CBS - Lesson 5 - 6 - 3 - 10 October 2022

External Statistics
LESSONS #5 and #6
Central Banks’ Statistics

Post-Graduation in Statistical Systems
2022|2023
Lesson 5: 3rd October 2022
1. Secondary income account

2. Capital account
3. Financial account

Post-Graduation in Statistical Systems, 2022|2023 2
Secondary Income Account
Main components

General overview
 Secondary Income Account shows current transfers (in cash or in

kind) between residents and nonresidents.
 secondary income, together with primary income, affects gross
national disposable income
 Current transfers can be further classified by institutional sectors
receiving or providing the transfers
 Two distinctions are made:

i) transfers are distinguished from other types of transactions
ii) current transfers are distinguished from capital transfers

Valuation
 Valuation transfers should be valued at the prices that would have
been received if had been sold in the market (in Kind); at the market
price of goods /services at the time of the transfer (donation); cost of
acquisition, no time lag between the acquisition and the transfer
 The recording of a transfer involves two entries:
 In cash - the donor (recipient) records a decrease (increase) in
currency or deposits and a transfer payable (receivable)
 Provision of goods or services in kind without a charge, the donor
(recipient) records an export (import) of goods or services and a
transfer payable (receivable)
 When a liability is forgiven, the creditor and debtor extinguish the
financial asset and liability, respectively, with the corresponding
entries recorded as transfers
Types of Current Transfers
 Types of current transfers: Personal transfers and other current
transfers
 Personal transfers current transfers in cash or in kind made/received by
resident households to /from nonresident households.
Resources sent abroad by residents of an economy for the purpose of financing
other residents of the same economy who are staying abroad should not be
recorded as current transfers (e.g. education services)
 Expenditures incurred abroad by residents staying for less than one year
in foreign economic territories are generally recorded as travel
 Funds sent abroad for depositing on a bank account abroad are recorded
in financial account

 Joint accounts of emigrant workers in their home country

 If the joint account in their home country is freely usable by its holders in
the home country, the account may be considered to be held by residents.
Deposits made to this account by the nonresident - personal transfer
 Transfers regarded as taking place directly from those participating in the

lottery or gambling to the winners and charities (they are not recorded as
transfers to or by the unit operating the gambling)
 Remittances - Represent household income from foreign economies
arising mainly from the temporary or permanent movement of people to
those economies

Three categories (from the perspective of the recipient economy)
Total remittances and

Personal remittances Total remittances
transfers to NPISHs
• Personal transfers • Personal remittances • Total remittances
receivable (+) receivable (+) receivable (+)
• Compensation of • Social benefits receivable • Current transfers
employees receivable (+) (+) receivable by NPISHs (+)
• Taxes and social • Capital transfers
contributions payable, receivable by NPISHs (+)
related to compensation
of employees (-)
• Transport and travel
expenditures payable by
residents employed by
nonresidents (-)
• Capital transfers
receivable from
households (+)

 Other current transfers include
Current taxes on income, wealth, etc.
Social contributions
Social benefits
Net premiums on nonlife insurance and standardized guarantees
Nonlife insurance claims and calls under standardized guarantees
Current international cooperation
Miscellaneous current transfers

 Current taxes on income, wealth, etc - mainly taxes levied on the income
earned by nonresidents from the provision of their labor or financial
assets (e.g. income taxes), taxes on capital are also included. Refund of
taxes to taxpayers are treated as negative taxes
 Social contributions - actual / imputed contributions made by
households to social insurance schemes to make provision for social
benefits to be paid. The calculation of the amount of social contributions
varies for social security and pension schemes
 Social insurance schemes include social security schemes and
employment-related schemes

 Social contributions to
Social security schemes - actual contributions payable by the
employers and employees (the amount payable by employers is
included in the compensation of employees). Because the amount
payable by employers is included in the compensation of employees,
the total of social contributions payable to social security schemes is
recorded as a transfer payable by the employees
Pension schemes - contribution supplements and service charge:
Employers’ actual contributions + Employers’ imputed contributions +
Employees’ actual contributions + Contribution supplements
corresponding to investment income payable by pension schemes on
pension entitlements – Service charges payable to pension schemes
(charges payable by the employees, because the beneficiaries are the
ultimate users)

 Social benefits - include benefits payable under social security and
pension schemes
 Net premiums on nonlife insurance and standardized guarantees
Nonlife insurance premiums consist of both the gross premiums payable
by policyholders to obtain insurance (premiums earned) and the premium
supplements payable out of the investment income attributable to
insurance policyholders
[Net non life insurance premiums = net premiums receivable (earned)] =
gross premiums receivable + premium supplements – insurance service

