Financial centers. Plan

MAJOR OFFSHORE BANKING CENTERS: DISCREPANCIES IN REPORTED NON-DIRECT INVESTMENT INCOME, 1983
(In billions of U.S. dollars)

¹Balance of payments transactions recorded in the Fund’s Balance of Payments Statistics Yearbook, 1985, Part 2. For Hong Kong, Yearbook figures are Fund estimates, for The Bahamas. Yearbook data were revised by the response to the investment income questionnaire and reclassified on the basis of Fund staff estimates; and for Singapore, Yearbook data were revised on the basis of Fund staff estimates.
²Based on amounts outstanding (taken from International Financial Statistics), and on cross-border interest rates. (See Chapter V, Table 38.) Does not include income related to investments in bonds and equities (Table 39).
³Does not include interest payments on bank liabilities vis-à-vis nonresident nonbanks.
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Another kind of problem is that as funds flow through these centers, their classification is often transformed because of incomplete reporting. For instance, premiums paid from the United States to a captive insurance company in Bermuda and placed in a bank account in London will not be reported at all by Bermuda but will (collectively) appear as an insurance debit in the U.S. current account and a short-term capital account inflow in the U.K. balance of payments. Thus, the OFCs generate discrepancies in both the current and capital accounts, or sometimes asymmetries as between different elements of the current account.
Furthermore, in many cases the MOB centers’ “normal” residents also have substantial foreign interests that are not reported by the MOB centers but are recorded in the accounts of partner countries. These interests include direct or portfolio investments that generate income, including the interest on official reserves, or substantial shipping operations.
Another problem arising from operations of IFCs is the question of whether these countries or economies should be required to report the transactions of the intermediaries operating in their territories on a gross or net basis. In principle, they should report on a gross basis, according to the Fund’s Balance of Payments Manual, but in practice this may tend to inflate these transactions’ significance in the true savings and investment pattern of the world economy. The same question arises, of course, when considering the measurement of capital flows via IFCs or the presentation of banks’ international balance sheets.