Statistical standard for financial assets and liabilities 2013

Transcription

1 Rationale The main purpose of classifying financial assets and liabilities is to provide consistent and relevant statistics that support economic analysis and macroeconomic management for New Zealand. As these classes have economic-based meanings, their definitions can vary from accounting and taxation definitions. Financial assets and liabilities will respond differently to fiscal and monetary policy depending on their type, and under various economic conditions. Financial asset and liability statistics are useful for assessing: liquidity and financial soundness of sectors exposure to financial risks sensitivity to monetary and fiscal policy leverage within the economy or institutional sectors the composition of a sector s assets and liabilities claims on other sectors, including the rest of the world. The Statistical Classification of Financial Assets and Liabilities 2013 (SCFAL), which underpins this statistical standard, is largely based on the classification of financial assets and liabilities in the System of National Accounts 2008 (2008 SNA). Therefore the concepts and definitions within this standard also align closely with the 2008 SNA manual. It provides a standard system for classifying the financial assets and liabilities of all institutional units within the economy. Because of the symmetry of financial assets and liabilities, the same classification is used for both assets and liabilities. Definition Financial assets Financial assets are obligations over which ownership rights are enforced by institutional units, individually or collectively, and from which owners may derive economic benefits by holding them, or using them over a period of time. Financial assets differ from other assets in that there is a counterpart liability on the part of another institutional unit. The exceptions to this rule are for monetary gold and Special Drawing Rights. Financial liabilities Financial liabilities are obligations over which ownership rights are enforced by institutional units, individually or collectively, and which are economic costs to the units holding them. All financial liabilities have a counterpart financial asset, which is held by another institutional unit. Financial instrument The term financial instrument refers to both the asset or liability aspect of a category in the classification. Instruments of a contingent nature, such as one-off loan guarantees, are not considered financial assets as the transaction will only be created if at least one particular event occurs. Should that event occur, then the transaction is recorded, though it is no longer contingent. Therefore contingent instruments are not included in this classification. Corporations may set aside provisions which are funds to cover unexpected events or cover default by their customers. Provisions are not financial liabilities as there is no exchange or contractual relationship between institutional units. Provisions remain part of the net worth of a corporation. Operational issues There may be some issues with measuring asset groups at the third level of the classification. This is due to respondents having difficulty classifying some financial instruments to this level of detail. Some classes of instruments may be statistically insignificant and therefore difficult to collect data for in the context of New Zealand s economy. Explanatory notes Basis of ownership The transfer of financial instruments from one institutional unit to another is recorded when the economic ownership of the instrument changes from the first unit to the second. The Statistical Classification of Financial Assets and Liabilities 2013 is consistent with the 2008 SNA, in which a distinction is made between legal ownership and economic ownership. The legal owner is the institutional unit entitled in law to the benefits embodied in the asset s value. Every financial instrument has both a legal owner and an economic owner, though in many cases an institutional unit will have both forms of ownership over an instrument. Where they do not, the legal owner has handed responsibility for the risk involved in using the financial instrument to the economic owner, along with associated benefits. Classification criteria The Statistical Classification of Financial Assets and Liabilities 2013 is based primarily on two concepts: (1) the liquidity of the asset or liability, and (2) the legal characteristics of the underlying creditor/debtor relationship. 1

2 The concept of liquidity comprises the more specific characteristics of financial instruments, such as negotiability, transferability, marketability, or convertibility. These characteristics play a major role in determining the categories, although they are not separately identified in a systematic way. The legal characteristics of a financial instrument represents legal and technical arrangements which are defined by the issuer (or writer) of a financial instrument. These include but are not limited to; the day of issuance, trading criteria, payment schedules, maturity, right of transfer with or without authorisation from the issuer, and quotation in structured markets. These arrangements are usually defined in a contract. Maturity distinction is recognised as a secondary criterion in the classification of financial assets and liabilities. Short-term is defined as the instrument having an original maturity of one year or less, while long-term is defined as an original maturity of more than one year. Classification The Statistical Classification of Financial Assets and Liabilities 2013 is a three-level hierarchical classification. Level 1 has 8 categories, level 2 has 20 categories, and level 3 has 24 categories. 