Download the road to a modern survey system: strategic choices and first

THE ROAD TO A MODERN SURVEY SYSTEM: STRATEGIC
CHOICES AND FIRST EXPERIENCES
1
Pim Claassen, Bank of the Netherlands, Netherlands
1
INTRODUCTION
In many countries, balance of payments compilers are currently in the process of
reconsidering their collection strategy. In some countries, this may take the form of an
evolutionary process; in other countries that of a radical reform. As in many European
countries, the former Dutch (closed) settlement system originated from just after World War
II, when foreign exchange regulations were needed to safeguard sufficient levels of foreign
reserves. In those circumstances the balance of payments could be considered a free of charge
‘by product’ of the system of foreign exchange regulations. However, with the liberalisation
of imports, exports and financial flows (also within the European Union) the balance of
payments became a statistic in its own. While the costs of this statistic thus became more
explicit, compilers also increasingly faced problems measuring the continuously expanding
cross border financial flows. Against this background the Netherlands Bank (DNB) decided,
in early 2000, to reform its settlement system in a direct reporting system, which became
operational in May 2003. This decision not only aimed at increasing the quality of the balance
of payments but, at least as important, also at lowering the reporting burden to society. A new
division of tasks between DNB and Statistics Netherlands was agreed, whereby the latter took
over the statistics on international trade in services.
2
Part I of this paper heavily draws on the Statistical Bulletin that DNB published in May 2003 .
This special issue, among others, provides a full description of the strategic choices for the
new system as well as a set of reporting forms and explanatory notes. Part II of this paper
reports on the first experiences with direct reporting.
2
2.1
PART I: STRATEGIC CHOICES
The reconciliation model
DNB made a clear choice for an integrated reporting model with both flows and stocks,
including a full reconciliation between them. This preference was reinforced by the prospect
that the frequency of the IIP was going to be raised from annual to quarterly. Although there
is no formal international obligation to present the reconciliation of flows and stocks as
separate data sets, it is not unlikely (for instance in the context of the revision of BPM 5) that
this will be the case to allow the quality of data to be tested. The final decision to implement
the so-called ‘reconciliation model’ in the Netherlands however was not taken until
consultations with external auditors and a representative group of reporting entities confirmed
1 The author, Head of the Balance of Payments & Financial Accounts Department, would like to thank his
colleagues for their valuable comments in preparing this paper.
2 Balance of payments in the Netherlands ‘The road to a modern survey system’. De Nederlandsche Bank,
Statistical Bulletin, Special Issue, May 2003 (Internet: http://www.dnb.nl)
SI/2004/01868/cla
its feasibility, notably because it largely corresponds to the data available in the business
administration. In other countries with survey systems, like New Zealand, Australia, Ireland
and Finland, similar reporting schemes had already been put into operation successfully. As
an example, table 1, shows the reconciliation model for the reporting of loans.
Table 1 Example of the reconciliation model for loans
Eur thousand
Asset
Type of
asset
Country of
the foreign
debtor
Changing during the month
Position at the
beginning of
the month
Transactions
Other changes
Position at the
end of the
month
0
-10
96
Rec
Rec/Bop
IIP
Revaluation
Increase asset
Decrease
asset
Exchange rate
changes
Other price
changes
100
35
25
-4
IIP
Bop
Bop
Rec
Loans, original maturity > 1 year, to non-banks
-Loans
US
-Loans
GB
-Etcetera
Purposes
IIP/B oP/Recl
1 Bop is balance of payments; rec is reconciliation
2.2
Security-by-security reporting
In the reconciliation model, reporting agents can choose between security-by-security
reporting and security reporting on an aggregated level, i.e. sum totals broken down by type
of security, and the country of residence and the sector of the issuer. Security-by-security
reporting is based on ISIN codes. Security-by-security reporting implies a large data flow
between the reporting entities and the balance-of-payments compiler and a complex
compilation process. A prerequisite for processing the collected security-by-security data,
furthermore, is a database with updated information on a large number of securities issued
worldwide.
