June 2002
Classification of Financial Derivatives Involving Affiliated Enterprises in the
Balance of Payments Statistics and the International Investment Position
(IIP) Statement
In 2000, the IMF published Financial Derivatives: A Supplement to the Fifth
Edition (1993) of the Balance of Payments Manual, which, amongst other things,
changed the structure of the balance of payments financial account and the IIP to
include a new functional category for financial derivatives. The Supplement also
reflected a provisional decision of the IMF Committee on Balance of Payments
(BOPCOM) to include financial derivative transactions involving affiliated
enterprises (other than those between affiliated banks and financial
intermediaries)1 in the direct investment category under a new sub-category for
financial derivatives. In making the provisional decision, the BOPCOM
recognized that the continued classification of financial derivatives within direct
investment would depend on country experience in implementing the
recommendations.
The IMF subsequently sought the advice of regional groups of balance of
payments compilers on their country experience in implementing the provisional
recommendations on the classification of financial derivative transactions in
direct investment. The issue was discussed at meetings of the European Central
Bank (ECB) Working Group on Balance of Payments and External Reserves, and
the Organisation for Economic Cooperation and Development (OECD) Working
Party on Financial Statistics, as well as within the BOPCOM itself. The member
countries of the ECB and OECD groups did not support the creation of a separate
component for financial derivative transactions within the direct investment
category. Consequently, in October 2001 the BOPCOM decided to update its
provisional decision on this issue, and reached the final decision that financial
derivative transactions involving affiliated enterprises should be classified under
the financial derivatives category of