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Document Sample
Form PL: Profit and Loss return
Form PL should cover all the income and expenditure of the reporting institution. It is split into
two sections: Part 1 covering all transactions and Part 2 covering transactions with non-
residents only. The information obtained from this form is to be used primarily in the provision of
aggregate information for the banking sector to the Office for National Statistics in calculating
GDP and Balance of Payments. Except where otherwise stated, figures should be reported
gross rather than net, and only for the period in question. Any adjustments to previous periods
should be treated as revisions to those periods (see appendix). Most items on this form should
be shown on an accruals basis, including discounts and premia on money market instruments
and bonds. In the case of debt securities (bonds and FRNs under items 1D and 2D), accrued
interest should be determined, if possible, by reference to the rate applicable at the point of
issue (‘the debtor approach’). Dividends received and paid (items 4, 17, 26 and 30) and non-
dividend remitted earnings should be reported on a cash basis.
Guidance largely remains unchanged following the adoption of International Accounting
Standards (IAS) from 2005 other than for the treatment of software development costs within
Added o/a
Stats expenditure. During working discussions with banking industry representatives over IAS
Notice
2004/06 implementation, banks mainly indicated a preference for retaining the existing Yellow Folder
Guidance for statistical reporting. If any banks wish to change their reporting on certain items
to an IAS basis please discuss with your usual Form PL contact at the Bank.
Each return covers data for three months only, i.e. for the quarter to end-March, June,
September and December. Annual returns are for year to end-December.
PL item Part 1
1 Total interest receivable
Include
Amended (a) Interest receivable classified by instrument. This is intended to be on a contractual basis as
o/a Stats
opposed to the effective yield basis outlined within International Accounting Standards (see
Notice
2004/06 Introduction above)
(b) Any interest receivable on gold deposits within item 1B (loans and advances)
Also include additional detail for interest receivable from loans and advances (item 1B) and
repos (item 1C) by economic sector. See section III of the Classification of Accounts guide.
Exclude
(a) Interest received from interest rate swaps, which should be reported under dealing profits
from derivatives (see Item 8C)
Note:
In the case of netting/pooling arrangements, if gross flows are available, they should be
Amended reported. If gross flows are not available and the netting occurs within the same economic
o/a Stats
Notice sector, net flows can be reported. However, if gross flows are not available, and the net flow is
2003/03
based on accounts from different economic sectors (e.g. private non-financial corporations and
non-residents), then these should be excluded.
September 2004 – Amended (Effective January 2005) PL / Page 1
Examples:
(a) If there is a loan and a deposit from one customer and the interest is calculated gross,
but charged net – interest should be reported on a gross basis.
(b) If credit and debit balances exist for the same customer, the interest is calculated net,
and therefore charged/paid net – interest can be reported on a net basis.
(c) If there are credit and debit balances which either apply to customers in different
economic sectors or are held in different countries, but which are pooled (either
physically or notionally) for the calculation and posting of interest – if gross flows are
not available, you should exclude the interest from the figures.
PL Item
1A Interest receivable on money market instruments
Include
(a) All interest receivable on money market instruments included in BT items 23E, 23F, 23GA,
23GC, 23J and 23L, embracing all income from certificates of deposit, promissory notes,
commercial paper and other short-term negotiable paper.
(b) Any interest or discount receivable on bills (BT item 26), except where such interest relates
to bills held in respect of ECGD guaranteed lending (also see item 1B below).
(c) Any interest accruing over the reporting period in respect of short-term deep discount and
zero-coupon instruments – please also see General Notes and Definitions, item 8(b) (v).
1B Interest receivable on loans and advances (excluding under repo agreements)
Include
(a) Any loans and advances denominated in gold
(b) Interest debited in respect of loans and overdrafts on accounts (BT item 29)
(c) Interest from balances with banks, building societies or other monetary financial institutions
(BT items 23D, 23GB, 23H and 23K).
(d) All interest receipts, including those from bills held, in respect of ECGD ‘scheme lending’
for exports and DTI special ‘scheme lending’ for shipbuilding (BT items 27 and 28). Include
here any subsidies received (net of any payments).