1 Monetary gold and Special Drawing Rights 11 Monetary gold 111 Monetary gold 12 Special Drawing Rights 121 Special Drawing Rights 2 Currency and deposits 21 Currency 211 Currency 22 Transferable deposits 221 Interbank positions 222 Other transferable deposits 23 Other deposits 231 Other deposits 3 Debt securities 31 Short-term debt securities 311 Short-term debt securities 32 Long-term debt securities 321 Long-term debt securities 4 Loans 41 Short-term loans 411 Short-term loans 42 Long-term loans 421 Long-term loans 5 Equity and investment fund shares 51 Equity 511 Listed shares 512 Unlisted shares 513 Other equity 52 Investment fund shares 521 Money market fund shares 522 Other investment fund shares 6 Insurance, pension, and standardised guarantee schemes 61 Non-life insurance technical provisions/reserves 2

3 611 Non-life insurance technical provisions/reserves 62 Life insurance and annuity entitlements 621 Life insurance and annuity entitlements 63 Pension entitlements 631 Pension entitlements 64 Claims of pension funds on pension managers 641 Claims of pension funds on pension managers 65 Provisions for calls under standardised guarantees 651 Provisions for calls under standardised guarantees 7 Financial derivatives and employee stock options 71 Financial derivatives 711 Financial derivatives 72 Employee stock options 721 Employee stock options 8 Other accounts receivable/payable 81 Trade credits and advances 811 Trade credits and advances 82 Accounts receivable/payable nec 821 Accounts receivable/payable nec The classification is stored in the Classifications and Related Standards System (CARS) under the subject financial' and the topic 'financial assets and liabilities'. It will replace the existing Financial Assets and Liabilities New Zealand Standard Classification (FINASS) Classification Statistical Classification of Financial Assets and Liabilities 2013 Abbreviation SCFAL Version V1.0 Effective date 18 December 2013 Coding process Not applicable Questionnaire module Requirements The main requirement for the collection of data on financial assets and liabilities is that the questionnaire module needs to clearly specify the types of assets and liabilities. This is so respondents can classify their financial information appropriately. The questionnaire module also needs to clearly indicate if dollar values of the assets or liabilities are required, and provide enough information to identify the original maturity of these instruments. Example There is no standard question for determining statistics of financial assets and liabilities. Data comes from a range of surveys, and questions vary depending on the survey s target respondent group. The surveys currently include: Annual Enterprise Surveys Household Economic Surveys Local Authority Census Managed Funds Survey Nominees Survey Quarterly International Investment Survey Standard Statistical Return (Reserve Bank of New Zealand). 3

4 Standard output The three levels of the SCFAL can be used as standard outputs, either in combination or individually. SCFAL outputs usually measure specific institutional sectors, as defined in the Statistical Standard for Institutional Sectors. Related classifications and standards New Zealand Financial Assets and Liabilities New Zealand Standard Classification 1996 (retired) HES Household Wealth Classification Statistical Classification of Non-Financial Assets (under development) Statistical Standard for Institutional Sectors (2013) International The statistical standard for financial assets and liabilities 2013 is based largely on the principles from the 2008 SNA. The international manuals listed below also provide further guidelines for specific treatment of instruments, and more-detailed technical information for specific topics: Balance of payments, international investment position, and rest of the world sector: Balance of Payments and International Investment Position Manual (6th Edition) Handbook of Security Statistics (2009) External Debt Statistics: Guide for Compilers and Users (2013) National accounts and government sector accounts: Government Finance Statistics (2012 draft) Handbook of National Accounting: Financial Production, Flows and Stocks in the System of National Accounts (2013) Financial sector: Monetary and Financial Statistics Manual (2000) Household wealth: OECD Guidelines for Micro Statistics on Household Wealth (2013) OECD Framework for Statistics on the Distribution of Household Income, Consumption and Wealth (2013). Glossary Economic ownership The institutional unit assuming the benefits of use and risk of the asset in case of damage, destruction and theft etc is the economic owner. Financial instrument Because of the symmetry of financial assets and liabilities, the same classification is used to portray both assets and liabilities. The term financial instrument refers to either the asset or liability aspect of a category in the classification. Institutional units Institutional units are the