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Malik Bani Hani
International Transactions reporting System Workshop
Amman – Jordan
April 7-9, 2014

What is an ITRS

Simplified and model ITRS

Main elements of an ITRS

Advantages and weaknesses of ITRS as a
data source
The ITRS is part of the broader institutional
data collection framework of many countries. It
differs from country to country drawing from
countries’ legal framework, accounting
systems, and foreign exchange regulations;
however, virtually all such systems have certain
features in common.
(reference: Balance of Payments and
International Investment Position Compilation
Guide (BPM6CG) )


As a general rule, an ITRS is a data collection
system that obtains data from banks and
enterprises at the level of individual
transactions.
The banking sector is central to the ITRS.
Banks report all operations which are carried
out between residents and nonresidents
through their books on their own account and
on the account of their clients.
◦ Individual cash transactions that
pass through domestic banks
and enterprise bank accounts
abroad,
◦ noncash transactions,
◦ stock (balance sheet positions)
 Most ITRSs started as foreign exchange record systems and
evolved as by-products of these systems

Effective exchange control and enforceable reporting
obligation are foundations of comprehensive ITRS
 The comprehensiveness of the ITRS may vary depending on
type of implemented ITRS
 Types of ITRS :

Closed

Open

Partial

A closed ITRS accounts for all transactions and reconciles
them with corresponding changes in stock positions (reported
transactions are compared to changes in outstanding account
balances)

An open ITRS does not allow a complete accounting and
reconciliation between the reported transactions and changes
in bank’s foreign exchange position

In a partial ITRS, certain BOP transactions are not recorded
(e.g., it may not include exports of goods and short term
financial transactions, but it provides for reconciliation of data
on certain flows and/or stocks)
ITRS Reporters
 An ITRS typically collects data from
reporters in:
 the banking sector
 the central bank, and
 selected enterprises, called direct reporters
that report directly to the balance of
payments unit.



Full direct reporters (FDR) are enterprises with a high
degree of cross-border transactions that conduct
their transactions through accounts with domestic
banks and, in some cases, through accounts with
banks abroad and intercompany accounts.
FDR report to balance of payments compilers all
transactions and positions with nonresidents
conducted through all mentioned accounts.
In a closed system, domestic banks will also report
FDR transactions conducted through domestic
accounts;
however
they
will
classify
these
transactions as neutral, to avoid duplication.

Partial direct reporters (PDR) are enterprises
that have accounts with nonresident banks
and are not FDR. PDR report directly to
compilers only transactions through accounts
abroad.
Primary responsibility for reporting within the
ITRS:


resident banks and enterprises are required
to report their foreign payments to the
Central Bank
the obligation applies to payments to and
from non-residents
Assets
Banks’ correspondent
accounts (so-called
NOSTRO and LORO or
VOSTRO)
Bank clients’ account
Foreign currency
accounts (banknotes and
coins)
Other accounts, including
time deposits, loans, and
securities accounts
Resident
Nonresident
NOSTRO
NOSTRO
Liabilities
Resident
LORO
Nonresident
LORO

Domestic banking system, including the
central bank reports:
their own payments
payments effected for their customers

So, all transactions which involve a resident
and a nonresident account should be
reported
Assumptions:
 no payments are allowed in foreign exchange (FX)
within the domestic payment system;
 residents can hold FX accounts with domestic banks
(FX can be used only for savings or for payments
abroad)
 residents (except banks) are not allowed to have
accounts with banks abroad
 nonresidents are allowed to have accounts with
domestic banks (in both FX and domestic currency
but domestic payments can be done only from the
accounts in domestic currency)
 resident legal entities are allowed to withdraw FX in
cash (banknotes) only for travel abroad





Under this assumptions, we will discuss four types of FX
transactions which may be recorded in Country A:
Bank’s client paid 40 FX for imported goods
Nostro 40 (credit); client account 40 (debit)
For travel abroad, residents withdraw 30 FX in cash from
their FX accounts
FX cash 30 (credit); client account 30 (debit)
A nonresident received 50 in domestic currency for goods
exported to residents and paid 20 in domestic currency for
services imported from residents. Transactions are made
through nonresident’s account with domestic bank
Nonresident client account 50 (credit) 20 (debit);
resident client account 50 (debit) 20 (credit)
Resident banks undertake FX transactions with
correspondent banks abroad (exchange 70 USD for EURO)
Nostro USD 70 (credit); Nostro EURO 70 (debit)


