scope and Uses of Data • Monetary and Financial Statistics, Flow of Funds Accounts • and International Investment Position (IIP) • Sources of Data • Sectoral Balance Sheet http://www.sbp.org.pk/departments/stats.htm SBP: Statistics Department

6. Why compile quality statistics? A base for decision making Low Quality High Doubtful Decisions Reliable SBP: Statistics Department

7. Why compile quality statistics? • Evaluate results of the actions taken; • Analyze the developments of economy • Watch behavior of various sectors of the economy • Record their role in transferring funds • National and international needs, wants and demands • To cope to the demands of policy makers SBP: Statistics Department

8. Major areas of data compilation by Statistics Department: Monetary Statistics Financial Statistics Flow of Funds Accounts of Pakistan International Investment Position Pakistan Balance of Payment Foreign Trade and Services Workers’ Remittances Foreign Investment Banking Statistics Stock Market Statistics Balance Sheet Analysis and Seasonal Adjustment of Data Series Scope and uses of data SBP: Statistics Department

9. The compilation of Monetary and Financial Statistics and Flow of Funds Accounts require balance sheet data from all sub-sectors of the financial sector classified in sectors’ commonly known as sectoral balance sheet. However, Flow of Funds Accounts need data from other sectors of the economy Scope and uses of data SBP: Statistics Department

10. Among other statements based on various combinations of the variables the following main statement are prepared from the sectoral balance sheet data: Depository corporations survey Deposit money institutions survey Other depository corporations survey Other financial corporations survey Financial corporations survey Flow of Funds Accounts (FFAs) International Investment Position (IIP) Scope and uses of data SBP: Statistics Department

11. Monetary Statistics Monetary Statistics consist of a comprehensive set of stock and flow data on the financial and non-financial assets and liabilities of financial sector of the economy SBP: Statistics Department

12. Financial Statistics Financial statistics consist of a comprehensive set of stock and flow data on the financial assets and liabilities of all sectors of an economy. The financial statistics are organized and presented in the formats designed to show financial flows among the sectors of an economy and corresponding financial asset and liability position. SBP: Statistics Department

13. Flow of funds data Flow of funds data are presented in matrix form, which provides comprehensive coverage of production, distribution, and all non-financial and financial stocks and flows for the total economy as well as for each of its sectors SBP: Statistics Department

14. Non-financial assets Financial sector Non-financial assets Financial assets Financial liabilities Monetary Statistics Other sectors of the economy Financial assets Financial liabilities Financial Statistics Flow of funds accounts SBP: Statistics Department

15. International Investment Position (IIP) IIP is the balance sheet of external financial assets and liabilities of an economy. Financial items that comprise the IIP consist of FDI, FPI, Financial derivatives and other investment on both sides while Reserves on assets side only. SBP: Statistics Department

16. Sources of Data • State bank of Pakistan • Deposit money institutions • Other depository institutions • Non-bank financial corporations (non-depository) (Other financial intermediaries) • Insurance companies • Exchange companies (Financial auxiliaries) • Non-financial corporations • Public • Private • The rest of the world SBP: Statistics Department

17. Relationship to the 1993 SNA • Concordance between this statement and 1993 SNA with respect to the principals and concepts. • Guidelines for this statement are consistent with 1993 SNA on the issues such as: • Residency criterion • Sectorization of the economy • Classification of assets and liabilities • Recording of transactions and other flows • Valuation of assets and liabilities SBP: Statistics Department

18. Residency criterion • Individuals • No nationality or legal boundaries (Political boarders) but Economic territory (Economic territory consists of geographic territory with in which persons, goods and capital circulate freely – includes, Airspace, territorial waters, free trade zones etc.) • Centre of economic interest • +1 year • Exceptions • Students • Crew members • Diplomats • Armed forces members SBP: Statistics Department

19. Residency criterion • Corporations • +1 year • Separate set of accounts • Significant production of goods or services • Transactions located in that economy SBP: Statistics Department

20. Sectors of the economy • Non-financial corporations • Financial corporation • General government • NPIs serving households • Households • The rest of the world Components of liabilities & assets SBP: Statistics Department

21. Sectors/sub-sectors of the economy • Non-financial corporations • Public • Private • Foreign controlled • National private Back

22. Sectors/sub-sectors of the economy • Financial corporations • Depository corporations • Central bank • Other depository corporations • Deposit money institutions • Public • Private • Foreign controlled • National private • Other deposit accepting institutions SBP: Statistics Department

23. Sectors/sub-sectors of the economy • Other financial intermediaries • Public • Private • Foreign controlled • National private • Financial auxiliaries • Public • Private SBP: Statistics Department

