6

Click here to load reader

Working session with the DFI experts on tracking and ... · 1 Working session with the DFI experts on tracking and valorising DFIs’ operations in the post-2015 DAC statistical framework

  • Upload
    vukien

  • View
    212

  • Download
    0

Embed Size (px)

Citation preview

Page 1: Working session with the DFI experts on tracking and ... · 1 Working session with the DFI experts on tracking and valorising DFIs’ operations in the post-2015 DAC statistical framework

1

Working session with the DFI experts on tracking and valorising DFIs’ operations in the post-2015 DAC statistical framework

Summary of main points discussed

The working session was structured in three sections, to discuss and advance work on:

1. the ongoing update of the DAC classification by financial instrument;

2. the measurement of the mobilisation effect of public development finance; and

3. the confidentiality criteria for statistical presentations on DFIs’ operations.

1. Towards a new classification of financial instruments in DAC statistics

The objective of this session was to inform and receive feedback from participants on the work

carried out by the OECD to update the current DAC classification by financial instruments. The

update is required to better reflect DFIs’ portfolios in DAC statistics and to allow the tracking of

financial instruments with the potential of mobilising additional resources from the private sector.

The update is also expected to bring greater clarity to the classification (e.g. remove non-financially-

relevant variables).

1.1. Comments from the DFI experts

Participants generally welcomed the update and the DAC’s willingness to better capture DFIs’

operations. More specifically, participants were invited to i) comment on the extent to which the

proposed new classification was consistent and comprehensive from a DFI perspective, and ii)

answer a number of technical questions that were still pending. Their comments and suggestions

included:

A new broad category for mezzanine finance / hybrid instruments could be included to facilitate the identification of investment products that combine the attributes of equity and debt.

The sub-category for blended loans should be removed to ensure that instruments are mutually exclusive. The DFI experts highlighted that blended loans combine at least two instruments and could therefore overlap with other items in the classification. However, they recognised the importance of separately identifying blended loans and suggested capturing this dimension through a flag.

The item “first-loss shares” introduces an “intention” dimension in the classification and creates an overlap with common equity, which is also first-loss. They suggested removing this category. The Secretariat highlighted that it is necessary to identify first-loss shares separately for ODA-eligibility purposes.

The subcategory “reinvested earnings” should be removed, since this does not correspond

to a financial instrument but rather refers to a sub-category of equity in the investee

companies’ balance sheet.

Page 2: Working session with the DFI experts on tracking and ... · 1 Working session with the DFI experts on tracking and valorising DFIs’ operations in the post-2015 DAC statistical framework

2

The category “other securities” should be removed, as all possible residual items are covered by the specific categories.

The category “Guarantees” should be renamed to “Unfunded contingent liabilities” to broaden its scope and cover other contingent liabilities such as stock warrants, derivatives, stock options, etc. It was also suggested to remove the distinction between credit and investment guarantees to simplify reporting.

On a more general note, participants highlighted that a flow-based system such as that of the DAC does not allow to properly capturing the risk dimension involved in the financial instruments used by DFIs.

1.2. Incorporating the comments in the proposed classification

Based on comments/inputs received from participants, the list could be revised as follows:

From the previous version

The new one, including DFIs’ comments

Broad category Sub-category Broad category Sub-category

DEBT INSTRUMENTS

Loans Standard loan Subordinated loan, incl. loan component of mezzanine finance (NEW) Blended loan (NEW) Reimbursable grant (NEW)

Debt securities Conventional bonds Asset-backed securities (NEW) Other debt securities

Simplified: - “Blended loan” removed. - “Subordinated debt” moved to “Mezzanine finance instruments”.

DEBT INSTRUMENTS

Standard loan Reimbursable grant (NEW) Bonds Asset-backed securities (NEW) Other debt securities

New: - All instruments having both equity and debt characteristics.

MEZZANINE FINANCE

INSTRUMENTS

Subordinated loan (NEW) Preferred equity (NEW) Other hybrid instruments (NEW)

EQUITY AND INVESTMENT

SHARES

Equity and investment fund shares

Common equity (NEW) Preferred equity, incl. equity component of mezzanine finance (NEW) First-loss shares in structured investment fund (NEW) Other investment fund shares (NEW) Reinvested earnings

Simplified: - Preferred equity moved to “Mezzanine finance instruments”. -Reference to “first-loss shares” removed. - Structured and other investment funds renamed as “collective investment vehicles”.