With the abolition of exchange controls, a
growing and more direct role is devoted to socalled direct reporters – resident enterprises
having accounts with banks abroad
A direct reporter must submit information on
transactions on their:
accounts with banks abroad
intercompany accounts
international clearing accounts

Reporting principles for direct reporters are
basically the same as for banks

Reporting forms for banks in a close ITRS:

could include forms for:
transactions (payments/receipts) on behalf of bank’
clients.
bank’s own transactions

reporting requirements (accounts to be
reported) should be identified for each bank
Reporting forms for direct reporters (with have
accounts with nonresident banks) in a close
ITRS (ex.: BPCG, Appendix II, model form 5):
could be similar with the form for banks for
reporting their clients’ transactions
should include opening and closing positions and
flows during the period
Transactions should be classified using the
same codes as in banks’ reports (for
consistency)

Reporting form should:
be well designed
provide sufficient information to ensure correct coding
provide sufficient information for verification and
validation (e.g., explicit description of transaction
purpose, insertion of position data, etc.)
include reference information and instructions for
completing
The information must be submitted to the Central Bank using an
approved classification scheme (to facilitate the processing
and to increase its usefulness)
 The main classification categories:
 payment purpose
 currency
 nonresident party's country
Balance of payments transactions are coded for statistical
recording:
 at the time of transaction (complete information is readily
available at that time)
 by beneficiaries or remitters
 in a way that enables statisticians to compile all standard
components of the BOP statement; nevertheless the codes
description could be modified for aligning it with the terms
used by reporters
Codes should cover:
 standard components of balance of payments
(i.e., current, capital, and financial
transactions between residents and
nonresidents)
 specific codes (more details) when required
by specific needs of users (ex., additional
breakdown by type of commodity)
 codes for ‘neutral’ transactions
 codes for settlement transactions
Settlement transactions might be reported but
they are not included in the BOP if:
 misclassified
they could weaken the quality of
balance of payments statistics
 identified
by codes they can be easily
checked to avoid reporting errors

A too short list of transaction codes:
does not permit compilation of all standard BOP
components
data could be misclassified

A too long list of transaction codes:
impairs reporters’ understanding
may increase the number of errors
results in more work for compilers
worsen the quality of balance of payments
statement
To achieve better results, the information on the transaction
purpose should be:
 part of the payment order
 available also for amounts bellow the threshold

The difficulty of obtaining such data depends on existing
legislation

Clients may not be willing to disclose the necessary information
to the reporting bank

Bank might not be familiar with the purpose of receipts from
abroad for clients ― data must be obtained from beneficiaries
A reporting threshold may be introduced in both
closed or open ITRS to reduce the reporting burden
and processing costs
It could be set as follows:
 small-value transactions may be reported
individually, but without transaction codes
 small-value transactions may be reported in
aggregate without transaction codes
 some additional details on small transactions may be
reported, such as a breakdown by sector of resident
 small-value transactions are not reported at all

It is important that judgment be applied in adopting
thresholds so that overall data quality remains
acceptable

For classification purposes, it may be necessary
to have information on types of transactions that
fall below the threshold

This information may be gathered from:
 periodic
sample survey that could be small, ad-
hoc surveys curried out via special arrangements
with one or more commercial banks
 an
analysis of small transactions, which could be
undertaken before thresholds were raised



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Reconciliation of stocks and flows
The results should be balanced by bank and
by currency
Offsetting settlement entries
High value transactions should be double
checked with payment documents






reported positions with balance sheets of the
banks,
withdrawals of loans and repayments of debt with
debt statistics,
income on debt with information from debt
statistics,
income on equity with information from DI surveys,
transfers to/from companies accounts abroad with
reports on accounts abroad,
netting payments with reports on intercompany
accounts or clearing accounts.

data are available with short time lag, capability to deliver
information to compilers in a very timely and frequent
manner

it is a cost-effective source of data

provide quality data, Well structured ITRS in an exchange
control regime tend to be accurate

very adequate for compilation of transactions of small
amounts, such as income, services, and personal transfers.

all cash settlements are reported for statistics,

compilers can intervene in case of new type of transactions,

Omissions

Misclassification

Loss of information due to reporting thresholds

Settlements of net amounts

Lack of bilateral data

Purpose of incoming transactions usually
unknown and can be confidently classified
THANK YOU!
QUESTIONS!