Standardized guarantees occur when some units, especially government

units, provide guarantees against creditors defaulting in conditions that
have the same characteristics as nonlife insurance.
Net nonlife insurance premiums constitute current transfers (secondary
income account).
Nonlife insurance claims and calls under standardized guarantees -
amounts payable in settlement of claims that become due during the
current accounting period. Become due at the moment when the
eventuality occurs that gives rise to a valid claim. Are calculated and
recorded in the same way as for the direct nonlife insurance

Capital Account
Main components

Capital Account
General overview
 Capital Account shows capital transfers receivable /payable between

residents and nonresidents and the acquisition / disposal of
nonproduced, nonfinancial assets between residents and nonresidents
 Acquisition and disposal of nonproduced, nonfinancial assets are

recorded at the time of change of ownership
 Capital transfers are recorded when all requirements and conditions

for receiving them are satisfied and the receiving unit has an
unconditional claim
 These to items are recorded separately on a gross basis

Capital Account
Nonproduced, nonfinancial assets
 Nonproduced, nonfinancial assets consist of:

i) natural resources
ii) contracts, leases, and licenses
iii) marketing assets (and goodwill)
i) Natural resources - land if not included in Foreign Direct Investment,

mineral rights, forestry rights, water, fishing rights, air space, and
electromagnetic spectrum. International transactions arise when:
acquisitions and disposals of land for enclaves of international
organizations and foreign governments
voluntary changes of sovereignty over a particular area, whether for
payment or as a transfer
Capital Account
Nonproduced, nonfinancial assets
ii) Contracts, leases, and licenses - covers those contracts, leases, and
licenses recognized as economic assets, which are creations of society and
its legal system, sometimes called intangible assets
iii) Marketing assets (and Goodwill) consist of items such as brand names,
mastheads, trademarks, logos, and domain names, when sold separately
from the entity that owns them. Goodwill arises when a company acquires
another company, but it pays more than the market value (fair value) of net
assets/liabilities.

Capital Account
Capital Transfers
 Capital Transfers - transfers in which the ownership of an asset (other

than cash or inventories): i) changes from one party to another; ii)
obliges one or both parties to acquire / dispose of an asset; iii) a
liability is forgiven by the creditor
 Types of capital transfers:
Debt forgiveness
Nonlife insurance claims
Investment grants
Other capital transfers
…

Capital Account
Capital Transfers
 Debt forgiveness - voluntary cancellation of all or part of a debt

obligation (principal amount outstanding, including interest arrears and
any other accrued interest costs) within a contractual agreement
between creditor and debtor
 Nonlife insurance claims - Exceptionally large claims. By convention, all
cross-border nonlife insurance claims are classified as current transfers,
unless it is necessary to record a capital transfer to be consistent with the
national accounts
 Investment grants - capital transfers in cash or in kind made by
governments or international organizations to other institutional units to
finance all or part of the costs of their acquiring fixed assets.

Financial Account
Main components

Financial Account
General overview
 Financial Account records transactions that involve financial assets

/liabilities and that take place between residents and nonresidents
 Indicates the functional categories, sectors , instruments, and
maturities used for net international financing transactions being
classified according to the instrument and functional categories
 Net recording aggregations whereby all debit entries of a particular
asset or a particular liability are netted against all credit entries in the
same asset type or in the same liability type
 Change of economic ownership
 Market value - exclusive of commissions, fees, service charges,
regulatory levies, and taxes, whether charged explicitly, included in the
purchaser’s price, or deducted from the seller’s proceeds.
Financial Account
General overview / Classification of financial assets and liabilities
 Classifications of financial assets /liabilities applied to positions, the

associated income, transactions, and other changes involving financial
assets / liabilities. Are used to group similar components and to
separate components with different characteristics
 Economic assets resources over which ownership rights are enforced
and from which future economic benefits (e.g., the ability to use
assets such as buildings in production) may flow to the owner (the
party who has the risks and rewards of ownership)
Classification system: i) financial assets ; ii) nonfinancial assets
i) financial assets consist of claims and the gold bullion component of

monetary gold
ii) nonfinancial assets do not have a corresponding liability (e.g., emission
rights may be traded on organized markets)
Financial Account
Classification of financial assets and liabilities
 Claim is a financial instrument that gives rise to an economic asset with
a counterpart liability.
 Financial instruments full range of financial contracts made

between institutional units
 Classification based primarily on the legal characteristics that describe
the form of underlying relationship between the parties to an
instrument, also related to their liquidity /economic purpose
 Classification of Financial Assets and Liabilities by Type of Instrument
Equity and investment fund shares
Debt instruments
Other financial assets and liabilities