DNB concluded that the advantages for both the reporting agents and the compiler in terms of
the reporting burden and data quality far outweigh the costs. Reporting agents using ISIN
codes do not have to classify their portfolio by type of security, country and sector. This
classification is generally difficult to provide because it does not suit the business
administration. Also they can refrain from reporting price and currency changes and accrued
interest, since DNB derives this information from its security database. Finally, reporting by
ISIN codes may shield entities from the consequences of new data requirements, insofar as
these can be met through the adaptation of DNB’s security database.
The security database developed by DNB, DEBBI, contains information on about 450,000
securities, identifiable by their ISIN codes. DNB buys this information from a commercial
data provider. The database is not only an important source for the balance-of-payments, but
also for the so-called issue market statistics.
2.3
On-line quality checks
A close relation of the reporting model for the financial account to the data available in the
business administration was an important prerequisite for the new system. It not only reduces
the reporting burden, but also enhances data quality which in principle will be equivalent to
the quality of the business accounts of the reporting agents. The full reconciliation included in
the reporting model also allows for two simple but significant checks of the consistency of the
data. Firstly, for any specific item the sum total of all reported changes must be equal to the
difference between the opening and closing positions. And secondly, each opening position
must be equal to its closing position in the previous reporting period. For data transmission,
DNB developed an internet application (e-Line Bop, see below) that carries out both checks
on-line. If the results of the tests are negative, transmission is not possible. Since so-called
‘logical errors’ are filtered out, DNB’s efforts to check the data are confined to plausibility
checks. The larger effort is focused on the plausibility of the macro data, which may of course
facilitate the detection of outliers at the micro level.
2.4
Procedure for non-response
Since the beginning of 2000, DNB has an effective legal instrument to keep non-response
limited through its authority to impose administrative fines and fees and/or cease and desist
orders under penalty. The availability of this instrument made it easier for DNB to decide
upon the transition to a survey system. Without it, a significant increase of non-response
compared to the settlement system would have been possible. After all, in the settlement
system data were largely collected through banks, which generally display more reliable
reporting than non-banks. Nevertheless, significant non-response was expected to occur,
notably in the first months after the transition to the new system.
In the new system estimates for non-response are generated automatically at the start of the
production run of each reporting month. These estimates take place at the micro level, i.e. for
each missing report a single ‘imputation’ is processed, based on the historical data of the
reporting agent involved. When the actual reports are received, the imputations are replaced
automatically. The quality of the generated output thus steadily improves as more reports are
received and added to the database.
2.5
Cooperation with Statistics Netherlands
In a survey system, a variety of sources and grossing up procedures are used, which in itself
make it more difficult to trace the origin of implausible macro results. Plausibility checks
therefore are based more than before on the extent to which the balance of payments fits into
the overall statistical framework of the national accounts compiled by Statistics Netherlands.
This requires close cooperation between both institutions. The process of matching data is
facilitated by the fact that the new DNB reporting forms comprise transactions, not
settlements, which corresponds with the concept used in the national accounts. Also the sector
classifications used by both institutions have been geared to one another. To that end, it is
necessary to periodically attune register information for the financial account with the general
business register of Statistics Netherlands. This register contains over a million legal entities
established in the Netherlands and is updated daily with amongst other things information
from the Chambers of Commerce. This procedure is aimed at preserving identical sector
classifications of single reporting agents, so that distortions of the macro data on these
grounds can be prevented. Attuning the registers also enables the comparison of the micro
3
data collected by both institutions from single reporting agents. In general, the overall
cooperation with Statistics Netherlands contributes to greater harmonisation of the balance of
payments and the national accounts.
2.6
E-Line Bop
Data transmission from the reporting agents to DNB takes place over the internet by means of
e-Line Betalingsbalans, further referred to as e-Line Bop. This application delivers data to
each reporting agent regarding its register data held by DNB, its ‘profile’ determining its
reporting obligations and an overview of the reports already transmitted and still due. For
each data transmission, the reporting agent must contact the DNB server to start the session
and approach the electronic ‘reporting forms’. This procedure also warrants that new
requirements, resulting e.g. from international regulations, are implemented simultaneously
by all agents. As mentioned before, data transmission to DNB is only possible after the
reporting agent has successfully carried out consistency checks of its data.