EQUITY AND SHARES IN

COLLECTIVE INVESTMENT

VEHICLES

Common equity Shares in collective investment vehicles (NEW) Reinvested earnings

OTHER SECURITIES

Other (including financial derivatives)

Suppressed

GUARANTEES

Guarantees Loan guarantee Equity guarantee Other guarantee

Simplified: - Category renamed to potentially cover other unfunded contingent liabilities - All guarantee schemes grouped under same item.

GUARANTEES AND OTHER UNFUNDED

CONTINGENT LIABILITIES

Guarantees/insurance (NEW)

TO

Page 3: Working session with the DFI experts on tracking and ... · 1 Working session with the DFI experts on tracking and valorising DFIs’ operations in the post-2015 DAC statistical framework

3

2. Measuring the mobilisation effect of development finance

The preliminary results of the survey on mobilisation and the findings from the survey on guarantees

carried out by the OECD were presented. The main objective of both surveys was to assess the

feasibility to measure the amounts mobilised by specific financial instruments in an international

statistical system.

2.1. Comments from the DFI experts

Discussion focused on possible options and specific issues that needed to be addressed while

developing a common methodology to measure the amounts mobilised, in particular: data

availability, scope of measurement, additionality/causality, attribution, and point of measurement.

Data availability

Data on amounts mobilised, while not systematically collected, are often available in project

documentation.

Data on the face value of a loan guaranteed by an institution, on the total amount of private

investments in a syndicated operation, and on private investments in investment funds are

mostly available. Data on total project costs are more difficult to get – and to use - as the

definition of a “project” is often vague, with no clear boundaries applied to it within the

institutions.

Changes in DFI’s statistical systems are possible, but take time and effort.

Scope

Measurement should be limited to the mobilisation/leverage effect and should not aim to

capture public institutions’ catalytic role.

A common definition for “public” and “private” would be needed to clearly define the scope

of measurement.

Institutions that included the amounts mobilised from public sources in their calculations

argued that excluding these amounts would result in an underestimation of the real

mobilisation effect. They agreed however that their inclusion would result in double-

counting in an international statistical system such as that of the DAC.

Additionality/causality

Precise and commonly agreed definitions and assumptions are key to ensure that reporting

is coherent across institutions.

The estimation of amounts mobilised seems feasible only when these amounts can be

derived from concrete figures attached to the financial instrument in use by DFIs. Assessing

causality/additionality from the total project cost is difficult due to the need of subjective

judgements (e.g. if a DFI purchases shares in an equity fund, is the “project” the equity fund

or the investments that the equity fund makes during its life?).

Assessing additionality/causality is relatively more straightforward for institutions providing

fee-based financial services to mobilise funds for projects (e.g. IFC). This is because the

payment of the fee by the client is a proof of causality, as it represents a formal recognition

Page 4: Working session with the DFI experts on tracking and ... · 1 Working session with the DFI experts on tracking and valorising DFIs’ operations in the post-2015 DAC statistical framework

4

that the institution charging the fee has mobilised the funds (see IFC core mobilization

methodology).

A concern was that reporting to the DAC should not be contradictory with what DFIs report

in their institutional communication.

Attribution

Pro-rata attribution is simple. However, such an approach has the potential to

underestimate the mobilisation impact of non-monetary exchanges, as it would not capture

a DFI being more active in the project than others.

Pro-rata attribution does not work for syndicated loans. Amounts mobilised from the

private sector in a syndicated loan should be attributed to the arranger of the syndication.

Such an approach is a better reflection of reality, as the arranger has a proven more active

role. It would also make reporting easier as the arranger – who has the data on total

amounts mobilised – would be the only public institution to report.

Point of measurement

Better to use data on commitments and to avoid using data on Board approvals, as it may

take time to commit the funds after they are approved by the institution’s Board.

Data on commitments are more readily available than data on disbursements. Getting to

measure amounts mobilised on disbursements would be interesting whenever data allow.

The measurement of amounts mobilised may need to be limited to private resources

committed during the year of the public investment in the case of open-ended projects.

Trying to include private investments in subsequent years may result in complex calculations

for this type of projects.

Measurement options by instrument

The table below summarises possible options discussed to measure the amounts mobilised by

financial instrument.