Exclude
(a) Finance charges on finance leases (see item 9B)
1BEA- Breakdown of interest receivable on loans and advances to other financial corporations
BEC Provide breakdown into insurance companies and pension funds, investment and unit trusts,
and financial auxiliaries. The classification system used is set out in sections III.3(4), III.3(2)
and III.3(8) of the Classification of Accounts guide and is based upon the Standard Industrial
Classification 1992 (or SIC92). This, in turn, is based upon NACE Revision One, the European
industrial classification system. It is used in completing the AD and AL forms (but excludes the
public sector).
PL / Page 2 May 2003
PL Item
1BJA- Breakdown of interest receivable on loans and advances to private non-financial
BJD corporations
Provide breakdown into manufacturing, wholesale and retail trade, transport, storage and
communications and real estate. The classification system used is set out in sections IV.2(4),
IV.2(7), IV.2(9) and IV.2(10A) of the Classification of Accounts guide and is based upon the
Standard Industrial Classification 1992 (or SIC92). This, in turn, is based upon NACE Revision
One, the European industrial classification system. It is used in completing the AD and AL
forms (but excludes the public sector).
1BKA Interest receivable on loans and advances to unincorporated businesses other than
unlimited liability partnerships
See section III.10(b) of the Classification of Accounts guide.
1BKB Interest receivable on bridging finance
Include bridging mortgage loans to individuals and individual trusts.
1BKC Interest receivable on loans secured on dwellings
This item comprises mortgage loans to individuals and individual trusts, except bridging finance
(to be placed in item 1BKB).
Include
(a) Flexible mortgage products (see notes to Form Q1(D) for definition)
(b) Loans for home improvements, house repairs and maintenance where they are also
secured by a first charge over the property
(c) Mortgage sub-participants, where they are fully and specifically secured against residential
Added o/a mortgage loans. Mortgage sub-participation is where one bank undertakes a mortgage and
Stats
Notice then shares the debt/risk with another institution. Each party in this loan should report their
2003/03
own share in a similar manner to the treatment of a syndicated loan.
(d) Mortgage loans secured on property where the occupier works at home but no structural
alterations are required to return the property to full residential use (see also definitions to
Form QX, item XF).
Exclude
Added o/a (a) The mortgage loan if any part of the property is used for non-residential purposes and
Stats
Notice structural alterations are required to return the property to full residential use (enter in item
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1BKE).
1BKD Interest receivable on credit card lending
Include ‘charge card’ lending (even if the outstanding balance has to be paid off in full at the
end of each charging period).
1BKE Interest receivable on other loans to individuals
Include
(a) All loans and advances to individuals not listed in 1BKA-D
(b) All overdrafts outstanding (overdrafts comprise of debit balances on accounts which, if in
Added o/a credit, would be classed as deposits)
Stats
Notice The mortgage loan, if any part of the property is used for non-residential purposes and
2003/03
structural alterations are required to return the property to full residential use.
July 2004 - Amended PL / Page 3
PL Item
1BMA Interest receivable on loans and advances to, or balances with, non-resident banks
The definition for banks covers non-resident offices of reporting institutions, central monetary
Added o/a
Stats institutions and other non-resident banks, and is as defined in Sections III.12 a, b and c of the
Notice
2004/04 Classification of Accounts guide.
This will not be a requirement until 2005 at the earliest.
1BMB Interest receivable on loans and advances to, or balances with, non-resident other
financial intermediaries
The detailed definition for the classification of institutions to be included in this box has yet to
be finalised within relevant EU regulation.
This will not be a requirement until 2005 at the earliest and the final definitions will be the
subject of discussions with the BBA once the EU regulation has been completed.
1C Interest receivable on repos / reverse repos
Refer to the appendix to the Notes of Form PL for further details on the treatment of repos.
Repo interest refers to interest from both repo and buy / sell back repo trading.
Include receipts from security lending / borrowing only when cash collateral is involved – other
income from security lending / borrowing should be classified as fees.
Interest receivable on repos / reverse repos should also be shown by economic sector (see
definitions under interest receivable on loans and advances – item 1B).
1D Interest receivable on bonds and FRNs
Include
Amended
o/a Stats (a) All interest receivable on bonds, FRNs and other instruments included in BT item 32 (i.e. all
Notice
2004/02 debt instruments other than those included under item 1A above)
(b) Both the value of any coupon receipts and part of the discount that unwinds during the
period under review, if a bond is issued at discount (or premium) from its nominal (the
‘debtor approach’ stated under ESA 95). However, if accruals based on the discount at
issue are not known, instead include accruals based on the discount at the time of the
acquisition.
