Real Sector Division
IMF Statistics Department
International Financial Institutions
Kim Zieschang
Advisory Expert Group Meeting
Inter Secretariat Working Group on National Accounts
Washington, DC, September 8-10, 2014
Reproductions of this material, or any parts of it, should refer to the IMF Statistics Department as the source.
Real Sector Division
IMF Statistics Department
Accounting for International Financial
Institutions (IFIs) in the national accounts
 IFIs do produce service output
 Their output is sold/provided to their member countries

and thus in principle enters members’ service imports,
and IFI transactions also have implications for countries’
primary income and disposable income from abroad
But coverage of these services is not uniform in the
national accounts and BOP of countries, particularly as
regards the indirectly measured services (FISIM), if any,
that they provide
•
•
De minimus argument may have force for many member
countries of IFIs, but perhaps not for some members that
have made unusually heavy use of IFI financial resources
As this is an application of FISIM and thus capital accounting,
has definition of income implications: a need for research
Real Sector Division
IMF Statistics Department
IMF exemplifying IFIs [1]
 The IMF holds an array of financial assets, including


monetary gold (2008 SNA AF1), deposits (AF2), debt
securities (AF3), and loans (AF4).
The IMF is an Other financial intermediary (S125), whose
“Reserve position in the IMF” liability is classified as
Other deposits (AF29) [2008 SNA, paragraph 11.59;
BPM6, paragraph 5.43].
IMF financial statements comply with the International
Financial Reporting Standards (IFRS), but its balance
sheet contains some financial positions the 2008 SNA
considers contingent and thus not within the SNA asset
boundary; in addition, valuations do not necessarily
comply with 2008 SNA standards (historical valuation of
gold and fixed [nonfinancial] assets).
Real Sector Division
IMF Statistics Department
IMF exemplifying IFIs [2]
 The IMF is a cooperative financial institution, whose

owners vote on the basis their share (quota) of paid in
(Reserve tranche) and pledged (Subscription payments)
financial capital that is determined jointly by its member
countries in periodic (quota) review exercises; like some
other cooperative financial institutions, IMF members
have both a deposit (AF29 – Other deposits, 2008 SNA,
paragraph 11.59) and equity (AF519 – Other equity, 2008
SNA, paragraph 11.88) interest in the institution (see IMF
paper on Other equity, this meeting).
The IMF undertakes a substantial amount of loan
monitoring and financial surveillance activity.
Real Sector Division
IMF Statistics Department
IMF exemplifying IFIs [3]
 The information with which IMF current price output and
the uses of that output by its member countries might be
calculated is, for the most part, already published on its
website (http://www.imf.org/external/fin.htm).
Real Sector Division
IMF Statistics Department
Output and uses of output of IFIs [1]
 Market output
• Directly measured—service charges, used as paid
• Indirectly measured—financial intermediation services
indirectly measured (FISIM)


2008 SNA de minimus language on interbank flows of FISIM
predicated on reference rate being interbank rate
Other options for reference rate of financial institutions will
generally be higher (e.g., inst. cost of capital/cost of funding)



On FISIM output, one reference rate per institution (cost of
capital/funds)
On use of FISIM, valuation based on reference rate of supplying
institution; makes more precise 2008 SNA language concerning specific
reference rates for different currencies of denomination when the
supplier is nonresident—but only for uses of FISIM, not output)
Regional central banks are SNA central banks (S121), but in IMF’s
view, IMF is not a bank, but an Other financial intermediary (S125)

IFI Other deposit funding (AF29) not considered to be in broad money
Real Sector Division
IMF Statistics Department
Output and uses of output of IFIs [2]
 Non-market output (e.g., technical assistance)
• Test for non-market status

Most IFIs like IMF more than cover the cost of providing technical
assistance financed from their administrative budgets



•
Part of loan monitoring and financial surveillance?
But, technical assistance enabled by “Structured Fund Account”
financing, provided directly by some member countries in support
of other members, with IMF executing, might be associated with a
non-market transaction with an explicit IMF administrative service
charge to the donor (thus in the donor’s service imports).
IMF does not report SFA funding within its own accounts (General
Department), but independently (e.g., April 2014 Financial Report,
p. 77)
Output at sum of costs

Reconsider fully including capital charges, not just consumption of
fixed capital in “Operating expense”
Real Sector Division
IMF Statistics Department
Output and uses of output of IFIs [3]
 Non-market output (e.g., technical assistance) (cont’d)
• Uses


A service import (supply) used as intermediate or final consumption;
with a corresponding Current international cooperation (D74, an
Other current transfer—D7) flow in calculating Disposable income.
Human capital formation?


