Chapter 5 Compilation of the FFA
2. Specific Methods Used for Compiling the FFA
With the vertical approach, figures are compiled for each cell using the financial statements of individual economic entities as source data. For the most part, figures for sectors such as financial institutions and their sub-sectors, public nonfinancial corporations and social security funds (including public pensions) are established using this approach4.
With regard to financial statements that are used as source data, there are several cases. 1) Aggregated financial statement by sector, such as balance sheets of domestically licensed banks and assets of securities investment trusts, can be used directly for the most part. 2) Financial statements of individual entities, for example, public institutions, are totaled to derive aggregated assets and liabilities for each sector. 3) Some data are obtained through “consolidation.” As in the case of pension funds, the asset management entrusted to trust banks and insurance companies are “consolidated” to the pension funds. In this case, first, the amount of total assets entrusted are identified, and then allocated to each holding assets by using the trustees’ asset allocation (please refer to chapter 2 on “consolidation of accounts”).
[Examples for the sector derived by consolidation]
• Corporate pensions (see following chart), other pensions.
• Postal savings, life insurance (except private life insurance companies), and public pensions.
4 Not all items could be drawn directly from financial statements. It should be noted that there is a need to supplement by, for example, adjusting differences in the classification items between the financial statements and the FFA, and estimating quarterly data due to a delay in obtaining
<Breakdown of corporate pensions sector>
Identifying figures using the horizontal approach
With the horizontal approach, figures are compiled for each cell by distributing totaled data identified for each transaction item to the individual sector’s holding assets or liabilities. For example, 1) in the case of deposits, loans and other financial instruments that are intermediated by financial institutions, data for counterparty breakdowns are available in addition to the total data. In this case, the statistic is used as a source data to identify asset or liability figures for each sector. Concerning securities, if available, 2) outstanding data for each transaction by each holding entity, 3) purchaser data, and 4) bond-registering institutions’ data can be used to estimate holding assets for each sector upon grasping total data from market statistics.
[Examples]
1) Establish figure for each holding sector by deriving statistics for counterparty breakdowns from financial institutions sectoral data. Those transactions are intermediated by financial institutions, such as deposits and loans.
• Transferable deposits, time deposits, certificates of deposit, and foreign currency deposits.
• Private financial institution loans to businesses and governments, and installment credit (from finance companies)
Es timation: Portfolio of a) Entrusted outstanding of pension trusts
for employees' pension funds, former qualified retirement pension plans, defined contribution pension plans (corporate-type), and
defined benefit corporate pensions funds (fund-type pension funds and contract-type pension funds)
Allocate proportionally by portfolio data of life insurance companies b) Entrusted outstanding of life insurance companies
for employees' pension funds, former qualified retirement pension plans, defined contribution pension plans (corporate-type), and
defined benefit corporate pensions funds (fund-type pension funds and contract-type pension funds)
Allocate proportionally by c) Entrusted outstanding of mutual-aid insurances
for former qualified retirement pension plans and
defined benefit corporate pensions funds (fund-type pension funds and contract-type pension funds)
Composition
d) Entrusted outstanding of investment management companies and designated money trusts for employees' pension funds, former qualified retirement pension plans, and
defined benefit corporate pensions funds (fund-type pension funds and contract-type pension funds)
Composition
Entrusted outstanding of pension tokkin (investment management companies)
Entrusted outstanding of designated money trusts
2) Estimate figures for each holding sector using outstanding data for each transaction or each holding entity involved (applied in the case of instruments with high liquidity or when it is not possible to identify sufficient data from financial statements):
• Shares (listed shares; see following chart)
• Repurchase agreements and securities lending transactions, financial derivatives.
3) Estimate figures for each holding sector using purchaser data from issuing entities and brokerage firms (applied in the case of instruments with low liquidity):
• A part of securities investment trusts and mortgage securities.
4) Estimate figures for each holding sector using the data on bond registration:
• Central government securities, local government securities, public corporation securities, industrial securities, bank debentures.
<Identifying holding sector of shares>
Transaction data in sectors that cannot be identified by the vertical approach are built up using the horizontal approach. Those sectors are for example, private nonfinancial corporations, central government, local governments, households, and private nonprofit institutions serving households. In cases where data cannot be obtained by this process, the matrix is completed by making further estimation taking “vertical approach” into consideration5.
5 For overseas sector, while data that show comprehensive assets and liabilities of the overall sector are used, many figures are identified in terms of transaction items. Both approaches are
<assets>
<liabilities>
Primary market <liabilities>
<assets>
*Underwritten amounts by sectors are estimated by assuming the equal allocation of new stocks to existing holders unless underwriting sector can be identified.
**Traded amounts by sectors are estimated by using exchange trading and holding data by sectors compiled by stock exchanges
Overseas Households
Private nonfinancial corporations
Financial institutions issue newshares Secondary market
Trade issued shares**
Underwrite new shares*
Underwrite
new shares Trade issued
shares
3. Mark-to-market accounting and Creating the Reconciliation Table (last