The installation of e-Line Bop requires that the reporting agent downloads a plug-in, a socalled Java-runtime environment (a worldwide standard for which the software is freely
available), to his IT environment in order to use the Java-applet provided by DNB. The applet
provides for – protected – communication with DNB. To be able to log in on the DNB server,
the user must identify himself through his registration number and application code, after
which the authenticity of his connection can be checked. The data can be entered manually or
electronically, through the import of files in CSV or XML format. Actual transmission takes
place through an encrypted so-called SSL tunnel which warrants a high level of security
against interception by third parties. By accepting the user agreement reporting agents also
acknowledge that their reporting forms are filled out truthfully.
2.7
Uniformity of the new system
DNB has aimed for a high level of uniformity in the collection system. Nevertheless specific
circumstances had to be taken into account that affects the ability of different types of
reporting entities to report the data. For instance the business administration of special
financial institutions (SFIs) in the Netherlands usually does not allow for monthly (or even
quarterly) reporting of stock data. In such cases, adjustments for were made to the basic
reconciliation model for monthly reporting to meet these limitations. Also the requirements
for different types of reporting agents can differ because they engage in specific activities. In
total, DNB distinguishes 14 separate reporting profiles, each of which comprises the
requirements for a specific economic (sub) sector. From a technical point of view, however
the reporting profiles are simple variations of the reconciliation model, which warrants a high
level of transparency in the elaboration of the collected information. As a result, the
automation system for processing the data has remained relatively transparent, too, so that any
future adjustments will be less costly to implement.
3 To enable the data exchange with adequate confidentiality guarantees, adaptations of the legal framework in
which the statistical tasks of DNB and Statistics Netherlands are laid down, had to be effected.
The uniformity of the reporting profiles may also be of benefit to the reporting population,
notably those using standardised software for their business administration. The market offers
a wide variety of such packages generally referred to as ERP software, short for Enterprise
Resource Programming. The close connection of the reporting profiles to the business ledgers
in principle provides the possibility to incorporate the reporting requirements into future
releases of these packages. To encourage this process, DNB informed ERP producers,
amongst others, through presentations and bilateral consultations.
2.8
Frequency of data collection
The uniformity in the system also prevails for the frequency of the reporting requirements. In
principle all data for the financial account are collected monthly and for international trade in
services quarterly. The distinction in the international requirements as regards the frequencies
at which different levels of detail have to be provided therefore is not reflected in the new
reporting system. This decision was based on the consultations with external parties for whom
it appeared inefficient to process diverse data sets at different frequencies. Instead they prefer
to preserve one single routine in which all information is processed simultaneously, even if
this implies that more detail is provided at a certain frequency than actually required.
An exception to this principle had to be made for data that cannot be processed monthly,
because they are simply not available. This notably concerns specific items of direct
investment and real estate. Profits and losses, market valuation and dividends paid and
retained profits are generally assessed, and hence collected, on an annual basis only. The
monthly requirements for these direct investment items are therefore confined to available
data, notably sales, purchases and dividends having become payable. Similarly for real estate,
monthly requirements only concern purchases, sales and net income; the remaining data are
collected annually. To accommodate reporting agents further these data can be reported at the
end of their financial year. DNB collected information from each reporting entity on the
4
actual month in which their financial year ends. E-Line Bop uses this information to
automatically request the yearly data reports in the month in which they have become due.
The stock data obtained through the yearly reports automatically replace the stocks previously
estimated for the months comprising the entity’s financial year. These estimates are obtained
through the accumulation of the reported flows. Similarly, the reinvested earnings included in
the annual report are distributed automatically over the twelve months concerned.
2.9
Reporting by banks
Data collection from banks is more diverse. For their reporting on portfolio investment and
derivatives, the reconciliation model is used. This also applies to banks’ intermediary
reporting concerning their customers’ activities in these fields. Banks’ own direct and other
investment on the other hand have both been integrated in existing bank reports, notably for
money and banking statistics and prudential supervision. An important step to enable this was
taken in the 1990s when money and banking statistics were harmonised in preparation for
monetary union. One of the measures taken at the time was the introduction of a geographic
breakdown of all EU countries, necessary for the consolidation of national money and
banking statistics to the level of the euro area. In consultations with the Netherlands Bankers’
4 It appeared that 20% of the reporting agents has a financial year that differs from a calendar year.
Association, it was decided to use the opportunity to adopt a full geographic breakdown vis-àvis all countries of the world to achieve the integration of balance-of-payments data.
