Please refer to State Bank’s circular No. DS.MFS.5 (18)/2009-872 dated 22nd May, 2009, under which banks are required to submit monthly Sectoral Balance Sheet (Flow of Funds statement - Annexure A03) regularly to Statistics & DWH Department through DAG Portal of SBP.

It has been observed that banks are reporting full amounts of underlying instrument on currency forwards (swaps) in sectoral balance sheet (Annexure A03) or negative values are reported in both assets and liabilities side. However, as per the instructions of State Bank only those asset and liability position for forward (swap) contracts need to be recorded in the above mentioned statement that result from the price changes of the underlying instrument. At the inception of a forward (swap) contract, the contract has a Zero value for both parties, because these parties exchange risk exposures of equal market value. However, as the exchange rate or interest rate of the underlying currency changes during the life of the contract the market position of each party will differ from Zero and an asset or liability position will be created for each party and these positions should be reported in sectoral balance sheet of the bank and revalued at least on a monthly basis. An example is enclosed to describe the treatment of currency forward (swap) contracts in monetary statistics. In case of any query regarding the enclosed document the officer concerned of this department may be contacted.

All banks are advised to record and report the data strictly according to the above instructions in sectoral balance sheet (Annexure A03).

Encl: (As Above)