Challenges of the Financial Corporations sub-sectors.

1
Challenges of the Financial Corporations
sub-sectors.

• Joint WPFS-WPNA Workshop SNA Implementation
• Presenter Dr Robert Dunn (Head of ESA 10
  Implementation Branch)
• Email Robert.Dunn_at_ons.gov.uk
• Tel [phone]

2
Content

• The Financial Corporations sub-sectors within the
  SNA ESA
• Data Sources
• Challenges in the classification of Investment
  Funds
• Resident vs non-resident units
• Classification of REITs as non-MMFs Investment
  Funds
• Challenges in identifying Special Purpose
  Entities
• SPE activities
• Gathering data from SPEs
• As an Institutional Unit

3
Content

• Further Work
• Business Register Improvements
• Review of ONS Financial Surveys
• Further use of administrative data

4
Financial Corporations sub-sectors within the SNA
ESA

• S.121 Central Bank.
• S.122 Deposit-taking Corporations except the
  Central Bank.
• S.123 Money Market Funds (MMF)
• S.124 Non-MMF Investment Funds
• S.125 Other Financial Intermediaries except
  Insurance Corporations and Pension Funds

5
Financial Corporations sub-sectors within the SNA
ESA

• S.126 Financial Auxiliaries
• S.127 Captive Financial Institutions and
• Money Lenders
• S.128 Insurance Corporations
• S.129 Pension Funds

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Challenges in the Classification of Investment
funds.

• Resident vs non-resident units
• Majority of investment funds are legally
  domiciled overseas
• Fund manager located in London
• Around 34 sterling MMFs identified with a total
  value of c.114bn, only one of which is legally
  domiciled in UK.

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Challenges in the Classification of Investment
funds.

• Classification of Real Estate Investment Trusts
  as Non-MMFs Investment Funds.
• REIT is a company that manages a portfolio of
  real estate to earn profit for shareholders
• 1st January 2007 - Launch UK REITs
• REITs very tax efficient as company pays no
  corporation tax or capital gains tax on profits
  from property investments.
• A number of property management companies convert
  into REITs. (Is this a true change of activity?)
• Not directly supervised by the Financial Services
  Authority (FSA).
• Under ESA/SNA REITs are classified as non-MMF
  investment trusts
• Companies on Business Register classified to
  various industries, all non-financial (S.11).

8
Challenges in Identifying Special Purpose
Entities.

• Activities of SPEs
• Securitisation
• Risk sharing
• Asset transfer
• Property investing

9
Challenges in Identifying Special Purpose
Entities.

• Gathering data from SPEs
• Identification
• Little physical presence
• Country of registration used to determine
  residency.
• They have no or few employees
• Impacts survey response burdens.
• Grossing of survey results

10
Challenges in Identifying Special Purpose
Entities.

• As an Institutional Unit.
• Entitled to own goods and assets in its own right
• Able to take economic decisions and engage in
  economic activities
• Able to incur liabilities on its own behalf
• Able to draw up a complete set of accounts
• Otherwise unit is consolidated with parent.

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Further Work

• Business register improvements
• Coverage of SPEs
• Identifying relationships between fund managers
  and investment funds.
• Segregating holding companies and head offices
• Review of ONS financial surveys
• Further use of administrative data

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• QUESTIONS?