24. Sectors/sub-sectors of the economy • Insurance corporations and pension funds • Life insurance corporations • Public • Private • Foreign controlled • National private • Non-life insurance corporations • Public • Private • Foreign controlled • National private • Pension funds • Public • Private • Foreign controlled • National private Back SBP: Statistics Department

25. Sectors/sub-sectors of the economy • General government • Central government • Federal government excluding NPIs & Public ent. • NPIs (Non market) • Provincial Governments • Provincial Governments excluding NPIs & Public ent. • NPIs(Non market) • Local governments • Non-profit institutions serving households (non-market) • Foreign controlled • National private SBP: Statistics Department

26. Sectors/sub-sectors of the economy • Households • Employers • Own account workers • Employees • Recipient of property and transfer incomes SBP: Statistics Department

27. Sectoral definitions • Deposit money institutions These consist of resident depository corporations, which have any liabilities in the form of deposits payable on demand, transferable by cheques or otherwise useable for making payments. Commercial banks, specialized banks and Punjab provincial cooperative bank in Pakistan fall under this category. Back SBP: Statistics Department

28. Sectoral definitions • Non-financial corporations Non-financial corporations are resident corporations and quasi corporations whose principal activity is the production of market goods or non-financial services. SBP: Statistics Department

29. Sectoral definitions • Quasi corporations Quasi-corporations are unincorporated enterprises that function as if they were corporations, and • Production is maintained for one year or more. • A separate set of accounts is maintained for the local activities. • Income tax is paid in the host country. Back SBP: Statistics Department

30. Sectoral definitions • Foreign controlled Foreign controlled corporations are resident corporations controlled by non-residents. It is difficult to determine the degree of effective control in a corporation that has majority ownership shares; the general rule is that owners should exercise majority control in the form of greater than 50% the voting shares or management is fully under control of non-residents. Back SBP: Statistics Department

31. Sectoral definitions • Public enterprises Resident corporations controlled by the government. Control may be exercised through ownership of more than half the voting shares, legislation, decree, or regulations that establish specific corporate policy or allow the government to appoint the directors. Back SBP: Statistics Department

32. Sectoral definitions • Other deposit accepting institutions These consist of resident depository corporations, which have any liability in the form of deposits that may not be readily transferable or in the form of financial instruments such as short-term certificates of deposits, which are close substitutes for deposits. Back SBP: Statistics Department

33. Sectoral definitions • Other financial intermediaries Corporations engaged in financial intermediation, which raise funds on financial markets, but not in the form of deposits, and use them to acquire other kind of financial assets. These include discount houses, venture capital companies, mutual funds, housing finance companies and cooperative banks except Punjab provincial cooperative bank etc. Back SBP: Statistics Department

34. Sectoral definitions • Financial auxiliaries Corporations such as securities brokers, loan brokers, floatation corporations, exchange companies insurance brokers etc. they also include corporations whose principal function is to guarantee, by endorsement, bills or similar instruments intended for discounting or refinancing by financial corporations, and also corporations which arrange hedging instruments such as swaps, options, and futures or other instruments which are continually being developed as a result of wide-ranging financial innovation. Back SBP: Statistics Department

35. Sectoral definitions • NPIs (Market) • Engaged in market production. • Charge fees determined by their costs of production. • Retain surpluses if any. SBP: Statistics Department

36. Sectoral definitions • NPIs (Non-market) Non-market producers that provide most of their output free or at prices that are not economically significant (i.e., at prices that do not significantly influence amounts supplied or amounts purchased). NPIs engaged mainly in non-market production fall into two main groups: • The NPIs that are mainly controlled and financed by the government • Those NPIs providing non-market goods and services to households and financed mainly by transfers from non-government sources – households, corporations, or non-residents etc. These are commonly termed as NPISHs, a separate sector of the economy. Back SBP: Statistics Department

37. Sectoral definitions • Employers The employers' are self-employed persons with paid employees. • Own account workers These are self-employed persons without paid employees. • Employees These are persons, which receive income from their employers. • Recipient of property and transfer incomes These are persons, which receive income from property or transfers as the largest source. . Back SBP: Statistics Department

38. Assets/ Liabilities • Currency and Deposits • Currency • Transferable deposits • Restricted/ compulsory deposits • Other deposits • Securities other than shares • Loans • Shares and other equity • Insurance technical reserves • Financial derivatives • Other accounts receivable/ payable • Non-financial assets SBP: Statistics Department

39. Assets/ liabilities – definitions • Currency (Cash in hand) Notes and coins that are of fixed nominal values and accepted as legal tender in an economy that are issued by the central bank and/or government. Also includes currency that is no longer legal tender, but that can be exchanged immediately for current legal tender. This category subdivided into bank notes, coins including prize bonds purchased over the counter for value to surrender the SBP/ National Directorate of Savings and foreign currency notes and coins Back SBP: Statistics Department

