Recording Government Actions Taken in Response to the GFS Paris December 2010

Recording Government Actions
Taken in Response to the GFS
OECD National Accounts Working Party Meeting
Paris December 2010
• NAWP 2009
• Request for countries to provide information on
measures related to the GFS.
• Unfortunately, little information is readily available on
national websites. Eurostat has provided detailed
assessment by way of impact on debt/deficits.
• NAWP 2010
• Paper categorises transactions and makes
recommendations on SNA treatment
• Delegates asked to consider recommendations (and
possibility of survey in non EU countries)
• Recommendation 1: If they act independently and
carry the risks and rewards associated with the assets
and liabilities they hold then they should be treated as
publicly-owned financial institutions. If they fail this
criterion then they should be treated as part of general
• (Paragraph 22.52 of the 2008 SNA)
Quantitative Easing
• Recommendation (2): The first step – the appearance
of money – recorded in the other changes in volume of
assets account.
• Recommendation (3): The second step is simply a
trade in financial assets that should be recorded in the
financial account.
Liquidity Support
• Domestic Currency: Recommendation (4): Unless
evidence to the contrary, assumed that CB expects to
be repaid for loan and no capital transfer takes place.
– If a part, or all, of the loan is later forgiven then a capital
transfer should be recorded at that time.
– If it is written off as a bad debt it is recorded in the other
changes in the volume of assets account.
• Foreign currency: Recommendation (5): Lower
interest rates implies a subsidy from CG to the
commercial bank and current transfer from CB to CG.
Paragraph 7.126 of the 2008 SNA.
Impaired Financial Asset
• Recommendation (6): purchases of impaired assets,
other than loans, should be recorded at fair value. If a
significant difference exist between actual price paid &
fair value this should be recorded as a capital transfer.
• (Annex to the paper provides detailed guidance
developed by Eurostat to determine fair value)
Impaired Financial Asset
Purchases (Loans)
• Recommendation (7)
– Purchases of loans are recorded at nominal value unless they
become tradable with an established market value.
– Non-performing loans should also be recorded at their fair value
as memorandum items.
– If a market for the loans develops and they are regularly traded
they are reclassified as securities, recorded at market value.
– If nominal value is much greater than fair value, no capital
transfer is recorded when government purchases the loan. But if
loans are irrecoverable, their value is reduced to zero as an other
volume change in the balance sheet of the corporation & a capital
transfer recorded from government . If there is some possibility
that some part of the loan may be recoverable in the future then
the loans are reclassified (at their zero value) from the balance
sheet of the corporation to government at the time the capital
transfer is recorded. Any increases in value are a revaluation
item in the government’s balance sheet.
Liability Guarantees
• Standardised and one-off guarantees.
• Standardised:
– Possible to estimate expected risk of default . Like non-life
insurance output, output of the guarantor=fees + fees
supplements minus expected value of defaults.
• One-off
– Less easy to calculate expected value of defaults. By
convention output=fee charged.
• Recommendation 8
– treat temporary guarantees introduced after the GFC began as
one-off guarantees
• Recommendation (9): Paper and Eurostat Guidance
recommends that if a government makes a capital
injection into a financial corporation that has incurred
losses for more than one accounting period the
injection should be recorded as a capital transfer. But if
some prospects of future returns, the injection should
be partitioned into a financial asset acquisition and a
capital transfer.
Car scrappage schemes
Credit provided to customers via dealers: Recommendation (11.1): The
credit is a subsidy on a product.
Credit direct to purchaser: Recommendation (11.2): The payment is
recorded as a current transfer for households (consumption expenditure),
and a capital transfer for business/ government.
Credit to purchaser as a tax credit. Recommendation (11.3):If the credit is
payable it is recorded as a transfer. If it is non-payable it is recorded as a
reduction in the income tax liability of the purchaser.
Credit provided to owners via scrapper without the need to purchase a new
vehicle. Recommendation (11.4 ) :Credit is applied by scrapper to
increase payment made to the owner of the vehicle & scrapper claims a
reimbursement from the government. - recorded as a subsidy on a product
A payment is made directly to owners who scrap a used qualifying vehicle:
Recommendation (11.5): If cash is paid directly to owner it is recorded as
a transfer. If the payment is via a non-payable tax credit it is recorded as a
reduction in the income tax liability of the owner.
Countries invited to comment on recommendations:
• do countries agree with them, if not what do they
• are there variations of actions that need to be
addressed, if so what do they propose?
• are there issues that have not been addressed at all, if
so could they be described?
Are countries willing to participate in a
Provide more information on-line?