Generally, recipient is the Central government of the member country
[S1311 or S1321], or the member’s Central bank [S121])
A human capital investment, but human capital currently outside the
asset boundary.
Real Sector Division
IMF Statistics Department
FISIM algebra for IFIs [1]
Table 1. Notation
Concept
Flow
Output (total, in current prices)
P1
Directly priced output prices (m vector)
p
Directly priced output quantities (m vector)
y
Intermediate consumption
P2
Compensation of employees
D1
Other taxes on production
D29
Consumption of fixed capital
─P51c
Asset
Liability
Nonfinancial assets
AN
Financial instruments
AFA
AFL
AF1A
AF1L
Monetary gold and SDRs
Monetary gold
AF11A
SDRs
AF12A
AF12L
Non-equity debt instruments
AFA
AFL
Deposits
AF2DA
AF2DL
Debt securities
AF3A
AF3L
Loans
AF4A
AF4L
AF51A
AF5CL
Equity capital
Real Sector Division
IMF Statistics Department
FISIM algebra for IFIs [2]
Cash flow identity
 AFA  P2  D1  D29  P51c  rAFL
 AFL
py  rAFA
 AFA  P2  D1  D29  P51c  rAFL
 AFL
rAF 5CL AF 5CL  py  rAFA
Balance sheet identity
AFA  AN  AFL
Real Sector Division
IMF Statistics Department
FISIM algebra for IFIs [3]
SNA output: direct charges and FISIM + cost side implications (note
the last term on the RHS)
py   r   rAFL  AFL   rAFA  r   AFA
 P 2  D1  D 29  P51c  r  AN   rAF 5CL  r  AF 5CL.
Reference rate (cost of funding, including equity)
 AFL
rˆAFL
r
  AFL
Scope of instruments question: This is essentially 1993 SNA scope of
FISIM; 2008 SNA subtracts positive and negative FISIM margins from
both sides of the above output = cost equation for all instruments
other than deposit liabilities and loan assets.
Real Sector Division
IMF Statistics Department
FISIM algebra for IFIs [4]
Uses of output by IFI member countries (ith country)
P 2  pyi   r   rAF 2 DL ,i  AF 2 DLi   rAF 4 A,i  r   AF 4 Ai
 P 2i   r   rAF 2 DL ,i  AF 2 DLi   rAF 4 A,i  r   AF 4 Ai .
Real Sector Division
IMF Statistics Department
Recommendations for AEG [1]
(1) Based on the example of the IMF, research on the
determining the FISIM output of IFIs and the uses of that
output by their member countries is potentially feasible.
However, measuring the output of other IFIs has not
been attempted and is likely to raise additional issues.
Among these would be measurement of the nonmarket
services of the IMF, if any. Thus further research could
examine these additional issues – including
reconsideration of the nature of technical assistance as a
service rather than a current transfer - and test the de
minimus argument. The research could also shed light on
the performance of, e.g., alternative internal reference
rate calculations for these institutions, among which
would be a cost of funds calculation.
Real Sector Division
IMF Statistics Department
Recommendations for AEG [2]
(2) The conceptual implications of measuring IFI output for
member countries’ national accounts, balance of
payments and perhaps government finance statistics
would need to be carefully considered and whether they
are de minimus.
(3) This work may have Research Agenda implications for
the scope of the financial instruments associated with
the production of FISIM.
Real Sector Division
IMF Statistics Department
Questions for AEG
(1) What experience do AEG members have with measuring
the explicit and implicit services of IFIs?
(2) What are the AEG’s views on initiating research to
determine the output of IFIs, including FISIM and
nonmarket services provided, and the conceptual
implications for member countries national accounts,
balance of payments and perhaps government finance
statistics?
(3) If the AEG agrees research should be undertaken, does it
agree with the proposed scope of that research?
(4) Should any research be undertaken with the purpose of
updating the SNA before or at the next update of the
SNA?