Financial Account
Classification of financial assets and liabilities / Type of instrument
 Equity and investment fund shares - the holders own a residual claim
on the assets of the institutional unit that issued the instrument
Equity all instruments and records that acknowledge claims on the residual
value of a corporation or quasi-corporation, after the claims of all creditors
have been met (liability of the issuing corporation or other unit)
Investment fund shares are collective investment undertakings through

which investors pool funds for investment in financial or nonfinancial assets
or both.
Include money market funds (MMF) and nonMMF investment funds

Financial Account
Type of instrument
 Debt instruments (applicable both the liability and corresponding

claims) require the payment of principal and/or interest at some
point(s) in the future. Consist of: i) Special Drawing Rights; ii) Currency
and Deposits; iii) Debt securities; iv) Loans; v) Insurance technical
reserves; vi) Pension and related entitlements; vii) Provision for calls
under standardized guarantees; viii) Other accounts receivable/payable
 Some instruments pay no interest
 Debt vs Equity

Financial Account
Type of instrument
 Special drawing rights (SDRs) - international reserve assets created by
the International Monetary Fund and allocated to members to
supplement existing official reserves
Represent unconditional rights to obtain foreign exchange or other reserve
assets from other International Monetary Fund members
Holdings (allocation) of SDRs (IMF member/ the member receiving them) are
recorded as an asset (incurrence of a liability)
The holdings and allocations should be shown gross, rather than netted
 Currency - Consists of notes and coins that are of fixed nominal values
and are issued or authorized by central banks or governments
 Deposits - include all claims that are on the central bank, deposit-taking
corporations other than the central bank, and, in some cases, other
institutional units

Financial Account
Type of instrument
 Debt securities - negotiable instruments serving as evidence of a debt.
Defined as:
i) Long-term - convertible bonds; non-participating preferred stocks
and shares; bonds with optional maturity dates of over one year…
ii) Short-term - treasury bills; short-term notes issued under note
issuance facilities; certificates of deposit; commercial paper
 Loans - financial assets that are created when a creditor lends funds
directly to a debtor, and are evidenced by documents that are not
negotiable (includes all loans, except accounts receivable/payable)

Financial Account
Type of instrument
 Insurance, pension, and standardized guarantee schemes - Consist of

the following:
i) nonlife insurance technical reserves - Reserves against outstanding
claims reserves for unearned (i.e., prepaid) insurance premiums
ii) life insurance and annuity entitlements - provide benefits to
policyholders upon the expiry of the policy/ compensate beneficiaries
upon the death of policyholders
iii) pension entitlements, claims of pension funds on pension managers,
and entitlements to nonpension funds - financial claims both existing
and future pensioners hold against either their employer or a fund
designated by the employer to pay pensions earned as part of a
compensation agreement between the employer and employee

Financial Account
Type of instrument
iv) provisions for calls under standardized guarantees - those that are
not provided by means of a financial derivative (such as credit default
swaps), but where the probability of default can be well established
 Other accounts receivable/payable: Trade credits and advances -
payment for goods or services not at the same time as the change in
ownership; Other - accounts receivable /payable other than those in
trade credit and advances
 Other financial assets and liabilities (not recognized as financial assets /
liabilities) - Contingent assets and liabilities (do not give rise to
unconditional requirements either to make payments or to provide other
objects of value)
i) Monetary gold to which the monetary authorities have title and is
held as reserve assets: gold bullion; unallocated gold accounts
ii) Financial derivatives
Financial Account
Maturity
 Maturity may relate to:

original maturity - the period from issue until the final contractually
scheduled payment (used in the standard components)
remaining maturity - the period from the reference date until the final
contractually scheduled payment
 Classification for debt instruments (liquidity dimensions):

Short-term as payable debt repayable on demand or with an original
maturity of one year or less (includes currency)
Long-term debt with an original maturity of more than one year or with no
stated maturity

Financial Account
Functional categories

Financial Account
 Direct investor - an entity that acquired, directly (owning equity that

gives voting power in the enterprise) or indirectly (by voting power in
another enterprise that has voting power in the enterprise), at least
10% of the voting power of a corporation resident in other economy
 Direct investment enterprise - an enterprise in which an investor

resident in another economy owns, directly or indirectly 10% or more
of its voting power. Relationship with a direct investor, a direct
investment enterprise is a subsidiary, or an associate

