rikardur.rikardsson@sedlabanki.is

Purpose

Statistical reporting of external assets and liabilities in accordance with the standard and codes of the International Monetary Fund (IMF) as published in its Balance of Payments Manual 5th edition (BPM5). The BPM5 presents a recommendation for the structure of accounts, concepts, definitions and valuation, based on the main principle of stating trade between residents and non-residents of the economic territory at current transaction value.

Foundation in law

The foundation in law for data collection, compilation and publication of the international investment position is in Chapter VI of Act No. 36/2001 on the Central Bank of Iceland and Act No. 87/1992 on Foreign Exchange. These laws (and related regulations) stipulate mandatory requirements of domestic entities to provide necessary information and ensure the confidentiality of the data collected by the Central Bank of Iceland for statistical purposes.

Sources

The central government, the Central Bank, banks and other financial institutions, as well as certain large enterprises, submit monthly or quarterly information on their external positions. The Icelandic Securities Depository provides information on non-residents’ holdings of listed securities. Annual surveys are also conducted to collect various data from legal entities.

2. Terms and definitions

International investment position

The international investment position shows the asset and liability position between residents and non-residents in Iceland. The international investment position is classified into direct investment, portfolio investment, other investment (deposits, loans, etc.) and the Central Bank of Iceland’s foreign reserves. Portfolio investment and other investment are further broken down by main sectors of the economy: the Central Bank of Iceland as the monetary authority, general government (central and municipal), banks (deposit money banks/DMBs) and other sectors.

Resident/non-resident

Resident under the definition in Act No 87/1992 on Foreign Exchange refers to any person, and legal entity, permanently resident in Iceland in accordance with the provisions of the Act on Legal Domicile, irrespective of nationality. Exempted from legal domicile are students and diplomats. Thus, Icelandic students and their family living abroad are residents of Iceland and foreign diplomats are non-residents in Iceland.

Non-resident refers to all other individuals or legal persons than residents.

Direct investment

Direct investment means that the investor acquires a significant influence in management of a company or a property. Such an active holding is defined as 10% or more of the ordinary share (equity capital). Direct investment is divided between outward investment by Icelandic residents (assets) and inward investment by non-residents (liabilities). In turn, these data are disaggregated into equity and other capital net (e.g. loans between related parties such as a parent company and its affiliates). Banks’ loan transactions with their affiliates, other than subordinated debt, are excluded.

Portfolio investment

Portfolio investment shows residents’ holdings of foreign securities (assets) and non-residents’ holdings of Icelandic securities (liabilities). Definition of foreign and Icelandic securities is based on the residence of the issuer of the security. Portfolio investment covers equities, shareholdings of less than 10% in companies and units in mutual funds, and debt instruments, bonds and notes (original maturity over one year) and money-market instruments (such as commercial paper). Securities need not be listed on a stock exchange but are classified according to their format.

Financial derivatives

Financial derivatives are swaps, forwards and futures, and options. Agreements in financial derivatives are inherently balanced on the asset and liability side when contracted, but their value might differ due to price changes on settlement. The Central Bank has not yet collected satisfactory information about all financial derivatives, but interest-rate and currency swaps linked to foreign borrowing by residents have been accounted for under the heading Other investment.

Other investments

Other investments than those specified above or reserve assets consist of trade credits and loans classified into short-term (with an original maturity of one year or less) or long-term. Currency and deposits are included in this category, along with other movements in assets and liabilities such as financial leases.

Reserve assets

Reserve assets are defined as foreign assets of the Central Bank which are accessible for intervention in the forex market or to meet the requirements of the balance of payments. Other external assets of the Central Bank which do not qualify as foreign reserves are classified under other investment in the financial account. Reserve assets comprise gold, SDR reserves and reserve position in IMF, and foreign exchange: currency and deposits, and securities.

3. Data processing

The international investment position is compiled quarterly by the Central Bank of Iceland’s Statistics & IT. The data sources used are those mentioned in section 1 above together with a survey at the end of the calendar year of legal entities’ direct investment, portfolio assets and external long-term borrowing. Some items in the quarterly compilation of the IIP, e.g. portfolio assets, are estimated by cumulating financial flows data. At the end of calendar year, a Coordinated Portfolio Investment Survey (CPIS) under the auspices of the IMF is conducted to collect data on residents’ holdings of foreign securities and their breakdown by country. The external position denominated in foreign currency is converted to Icelandic krónur at the buying exchange rate at the end of the quarter. Data are compiled in millions of krónur but disseminated in billions of krónur.

4. Reliability

The international investment position is derived from the financial flows recorded in the balance of payments as well as changes in the exchange rate and market value of debt securities.

The main deviations from the IMF’s BPM5 standard are: Equity capital of the direct investment position is compiled at book value instead of market value and data have not been collected or estimated for real estate owned abroad by residents and by non-residents in Iceland.

5. Revision of data

As a general rule, the quarterly data for the current and previous two years are preliminary. The data are revised with each compilation if warranted by new and better information or changes in methodology. Major revisions of the balance of payments are identified in a footnote to the table of statistics.

6. Time series and data frequency

Harmonised quarterly data on the international investment position are available from the end of 1989.

7. Publication

The international investment position is published quarterly in hard-copy and website press releases from the Central Bank of Iceland and under on the Statistics page of its website. Advance release calendar is posted on the Central Bank of Iceland website.

The international investment position is part of the IMF’s Special Data Dissemination Standard. 

8. Other

The statistical table of the international investment position provides a breakdown of the net external debt position of the main sectors: Central Bank, general government, banks and other sectors. The table also shows the ratios of international investment position (IIP) to gross domestic product (GDP). For comparability, the IIP and GDP are converted into foreign currency in terms of SDR (IMF’s basket of four currencies: USD, EUR, JPY and GBP).

Yearly and quarterly time series of the international investment position are presented in other Excel sheets.

A more detailed breakdown of data can be obtained with a request to the supervisor of the statistics.