fundamental units identified in the economy. They interact with other institutional units, make decisions, and undertake their activity to achieve certain objectives. How they behave within the economy reflects their role the units are grouped into institutional sectors based on having similar roles. Maturity Maturity is the date at which the final repayment of a financial asset or liability is due; by extension, a measure of the scheduled life of the financial asset or liability. Negotiability Financial instruments can be distinguished as being negotiable or not. A claim is negotiable if its legal ownership is readily able to be transferred from one unit to another unit, by delivery or endorsement. While any financial instrument can potentially be traded, negotiable instruments are designed to be traded on organised and other markets. Non-participating preference shares These shares pay a fixed income but do not provide for participation in the distribution of the residual value of an incorporated enterprise on dissolution. These are classified as debt securities. See appendix 2 for category definitions. Residual categories Not elsewhere classified (nec) 4

5 A 'not elsewhere classified' (nec) category is a residual category that appears within a classification for responses that are infrequent or unanticipated. An nec category never appears within a classification as a stand-alone descriptor, but is combined with descriptors, often taken from a higher level in the classification. References Balance of Payments and International Investment Position Manual (6th Edition) External Debt Statistics: Guide for Compilers and Users (2013) Government Finance Statistics (2012 draft) Handbook on Securities Statistics (2009) System of National Accounts (2008) Appendix 1 Differences between 2008 SNA and the SCFAL Overall the standard aligns with 2008 SNA, with the following minor differences to account for 2008 SNA classes that are considered immaterial in New Zealand, or not sufficiently large to justify additional data collection: 1. This classification splits transferable deposits into (a) Interbank positions, and (b) Other transferable deposits. Interbank positions are those that facilitate financial intermediation within New Zealand and abroad, and are usually very short-term. A key feature of New Zealand s banking system is that many registered banks are foreign owned and borrow from their overseas parents in the legal form of a long-term loan. Given this characteristic, interbank positions in New Zealand do not align well with the definition set out in the 2008 SNA. Related interbank loans with offshore lenders do not meet the definition of a transferable deposit outlined in this standard. As other transferable deposits is a residual category, its definition also differs from the 2008 SNA definition. See Appendix 2 for definition details. 2. Schemes included under pension entitlements in the 2008 SNA are designated by employers. In the SCFAL, employee-designated schemes are included as New Zealand workplace pension arrangements often involve a number of choices for employees. 3. In the 2008 SNA, financial derivatives are split into options and forwards. This breakdown was not included in the SCFAL as data will not be sourced at this classification level. 4. The 2008 SNA category entitlements to non-pension benefits is not included within the breakdown of insurance, pension, and standardised guarantee schemes in SCFAL. These are not common in New Zealand and are not currently collected in any Statistics NZ surveys. Appendix 2 Classification category definitions for the SCFAL 1 Monetary gold and Special Drawing Rights Monetary gold and Special Drawing Rights issued by the International Monetary Fund (IMF) are reserve assets. 11 Monetary gold 111 Monetary gold Monetary gold can be either allocated or unallocated. Allocated gold accounts provide ownership of a specific piece of gold. The ownership remains with the entity placing it for safe custody. Allocated gold accounts have no counterpart liability. When held as reserve assets, allocated gold accounts are classified as monetary gold. When not held as reserve assets, non-monetary gold is classified as a non-financial asset (typically valuables or inventories). In contrast, unallocated gold accounts represent a claim against the account operator to deliver gold. For these accounts, the account provider holds title to a reserve base of physical (allocated) gold and issues claims to account holders denominated in gold. Unallocated gold account liabilities are debt liabilities of the account operator. 12 Special Drawing Rights 121 Special Drawing Rights Special Drawing Rights (SDRs) are international reserve assets created by the IMF and allocated to members to supplement existing official reserves. An SDR is neither a currency, nor a claim on the IMF. The IMF may allocate SDRs to members in proportion to their IMF quotas. The value of SDR allocations is classified as other investment in the international investment position and rest of the world balance sheet. 2 Currency and deposits 5

