Impact of BPM6 on euro area balance of payments and international investment

position

Isabella BosettiRadenci, 7-9 November 2011

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Outline

• B.o.p. and i.i.p. statistics compiled by the ECB and their importance in EU policy making

• Most relevant changes introduced by BPM6 from the ECB perspective

– Methodological changes

– New treatment of transactions and positions

• The new ECB Guideline

– Main novelties

– Implementation timeline

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The importance of b.o.p. and i.i.p. in policy making

Euro area aggregates are used to:

� assess risks to price stability

� analyse the flows affecting monetary

conditions and exchange markets

� show the monetary presentation of bop

And also for:

� Economic analysis to assess risks to financial stability (ESRB and European Commission)

� the compilation of the RoW account in the quarterly euro area accounts

� And for the annual review of the international role of the euro

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The importance of b.o.p. and i.i.p. in policy making

National b.o.p. and i.i.p. are used to:

� monitor the divergence in competitiveness (ECB and European Commission)

� detect macroeconomic imbalances (European Commission):

o Current account balance, net i.i.p., % change of export market shares are 3 out of the 9 indicators of the Scoreboard

o Other relevant indicators are: current and capital account balance, net interest payments and net external debt

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New in BPM6: methodological changes

• Increased relevance of the i.i.p.

� Direct collection of price and

exchange rate effects

• Primary income:

– Accruals following the debtor

approach for debt securities

– Dividends recorded when they go ‘ex-dividend’

• Direct investment recorded on assets and liabilities basis

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New in BPM6: more detailed breakdowns

• Identification of 6 institutional sectors in portfolio investment and related income

• Breakdown by original maturity: short/long term for portfolio investment and other investment items

• More detailed items in :

– Primary and secondary income accounts

– Financial derivatives account

– Reserve assets

– And other investment:

�insurance, pension and standardized guarantee schemes

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New in BPM6: goods and services accounts

• Net exports of goods under merchanting (previous ‘merchanting and other trade-related services’) is moved to the goods account

• Manufacturing services on physical inputs owned by others (previous ‘goods for processing’) is moved to the services account

�The totals of the 2 accounts change, but the balance on goods and services is used as imbalance indicator

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New in BPM6: services and income accounts

• Financial intermediation services indirectly measured (FISIM) are isolated from the interest received/paid and are included in the services account

• In the primary income account interest calculations are based on “pure interest”

�The net current account balance will not change; while there will be revisions to net interest payments and to the services and income accounts, on total debits and credits

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New in BPM6: direct investment account

• Includes investments between “fellow enterprises”

�reclassification from the other investment account

�establishment of the EuroGroups Register

• Should include investment funds shares

�but for euro area internal consistency they will be classified in portfolio investment account

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New in BPM6: other investment account

• Allocation of special drawing rights

– Included in Other investment liabilities

�Minimal impact on net i.i.p.

• Monetary gold

– Distinction between gold bullion and unallocated gold accounts

�Potential impact on net i.i.p.

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New ECB Guideline

• It is the ECB’s legal instrument to impose legal requirements on the national central banks of the euro area.

• Its issuance is preceded by intensive discussions with all the national central banks

• The current Guideline (2004/15) is based on BPM5 methodology

• A new Guideline will be issued in early 2012, based on BPM6 standard components

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New ECB Guideline: BPM6 implementation

• Standard components not mandatory in ECB Guideline:

– details in transportation services

– breakdown between business and personal travel

– breakdown in personal cultural and recreational services

•Non-standard components in BPM6 mandatory for EA:

– more details in investment income account

– flows related to price and exchange rate revaluations in the financial account

– details in external debt by original maturity and remaining maturity in portfolio investment

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New ECB Guideline: BPM6 data publication

• First euro area aggregates following BPM6methodology will be published in November 2014

• Historical data will be converted to BPM6 format

• Monthly b.o.p.

• Quarterly b.o.p. and i.i.p.

– Euro area back to 2008

• Including the geographical breakdowns

– National data back to 1999

• Without geographical breakdowns

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IMF: BPM6 data publication

• Warning: the IMF will introduce BPM6 in their publications in 2012

– BPM5 euro area aggregates and national data will be converted to BPM6 automatically by the IMF

– These data may be revised in 2014 after the nationally tailor made conversion to BPM6 has been completed

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New ECB Guideline: timeliness improvements

• Quarterly b.o.p. and i.i.p. data currently reported at T+90 days will be anticipated:

• 2014: T+85

• 2017: T+82

• 2019: T+80

�Euro area accounts statistics available to the ECB Governing Council one month earlier from September 2015

�Euro area quarterly b.o.p. and i.i.p. published at T+90 in the medium term

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New ECB Guideline: simplification of reporting

• Eurostat and ECB data requests will be aligned

– Same file transmitted to both institutions

• Breakdowns currently reported at semi-annual and annual frequency will be reported quarterly

– Only monthly and quarterly reporting

• SDMX framework used for data exchange

– More intelligence possible for data mining and data validation checks

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Thank you for your attention!

Any questions?