DEPOSITS AND LOANS – Borderline Issues

SNA Chapter 11

MFSM Chapter 4

1993 SNA“Transferable deposits" and "other" deposits, the

latter including "all claims, other than transferable deposits, on the central bank, other depository institutions, government units, and in some cases other institutional units that are represented by evidence of deposit". (Para 11.72)

“Loans include all financial assets that (a) are created when creditors lend funds directly to debtors, (b) are evidenced by non-negotiable instruments, or (c) for which the lender receives no security evidencing the transaction” (Para 11.83)

Not clear in practice.When both parties are banks, it is particularly hard to classify consistently.Requires additional operational guidance.

ESA 95 recognizes problem.• adds criterion of who is taking the

initiative.• in addition, convention based on who is

borrower so that MFIs’ short-term liabilities are all deposits.

Question 1

What are the views of Group members on the analytical use of the split between deposits and loans?

The IMF Committee on BOP Statistics agreed that the distinction was useful.

Question 2

Should the usefulness of this split be confirmed, do Group members agree that current international standards do not provide clear criteria to perform such a distinction?

The Committee noted that the distinction was blurred in a minority of cases. It was agreed that it was not necessary for the Committee to prescribe criteria.

Question 3Do Group members have any preference for any of the criteria

mentioned in the note, i.e. (i) looking at who takes the initiative (and whether or not a

distinction should be made between short-term and long-term instruments);

(ii) taking into account the nature of the borrower (banks ≈ deposits / non-banks ≈ loans);

(iii) defining in a very precise way which instruments meet the definition of “transferable” and “other deposits”;

(iv) considering the representation in the documents that evidence loans or deposits; etc.?

The Committee mentioned the parties’ own descriptions, and the financial/nonfinancial borrower criterion. It was considered that the use of the party who initiates the arrangement was not an effective criterion.