a knowledge sharing session on sectoral balance sheet data reporting sbp: statistics department by:...

A knowledge sharing session on

sectoral balance sheet data reporting

SBP: Statistics Department

By:Malik Muhammad [email protected]

Naseer [email protected] and

NameOrganizationResponsibility


Introduction

Objective

1. To introduce:a. The data compilation and dissemination standards

b. Concepts of monetary, financial and flow of funds statistics

c. Concepts and definitions of the sectoral balance sheet items

2. Create harmony of understanding the concepts and definitions amongst data providers, compilers and users

3. To identify the difficulties and issue in reporting

4. To explore solution to these problems

5. Step ahead for quality data production


Statistical System’s Strength Triangle-SSST


Com

pilers

Providers

Use

rs

What is in it for you – WIIIFY?


•Why data collection and compilation?

•Concepts and DefinitionsSystem 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

Why compile quality statistics?


Decisions

Quality

ReliableDoubtful

HighLow

A base for decision making

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


Major areas of data compilation by Statistics Department: Monetary StatisticsFinancial StatisticsFlow of Funds Accounts of PakistanInternational Investment PositionPakistan Balance of PaymentForeign Trade and ServicesWorkers’ RemittancesForeign InvestmentBanking StatisticsStock Market StatisticsBalance Sheet Analysis and Seasonal Adjustment of Data Series

Scope and uses of data


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



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)



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


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.


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


Non-financial assets

Monetary Statistics

Other sectors of the economy Financial assets Financial liabilities


Financial sector Non-financial assets Financial assets Financial liabilities

Financial Statistics

Flow of funds accounts

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

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 worldSBP: Statistics Department

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


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


Corporations +1 year

Separate set of accounts

Significant production of goods or services

Transactions located in that economy


Residency criterion

Sectors of the economy

1. Non-financial corporations

2. Financial corporation

3. General government

4. NPIs serving households

5. Households

6. The rest of the world

SBP: Statistics Department Components of liabilities & assets

Sectors/sub-sectors of the economy

1. Non-financial corporations

• Public

• Private

Foreign controlled

National private

Back

2. Financial corporations

A. Depository corporations

a. Central bank

b. Other depository corporations Deposit money institutions

Public Private Foreign controlled National private

c. Other deposit accepting institutions



B. Other financial intermediaries

Public

Private

Foreign controlled

National private

C. Financial auxiliaries

Public

Private



E. Insurance corporations and pension funds

i) Life insurance corporations• Public• Private

Foreign controlled National private

ii) Non-life insurance corporations• Public• Private


iii) Pension funds• Public• Private




Back

3. General governmenta) Central government

i) Federal government excluding NPIs & Public ent.

ii) NPIs (Non market)

b) Provincial Governmentsi) Provincial Governments excluding NPIs & Public ent.

ii) NPIs(Non market)

c) Local governments4. Non-profit institutions serving households (non-market)

a) Foreign controlledb) National private



5. Households

a) Employers

b) Own account workers

c) Employees

d) Recipient of property and transfer incomes



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.

SBP: Statistics Department Back


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.



Quasi corporations

Quasi-corporations are unincorporated enterprises that

function as if they were corporations, and

o Production is maintained for one year or more.

o A separate set of accounts is maintained for the

local activities.

o Income tax is paid in the host country.


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.



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.



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.



Other financial intermediariesCorporations 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.


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.



NPIs (Market)

1. Engaged in market production.

2. Charge fees determined by their costs of

production.

3. Retain surpluses if any.



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.


Sectoral definitions Employers

The employers' are self-employed persons with paid employees.

Own account workersThese are self-employed persons without paid

employees. Employees

These are persons, which receive income from their employers.

Recipient of property and transfer incomesThese are persons, which receive income from property

or transfers as the largest source. .