2.10
Actual transition
The preparations for the new system included a two-year transitional period in which the
sampled enterprises were informed extensively about the new reporting requirements. Serious
thought was given to incorporating a period of double-reporting during the transitional period.
However, due to the fact this would create an additional burden both for reporting agents and
for DNB itself, a middle course was adopted. For the large majority of the reporting agents,
the transition occurred as a “big bang”, i.e. all at the same date without double-reporting.
Concurrently around 85 top reporters, accounting for up to 40% of flows and stocks of direct
investment, were offered the opportunity to adopt the new reporting system at an earlier stage.
These corporations were supported intensively. After a trial period in which the quality of the
new reports was assessed, they could make the definitive switch to the new system. At that
moment, their reporting for the settlement system was discontinued. About half these
enterprises either made a successful early transition, or at least transmitted approved testreports.
To avoid double-counting in the settlement system, arrangements with the banking sector
were made at that time to ‘neutralise’ the international settlements of top reporters that had
made the early transition. To that end a special neutral code was adopted. DNB also had to
adapt its IT infrastructure for the settlement system, still in full operation, to be able to
process the data of the top reporters. This adjustment entailed that the reports by the top
enterprises were automatically translated into ‘settlement reports’. A relatively minor effort
thus enabled simultaneous reporting according to the old and the new collection model. This
may be a workable approach also for countries applying settlement systems, if at any time
multinationals will be allowed to switch to the so-called multinational reporting model.
2.11
Centralised reporting
The sampling process for the new survey was drawn from a population including all
economic entities from which data for the financial account were collected in the settlement
system. In many cases two or more of the entities selected in the sample appeared to be part of
a single conglomerate. If these corporations maintain a centralised business administration for
all their group companies located in the Netherlands, it may be inefficient for them to report
separate data for each single agent in the sample. Therefore DNB offers the possibility of so5
called centralised reporting. Corporations can decide for themselves whether a centralised
report covers all resident group companies, or only part of them, so long as the entities
actually selected are included. To be eligible for a centralised report, corporations must
however meet the following conditions:
•
Only resident group companies can be included.
5 As the facility to use centralised reporting has been used by many conglomerates the number of originally
selected 2,800 reporting agents (see next paragraph) has been further condensed to about 2,100 reporting
agents. As many of these conglomerates, because of their centralised business administration, include all of their
group companies in their reporting the actual number of resident companies covered by direct reporting
numbers about 4,700. As a result, the actual coverage of the sample might be slightly higher overall than
envisaged.
•
The foreign assets and liabilities of the included companies must be covered for 100%,
also if it concerns participations of less than 100%.
•
To prevent statistical distortions at the macro level, all companies included in a
centralised report must belong to the same economic sector. If this is not the case separate
reports for each sector have to be produced.
2.12
Cutting-of-the-tail & grossing up procedure
For the benefit of the sampling process, DNB compiled a database containing the resident
population active in the field of the financial account. This ‘extended register’, comprising
around 43,000 domestic entities, contained not only register information, e.g. names,
addresses, but also quantitative data on the size of the external transactions and positions of
the entities included. The information was to a large extent derived from information
available from the settlement system.
6
In addition, public information for the financial sector was used. From the extended register a
sample of about 2,800 reporting agents was drawn. The sampling process was
straightforward, following the so-called cutting-of the-tail principle: for each of the major
items of the financial account those reporting agents were selected that account for around
95% of the total transactions and positions of the population. The results confirm the
efficiency that can be achieved by direct reporting: a sample of 6.5% was sufficient to achieve
a 95% coverage for the financial account. Although this coverage comes close to full
coverage, some procedure for grossing up the reported data was considered necessary to
ensure that the macro data give a complete picture of the economic and financial
developments.