6 Financial transactions in currency and deposits consist of additions to, or disposals of, currency, and establishing or incrementing a deposit or making a withdrawal from it. Deposits include all claims on the central bank, deposit-taking corporations, and finance companies. They are represented by evidence of deposit. 21 Currency 211 Currency Currency consists of notes and coins of fixed nominal values that are issued and authorised by central banks or governments; notes and coins are in circulation and commonly used to make payments. 22 Transferable deposits Transferable deposits consist of all deposits that are exchangeable on demand, at par without restriction or penalty, and directly usable for making payments by cheque, direct debit/credit, or other payment facility. 221 Interbank positions Interbank positions are all positions between related or unrelated banking institutions, other than securities and accounts receivable/payable, that facilitate financial intermediation within New Zealand and abroad. Interbank positions include nostro and vostro accounts and other short-term deposits with other banking institutions. These are usually very short-term. New Zealand registered banks debt financing that is not for financial intermediation, i.e. long-term funding from overseas related entities, are not interbank positions and are classified as their legally incorporated instrument. This may be in the form of a debt security or loan. Subordinated debt is used by lenders to meet capital adequacy requirements set out by the Reserve Bank of New Zealand. In New Zealand this funding is often sourced from related-party lenders offshore. The liquidity status of subordinated debt doesn t match the definition of a transferable deposit. Subordinated debt is classified as a debt security or loan. 222 Other transferable deposits Other transferable deposits are all transferable deposits other than interbank positions. The deposit liability is owed to a household or other non-bank institution. 23 Other deposits 231 Other deposits Other deposits include all claims, other than transferable deposits, represented by evidence of deposit. Examples include: fixed-term deposits; sight deposits that permit immediate cash withdrawals but not direct third-party transfers; and shares that are legally (or practically) redeemable on demand or on short notice in finance companies, credit unions, building societies, etc. Other deposits also include at call cash collateral received from, or posted to, a derivative counterparty to protect against counterparty risk. Debt securities under repurchase agreements are classified as loans. When a deposit account becomes overdrawn, it is also reclassified as a loan. 3 Debt securities A debt security is a promise on the part of the issuer (the borrower) to make one or more payments to the holder (the lender) at a specified future date or dates. Such securities usually carry a specific rate of interest (the coupon) and/or are sold at a discount to the amount that will be repaid at maturity. Debt securities are negotiable, and have potential to be traded to third parties. They include non-participating preference shares. New Zealand government kiwi bonds are debt securities denominated in New Zealand dollars available only to New Zealand residents. Any non-resident is ineligible. Contract maturities are either six months, one year, two years, or four years. Kauri bonds are New Zealand dollar-denominated securities, registered in New Zealand and issued by a foreign issuer. Kauri bonds are classified as being short-term or long-term debt securities depending on their contract maturity. 31 Short-term debt securities 311 Short-term debt securities Short-term debt securities are securities that are payable on demand or have an original maturity of one year or less. Examples include: treasury bills and other short-term paper issued by general government; and negotiable short-term paper issued by financial and non-financial instruments, such as registered transferable deposits, commercial paper, commercial bills, Treasury bills, short-term negotiable bank certificates of deposit, short-term asset-backed securities (otherwise known as structured credit), and bills of exchange. 32 Long-term debt securities 321 Long-term debt securities 6

7 Long-term debt securities are securities that have an original maturity of more than one year or have no stated contracted expiry date. Examples of long-term debt securities include: subordinated bonds (or debt); capital notes, step-up securities, local authority bonds, bonds with optional maturity dates, the latest of which is more than one year away; undated or perpetual bonds; index-linked securities; deep-discounted bonds and zero coupon bonds; eurobonds; global bonds; privately issued bonds; securities resulting from the conversion of loans; loans that have become negotiable de facto; debentures; and loan stock convertible into shares. Shares or stocks that pay a fixed income but do not allow participation in the distribution of the residual value of the corporation on dissolution, including non-participating preference shares, are classified as debt securities instead of equity. 4 Loans Loans are created by a creditor directly lending funds to a debtor, through an arrangement in which the lender either receives no security evidencing the transaction or receives a non-negotiable document or instrument. Included are: loans to finance trade, other loans and advances (including mortgages), use of IMF credit, and loans from the IMF. In addition, acquisitions of goods backed by financial leases are classified as loans, as are debt securities under repurchase agreements. An overdraft arising from the overdraft facility of a transferable deposit account is classified as a loan. However, undrawn lines of credit are not recognised as a liability. 