Transition from ITRS to Direct reporting Skopje, October 3, 2013

1. Transition from ITRS to Direct reportingSkopje, October 3, 2013 Liliana Bancheva Bulgarian National Bank Balance of Payments and External Debt Division, Statistics Directorate

2. Transition from ITRS to direct reportingIntroduction BOPED Division within the Statistics directorate of the BNB independently compiles: Balance of payments (b.o.p.) statistics - since 1994 External debt statistics – since 1996 International investment position (i.i.p.) – since 1998 International reserves and foreign currency liquidity data template (Data Template) – since 2003 Investment fund statistics – since 2007 Staff – 16 well qualified specialists: 14 experts in statistics, 2 registrars

3. Transition from ITRS to direct reportingWhy? Due to the changing environment (legal and methodological) Bulgarian bop statistical production system has evolved from: • An exchange control system before 1994, to • A system mainly based in settlements (ITRS), as it was first implemented in 1994 based on an aggregated reporting by BoP code, to • An open system based on the aggregation of a growing number of different data sources (e.g. Direct reporting + Administrative sources + Surveys + ITRS). This “new” system has been running on a monthly basis since 2010.

4. Transition from ITRS to direct reportingWhy? • The free capital movements in Bulgaria have to be backed by an efficient system for monitoring capital flows, among which the portfolio capital flows to and from the rest of the world. • Changes in the methodological requirements – form BPM4, through BPM5 to BPM6 • Constantly increasing requirements for the quality, coverage and timeliness of the statistical data • Removal of the settlement-based national reporting obligations on payment service providers for balance of payments statistics – loss of information particularly in other services Led to stronger need to directly approach companies involved in transactions with non-residents.

5. Transition from ITRS to direct reportingWhat?

6. Transition from ITRS to direct reportingKey success factors • Sound legal basis – requirements, penalties • Define the reporting population - item tailored approach (bop register, ITRS, conditional reporting) • Explore internal and external users’ needs • Flexible user-friendly IT system IT support • Re-use of already available data • Well-trained staff and good co-operation with the respondents • Learning from others

7. Transition from ITRS to direct reportingSetting up the legal requirements • The BNB Law – Art. 42 “The Bulgarian National Bank shall compile the balance of payments of this country. For this purpose, all government and municipal authorities, as well as legal entities and physical persons, shall provide information to the BNB in accordance with a procedure established by the BNB”. • Foreign Exchange Law – Art. 7 – 10 –specify the subjects that shall keep register for the purpose of the BOP statistics and provide the information to the BNB, also gives BNB the right to require from any legal entity and person information, which may be relevant to the country’s Balance of Payments and International Investment Position.

8. Transition from ITRS to direct reportingSetting up the legal requirements • Penalties for not declaring and not reporting - Foreign Exchange Law • For natural persons - Anyone who is found to have violated or permitted a violation under Art. 7, Art. 8 and Art. 10, Para 2 shall be fined from 200 to 1 000 levs, unless the violation constitutes a criminal offence. • For a violation under Art. 7, Art. 8 and Art. 10, Para 1, legal entities and sole proprietors shall be subject to property sanctions in amounts from 2 000 to 10 000 levs (aprox. 5 000 euro). • Procedures for declaring and reporting for the BOP and IIP statistics - Regulation No 27 of the BNB

9. Transition from ITRS to direct reportingDefining reporting population Item tailored approach For other services • Unstable reporting population based on various sources, mainly ITRS, administrative records - stratified sampling – strata are selected based upon the account entry (debit/credit) and item • Stable reporting population - all Banks and insurance – census survey

10. Transition from ITRS to direct reportingDefining reporting population Item tailored approach For FDI abroad, company loans, issue/purchase of securities abroad • Direct Reporting based on Statistical Declaration - any resident legal entity or sole proprietor who has concluded a transaction under Article 7, paragraph 5 of the Currency Law shall submit to the BNB a declaration within 15 business days after the conclusion of the transaction as follows: • on transactions related to extending or borrowing of loans – exemption threshold of the lev equivalent of BGN 50,000

11. Transition from ITRS to direct reportingDefining reporting population Item tailored approach For portfolio investments • Direct reporting to the BNB by: - domestic issuers/end investors is applied for financial and government sectors (S12 and S13), which are perceived as main institutional investors and issuers - resident issues abroad and - residents holding securities in self-custody or with foreign custodians • Indirect reporting by custodians or other intermediaries is applied towards non-financial sector, households and non-profit institutions serving households (S11, S14 and S15).

12. Transition from ITRS to direct reportingDefining reporting population For natural persons (loans and other assets and liabilities) and companies trade credits and advances Statistical Reporting without prior Declaration • Resident legal entities and sole proprietors report on a quarterly basis to the BNB in statistical forms receivables/payables from/to non-residents on commercial credits and transactions other than financial loans provided the total amount of receivables/payables is equal to or exceeding the lev equivalent of BGN 50,000; • Resident natural persons report annually to the BNB in statistical forms their receivables from or liabilities to non-residents on financial credits, including on extended financial credits by opening bank accounts in other countries, by 31 March in the year following the reporting year – exemption threshold of of BGN 50,000 (about EUR 25 000 mln.)

13. Transition from ITRS to direct reportingIdentifying user needs Main users of external statistics data of the BNB: • National accounts – both Financial Accounts and Non-financial Accounts • Researchers • International organizations • National specific needs When designing the reporting forms and requirements all users’ need have to be analyzed and taken aboard regarding: • Level of detail of the information • Level of detail of breakdowns (geographical, instrument, maturity, etc.) • Periodicity • Timeliness

14. Transition from ITRS to direct reportingDesign and development of IT system IT two step solution in the BNB: As a first step - a simple model of the future Integrated Statistical Information System called the “Prototype” was developed and implemented by the Statistics Directorate. It allowed for: - formal checks of reports - processing of large amounts of data - production of aggregated statistical reports - better understanding of the processes that will facilitate the requirements for the future ISIS

15. Transition from ITRS to direct reportingDesign and development of IT system IT two step solutions: The second step is the development and implementation of the Integrated Statistical Information System. In addition to the functionalities of the Prototype it will allow for: - Production of various structures of the aggregated data depending on the user’s needs - automate reporting - provide access of internal and external users to aggregate data

16. Transition from ITRS to direct reportingConclusions • Our experience with the collection of external statistics data so far confirms the importance of the effective and efficient use of business registers. • Results may be inaccurate for reasons like non-response and inaccurate returns, but a crucial cause may also be non-coverage due to poor keeping of a register. • This requires a flexible user-friendly IT system, well-trained staff and good co-operation with the respondents and users. • Since 1999 the BNB direct reporting system is in a constant change and improvement, BUT “Life changes faster than any Regulation”