Circular BCL 2007/211 of 15 October 2007 — New Statistical Data Collection for Non-Money Market Funds — Modification of Statistical Data Collection for Money Market Funds

1 / 16
Luxembourg, 15 October 2007
To all Luxembourg collective investment undertakings

CIRCULAR BCL 2007/211
New Statistical Data Collection for Non-Money Market Funds Modification of Statistical Data Collection for Money Market Funds

Dear Sirs, Madams,

On 27 July 2007, the Governing Council of the European Central Bank (ECB) adopted Regulation ECB/2007/8 concerning the collection of statistical information on the assets and liabilities of investment funds by the ECB. This regulation complements the existing framework of ECB statistical activities necessary to enable the European System of Central Banks (ESCB) to perform its functions by defining the natural and legal persons subject to reporting obligations, the confidentiality regime, and adequate implementation and sanction provisions, in accordance with Article 5.4 of the Statutes of the European System of Central Banks and of the European Central Bank.

2 / 16

In this context, it should be recalled that Regulation ECB/2001/13 concerning the consolidated balance sheet of the monetary financial institutions sector and ECB Guideline ECB/2004/15 concerning the balance of payments and the global external position already define a number of statistical information requests concerning the collective investment undertaking (CIU) sector.

All ECB requirements for statistical reporting by collective investment undertakings (CIUs) adhere to three essential rules.

First, the ECB must receive comparable, reliable, and up-to-date statistical information, collected under similar conditions throughout the euro area.

Second, the reporting obligations set out in the regulations must respect the principles of transparency and legal certainty. The regulations are therefore binding and apply directly throughout the euro area. They impose direct obligations on legal or natural persons, subject to sanctions that may be imposed by the ECB if reporting requirements are not met.

The statistical information subject to reporting in accordance with ECB requirements and the minimum standards to be respected are detailed in the aforementioned ECB Guideline and Regulations. In accordance with these texts, National Central Banks (NCBs) must submit monthly and quarterly information covering:

• the outstanding amounts of assets and liabilities of money market CIUs
• the outstanding amounts of assets and liabilities of non-money market CIUs
• transactions carried out by non-money market CIUs on their assets and liabilities

Based on the aforementioned ECB Guideline and Regulations, the BCL has developed a data collection system for monetary and non-monetary collective investment undertakings, the characteristics of which are detailed in this circular.

3 / 16

1 Objectives

Based on ECB Guideline ECB/2004/15 and Regulations ECB/2001/13 and ECB/2007/8, the BCL has developed a collection system intended to meet the following objectives:

• Complete coverage of the foreseeable requirements of the European Central Bank for monetary and financial statistics.
  However, attention should be drawn to the fact that statistics collected in other areas will also need to be modified. These modifications, which will be presented later, concern essentially data related to the balance sheets of money market CIUs.
• Minimization of the workload for reporting institutions.
• Consistency with data collected for prudential supervision purposes.
  This consistency, which is not possible for all information to be collected, allows the use of prudential data in the process of compiling data for the ECB and contributes to the quality control of collected data.
• Compatibility with the ESA95 standard (European System of Accounts 1995).
  Compliance of collected data with the ESA95 standard will facilitate their use in the field of national accounting and in the balance of payments and should help avoid additional surveys.

2 Main Innovations

Compared to the existing statistical collection system, the innovations concern both the reporting population and the existing monthly and quarterly collections for money market CIUs.

• A significant innovation is the introduction of a new category of reporting institutions: non-money market CIUs 1. This is intended to cover all CIUs that are not included on the official list of money market CIUs, regardless of whether they are governed by the Law of 20 December 2002 or the Law of 13 February 2007.

1 Regulation ECB/2007/8 designates these entities by the term "Investment Funds" as opposed to money market CIUs.

4 / 16

• Conversely, CIUs or CIU compartments of modest size are exempt from quarterly collection provided they submit the monthly prudential report O 1.1 to the CSSF.
  Indeed, the aforementioned ECB Regulations provide for the possibility of exempting small-sized reporters from reporting. Exemptions will be granted based on the share of the net asset value of the reporters in the sum of the net asset value of all CIUs or CIU compartments.