41 Short-term loans 411 Short-term loans Short-term loans are loans with an original maturity of one year or less. Loans repayable on the demand of the creditor should be classified as short-term, even when these loans are expected to be outstanding for more than one year. 42 Long-term loans 421 Long-term loans Long-term loans are loans with no stated maturity, or an original maturity of more than one year. 5 Equity and investment fund shares Holders of equity and investment fund shares own a residual claim on the assets of the institutional unit that issued the instrument. 51 Equity Equity consists of all instruments and records acknowledging, after the claims of all creditors have been met, claims to the residual values of incorporated and unincorporated enterprises. Equity is not a debt instrument, as it gives a residual claim on the assets of the entity. Equity includes all participating preference shares, but not non-participating preference shares. 511 Listed shares Listed shares are equity securities listed on an exchange. They are also referred to as quoted shares. The existence of quoted prices of shares listed on an exchange means that current market prices are usually readily available. Listed shares may be on a domestic or foreign stock exchange. Stock Exchange (NZX) is currently New Zealand s only exchange. 512 Unlisted shares Unlisted shares are equity securities not listed on an exchange. They can also be referred to as private equity; venture capital usually takes this form. Unlisted shares also include shares issued in overseas economies owned by New Zealand-based entities and households. Rules and regulations governing the issue of equity securities abroad may be different from those exercised in New Zealand. 513 Other equity Other equity is equity that is not in the form of securities. It can include equity in unincorporated enterprises (e.g. branches, trusts, sole traders, limited liability, and other partnerships), unincorporated funds, ownership of real estate, and other natural resources (such as land and minerals). The ownership of some international organisations is not in the form of shares and is classified as other equity, although equity in the Bank for International Settlements (BIS) is in the form of unlisted shares. In New Zealand shares in the BIS are held only by the central bank. 52 Investment fund shares Investment funds are collective investment undertakings through which investors pool funds for investment in financial or nonfinancial assets, or both. These are sometimes known as mutual funds. These funds issue shares (if a corporate structure is used) or units (if a trust structure is used). The shares in the fund purchased by individual investors represent an ownership interest in the pool of underlying assets that is, the investors have an equity stake. Because professional fund managers make the selection of assets, investment funds provide individual investors with an opportunity to invest in a diversified and 7

8 professionally managed portfolio of securities, without the need for detailed knowledge of the individual companies issuing the stocks and bonds. 521 Money market fund shares Money market funds are investment funds that invest only or primarily in short-term money market securities such as Treasury bills, certificates of deposit, and commercial paper. Money market fund shares or units represent a claim on a proportion of the value of an established money market fund. 522 Other investment fund shares Other investment funds typically invest in longer-term financial assets. They are not transferable and are typically not regarded as substitutes for deposits. Other investment fund shares or units represent a claim on a proportion of the value of an established investment fund, other than a money market fund. 6 Insurance, pension, and standardised guarantee schemes Insurance, pension, and standardised guarantee schemes all function as a form of redistribution of income or wealth mediated by financial institutions. Units participating in the schemes contribute to them, and may receive benefits (or have claims settled) in the same or later periods. 61 Non-life insurance technical provisions/reserves 611 Non-life insurance technical provisions/reserves Non-life insurance technical reserves consist of: (a) Reserves for unearned insurance premiums (prepayment of premiums) (b) Reserves against outstanding insurance claims the amounts identified by insurance corporations to cover what they expect to pay out, arising from events that have occurred but for which the claims are not yet settled. These are recorded when the insured event occurs, rather than when the insurance claim is made by the policyholder. Both non-life direct insurance and reinsurance are included in this item. These reserves represent liabilities of the insurer and a corresponding asset of the policyholders. 