40. Assets/ liabilities – definitions • Transferable deposits • Demand deposits in national or in foreign currency i.e., exchangeable on demand at par without penalty or restriction. • Freely transferable by cheque or otherwise, commonly used to make payments. Back SBP: Statistics Department

41. Assets/ liabilities – definitions • Restricted/ compulsory deposits Deposits for which withdrawals are restricted on the basis of legal, regulatory or commercial requirements are restricted deposits. Examples are; • Import deposits that are required of importers in advance of importation. • Transferable deposits that have been posted to depositors’ accounts, but that can not be withdrawn upon until the deposit items (e.g., cheques or drafts) have been collected by the depository corporations that accepted them. • Compulsory savings deposits arising from an official requirement that are share of a worker’s earnings. • Foreign currency deposits that are blocked. • Deposits of financial corporations that are closed pending liquidation or reorganization. Back SBP: Statistics Department

42. Assets/ liabilities – definitions • Other deposits All claims other than transferable deposits and restricted deposits in national currency or in foreign currency that are represented by evidence of deposits. These include: • Sight deposits (which permit immediate cash withdrawals but not direct third-party transfers); • Non-transferable savings deposits and term deposits; • Financial corporations’ liabilities in the form of shares or similar evidence of deposits that are legally or in practice, redeemable immediately or at relatively short notice; • Shares of money-market funds that have restrictions on third-party transferability • Call money deposits Back SBP: Statistics Department

43. Assets/ liabilities – definitions • Investment in securities other than shares Investments in financial assets that are normally traded in the financial markets and that give the holders the unconditional right to receive stated fixed sums on a specified dates or the unconditional right to fixed money incomes or contractually determined variable money incomes. These securities are classified as short-term and long-term securities other than shares such as Government treasury bills, Federal government bonds, Federal investment bonds, Commodity bonds, Pakistan investment bonds, corporate bonds and debentures, negotiable certificates of deposits (not negotiable would be categorized under deposits), commercial paper, TFCs, PTCs, Modaraba certificates, and negotiable securities backed by loans or other assets. Preferred stock or shares that pay a fixed income but do not provide for participation in the distribution of residual value of an incorporated enterprise on dissolution are also included in this category. Back SBP: Statistics Department

44. Assets/ liabilities – definitions • Loans extended (Advances) and Borrowings Financial asset resulting from the delivery of cash or other assets by a lender to a borrower in return for an obligation to repay on a specified date or dates, or on demand, usually with mark-up or interest. Creditor’s outstanding claim should match the debtor’s obligation, which comprises the outstanding principal amount plus any accrued interest (i.e., interest earned but not yet due for payment). Not adjusted for expected losses. The value of a loan portfolio should be adjusted downward only when (1) loans are actually written off as un-collectible or (2) when the outstanding amount of the loan has been reduced through formal debt reorganization. SBP: Statistics Department

45. Assets/ liabilities – definitions • Loans extended (Advances) and Borrowings These include:- • Commodity operations • Trade financing • Government self employment schemes • Working capital loans • Fixed investment loans • Bills purchased & discounted • Reverse REPO/ REPO • Money at call • Consumer financing • Financial leases & similar arrangements Back SBP: Statistics Department

46. Assets/ liabilities – definitions • Shares and other equity All instruments and records acknowledging claims to the residual value of companies / corporations, after the claims of all creditors have been met are categorized as shares and other equity. There are several types of shares, including common stock, preferred stock, treasury stock, and dual class shares. Mutual funds and NIT units are to be included under this category, for the reason that they give rise to the equity of issuing institution. Shares and other equity as assets should be reported separately as quoted and non-quoted. SBP: Statistics Department

47. Assets/ liabilities – definitions Quoted shares - ordinary Shares are usually traded on a stock exchange, where people and organisations may buy and sell shares in a wide range of companies. A given company will usually only trade its shares in one market, and it is said to be quoted, or listed, on that stock exchange. However, some large, multinational corporations are listed on more than one exchanges. They are referred to as inter-listed shares SBP: Statistics Department

48. Assets/ liabilities – definitions Unquoted shares Unquoted shares are shares which are not traded on stock exchanges or other organized financial markets. SBP: Statistics Department

49. Assets/ liabilities – definitions Preferred stocks / shares with claims on residual value Preferred stocks are shares of a corporation, which represent ownership in a corporation with the distinction that if company earnings are sufficient, and dividends are to be paid, dividends must be first paid to these holders of stock. Preferred shares have priority over common shares in the distribution of dividends and assets. SBP: Statistics Department

50. Assets/ liabilities – definitions Valuation of Shares • Investment is the shares of other companies are required to be reported at market price. • Shares of your company with others (liability) is required to be reported at book value. • Shares that have been bought back from the public. These reacquired shares (called treasury shares) are not included in holdings of shares. SBP: Statistics Department