Guarantees
http://unstats.un.org/unsd/nationalaccount/AEG/papers/m2guarantees.pdf
http://unstats.un.org/unsd/nationalaccount/AEG/papers/m3guarantees.pdf
Guarantees
Part of “balance sheet approach” – trend to look at
positions to analyze economic problems, not just flows.
Off-balance sheet obligations.
Important for assessing vulnerability (can hide debt).
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Examples of Guarantees
Guarantor and Debtor are related entities:
Government and government-owned enterprises.
Companies and their subsidiaries.
Guarantor and Debtor are at arm’s length:
Banker’s acceptances and other guarantees on a fee
basis.
Government support for worthy private projects.
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Time of recognition
Granting of guarantee?
Activation of guarantee?
After default by guaranteed party.
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On the activation of a guarantee, if Debtor still exists, three
steps occur:
 Creditor’s liability to Debtor is eliminated.
 Guarantor’s liability to Creditor is created.
 Debtor’s liability to Guarantor is (usually) created.
 More complex than usual transactions, because three
parties involved.
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Current Treatment
(a) Before activation, guarantees are contingent assets
and therefore outside the system.
(b) No specific guidance on classification of flows on
activation in BPM5 or SNA. However:
• GFSM has injection of equity for continuing
subsidiaries and capital transfer otherwise; and
• ESA95 has injection of equity and capital transfer
cases; also mentions other volume changes when the
original debtor disappears.
• For bank guarantees, from general practice, it
appears that service charge when issued; other
volume changes if not recovered.
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Decisions
External Debt Statistics Guide suggests show expected liabilities
under guarantees as a supplementary item.
AEG didn’t want to change asset boundary to include guarantees in
general as assets, except when they:
Amount to a financial derivative; or
Are standardized guarantees (e.g., on student loans) – considered
to be similar to insurance.
On activation:
Details still being discussed.
Attempt to have single solution, but evidence suggests different
(some capital transfer, sometimes financial account transaction).
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Questions
Are guarantees important issues in your country?
How should they be recorded?
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