2.13
Updating the register and benchmarking
The sampling process described above will have to be repeated periodically to reassess the
coverage and, if necessary, adjust the grossing up ratios, presently set at 5%. Periodic
benchmark surveys on the cross-border stocks and flows of the entities not included in the
present sample, i.e. the tail, were considered as possible options. A prerequisite for a
representative benchmark survey is of course a comprehensive register of the population
relevant for the financial account. At that time, DNB envisaged four major sources to keep the
present register up to date. Large new direct investments can generally be traced by consulting
the financial press. In some cases, these transactions may be so substantial that the resident
entity involved will have to be added to the sample immediately. A second source is the socalled ‘register tapes’ a group of large banks will provide to Statistics Netherlands on a
monthly or quarterly basis (depending on their own preference). These tapes comprise simple
sum totals of all cross-border payments per customer that exceed a threshold of EUR 12,500.
DNB receives an overview from Statistics Netherlands comprising the customers responsible
for the largest aggregated payments. This information may lead to the identification of
enterprises that have newly become relevant for the financial account. Also the periodic
attuning of micro data with Statistics Netherlands can result in the detection of new entities
relevant for the DNB register. The fourth source for preserving the accuracy of the DNB
6 Due to restrictions on the public accessibility of these sources, DNB in two cases had to carry out small
benchmark surveys to obtain the quantitative data needed for the sampling process, notably for investment
companies and pension funds.
register concerns SFIs. For statistical purposes these institutions are legally obliged to register
at DNB upon their establishment in the Netherlands. Their registration is facilitated by the
fact that many SFI are administered by trust companies well aware of this obligation.
3
PART II: FIRST EXPERIENCES WITH DIRECT REPORTING
The second part of this paper describes the first experiences with the new direct system. More
in particular, it intends to assess whether the strategic choices described in part I have worked
out well in practice and whether the primary targets of increasing quality and lowering the
reporting burden to society have indeed been achieved. The conclusion is that experiences
have been very positive and sometimes even above expectations.
3.1
Response rate
Already from the start the response rate has been higher than expected. Moreover, the
response rate has been improving throughout the period the new collection system is
operational. Chart 1 clearly illustrates this continuous improvement.
Chart 1: Response rate
At the moment, almost 80% of reports have already been received after 15 working days, i.e.
the official reporting deadline. This percentage increases to almost 90% at the time the
monthly data are processed for dissemination. Towards the end of a quarter, when the
quarterly data for the previous quarter are disseminated, the average monthly coverage has
increased further to about 98%. In the former system the correspondent response rate for
reporting agents’ monthly reports on foreign bank accounts was, at least, 30% lower.
Chart 2: the response rate for the different reporting profiles (at end-June 2004).
Chart 2
Response rate per profile
Profile
2003-Q2 2003-Q3 2003-Q4 2004-Q1
NFV
99,96%
99,63%
98,90%
98,34%
OFI
100,00% 100,00% 100,00%
98,20%
BLG
100,00% 100,00% 100,00% 100,00%
VRZ
100,00%
98,93%
98,39%
98,34%
PNS
100,00% 100,00% 100,00% 100,00%
BFI
99,10%
99,03%
99,13%
97,97%
MFI
100,00% 100,00% 100,00%
99,10%
BWB
100,00% 100,00% 100,00% 100,00%
CLM
100,00% 100,00% 100,00% 100,00%
CSD
100,00% 100,00% 100,00% 100,00%
OVH
100,00% 100,00% 100,00%
88,89%
SLB
100,00% 100,00% 100,00% 100,00%
SLN
100,00% 100,00% 100,00% 100,00%
DNB
100,00% 100,00% 100,00% 100,00%
Total
99,59%
99,40%
99,15%
98,31%
The fact that the initial response rate was high undoubtedly reflects the efforts to inform
reporting agents well ahead of the implementation of the new system. All new reporting
agents had been extensively informed well in advance in writing about their new reporting
obligations. Also, DNB account managers had already been allocated to reporting agents in
early January 2003, which enabled intensive and personal support to reporters. In order to
help remind reporting agents to their reporting obligations DNB, at the request of reporters,
also launched a monthly e-mail signalling service. This e-mail is sent out at the first day the
reporting for a new month can start. In addition, DNB has a strict policy of sending out formal
(written) reminders. These formal reminders are sent out only few days after the official
reporting deadline has passed. In October 2003, after allowing for a certain transition period,
DNB informed all reporting agents that from that moment on it would actively use its
authority to impose administrative sanctions. In practice this means that if reporting agents do
not react properly to these formal reminders, DNB initiates a sanctioning procedure. In the
last quarter of 2003, DNB sent out 43 cease and desist orders under penalty to reporting
agents. Most of them reacted promptly, but some had to pay up to EUR 11,000 each.
