CBS - Lesson 7 - 19 October 2022

External Statistics
LESSON #7
Central Banks’ Statistics

Post-Graduation in Statistical Systems
2022|2023
Lesson 7: 19th October 2022
1. Financial account
2. Other changes in Financial assets and Liabilities

Account

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Post-Graduation in Statistical Systems, 2022|2023 Interno -- Banco
Banco de
de Portugal
Portugal
Financial Account
Functional categories

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Banco de
de Portugal
Portugal
Financial Account
 Portfolio investment cross-border transactions and positions involving

debt or equity securities, other than those included in direct
investment or reserve assets
 Securities characteristic negotiability - legal ownership is capable of
being transferred from one unit to another by delivery / endorsement
 Facilitates trading, allowing securities to be held by different parties
during their lives, diversification by investors of their portfolios and
withdraw their investment readily (anonym and distant relationship
between the issuer and the investor and the instruments)

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Banco de
de Portugal
Portugal
Financial Account
 Valuation at market value when they are acquired/sold. Securities

regularly traded (not traded) in markets can be valued using the
markets’ price quotations (estimate fair values)
 Use of the dirty (market) price:
Equity - inclusion of dividends declared payable but not yet paid
(until ex-dividend date)
Debt - inclusion of accrued interest not yet paid (accrued interest is
calculated following the “debtor approach”)
 Includes
Equity securities - listed /unlisted shares when the investor owns less than
10% in total shares, time-share accommodation evidenced by a security
Debt securities - negotiable instruments serving as evidence of a debt
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Banco de
de Portugal
Portugal
Financial Account

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Banco de
de Portugal
Portugal
Financial Account
Investment fund shares /units - evidenced by securities and that are not
reserve assets or direct investment
 Geographical breakdown assets (country of the issuer of the foreign

security) liabilities (country of ultimate holder)
 Estimation of debt securities fair value: i) future cash flows discount
value; ii) market prices of similar financial assets /liabilities
n
cash flowt
P.V  
i) Sum of the present values of all future cash flows: t 1 1  i t
The numerator is the cash flow in a future period (t); n is the number of future
periods for which cash flows are expected; i is the interest rate that is applied to
discount the future cash flow in period t
Example a resident company sold to nonresident a two-year maturity bonds

issued at a discount 10% yield and a MEUR 3 coupon payment every year. The
face value of the bond is MEUR 50. The discounted present value is…
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Banco de
de Portugal
Portugal
Financial Account
 Primary income - portfolio investment

Ownership of capital - dividends (equity) and reinvested earnings
(investment fund shares)
Debt securities – interest
Exercise A resident company in country “X” issued bonds MEUR 15 that

were acquired by non residents and bought MEUR 10 in ordinary stock of
nonresident companies. This company received MEUR 5 in dividends, after
nonresident government deducted MEUR 2 in withholding taxes. All the
amounts received / paid came from a resident comercial bank

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Banco de
de Portugal
Portugal
Financial Account

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Banco de
de Portugal
Portugal
Financial Account
 Financial Derivatives (other than Reserves) and Employee Stock

options - linked to another specific financial instrument or indicator or
commodity and through which specific financial risks (e.g., interest
rate risk, foreign exchange risk, equity and commodity price risks,
credit risk, …) can be traded in their own right in financial markets
 Allows trading financial risks - interest rate risk, foreign exchange risk,
equity and commodity price risk, credit risk; Used mostly for hedging, but
also speculation; High leverage
 Valuation at market prices. If market price data are unavailable, other

fair value methods (option models or present values) may be used

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Banco de
de Portugal
Portugal
Financial Account

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Banco de
de Portugal
Portugal
Financial Account
 Assets and liabilities should be recorded separately (gross basis) for

transactions /positions. If not feasible, net reporting is acceptable
 The market value of a forward-type contract can switch from an asset
to a liability position (and vice versa)
 If the required detail to clearly determine the asset/liability nature of a
transaction is not available: Cash receipts (payments) should be
recorded as decreases in assets (liabilities)
 Secondary market transactions in tradable derivatives, such as options
and futures, are financial transactions