Assets/ Liabilities

1. Currency and Depositsa)Currencyb)Transferable depositsc)Restricted/ compulsory depositsd)Other deposits

2. Securities other than shares3. Loans4. Shares and other equity5. Insurance technical reserves6. Financial derivatives7. Other accounts receivable/ payable8. Non-financial assets


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


Assets/ liabilities – definitions

Transferable deposits

1. Demand deposits in national or in foreign

currency i.e., exchangeable on demand at par

without penalty or restriction.

2. Freely transferable by cheque or otherwise,

commonly used to make payments.


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;

a) Import deposits that are required of importers in advance of importation.

b) 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.

c) Compulsory savings deposits arising from an official requirement that are share of a worker’s earnings.

d) Foreign currency deposits that are blocked.e) Deposits of financial corporations that are closed pending

liquidation or reorganization.


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:

1. Sight deposits (which permit immediate cash withdrawals but not direct third-party transfers);

2. Non-transferable savings deposits and term deposits;3. 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;

4. Shares of money-market funds that have restrictions on third-party transferability

5. Call money deposits


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.


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.


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


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


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



Unquoted shares

Unquoted shares are shares which are not traded

on stock exchanges or other organized financial

markets.



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.



Valuation of Shares1. Investment is the shares of other companies are

required to be reported at market price.

2. Shares of your company with others (liability) is required to be reported at book value.

3. Shares that have been bought back from the public. These reacquired shares (called treasury shares) are not included in holdings of shares.




General and special reservesGeneral and special reserves are capital redemption reserves, profit prior to incorporation, share premium, statutory reserves and appropriations of retained earnings. General and special reserves should be valued as the nominal amount of earnings that have been retained.


Retained earningsAll earnings (after-tax profit) from the overall operations of the corporations less any amount allocated to general and special reserves, which is established as a capital cushion to cover operational and financial risks of the corporations.



Current year resultAccumulated revenues during the year minus expenditures minus taxes minus retained earnings minus general and special reserves minus dividend payable.



Insurance technical reserves

Current claims of policyholders and beneficiaries rather than net equity of insurance corporations. Generally classified as under:-

1. Prepayments of premiums, and

2. Reserves against outstanding claims with insurance companies



Financial derivatives

Financial instruments that have no intrinsic value,

and are linked to another specific financial

instrument, indicator (foreign currencies,

government bonds, share price indices, interest

rates, etc.), or commodity (gold, wheat, sugar, etc.)

through which specific financial risks can be traded

in financial markets in their own right.



Unrealized gain/loss on forward foreign exchange contracts

In a forward contract, the counter parties agree to

exchange, on a specified date, a specified quantity of an

underlying item (real or financial) at an agreed-upon

contract price. The unrealized gain to be received due to

difference between the rates agreed upon and the rate

prevailing in the market should be reported as financial

derivatives.



Unrealized gain/loss on currency swaps

The best way to outline how Currency Swaps can save your money is by using an example.Let's say the deal you just signed today has to be paid in Euros. However, you don't have Euros but you will be getting a payment in Euros in a few weeks. Instead of buying Euros today, you can arrange a Swap. It allows you to borrow the Euros you need to pay for the purchase you just made, and then pay them later. The gain or loss due to prevailing rate and agreed rate is your asset or liability.



Unrealized gain/loss on option contracts

The purchaser of an option contract pays premium to the writer of the option. In return, the buyer acquires the right but not the obligation to buy (call option) or sell (put option) a specified underlying item (real or financial) at an agreed-upon contract price (the strike price) on or before a specified date. The buyer of an option acquires an asset, and the option writer incurs a liability. However, an option may expire without worth; it is exercised only if settling the contract is advantageous to the buyer. Therefore, unrealized gains/loss through these contracts would be reported as financial derivatives.



