Circular BCL 2001/165 of 5 May 2001 — Resumption of Activities of the Belgian-Luxembourg Exchange Institute by the BCL and STATEC

Luxembourg, 5 May 2001

To all credit institutions and to the financial services of the Post and Telecommunications company

CIRCULAR BCL 2001/165

Resumption of Activities of the Belgian-Luxembourg Exchange Institute by the Central Bank of Luxembourg and the Central Institute of Statistics and Economic Studies

Ladies and Gentlemen,

1. Introduction

Pursuant to the provisions of the single article of the law of 28 June 2000 amending the Grand Ducal Regulation of 10 November 1944 as amended relating to exchange control, the Central Bank of Luxembourg (BCL) and the Central Institute of Statistics and Economic Studies (STATEC) are jointly responsible for compiling the balance of payments and the global external position of Luxembourg. To this end, they currently use data collected by themselves, either directly or by delegation to the Belgian-Luxembourg Exchange Institute (IBLC).

However, the cessation of the monetary association between Belgium and Luxembourg at the beginning of 2002 will also lead to the cessation of IBLC activities regarding collection in Luxembourg. It will fall to the BCL and STATEC to resume, as of 1 January 2002, the activity of collecting information necessary for the establishment of the balance of payments. In this context, the BCL is responsible for collecting data from companies in the financial sector, and STATEC from other companies.

This implies that credit institutions must continue to transmit directories to the IBLC via the BCL until the end of 2001. From 1 January 2002, credit institutions must transmit files listing international transactions subject to the balance of payments to the BCL.

A working group composed of experts from the BCL and STATEC has developed the terms and formats of the data that credit institutions must report as of 1 January 2002. The project focuses - apart from various simplification measures - on the current reporting system. It has already been presented for opinion to the advisory committee on the balance of payments. This advisory committee comprises - in addition to the BCL and STATEC - nine local banks, the Association of Banks and Bankers Luxembourg, as well as the financial services of the Post and Telecommunications company.

The following paragraphs present the changes compared to the current system for recording payments and transactions with foreign countries. These changes will only enter into force from 1 January 2002. It should be emphasized that the ministerial regulation of 13 November 1998 - publishing six regulations of the Belgian-Luxembourg Exchange Institute as well as all communications to credit institutions established in the Grand Duchy of Luxembourg distributed by the IBLC - remain in application in 2002 and beyond, except regarding the changes detailed below. The BCL will produce a document detailing the statistical obligations of credit institutions and the financial services of the Post and Telecommunications company within the framework of recording payments and transactions with foreign countries. This latter document will be made available to credit institutions and the financial services of the Post and Telecommunications company before the end of the second quarter of the current year.

2. Simplifications to the collection system

2.1. Exemption threshold of 12,500 euros

The current simplification threshold of 9,000 euros - below which it is not mandatory to indicate the nature of the transaction - will be abolished. It is replaced by an exemption threshold of 12,500 euros, below which the recording of payments in the directory is not mandatory. This limit applies to individual payments, even in the case of payments relating to operations of the same nature, carried out simultaneously, the total amounts of which would exceed this threshold.

2.2. Removal of the table of claims and liabilities.

Credit institutions will no longer be required to communicate the IBLC table of claims and liabilities. The S1.1 and S1.2 tables of banking reporting will be used to improve the consistency of monetary and financial statistics with those of the balance of payments.

2.3. Exemptions from recording

Credit institutions will be exempt from recording the following operations:

• Operations carried out using banknotes.
• Conversion of former national currencies into euros.
• Indeterminate intra and extra UEBL operations (current codes 650 and 651).
• Internal entries in advance accounts or deposit accounts for one year or less.
• Rounding of decimal parts.
• Spot foreign exchange operations.
• Totals mentioned on statements of operations prepared by credit institutions.
• Transfers between resident credit institutions.

The code 020 "Transfers between resident credit institutions" will no longer be used in the directory. Consequently, the threshold of 2,500,000 euros concerning the mandatory identification of the intervening resident credit institution is abolished.

However, during transfers between resident credit institutions, the latter are required to transmit information on the non-residence of the payment orderer. Code 020 is therefore maintained for the transfer between resident credit institutions to inform about the residence of the orderer.

In summary, the operations exempt from inscription in the directory correspond to the following codes: 010, 012, 020, 075, 079, 500 to 519, 650, 651, 981, 982, 986, 987 and 988.

2.4. Other exemptions:

• Assimilation of precious metals held in account to a currency.
• Indication in the directory of a grouping of operations (aggregation factor).

The modifications presented above will only enter into force from 1 January 2002. These modifications will not be mandatory on 1 January 2002. Credit institutions wishing to continue with the old system are free not to apply the modifications described above.

Nevertheless, the transmission of a directory including codes associated with the operations described above can only continue during a transition period. The duration of this transition period is one year.