Since the BCL must provide information on the different sub-categories of CIUs based on the following criteria:

• Money market CIUs
• Non-money market CIUs
• Equity CIUs
• Bond CIUs
• Real estate CIUs
• Mixed CIUs
• Other CIUs
• Alternative CIUs (Hedge funds)

The selection of CIU compartments subject to reporting must be performed by sub-category rather than on the entire population.
Exemptions will be granted as long as the coverage degree of the collection is greater than 95% of the net asset value of the CIU category. The BCL will implement a regular review of the list of CIUs or CIU compartments exempt from quarterly collection.

• The introduction of a new category of reporting institutions also implies the definition of new statistical reports addressed to this category of reporters. Thus, money market and non-money market CIUs should prepare specific statistical reports to satisfy the ECB's information requests.
  With a view to minimizing the burden on reporters, the BCL opted for the introduction of a new single quarterly statistical report for money market CIUs and non-money market CIUs. Indeed, although the ECB distinguishes between money market CIUs that are part of the monetary financial institutions population and investment funds (non-money market CIUs), the Luxembourg entities responsible for establishing CIU reporting, namely CIU central administrations, must prepare statistical reports for both categories of reporters. Thus,

5 / 16

a single statistical report will constitute an advantage for CIU central administrations.

• The simultaneous introduction of security-by-security reporting and a revised quarterly statistical collection also allowed combining the two requests to avoid collecting the same information under two different reporting frameworks. Thus, the new quarterly statistical report for CIUs no longer requires breakdowns for securities held and issued.
  These breakdowns are compiled by the BCL by enriching the quarterly statistical report with information from the security-by-security collection.

3 Money Market CIUs

In the case of securities collective investment undertakings (CIUs), funds that invest in monetary assets (money market CIUs) meet the necessary liquidity conditions and are therefore included in the monetary financial institutions (MFI) sector. Money market CIUs are defined as CIUs whose shares are, in terms of liquidity, close substitutes for deposits and whose investments are essentially made in monetary instruments and/or other transferable debt securities with a residual maturity of one year or less and/or bank deposits and/or whose objective is to offer a yield close to money market rates. The criteria for enumerating money market CIUs can be assessed from multiple sources: prospectuses, fund regulations, legal nature of companies, articles of association or organizational rules, subscription documents or investment contracts, commercial documents or any other declaration having similar effects.

3.1 Selection Criteria for Money Market CIUs

The objective being to obtain a homogeneous population, it is important that different countries use identical or at least similar definitions to define the respective sub-groups.
For the purposes of defining money market UCITS mentioned in point 3 "Money Market CIUs" above:

6 / 16

1 CIUs are undertakings whose sole purpose is the collective investment of funds raised from the public and whose shares are, at the request of holders, repurchased or redeemed directly or indirectly from the assets of the undertaking. Such undertakings can be legally founded on the basis of either contract law (such as funds managed by management companies), company law (such as variable capital investment companies), or statutes (such as investment companies).

2 Bank deposits are cash deposits made with credit institutions, repayable on demand or with notice up to three months or with initial maturities up to two years, including sums paid to credit institutions as part of a transfer of securities during repurchase or securities lending operations.

3 CIU shares are close substitutes for deposits in terms of liquidity in that they can, under normal market circumstances, be repurchased, redeemed, or transferred, at the request of the holder, such that the liquidity of the shares is comparable to that of deposits.

4 "Essentially" means at least 85% of the investment portfolio.

5 Money market instruments represent categories of transferable debt securities that normally trade on the money market (e.g., certificates of deposit, commercial paper, bank acceptances, Treasury bills, and local government bonds) due to the following characteristics:

• Liquidity, in that they can be repurchased, redeemed, or sold at limited cost, with low commissions, limited bid-ask spreads, and reduced processing times
• Market depth, in that they are traded on a market capable of absorbing a large volume of transactions, with trading of large amounts having little influence on their price
• Value precision, in that their value can be determined precisely at any time or at least once a month
• Low interest rate risk, in that the residual maturity is one year or less, or if regular yield adjustments, consistent with money market developments, occur at least every twelve months
• Low credit risk, in that these instruments are:

7 / 16

− either listed on an official list of a stock exchange or traded on other regulated markets that operate regularly, are recognized, and are accessible to the public − either issued under regulations aimed at protecting investors and savings − either issued by:

• a central, regional, or local authority, the central bank of a Member State, the European Union, the European Central Bank, the European Investment Bank, or a non-member State or, if the latter is a federal State, one of the entities belonging to the federation, or an international public institution to which one or more Member States belong
• a credit institution subject to prudential supervision, in accordance with criteria defined by Community legislation or a credit institution subject to and satisfying prudential rules considered by competent authorities to be at least as stringent as those provided for by European legislation, or guaranteed by any such institution
• an undertaking whose securities have been listed on an official list of a stock exchange or are traded on other regulated markets that operate regularly, are recognized, and are accessible to the public.

Based on this definition, it has been decided to automatically include CIUs whose policy consists of:

• collective investment in money market instruments: that is, securities and instruments representing claims, whether or not they have the character of securities, including bonds, certificates of deposit, treasury bills, and all other similar highly liquid instruments or
• investment in deposits with credit institutions and
• CIUs whose object is collective investment in money market instruments and/or deposits with credit institutions and which benefit, for the calculation of the subscription tax, from the reduced rate of 0.01% provided for by the Law of 20 December 2002 relating to collective investment undertakings.

Also to be included:

• CIUs that do not benefit from the reduced subscription tax rate and whose investment policy consists of collective investment in money market instruments: that is, securities and instruments representing claims, whether or not they have the character of securities, including bonds, certificates of deposit, treasury bills, and all other similar highly liquid instruments or investment in deposits with credit institutions
• CIUs pursuing an investment policy mainly aimed at investing in liquid or short-term assets to guarantee the liquidity of shares to investors.

3.2 List of Money Market CIUs

The CSSF is responsible for establishing the list of monetary CIUs or compartments that are or will be included on the list of monetary financial institutions. The BCL is informed by copy of the correspondence exchanged between the CSSF and the CIUs or compartments and can thus transmit the list of Luxembourg monetary financial institutions to the ECB. The ECB is responsible for publishing the list of Luxembourg MFIs, together with the lists of other EU countries. It is understood that CIUs that make modifications, either to their investment policy or to the marketing of their shares, having an implication on their qualification as monetary financial institutions, are invited to inform the CSSF as soon as possible.

8 / 16

4 Non-Money Market CIUs

The population of non-money market CIUs covers all CIUs that are not included on the official list of money market CIUs, regardless of whether they are governed by the Law of 20 December 2002 or the Law of 13 February 2007.

Non-money market CIUs are divided into the following sub-categories based on their main investment policy:

• Equity CIUs
• Bond CIUs
• Real estate CIUs
• Mixed CIUs
• Other CIUs
• Alternative CIUs (Hedge funds)

4.1 List of Non-Money Market CIUs

The BCL receives identifying information from the CSSF on all CIUs and CIU compartments and can thus transmit the list of non-money market CIUs (investment funds) to the ECB. The ECB is responsible for publishing the list of Luxembourg investment funds, together with the lists of other EU countries.

5 Statistical Data Collection

The statistical data collection addressed to all CIUs or CIU compartments is intended for purely statistical purposes and is based primarily on the requirements formulated in the aforementioned ECB Regulations.

5.1 Regulation ECB/2001/13 concerning the consolidated balance sheet of the monetary financial institutions sector

Regulation ECB/2001/13 defines, on the one hand, the notion of money market CIU and, on the other hand, the monthly and quarterly information requests addressed to money market CIUs.
In accordance with the aforementioned ECB Regulation, Circular BCL 2002/171 of 5 June 2002 defined the notion of money market CIU in Luxembourg and introduced the monthly and quarterly statistical reporting of money market CIUs.
The latter includes the following statistical reports:

9 / 16

• S 1.3 "Monthly Statistical Report for Money Market CIUs"
• S 2.10 "Breakdown by Country"
• S 2.11 "Breakdown by Currency"
• S 2.12 "Breakdown by Sector"

In the context of introducing a new data collection for non-money market CIUs, the BCL opted for the introduction of a single quarterly statistical report (cf. point 5.2) for money market and non-money market CIUs. Thus, the current quarterly statistical reports for money market CIUs, namely reports S 2.10, S 2.11, and S 2.12, will be abolished with effect from 1 October 2008. The last reports to be sent to the BCL will refer to the date of 30 September 2008.

