Long-term loans (F.42)

5.73 Definition:

The sub-category long-term loans (F.42) consists of all transactions in long-term loans (AF.42) that is loans with a long-term original maturity (see paragraph 5.22.).

5.74 The distinction between transactions in loans (F.4) and transactions in deposits (F.22, F.29) may often be based on the criterion who is taking the initiative for the transaction. In cases where the initiative is taken by a borrower, the transaction is to classify in the category loans. In cases where the initiative is taken by a lender, the transaction is to classify in one of the deposit sub-categories. However, the criterion of who is taking the initiative is often a matter of judgement.

5.75 By convention, short-term loans granted to monetary financial institutions, resident or non-resident, are normally classified in one of the deposit sub-categories (AF.22, AF.29), and short-term deposits accepted by institutional units other than monetary financial institutions, resident or non-resident, are normally classified in sub-category short-term loans (AF.41). Therefore, deposits are liabilities predominantly of resident and non-resident monetary financial institutions (see paragraphs 5.44. and 5.49.), while monetary financial institutions normally have no short-term loan liabilities in the system.

5.76 It might be useful analytically to allow for exceptions to the above conventions. Examples are savings deposits with general government and non-monetary gold swaps between monetary financial institutions (see paragraph 5.81. e) .

5.77 The distinction between transactions in loans (F.4) and transactions in securities other than shares (F.3) can be based on the degree of marketability of the financial assets and its implications.

5.78 Security issues consist of a large number of identical documents, each evidencing a round sum, which together form the total amount borrowed. Compared with this, loans are evidenced in most cases by a single document and transactions in loans are carried out between one creditor and one debtor. In the case of syndicated loans, however, the loan is granted by several creditors.

5.79 Secondary trade in loans exists. However, individual loans are only traded incidentally. In cases where a loan becomes negotiable on an organised market, it is to classify in the category securities other than shares. An explicit conversion of the original loan is normally involved (see paragraphs 5.62 j and 5.62 k).

5.80 Standard loans are offered in most cases by financial corporations and they are often granted to households. The financial corporations determine the conditions and the households have only the choice either to accept or not to accept. Compared with this, the conditions of non-standard loans are usually the result of negotiations between the creditor and the debtor. This is an important criterion which facilitates a distinction between non-standard loans and securities other than shares. In the case of public security issues, the issue conditions are determined by the borrower, possibly after consulting the bank/lead-manager. In the case of private security issues, however, the creditor and the debtor negotiate the issue conditions (see paragraph 5.62 i).

5.81 Category AF.4 includes:

  1. balances on current accounts, for example, intra-group balances between non-financial corporations and their non-resident subsidiaries, but excluding balances which are liabilities of monetary financial institutions classified in the deposit sub-categories;
  2. balances of employees because of participation in the corporation's profits;
  3. repayable margin payments related to financial derivatives which are liabilities of institutional units other than monetary financial institutions (see paragraph 5.46 e);
  4. short-term repurchase agreements (repos) which are liabilities of institutional units other than monetary financial institutions (see paragraph 5.46 f) and long-term repurchase agreements;
  5. loans arising from non-monetary gold swaps. These are arrangements involving the temporary exchange of non-monetary gold for deposits. Their economic nature is similar to that of a collateralized loan in that the purchaser of the gold is providing to the seller advances backed by the gold for the period of the arrangement and is receiving a return from the fixed price when the gold is repurchased;
  6. loans which are counterparts of bankers' acceptances (see paragraph 5.58 d);
  7. financial leasing and hire-purchase agreements ;
  8. loans to finance trade credits;
  9. mortgage loans;
  10. consumer credit;
  11. revolving credits;
  12. instalment loans;
  13. loans paid as a guarantee for fulfilling certain obligations.

5.82 Category AF.4 includes further:

  1. financial claims or liabilities arising from the medium-term financial assistance for Member States' balances of payments. The loans are administered by the EMI ;
  2. financial claims on the IMF evidenced by loans under the General Arrangements to Borrow or under special borrowing arrangements with members;
  3. liabilities to the IMF evidenced by loans under the Structural Adjustment Facility, the Enhanced Structural Adjustment Facility, and the Trust Fund.

5.83 Category AF.4 does not include:

  1. other accounts receivable/payable (AF.7), including trade credits and advances (AF.71);
  2. financial assets or liabilities arising from the ownership of immovable assets, such as land and structures, by non-residents. They are classified in sub-position other equity (AF.513) (see paragraph 5.95 f).
5.84 Loans may be financial assets or liabilities of all sectors and the rest of the world. However, monetary financial institutions have normally no short-term loan liabilities in the system.

5.85 The sub-categories short-term loans and long-term loans are not divided into sub-positions in the system. Nevertheless, it may be useful analytically to divide, in particular, long-term loans into consumer credit , mortgage loans and other loans.