3. Mandatory changes on 1 January 2002

In detail, the changes exposed below, the codes that are deleted, must no longer be filled in from 1 January 2002. This implies that operations with Belgium are to be considered in the same way as those carried out with other countries of the Economic and Monetary Union. These changes are mandatory for the establishment of the balance of payments of the Grand Duchy of Luxembourg.

From now on, all operations (including those with Belgium) must obligatorily include the code of the economic nature of the transaction for amounts above the exemption threshold.

3.1. Operations between Luxembourg residents and Belgian residents

All these operations must be recorded in the directory in the same way as operations between residents and non-residents, as is already the case for current operations.

The code 750 "Payment between a resident of Belgium and a resident of Luxembourg" will be deleted.

The titles of the codes mentioning Belgium or the UEBL will be modified to refer only to Luxembourg.

3.2. Payments with Belgian public administrations

Codes 330, 331, 332, 530, 531 corresponding to payments with Belgian public administrations will be deleted.

4. Modifications to the collection system to preserve the quality of statistics

The introduction of the 12,500 euro exemption threshold leads to a decrease in the quality of statistics due to the loss of information. This predictable degradation in quality will be compensated by better use of data from different sources, and by the development of complementary information sources.

4.1. The threshold for identifying the resident counterparty

The loss of information linked to the introduction of the 12,500 euro threshold is significant for items where the number of low-value payments is high. This is particularly true for current account operations. To address this problem, compilers will reorient their system towards an "enterprise profile" approach. For this, the identification of the resident counterparty is necessary for amounts above the 12,500 euro threshold.

Consequently, for payments made on behalf of the clientele and exceeding 12,500 euros, credit institutions must identify the resident counterparty. This identification of the resident counterparty is done by indicating the eight-digit number assigned to any resident subject to VAT or, in the absence of this number, by the appropriate generic identification number.

4.2. Own account operations

Currently, the provisions of regulation L2 of the ministerial regulation of 13 November 1998 provide that own account operations of credit institutions are recorded in the directory regardless of the amount of the operations. By derogation from regulation L2, communication IBLC 99-006 limits the recording from the first euro to certain operations, a simplification threshold of 9,000 euros being applicable for other operations.

The introduction of the previous simplifications, and the lack of breakdown of the "other administrative expenses" item in the accounting scheme, does not allow for a reliable distribution of these expenses by product and by country. Consequently, the list of operations for which recording in the directory must be performed will be modified as follows:

Recording from the first euro of the economic nature of operations with foreign countries

	Current Situation	From 2002
Current Account	130, 300, 301, 303, 308, 309	090 to 393
Financial Account	010, 011, 012, 075, 500 to 519, 620 to 626, 635 and 640	640
Others	020, 071, 072, 073, 079, 080	-

Recording from the first euro of the country code corresponding to the country of residence of the non-resident counterparty

	Current Situation	From 2002
Current Account	130, 300, 301, 303, 308, 309	090 to 393
Financial Account	500 to 519, 620 to 626, 635 and 640	640

All own account operations recorded in the directory must include the identification of the bank as the resident counterparty.

For operations that do not need to be recorded from the first euro, the simplification threshold of 9,000 euros is replaced by an exemption threshold of 12,500 euros.

4.3. Identification of collective investment undertakings

This identification of collective investment undertakings (CIUs) is necessary for the joint use of operations from the balance of payments collection system and that carried out with CIUs (tables O1.1 and O4.1). The identifiers of the CIU compartments established by the Commission de Surveillance du Secteur Financier (CSSF) must be used for transactions with CIUs.

Identification must be carried out for any operation carried out by a CIU on its assets (e.g., purchase/sale of securities). However, identification should not be carried out for operations on CIU shares (subscription/issuance of shares - code 492).

5. Transmission of files

Currently, the transmission of directories is done on magnetic media to the IBLC or its Luxembourg representation office. In order to increase the efficiency and security of transmissions from credit institutions to the BCL, all credit institutions are invited to use the LIBRAC computer infrastructure, starting from 1 September 2001. The possibility of using the LIBRAC computer infrastructure has been available since 1 February 2001, with the BCL handling the transmission of daily and monthly files received from credit institutions to the IBLC via a secure computer line.

Individual and temporary derogations from the mode of transmission on computer media as provided for in Article 4 §2 of regulation L2 relating to specific statistical obligations of resident monetary financial institutions are extended.

It should be noted that the structure and nomenclature of messages currently used by the IBLC has been maintained (except regarding the file name) in order to avoid changes in the transmission computer processes of credit institutions.

For all information regarding the application of this circular, please contact Mr. Germain Stammet (tel. 4774 4279) or Mr. Philippe Arondel (tel. 4774 4269).

Please accept, Ladies and Gentlemen, the assurance of our very distinguished sentiments.

CENTRAL BANK OF LUXEMBOURG
The Management

Serge KOLB Andrée BILLON Yves MERSCH

ANNEX:
the law of 28 June 2000 amending the Grand Ducal Regulation of 10 November 1944 as amended relating to exchange control