Methodological explanation about the switch to a consolidated basis for the private sector debt indicators

The consolidated approach introduced in the Report 2014 may appear for some countries as more appropriate to measure the financial soundness of the non-financial private sector.

The difference between the 2 approaches is due to the treatment of the financial liabilities between resident units of the same sector. Nevertheless the consolidated approach is deemed relevant only for the non-financial corporations. Indeed such financial liabilities may be generated frequently for fiscal reasons between enterprises part of the same group. Financing activities between related enterprises appear mostly more stable than financing activities of the banking sector. In that prospect, one may consider that this kind of intra-group funding does not as such reflect macroeconomic imbalances. If this kind of liabilities is indeed largely the result of intra-group transactions initiated a.o. by intra-group financial centers, centralizing the management of the treasury and financing activities of the group, a bias may be introduced in the non-consolidated approach that will register all financial liabilities created by these activities. On the contrary, the consolidated approach will net out these transactions and resulting positions and as a result allow a more refined measurement of these liabilities. As in the MIP scoreboard the consolidated debt position and the consolidated credit flows do refer to gross liabilities.

Considering the presence in Belgium of several non-financial holdings and financial centers of multinational groups, the consolidated approach seems indeed to be more appropriate to assess the financial soundness of the non-financial private sector.