5.2 Regulation ECB/2007/8 concerning the assets and liabilities of investment funds

In accordance with Regulation ECB/2007/8, the BCL must provide the ECB with monthly information on:

• the outstanding amounts of assets and liabilities of investment funds
• transactions carried out by investment funds on their assets and liabilities.

In this context, it is important to note that the BCL must provide the ECB with information on the outstanding amounts of assets and liabilities of non-money market CIUs as well as transactions carried out on these assets and liabilities for all non-money market CIUs as well as for each of the aforementioned sub-categories of non-money market CIUs. The compilation of data on the different sub-categories of non-money market CIUs will be performed by the BCL based on identifying information on the main investment policy of non-money market CIUs.

5.2.1 Outstanding Reporting

Regarding information on outstanding amounts, the ECB Regulation allows National Central Banks (NCBs) to conduct a quarterly data collection from CIUs. The monthly information that NCBs must transmit to the ECB can be estimated based on the quarterly collection and the monthly net asset value. The BCL has therefore opted for the introduction of a quarterly outstanding collection, while monthly data will be estimated by the BCL based on data from the quarterly collection and the monthly prudential reporting (O 1.1) that CIUs and CIU compartments must submit to the CSSF.

10 / 16

As indicated above, the BCL has also opted for the introduction of a single report for money market and non-money market CIUs. It goes without saying that this single report must cover the information needs addressed by the ECB to money market and non-money market CIUs. Thus, as this report contains the information requests addressed to both categories of reporters, it may exceed, for certain items, the requests formulated in the respective ECB Regulations.

With a view to meeting all information needs, the new report S 2.13 "Quarterly Statistical Balance Sheet for CIUs" breaks with the tradition of CIU statistical reports, which until now were characterized by a fixed number of rows and columns. Report S 2.13 "Quarterly Statistical Balance Sheet for CIUs" is a matrix where compartments will break down the counterpart countries with a 2-character ISO code, the transaction currency with a 3-character ISO code, and the economic sector of the counterpart based on a list of about fifteen available codes. Thus, the size of this report will vary depending on the diversity of information to be provided and will no longer be limited to a fixed number of cells. The advantage of this solution lies in the fact that such a report is richer in basic information and will therefore allow the BCL to be more flexible when ECB requests evolve, notably following an enlargement of the euro area and/or the European Union.

Finally, it is also important to note that the introduction of report S 2.13 "Quarterly Statistical Balance Sheet for CIUs" goes hand in hand with the introduction of a monthly security-by-security outstanding collection (cf. point 5.2.2). Thus, report S 2.13 does not require for securities a breakdown by country and economic sector of the issuer nor by currency and initial maturity, since this information is collected under security-by-security reporting.

5.2.2 Transaction Reporting

Regarding transactions carried out on assets and liabilities, the Regulation does not require collecting them directly from non-money market CIUs. Thus, the BCL can estimate transactions:

• on securities provided it introduces a monthly security-by-security outstanding reporting
• on receivables, other assets, deposits, and other liabilities provided it has detailed information on the currencies in which these transactions are denominated

However, the BCL does not have the necessary information to estimate transactions and/or neutralize variations that do not result from transactions for immobilized assets and financial derivative instruments. To meet these needs, the BCL must therefore collect information from non-money market CIUs. The new report S 1.6 "Information on Valuation Effects on the Balance Sheet of CIUs" allows identifying valuation effects affecting immobilized assets and financial derivative instruments.

11 / 16

It is important to note that this information is to be provided only to the extent that the aforementioned items exceed 5% of total assets in terms of outstanding amounts.

5.3 BCL Statistical Reporting

With a view to ensuring the collection of statistical data by the ECB, CIUs or CIU compartments must periodically submit specific information to the BCL.
These financial information are:

• security-by-security reporting
• Report S 1.3 "Monthly Statistical Balance Sheet for Money Market CIUs"
• Report S 1.6 "Information on Valuation Effects on the Balance Sheet of Non-Money Market CIUs"
• Report S 2.13 "Quarterly Statistical Balance Sheet for CIUs"

These documents are attached to this circular as annexes.