3.2
Use of e-Line BOP
Only very few reporting agents turned out not be able to use e-Line Bop. These reporters
either had no access to internet or had very strict security policies within their company that
did not allow them to download the Java-applet from DNB into their IT environment. As a
consequence, at the moment over 97% of the reporting agents reports through internet. In
May 2004, DNB held a survey under its reporting agents in order to evaluate their use of eLine Bop. This survey gave, amongst others, information on the platform configurations used
by reporters, the use of the test mode of e-line, the sources of the reported data and the actual
use of e-Line.
When introducing e-Line, DNB had restricted its technical support to a limited number of
platform configurations. The survey showed that some of the combinations actively supported
by DNB are not used anymore in practice. A vast majority of reporters currently uses the
processing systems Windows 2000 Prof and Windows XP in combination with internet
browsers IE 5.5 and IE 6.0. The survey also showed that over half of the reporting agents had
actively used the test mode of e-Line in the implementation phase. This test-mode has been
made available to them as of January 2003. Large reporting agents, such as banks and pension
funds, even indicated that they still use this test mode, for instance if they make changes in
their reporting system. Another finding is that over 95% of the reporters confirm that their
general ledger has become the main source for their reports, whereas in the old settlement
system most information originated from treasury systems. This finding confirms that the
BOP reporting within companies has shifted to other departments, underlining the importance
of finding new contact persons. The survey also revealed that 92% of the reporters entered the
data manually into e-Line BOP and only 8% used dedicated software to have an automated
import in CSV or XML format. The latter finding might reflect the enormous reduction in the
number of data actually reported on a monthly basis by, in particular, non-financial
corporations and special financial institutions, as these reporting agents do not have to report
individual payments anymore.
3.3
Security by security reporting
DNB’s decision, in early 2000, to opt for security-by-security reporting in a direct reporting
system was, at that time, unique and meant that the new system had to be expanded to include
a complicated security-by-security processing subsystem. The data needed for processing are
acquired commercially, adding to the day-to-day costs of the system. In practice, the securityby-security processing subsystem has indeed proven difficult to build. The expertise needed
to define all the requirements concern the data needed from the commercial data provider, the
structure of the securities database and the algorithms and formulae for the processing. It has
therefore been necessary already to deliver a number of successive releases in order to refine
the first version of this subsystem according to experience gained since the start of production
in May 2003.
The adoption rate of security-by-security reporting has been much higher than expected, even
though the choice between security-by-security reporting (condensed) and aggregate reporting
(fully reconciled) is left to the reporter himself. At the moment, all reporting agents whose
profile allows for security-by-security reporting (mfi’s, pension funds, insurance companies,
investment companies and custodians) also use this facility. As a result, the share of portfolio
investment reported security-by-security would already seem to be much higher than 85%, i.e.
the percentage recently agreed upon within the Euro system (e.g. at the moment the
‘coverage’ for foreign debt securities is 98%). In cases where reporters do not use security-bysecurity reporting by ISIN code, it is for practical reasons rather than out of principle. For
instance, as the ISIN code is the international standard (ISO 6166), it was decided not to
support any of the other codes (e.g. CUSIP and SEDOL). Investment managers based in the
UK and the USA, used by Dutch pension funds, have not (yet) accepted the ISIN code and
provide data on an aggregate basis only to these pension funds. Close relations with these
managers have been forged so that the processing they perform produces aggregate data of
adequate quality.