62 Life insurance and annuity entitlements 621 Life insurance and annuity entitlements Life insurance and annuities entitlements show the extent of financial claims that policyholders have against an enterprise offering life insurance or providing annuities. These instruments provide benefits to policyholders on the expiry of the policy, or compensate beneficiaries on the death of policyholders, and are therefore kept separate from shareholders funds. These entitlements are regarded as liabilities of the insurance companies, and assets of the policyholders and beneficiaries. 63 Pension entitlements 631 Pension entitlements Pension entitlements show the extent of financial claims that existing and future pensioners hold against either their employer, or a fund designated by the employee or employer, to pay pensions earned as part of a compensation agreement between the employer and employee. KiwiSaver is an example of a fund designated by an employee. KiwiSaver is voluntary, work-based long-term savings initiative for retirement. The economy of residence of pension schemes may differ from that of some of their beneficiaries in particular for: border workers, guest workers who return home, people who retire to a different economy, staff of international organisations, and employees of transnational enterprise groups that have a single pension fund for the whole group. Liabilities of unfunded pension schemes are also included in this category. These entitlements represent liabilities of the pension fund and a corresponding asset of the beneficiaries. 64 Claims of pension funds on pension managers 641 Claims of pension funds on pension managers Claims of pension funds on pension managers refers to the situations where an employer contracts with a third party to look after the pension funds for his employees. The pension manager and the administrator retain the risks/rights in case of deficit/excess funding. When the pension manager is a different unit from the administrator, and the amount accruing to the pension fund falls below/exceeds the increase in entitlements, a claim/liability of the pension fund on the pension manager is recorded. 65 Provisions for calls under standardised guarantees 651 Provisions for calls under standardised guarantees Provisions for calls under standardised guarantees are financial claims that their holders have against the institutional units providing them. Provisions relating to calls under standardised guarantees are prepayments of net fees, and provision to meet outstanding calls under standardised guarantees. The value to be entered in the balance sheet for provisions for calls under standardised guarantees is the expected level of claims under current guarantees, less any expected recoveries. Like 8

9 provisions for prepaid insurance premiums and reserves, provisions for calls under standardised guarantees include unearned fees (premiums) and calls (claims) not yet settled. 7 Financial derivatives and employee stock options Financial derivatives and employee stock options are financial assets and liabilities with similar features, such as a strike price and some of the same risk elements. However, although both transfer risk, employee stock options are also designed to be a form of remuneration. The Securities Market Act 1988 regulates trading on registered exchanges and authorised futures exchanges. The Financial Markets Authority enables the authorisation and registration of securities and futures. 71 Financial derivatives 711 Financial derivatives Financial derivatives are financial instruments that are linked to a specific financial instrument or indicator or commodity, and through which specific financial risks can be traded in financial markets in their own right. The value of a financial derivative is derived from the price of an underlying item. Examples of financial derivatives are: foreign exchange swaps, interest rate swaps, dairy futures, currency options, forwards, and warrants. Payments associated with derivatives may be contingent on the realisation of an event, or alternatively, both parties in the contract may have unconditional rights to a pre-determined set of payments that conform to a set of variables (e.g. swaps). Derivatives are primarily used to manage risk and to speculate on the future dynamics of the underlying asset. 72 Employee stock options 721 Employee stock options An employee stock option is an agreement made on a given date under which an employee may purchase a given number of shares of the employer s stock, at a stated price, either at a stated time or within a period of time. 8 Other accounts receivable/payable Other accounts receivable/payable consists of (a) trade credit and advances, and (b) accounts receivable/payable nec. 81 Trade credits and advances 811 Trade credits and advances Trade credit and advances for goods and services consists of: (a) credit extended directly by the suppliers of goods and services to their customers (b) advances for work in progress (or yet to be undertaken), and prepayment by customers for goods and services not yet provided (the debt is extinguished when the supplier provides the goods and/or services). Trade credits and advances do not include loans to finance trade credit, which are classified as loans. 82 Accounts receivable/payable nec 821 Accounts receivable/payable nec Accounts receivable/payable nec covers amounts related to taxes, dividends, purchases and sales of securities, security lending fees, wages and salaries, and social contributions that have accrued but are not yet paid. These are receivables/payables that do not relate to goods and services. 9