Unrealized gain/loss on futures contractsFutures are standardized forms of forward contracts mostly traded on organized exchanges. An exchange-traded obligation to buy or sell a financial instrument or to make a payment at one of the exchange's fixed delivery dates, the details of which are transparent publicly on the trading floor and for which contract settlement takes place through the exchange's clearing house. The counter party in a futures transaction is the exchange. On the other hand, a forward is mostly an over-the-counter (OTC) transaction and the counter party is the contracting party. The, unrealised gains/losses through these contracts would be reported.


Other accounts receivable/ payable

Trade credit & advances Dividends receivable/ payable Settlement accounts Items in the process of collection Head office and inter branches adjustments Suspense account Prepayment of taxes Prepayment of rent Prepaid operating expenses Provision for loan losses or other losses Provision for expected costs Accrued wages, rent and taxes etc Accumulated depreciation Other miscellaneous asset/ liability items n.e.s



Trade credit & advances Unlike loans, trade credit is non-interest bearing credit facility. It is extended directly for sales of goods, supplies and materials on deferred payments to a buyer. Interest is charged if the debtor defers payments from the schedule.

Advances are extended for work in progress (if classified or to be classified as such under inventories by the debtor) and prepayments for goods and services. These do not include loans to finance trade credit, which are classified under loans.



Dividends receivable/ payableDividends receivable/ payable on corporate shares arise from the recording of dividends when the dividends are declared, rather than when the dividends are paid.

This is distribution of earnings to shareholders prorated by the class of security and paid in the shape of money, stock, scrip, or rarely, company products or property.



Settlement accounts Settlement accounts should be used to account for differences in the time of recording of

1. Purchases or sale of financial assets, on the trade dates when change of ownership occur and;

2. The subsequent payments for the financial assets on the settlement dates.



Items in the process of collection Cheques or other types of transferable items that are posted directly to depositors’ accounts, but these are unavailable for use until after the transferable items have cleared through the central bank or clearing organization.

If neither posted to depositors’ accounts nor cleared, these are contra assets/ liabilities.



Suspense accountIt is a temporary holding account for errors and omissions, items that having no proper classification pending until the determination of the proper account about their allocation. On liability side, it would be an account that is used to store short-term funds or securities until a permanent decision is made about their allocation



Provision for loan losses or other lossesSetting aside a part of a corporation’s income to cover anticipated loan losses or other losses; such provisioning may be made as a percentage of various classes of non-performing loans or may be for specific loan identified as irrecoverable or on other assets.



Accumulated depreciationDepreciation is a systematic allocation of the cost of a depreciable asset to expense over its useful life.

Accumulated depreciation contains the depreciation of the asset from the financial year in which it was bought up to the present financial year


Revaluation of depreciable assets

Illustration:

An asset was purchased at the cost of Rs 300,000. It was decide by the management that the depreciation would be charged @ 20% on the basis of SLN method. At the end of the 3rd year management decided to revalue the asset to the current market value. The current market value is 210,000.

Revaluation of depreciable assets

Illustration:Option 1.

Debit: Accumulated depreciation 180,000Credit: Cost of asset A/c 180,000

Debit: Cost of asset a/c 90,000Credit: Revaluation reserve A/c 90,000

New value of asset = 300,000 – 180,000 + 90,000 = 210,000

Back


Entities from which their owners may derive economic benefits by holding them or using them over a period of time are called non-financial assets.

Non-financial assets consist of tangible assets, both produced and non-produced, and intangible assets for which no correspondence liabilities are recorded



Produced assets

Fixed assets

Tangible fixed assets

Intangible fixed assets

Inventories

valuables

Non-produced assets

Tangible non-produced assets

Intangible non-produced assetsSBP: Statistics Department


Produced assets

Produced assets comprise non-financial assets that have come into existence as outputs from production processes.

Produced assets consist of fixed assets, inventories and valuables.


Fixed assets

Produced assets that are used repeatedly, or continuously in production processes for more that one year.

Tangible fixed assets are dwellings, other buildings and structures, machinery and equipments, and cultivated assets such as livestock for breeding and plantation.