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Banco de
de Portugal
Portugal
Financial Account
 Geographical breakdown - the country in which the clearing house
(exchange) or any other intermediary is located (information on the residence
of the ultimate investor usually not available)
 Valuation - because the future reference price is not known, the future value
of the financial derivative at maturity can only be estimated. The value may
be calculated as the difference between the agreed-upon contract price
(strike price) of the underlying item and the prevailing market price,
appropriately discounted, times quantity
 No primary income accrues on financial derivatives. Amounts accruing under
the contract are revaluations (other changes in assets and liabilities account)
 Employee stock options - options to buy the equity of a company, offered to
employees of the company as a form of remuneration

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Banco de
de Portugal
Portugal
Financial Account

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Banco de
de Portugal
Portugal
Financial Account
 Other Investment - residual category that includes positions and

transactions other than those included in direct investment, portfolio
investment, financial derivatives and employee stock options, and
reserve assets. Includes:
i) other equity - not included in direct investment /reserve assets and not in
the form of securities - not included in portfolio investment
ii) currency and deposits
Interbank deposits - other than securities and accounts receivable/ payable
are classified under deposits
Transferable deposits - i) exchangeable for banknotes /coins on demand at
par without penalty /restriction; ii) directly usable for making payments by
check, draft, direct debit or credit, or other direct payment facility

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Banco de
de Portugal
Portugal
Financial Account
Other deposits - claims, other than transferable deposits, that are

represented by evidence of deposit. Include savings and fixed-term
deposits, and nonnegotiable certificates of deposit
iii) loans (include use of IMF credit and loans from the IMF)
Interest costs accrued and not yet payable are included
When principal and/or interest payments are not made when due, arrears
occur until they are extinguished

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Banco de
de Portugal
Portugal
Financial Account
iv) Insurance, pension, and standardised guarantee schemes - represent

liabilities of the insurer, pension fund, or issuer of standardized guarantees
and a corresponding asset of the policyholders or beneficiaries
Nonlife insurance technical reserves
Life insurance /annuity and pension entitlements, entitlements to
nonpension funds, recognised as economic assets and liabilities
Claims of pension funds on pension managers
Provisions for calls under standardised guarantees
v) Trade credit and advances

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Banco de
de Portugal
Portugal
Financial Account
vi) Other accounts receivable/payable - other
vii) SDR allocations (SDR holdings included in reserve assets) - held only by
Monetary authorities of IMF members and International financial
institutions
 Primary income (includes accrual)

 Interest - deposits, loans, trade credit and advances, and other accounts
receivable/payable, SDR allocation, fees for monetary gold loans
 Income on equity and investment fund shares - not classified in any
other functional categories
 Investment income attributable to policyholders in insurance,
standardized guarantees, and pension funds
Exercise A resident company in country “X” contracted in 2016 a 2-year loan by
MEUR 20 from a commercial bank. Interest rate is 10% /year payable in 2018
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Banco de
de Portugal
Portugal
Financial Account

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Banco de
de Portugal
Portugal
Financial Account

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Banco de
de Portugal
Portugal
Financial Account
 Reserve assets - external assets that are readily available to and

controlled by monetary authorities for meeting balance of payments
financing needs, for intervention in exchange markets to affect the
currency exchange rate, and for other related purposes (maintaining
confidence in the currency and the economy, and serving as a basis for
foreign borrowing)
 Reserve assets, other than gold bullion, must be claims on
nonresidents. Conversely, the authorities’ foreign currency claims on
residents, including claims on resident banks, are not reserve assets