12 / 16

5.4 Reporting for monetary UCITS
Monetary UCITS are currently already subject to the statistical collection of the BCL and submit monthly and quarterly statistical reports.
From December 2008, the reporting for monetary UCITS will be characterized as follows:
1 Monthly statistical report S 1.3
All compartments are required to submit the monthly statistical report S 1.3 "Monthly Balance Sheet of Monetary UCITS".
2 Title-by-title reporting
To be submitted only by monetary UCITS that do not benefit from the reporting exemption provided for in point 2 "Main innovations" below.
3 Quarterly statistical report S 2.13
To be submitted only by monetary UCITS that do not benefit from the reporting exemption provided for in point 2 "Main innovations" below.

5.5 Reporting for non-monetary UCITS
Non-monetary UCITS are currently not subject to the statistical collection of the BCL.
From December 2008, the reporting for non-monetary UCITS will be characterized as follows:
1 Monthly statistical report S 1.6
To be submitted only by non-monetary UCITS that do not benefit from the reporting exemption provided for in point 2 below and that have information to provide on the items specified in this report.
2 Title-by-title reporting
To be submitted only by non-monetary UCITS that do not benefit from the reporting exemption provided for in point 2 "Main innovations" below.
3 Quarterly statistical report S 2.13
To be submitted only by non-monetary UCITS that do not benefit from the reporting exemption provided for in point 2 "Main innovations" below.

5.6 Entities subject to reporting
The Central Bank of Luxembourg makes available to declarants a list of UCITS or UCITS compartments subject to reporting on its website (http://www.bcl.lu).
This list, which will be updated monthly, will indicate for each UCITS or UCITS compartment the statistical reports to be submitted while specifically identifying the compartments newly added to the list.

6 Quality of transmitted data
We wish to emphasize the importance of the quality of data transmitted to the BCL and the need to submit data for verification against the detailed rules in the technical documentation prior to transmission. Only rigorous control performed at the time of data production will allow meeting both quality requirements and imposed deadlines. This point is all the more important as the data collected in this manner will be controlled by the ECB services before being aggregated with data from other Member States. Any significant error or negligence will have damaging repercussions on the reputation of the entire community of Luxembourg monetary financial institutions.

7 Compliance with reporting deadlines
The BCL will establish and communicate, by circular, to UCITS a table listing the precise dates by which monthly and quarterly statistical tables are to be submitted.
It is recalled to UCITS that the BCL must transmit monthly statistical reports to the European Central Bank within a period of 15 working days and quarterly statistical reports within a period of 28 working days following the period to which they relate. It is therefore essential that institutions strictly respect the delivery deadlines defined in this circular so that the BCL can meet its commitments within the ESCB.

8 Implementation of the new collection
The submission of this information is mandatory as of the deadline of respectively end of December 2008.
The monthly statistical report S 1.3 "Monthly Balance Sheet of Monetary UCITS" is to be delivered by January 14, 2009 at the latest.
The monthly title-by-title reporting as well as the quarterly statistical report S 2.13 "Quarterly Balance Sheet of UCITS" will thus be to be delivered by January 25, 2009 at the latest.
The first monthly statistical report S 1.6 "Information on valuation effects on the balance sheet of UCITS" refers to valuation effects occurring in January 2009. It is to be delivered by February 16, 2009 at the latest.
This circular replaces and repeals with effect from January 1, 2009 Circular BCL 2002/171 of June 5, 2002.
Please accept, Ladies and Gentlemen, the assurance of our very distinguished sentiments.
CENTRAL BANK OF LUXEMBOURG
The management

Serge KOLB Andrée BILLON Yves MERSCH

Annexes: 5
1 "Definitions and concepts for statistical reporting of collective investment undertakings" 2 List of member countries of the monetary union 3 S 1.6 "Information on valuation effects on the balance sheet of non-monetary UCITS" 4 S 2.13 "Quarterly Balance Sheet of UCITS" 5 Title-by-title reporting