Instrument Characteristics of possible measurement option

Guarantee

Amount mobilised defined as: the full nominal value of the instrument to which the guarantee relates, regardless of the share of this value covered by the guarantee (e.g. face value of the loan being guaranteed).

Scope: guarantees on loans or investments from the private sector

Causality: Assumption that the private investor would not have invested without the public guarantee

Attribution: to the public guarantor (pro-rata if co-guarantors)

Point of measurement: guarantee issuance

Report by: public guarantor

Data needs: the full nominal value of the instrument guaranteed, additional information on co-guarantors if applicable

Syndicated

Loan

Amount mobilised defined as: private resources in syndication

Scope: syndication with both public and private lenders

Causality: assumption is that the private sector would not have provided the loan without the public sector being the arranger of the syndication

Attribution: to the arranger

Point of measurement: Commitments, and disbursements when available.

Report by: arranger

Data needs: total amount of private resources in syndication

Page 5: Working session with the DFI experts on tracking and ... · 1 Working session with the DFI experts on tracking and valorising DFIs’ operations in the post-2015 DAC statistical framework

5

Instrument Characteristics of possible measurement option

Share in

collective investment

vehicles

Amount mobilised defined as: private resources in fund

Scope: Funds with both public and private investors

Causality: Assumption that private investors would not have invested in the fund without the participation of the public investor(s)

Attribution: TBD

Point of estimation: TBD

Report by: all public investors investing in the fund.

Data needs: TBD

3. Confidentiality criteria for statistical presentations on DFIs’ operations

The Secretariat briefed participants on the current treatment of data to comply with confidentiality

rules in DAC statistics and the problems that it raises. Different confidentiality rules apply according

to the type of donor and flow. The DAC discloses data as reported (and potentially filtered) by the

provider for multilateral institutions, while it applies a confidentiality filter for bilateral Other

Official Flows (OOF) - with data aggregations by year, donor agency, sector, etc. - ensuring that at

least three transactions are covered by each aggregate. Such a treatment poses some problems: on

the one hand, data quality and coverage issues are partly due to confidentiality constraints; and on

the other hand it leads to loss of information and poor analytical value of published data.

3.1. Comments from the DFI experts

Most bilateral DFIs are subject to country-specific legislation regarding what information

could be made public. These legal requirements constrain individual DFIs in different ways

and cannot be changed under DFIs’ own authority.

While there is a wide recognition that confidentiality constraints are indeed influencing DFIs’

reporting on their operations, specific constraints relate to the nature of the required

information. For a number of DFIs, confidential information is linked to the project titles,

company names or anything that would allow the identification of a specific activity

(especially for small DFIs as the total number of projects in a country might be limited). By

contrast, other DFIs already fully disclose commitment information on their website, while

any detailed/disaggregated information on reflows (e.g. repayments, revenues, losses and

profits) is confidential as it is linked to information on project evaluation. Participants

mentioned that the Secretariat could benefit from work already carried out by IATI to

identify confidential information and problematic data fields for DFIs.

Experts from bilateral DFIs mentioned that they can report at the activity level provided that

a filter is applied before publication. Multilateral DFIs would instead need to filter/aggregate

data themselves before reporting to the DAC in order to comply with their internal

confidentiality policies related to non-sovereign operations.

Semi-aggregate figures by country and sector would constitute for DFIs an acceptable

minimum level of aggregation in DAC statistical publications.

Page 6: Working session with the DFI experts on tracking and ... · 1 Working session with the DFI experts on tracking and valorising DFIs’ operations in the post-2015 DAC statistical framework

6

Participants

Shanti Bobin Vice-Chair of the Working Party on Development

Finance Statistics (WP-STAT), Treasury, France – Chair of the

working session

Andreas Berkhoff European Investment Bank

Colin Buckley CDC Group

Randy Caruso OECD Environment Directorate

Carmen Colla KfW

Elizabeth Davis International Financial Corporation

Margaret Kulhow Overseas Private Investment Corporation

Ola Nafstad Norfund

Marie Sennequier Agence Française de Développement

Philip Sieber-Gasser Swiss Investment Fund for Emerging Markets

Bernard Ziller European Investment Bank

From the Secretariat:

Julia Benn, Mariana Mirabile, Guillaume Pottier, Cécile Sangaré, Claudia Schmerler and Giovanni

Semeraro.