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Banco de
de Portugal
Portugal
Financial Account
 Control - in general, only external claims owned by monetary authorities

can be classified as reserve assets. Nonetheless, ownership is not the only
condition that confers control (some conditions have to be considered)
 Availability for use - must be readily available in an unconditional form (when
can be bought, sold, and liquidated for foreign currency - cash - with
minimum cost and time, without affecting the value of the asset)
 Denominated and settled in foreign currency in convertible foreign
currencies, that is, currencies that are freely usable for settlements of
international transactions (to be liquid)

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Banco de
de Portugal
Portugal
Financial Account
 Classification of reserve assets

 Monetary gold - is gold to which the monetary authorities (others
subject to the effective control of the monetary authorities) have title
and is held as reserve assets. It consists of:
- Gold bullion (coins, ingots, or bars, including gold held in allocated
gold accounts)
- Unallocated gold accounts with nonresidents
 Gold accounts
Allocated gold accounts - provide ownership of a specific piece of gold:
i) when held as reserve assets, are classified as monetary gold; ii)
when not held as reserve assets, are treated as representing
ownership of a good - nonmonetary gold

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Banco de
de Portugal
Portugal
Financial Account
Unallocated gold accounts - represent a claim against the account
operator to deliver gold: i) when held as reserve assets, are classified
as monetary gold; ii) when not held as reserve assets, and all
unallocated gold account liabilities, are classified as deposits
 To minimize risks of default in gold lending transactions, monetary
authorities can require collateral instead of cash (e.g., securities) from
the depository. Such collateral should not be included in reserve assets
 Gold bullion included in monetary gold is a financial asset for which
there is no corresponding liability
 Transactions in gold bullion as reserve assets are recorded as:
 transactions in gold bullion if occur between monetary authorities /
with international financial institutions
 other changes in volume if occur with all other counterparts
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Banco de
de Portugal
Portugal
Financial Account
 SDR holdings - reserve assets created by the IMF and are equivalent to
liquid balances in convertible currencies in nearly every respect
 Reserve position in the IMF is the sum of:
 “reserve tranche,” the foreign currency amounts that a member
country may draw from the IMF at short notice
 any indebtedness of the IMF (under a loan agreement) in the
General Resources Account that is readily available to the member
country
 Currency and deposits - available on demand, deposits with a fixed term
that are redeemable on demand or at very short notice without affecting
the value of the deposit
Comprise deposits held in foreign central banks, the BIS, other nonresident
deposit taking corporations, and deposit agreements with IMF Trust Accounts

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Banco de
de Portugal
Portugal
Financial Account
 Securities - include liquid and marketable equity and debt securities
issued by nonresidents:
 Long-term securities (e.g., 30-year US Treasury bonds) are included
 Unlisted securities are, in principle, excluded unless they are liquid
 Securities transferred under agreements by the monetary authorities for
cash collateral are assets of the original authorities and are either included
as reserve assets of the original owner, or excluded from reserve assets and
reclassified as portfolio investment assets
 Financial derivatives - are recorded only if pertain to the management of

reserve assets, are integral to the valuation of such assets, and are under
the effective control of the monetary authorities
 Recorded on a net basis at market value

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Banco de
de Portugal
Portugal
Financial Account
 Other claims - include short-term loans to nonresident non-deposit-
taking corporations, long-term loans to an IMF Trust Account readily
repayable to meet a balance of payments financing need, loans arising
from a reverse repo (unless deposits), and other financial assets not
included above (e.g., nonnegotiable investment fund shares)
 Investment income includes equity and investment fund shares
(dividends on equity securities and income attributable to investment
fund shareholders – distributed and reinvested earnings) and interest
(also includes fees on security lending and monetary gold loans and
interest on unallocated gold accounts)
 Interest on SDR holdings is shown on a gross basis i.e., the value of
interest payable on SDR allocations is not deducted
Example Banco de Portugal buys MUSD 100 treasury bond in US, MEUR 20
Italian bond
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Banco de
de Portugal
Portugal
Financial Account

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Banco de
de Portugal
Portugal
Classifications of Financial Assets and Liabilities
Type of instrument