The quality of portfolio investment data has improved considerably. Misinterpretations of the
reporting guidelines have been discovered with ease. Most misallocations by country of
issuer, type of security but also between portfolio investment and financial derivatives could
be rectified within a few months after the start of the new system. In the past, these mistakes
could not have been singled out so easily. The flexibility of the system has also been proven
in preparing for the ECB’s requirement to provide data by currency of denomination for debt
securities. The system has, however, turned out to be relatively expensive. Therefore, it is
welcome that the costs in the near future can be spread over more statistical products, such as
national financial accounts. Also any cost savings that might result from the centralised
securities database of the ECB are highly desirable. Although the coverage of securities
included in DNB’s own database has steadily been improving since May 2003, the centralised
securities database of the ECB could provide further quality improvements in this respect.
3.4
Cooperation with Statistics Netherlands
The cooperation with Statistics Netherlands has become much more intensive. It managed to
further streamline its process of delivering monthly trade data. DNB now has the trade data
available before the monthly BOP is submitted to the ECB. Both institutions also agreed on a
timetable to deliver the data on trade in international services to DNB. For the first monthly
submissions to the ECB, so called ‘first shots’, DNB uses estimates based on earlier quarterly
data. Statistics Netherlands, however, provides the quarterly data on international services to
DNB before the quarterly BOP data are due to the ECB. This is done together with data for
some other current and capital account items (e.g. compensation of employees and other
transfers).
The scope of cooperation with Statistics Netherlands has broadened even further. Building on
the success of DNB’s direct reporting, its foreseen role as prudential supervisor on pension
funds and insurance companies and the division of tasks already agreed on for the BOP, DNB
and Statistics Netherlands agreed upon a new division of tasks with respect to the financial
accounts. DNB will start collecting and compiling the national financial accounts for all
financial sectors, including households. In addition, both institutions agreed that for those
sectors DNB would also start collecting current account information needed for the quarterly
sector accounts and information on services needed for the BOP. From the discussions both
institutions have had so far with the representative organisations on the new reporting
framework it is clear that financial institutions see benefits in having their reporting
obligations, both supervisory and macro-economic reports, taken care of by one institution
(DNB) and as much as possible integrated in a few reports. It has also become clear that the
process of compiling financial accounts can benefit very much from security by security
reporting.
3.5
Updating register and benchmarking
Since the start of the direct reporting system DNB has further developed its strategy with
respect to benchmarking. For reporters in the financial sector DNB has decided it will use as
much as possible existing supervisory registers and data. This information allows DNB to
keep its BOP-register and reporting population up to date and, if necessary, also provides the
basis for grossing up purposes. However, DNB introduced annual benchmark reports for all
mfi’s, in particular to provide information on their cross border holding of securities and their
‘other investment’ assets and liabilities. Also SFIs, for which no supervisory data are
available, deserved special treatment. For this sector DNB also initiated a benchmark survey.
On the basis of the results of this survey, sent out early 2004 to over 8000 special financial
institutions, DNB will be able to update its register, the reporting population and gross up the
results of the sample. For non-financial companies DNB and Statistics Netherlands have
entered into an exchange of data to closely attune the reporting population. In this context the
general business register of the latter plays an important role. To illustrate the close
cooperation also in this field it can be mentioned that the Statistics Netherlands in its new
quarterly survey on business statistics does not intend to have non-financial companies to
distinguish foreign and domestic transactions and positions: for the foreign part it intends to
rely on BOP-data.
Except for abovementioned, more structural arrangements, DNB also uses other sources to
spot new large players. There are, for instance, strict procedures to follow up any news on
mergers and acquisitions in the financial press. Also DNB recently received from Statistics
Netherlands for the first time so-called ‘register tapes’ (explained in part I).
3.6
Quality
In the paragraph about security-by-security reporting it has already been mentioned that the
quality of the data for portfolio investment are felt to have improved considerably. This also
holds for the data in the other sub-accounts of the BOP. Some of these improvements result
directly from the new reporting system; other improvements are more indirect, but still very
noticeable. Against this background, it is not surprising, that the errors & omissions in the
new system have so far been within a narrower band than in the previous system (see chart 3).