Financial Account
 Affiliates of an enterprise:
i) its direct investor(s), both immediate and indirect
ii) its direct investment enterprises, whether subsidiaries (including
branches and other quasicorporations), associates and subsidiaries of
associates, both immediate and indirect
iii) Fellow enterprises - under the control or influence of the same
immediate or indirect investor, but neither fellow enterprise controls
or influences the other fellow enterprise
 All affiliates are in a direct investment relationship with each other

Financial Account
 Alternative methods to measure indirect control or influence
Framework for Direct Investment Relationships (FDIR) establishes criteria
for determining whether an interest of international capital gives rise to a
direct investment relationship, based on the concepts of control and
influence
Participation Multiplication Method (PMM) the calculation of participation
percentage is based on a straight multiplication and summation of direct
and indirect participation percentages (US method)
Direct Influence/Indirect Control Method (DIIC) includes in direct
investment all enterprises of which the voting power is 10% or more
directly owned, plus all enterprises that are controlled by them (ownership
of more than 50% of the voting power), plus all other enterprises in a
continuous chain of majority ownership

Financial Account
 Direct investment includes not only the equity transaction but all
subsequent financial transactions and positions associated with this
relationship: i) transactions (positions) between fellow enterprises,
(un)incorporated; ii) intercompany debt (except of selected financial
intermediaries); iii) reverse investment; iv) reinvested earnings; v)
investment in indirectly influenced or controlled enterprises
 Reverse investment - a direct investment enterprise lends funds to /
acquires equity in its immediate or indirect direct investor, provided
it does not own equity comprising 10 % or more of the voting power in
that direct investor
 Directional principle: inward and outward

Financial Account
 Primary income - direct investment (according to accrual principle)
Ownership of capital - dividends and reinvested earnings
Loans and debt securities - interest
 Special cases:
 Loans between Institutions that accept deposits, Investment funds and
Other financial intermediaries, except insurance corporations and
pension funds
 Investments in Investment funds are classified by convention within the
Eurosystem
 Real estate properties and homes
 Superdividends

Financial Account
Directional principle vs Asset / Liability

Questions, comments ...
João Falcão Silva

jmsilva@novaims.unl.pt | jmfsilva@bportugal.pt

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External Statistics

Central Banks’ Statistics

1. Secondary income account

Central Banks’ Statistics

Central Banks’ Statistics

 Secondary Income Account shows current transfers (in cash or in

 Two distinctions are made:

Central Banks’ Statistics

Central Banks’ Statistics

 Joint accounts of emigrant workers in their home country

 Transfers regarded as taking place directly from those participating in the

Central Banks’ Statistics

Total remittances and

Central Banks’ Statistics

 Other current transfers include

Current taxes on income, wealth, etc.

Net premiums on nonlife insurance and standardized guarantees

Nonlife insurance claims and calls under standardized guarantees

Current international cooperation

Miscellaneous current transfers

Central Banks’ Statistics

Central Banks’ Statistics

Central Banks’ Statistics

Central Banks’ Statistics

Standardized guarantees occur when some units, especially government

Central Banks’ Statistics

Central Banks’ Statistics

 Capital Account shows capital transfers receivable /payable between

 Acquisition and disposal of nonproduced, nonfinancial assets are

 Capital transfers are recorded when all requirements and conditions

Central Banks’ Statistics

 Nonproduced, nonfinancial assets consist of:

i) Natural resources - land if not included in Foreign Direct Investment,

Central Banks’ Statistics

 Capital Transfers - transfers in which the ownership of an asset (other

Central Banks’ Statistics

 Debt forgiveness - voluntary cancellation of all or part of a debt

Central Banks’ Statistics

Central Banks’ Statistics

 Financial Account records transactions that involve financial assets

 Classifications of financial assets /liabilities applied to positions, the

i) financial assets consist of claims and the gold bullion component of

 Financial instruments full range of financial contracts made

Central Banks’ Statistics

Investment fund shares are collective investment undertakings through

Central Banks’ Statistics

 Debt instruments (applicable both the liability and corresponding

Central Banks’ Statistics

Central Banks’ Statistics

Central Banks’ Statistics

 Insurance, pension, and standardized guarantee schemes - Consist of

Central Banks’ Statistics

 Maturity may relate to:

 Classification for debt instruments (liquidity dimensions):

Central Banks’ Statistics

Central Banks’ Statistics

 Direct investor - an entity that acquired, directly (owning equity that