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Banco de
de Portugal
Portugal
Financial Account
BoP / IIP linkages

Balance of Volume
payments Revaluations changes
Current and
capital acc.
=
Position at Financial Price Exchange
beginning of
period
+ account + changes + rate changes + Other
changes = Position at
end of period
Flows
International International
investment Position investment Position

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Banco de
de Portugal
Portugal
Other Changes in Financial
Assets and Liabilities Account
 Other changes in financial assets and liabilities account shows changes in

financial positions that arise for reasons other than transactions between
residents and nonresidents - “other flows”
 In international accounts, other changes are recorded only for financial
assets and liabilities because the international investment position relates
only to external financial assets and liabilities
 Together with the financial account, the other changes in financial assets and
liabilities explain changes in the International Investment Position - financial
assets and liabilities gain or lose value and appear or disappear as a result
of…

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Banco de
de Portugal
Portugal
 Other changes in the volume of financial assets and liabilities are any
changes in the value of these assets that are due neither to transactions nor
to revaluation. Includes:
 cancellation and write-offs
 economic appearance and disappearance of assets
 reclassification
 changes in financial assets arising from entities changing their economy
of residence

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Banco de
de Portugal
Portugal
 Revaluation occur because of a change in the monetary value of a financial
asset or liability due to changes in the level and structure of its price are any
changes in the value of these assets that are due neither to transactions nor
to revaluation. May also be called holding gains or losses
 Because of the importance of instruments denominated in foreign
currencies in the International Investment Position and their different
behavior, the values of revaluation are separated into those due to two
factors: exchange rate changes and other price changes
 Exchange rate changes show all the changes that result from exposure to
the effect of exchange rates
 Other price changes show other causes such as asset price volatility

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Banco de
de Portugal
Portugal
 General overview

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Banco de
de Portugal
Portugal
Questions, comments ...
João Falcão Silva

jmsilva@novaims.unl.pt | jmfsilva@bportugal.pt
Interno 35
Banco de
de Portugal
Portugal

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External Statistics

Central Banks’ Statistics

2. Other changes in Financial assets and Liabilities

Central Banks’ Statistics

Central Banks’ Statistics

 Portfolio investment cross-border transactions and positions involving

Central Banks’ Statistics

 Valuation at market value when they are acquired/sold. Securities

Central Banks’ Statistics

 Geographical breakdown assets (country of the issuer of the foreign

Example a resident company sold to nonresident a two-year maturity bonds

 Primary income - portfolio investment

Exercise A resident company in country “X” issued bonds MEUR 15 that

Central Banks’ Statistics

Central Banks’ Statistics

 Financial Derivatives (other than Reserves) and Employee Stock

 Valuation at market prices. If market price data are unavailable, other

Central Banks’ Statistics

Central Banks’ Statistics

 Assets and liabilities should be recorded separately (gross basis) for

Central Banks’ Statistics

Central Banks’ Statistics

Central Banks’ Statistics

 Other Investment - residual category that includes positions and

Central Banks’ Statistics

Other deposits - claims, other than transferable deposits, that are

Central Banks’ Statistics

iv) Insurance, pension, and standardised guarantee schemes - represent

Central Banks’ Statistics

 Primary income (includes accrual)

Central Banks’ Statistics

Central Banks’ Statistics

 Reserve assets - external assets that are readily available to and

Central Banks’ Statistics

 Control - in general, only external claims owned by monetary authorities

Central Banks’ Statistics

 Classification of reserve assets

Central Banks’ Statistics

Central Banks’ Statistics

 Financial derivatives - are recorded only if pertain to the management of

Central Banks’ Statistics

Central Banks’ Statistics

Central Banks’ Statistics

BoP / IIP linkages

Central Banks’ Statistics

 Other changes in financial assets and liabilities account shows changes in

Central Banks’ Statistics

Central Banks’ Statistics

Central Banks’ Statistics

Central Banks’ Statistics

João Falcão Silva

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