Intangible fixed assets are computer software, entertainment, literary or artistic originals.


Inventories

Inventories are produced assets such as:

• Materials and supplies• Work in progress• Finished goods; and• Goods for resale etc.


Valuables

Assets that are acquired and held primarily as store of value, not used for production or consumption such as:

• Non-monitory gold• Paintings, etc.


Non-produced assets

Non-produced non-financial assets are both tangible and intangible that come into existence other than trough process of production.

Tangible non-produced assets include land, subsoil assets, water resources, etc.

Intangible non-produced assets include patents, leases, and purchased goodwill.

SBP: Statistics Department Flows

Stock and flows

Opening stockNet transactions

Valuation changes

Other changes in volume

Closing stock


While reporting, MAKE sure:

To read description of major categories of assets and liabilities given in the Reporting Guide before filling the questionnaire (Annexure III).

To fill the amounts in columns where applicable That all items of assets and liabilities are reported in

thousands of Pak Rupees Opening stock of the year matched with the closing stock

of the preceding year That total assets and liabilities are equal The total of transactions, valuation changes and other

changes on volume of assets side are equal to those of liabilities side


Exercise

Net transactions

Net of acquisition and disposal of assets and liabilities that arise by mutual agreement between institutional units, from the creation, liquidation or change in ownership of assets and liabilities – Change of ownership occur through sale of all rights, obligations, and risks associated with an asset or liability


Examples of net transactions1. Net currency received during the reporting period.

(Assets) 2. Net of bank deposits placed with financial institutions and

withdrawn from them during the reporting period (Assets) 3. Deposits and interest credited minus withdrawals from the

accounts of individuals/ institutions during the reporting period i.e. net of credit and debit in the deposit accounts (Liabilities).

4. Net of loans disbursed and repaid during the reporting period (Assets)

5. Net of acquisition and disposal of liability in the shape of borrowings during the reporting period (Liabilities)


6. Net investment in securities other than shares i.e., securities purchased minus securities matured/ claimed during the reporting period (Assets).

7. Net of securities issued and redeemed during the reporting period (Liabilities).

8. Net investment in shares of corporations i.e., total shares acquired minus shares disposed off during the period (Assets).

9. All subsequent changes in the paid-up capital through issuance of shares (Liabilities)

Examples of net transactions


10. Receivable/payable items generated during the reporting period.

11. Total premium paid for the subsequent period minus premium consumed during the reporting period and outstanding claims that have to be settled with the insurance corporations– Insurance Technical Reserves (Assets).

12. Non-financial asset acquired during the reporting period after adding the cost of ownership transfer if born by the company minus transferring of non-financial asset to another entity by sale or gift after deduction of cost of ownership transfer if born by the company.

Examples of net transactions


Valuation changes


Exchange rate changes Price changes Fair value

Valuation changes


Fair valueThe fair value of a financial asset or liability refers to the value that approximates the value that would arise from a market transaction between unrelated parties.

General methods: Market prices of financial assets and liabilities that are

market traded but otherwise similar to the non-traded financial assets and liabilities that are being fair valued; or

Discounted present values of future cash flows from non-traded financial assets and liabilities.

Back

Other changes in volume

Financial flows that arise from asset and liability changes other than those arising from transactions and revaluations. These includes:

1. Write-offs of claims (Debt forgiveness is transaction, not OCV because both parties agree in this case)

2. Economic appearance of intangible non-produced assets such as purchased good will.

3. Catastrophic losses such as natural disasters, acts of war, and riots etc.

4. Uncompensated seizures such as possession taken by governments due to non payment of taxes, fines or similar livies

5. Sectoral reclassification6. Transactional reclassification (loan to grants or securities etc)


a knowledge sharing session on sectoral balance sheet data reporting sbp: statistics department by:...

Documents

statistics department

data sbp

financial statistics

data monetary

flow of funds statistics

compile quality statistics

data providers

data collection