The improvements resulting directly from the new reporting system are mostly related to the
use of a full reconciliation between flows and stocks (for most instruments, including
accruals, on a monthly basis) in the reporting forms. As noticed in a previous paragraph, most
of the data directly originates from the reporter’s general ledger and is therefore likely to be of
good quality. Moreover, reports also have to be internally consistent, something that can not
be achieved in a settlement system. At the macro-level there is the possibility of a monthly
reconciliation of flows and stocks, which in the former system (where flows came in on a
7
monthly basis and stocks, to some extent, were only reported on a yearly basis ) could only
take place at an annual basis. The new collection system thus also provides a much better
basis for the quarterly IIP and external debt statistics.
The other, more indirect, improvements result from the fact that it seems much easier to
control a direct reporting system than a settlement system. One illustrative example is that the
department’s account managers in the new system all have a clear responsibility for the
timeliness and quality of the reports of a limited number of reporting agents (in the former
system they had to deal with and code individual transactions of ten thousands of reporters).
The new system is also much more transparent. For instance, outliers can be easily traced and
dealt with in a context in which the reporter has submitted a full report. Moreover, the new
system in general would appear to allow for more timely management information. One of the
results is that the reporting discipline in the new system is much higher than in the former
system. The latter could be achieved because it is much easier to have equal treatment to
reporters (which is indeed essential if you decide to sanction reporting agents not fulfilling
their obligations) in the new system.
The fact that in the new collection system different reporting profiles are distinguished, has
also made it easier for DNB to organize an active feedback of aggregated data at a sector level
to the several groups of reporting agents (e.g. pension funds, custodians, insurance companies
and trust companies) that initially had been set up by DNB to discuss the new reporting
framework. This feedback, in which DNB presents the aggregated to the sector, has already
proven to be very useful, also in terms of checking the plausibility of some observed
developments. These sectoral analyses could be further strengthened on the basis of the
information DNB is going to collect for the national financial accounts.
One of the few problems that initially caused problems with respect to errors & omissions
were the continuously expanding activities of so called Special Purpose Vehicles (SPVs).
Many of these SPVs, which issue very large amounts of debt securities in the international
market for securisation purposes, were set up recently and were at that time not registered as
direct reporters (causing omissions). Their issues could fortunately be traced in the security
issue statistics, but it is clear that, because of the amounts involved, better coverage of their
business is warranted.
3.7
Costs to society
The reduction of the reporting burden to society has been an important aim of the change in
the reporting system. In this respect, it should be noticed that in the Netherlands the reduction
in the reporting burden in the meantime also has become a political issue, since the
government has committed itself to a lowering of the administrative burden by a minimum of
25% in four years time. In this context the Ministry of Finance, early 2003, ‘zero-measured’
the estimated costs to society related to the balance of payments. These costs, applying to the
former closed settlement system, were then estimated at EUR 75 million per year.
7 In the former settlement system there were yearly reports for stocks of direct investment (equity), portfolio
investment and derivatives. For other instruments, in particular intercompany loans and other investment (of
other sectors) stocks had been estimated by cumulating flows. For those instruments improved collection in the
new system has caused breaks in time series.
In the survey DNB held in May 2004, reporters were also asked for the time they actually
spent on the initial installation of e-Line BOP and the initial retrieval of the data to be
reported to DNB. Together those two activities took reporters on average 23 hours, equivalent
to about EUR 3,6 million in total one-off costs to society. The survey also gave information
on the time reporters spend on fulfilling their regular reporting BOP-obligations. This turned
out to be 3,25 hours per month, almost regardless of the reporting profile of the reporting
agent. Based on this outcome the running costs to society for the BOP-reports to DNB could
be estimated at EUR 6,8 million per year, indicating large cost savings as compared to the
8
former settlement system. In making this comparison some (specific Dutch) features of the
former system should be kept in mind. For instance, in the former system all reporting agents
had to provide the information themselves on the economic nature of the transaction for each
single payment above a threshold, both on the payments made through domestic banks as well
as on payments settled through foreign banks.
8 The costs to society of the new survey for international services should be added to this in order to come to
fully comparable data. Although these costs are as yet not known, they will change very little to this favourable
outcome.