Exclude
(a) Dealing profits / losses (to be placed in item 8).
2 Total interest payable
Include
Added o/a (a) Interest payable classified by instrument. This is intended to be on a contractual basis as
Stats
Notice opposed to the effective yield basis outlined within International Accounting Standards (see
2004/06
Introduction above).
(b) Any interest payable on gold deposits
PL/ Page 4 March 2004 - Amended
Exclude
(a) Any interest passed on to other participants in a syndicated loan
Added o/a (b) Interest paid relating to interest rate swaps, which should be reported under dealing profits
Stats
Notice from derivatives (Item 8C), as a negative entry.
2003/03
(c) Also include additional detail for interest payable on deposits (item 2B) and repos (item 2C)
by economic sector. See section III of the Classification of Accounts guide.
2A Interest payable on money market instruments
Include all interest payable on money market instruments included in BT items 4 and 5A,
embracing all income from certificates of deposit, promissory notes, commercial paper and
other short-term negotiable paper. See also General Notes and Definitions, item 8(b) (v)
Note that there is no split for interest payable on money market instruments to non-residents.
2B Interest payable on deposits (excluding under repo agreements)
Include
(a) Any deposits denominated in gold
(b) Interest payable on deposit liabilities included under items 2 and 3 on Form BT
Exclude
(a) Finance charges on finance leases (see item 12BB)
Interest payable on deposits should be shown by economic sector (see definitions under
interest receivable on loans and advances – item 1B).
2C Interest payable on repos / reverse repos
Refer to the appendix to the Notes of Form PL for further details on the treatment of repos.
Repo interest refers to interest from both repo and buy / sell back repo trading.
Include payments from security lending / borrowing only when cash collateral is involved –
other income from security lending / borrowing should be classified as fees.
Interest payable on repos / reverse repos should also be shown by economic sector (see
definitions under interest receivable on loans and advances – item 1B).
2D Interest payable on bonds and FRNs
Include
Amended
o/a Stats (a) All interest payable on bonds, FRNs and other instruments included in BT items 5B and 5C
Notice
2004/02 and QX item 19CD3 (i.e. all debt instruments other than those included under item 2A
above)
(b) Both the value of any coupon receipts and part of the discount that unwinds during the
period under review, if a bond is issued at discount (or premium) from its nominal (the
‘debtor approach’ stated under ESA 95).
Exclude
(a) Dealing profits / losses (to be placed in item 8).
Note that there is no split for interest payable on bonds and FRNs to non-residents.
March 2004 - Amended PL / Page 5
PL Item
3 Net interest income
Total interest receivable (item 1) less total interest payable (item 2) for all currencies.
4 Dividends received
Enter the value of dividends received during the period (this should also include the cash value
of any scrip issues). Include all dividends received on equity.
Exclude dealing profits / losses (item 8).
Figures should be reported gross of tax and on a cash basis.
5 Fees and commissions receivable
Banks should report receipts on a gross basis; only those unable to ascertain gross figures
Added o/a should report on a net basis. It is acceptable to report here on an amortised basis, as opposed
Stats
Notice to a contractual basis, as outlined within International Accounting Standards (see Introduction
2004/06
above).
Total fees and commissions receivable from non-residents should be separately identified in
Added o/a
Stats item 5A. The product breakdown of fees and commissions requested from item 5B-5H should
Notice
2003/03 add to the total of item 5, i.e. include transactions with all counter parties (including non-
residents).
Sector detail for private non-financial corporations (items 5BA, 5CA, 5EA, 5FA, 5GA and 5HA)
and households (items 5FB, 5GB and 5HB) is optional until Q1 2005, as agreed following
Added o/a
Stats discussions with banks and the BBA. These sectoral breakdowns are as listed in section III of
Notice
2003/03 the Classification of Accounts guide.
5B Investment banking, advisory, brokerage and underwriting
Include
(a) Fees and commissions from underwriting (or participation in the underwriting of) securities,
private placements of securities, investment advisory and management services, merger
and acquisition services and related consulting fees
(b) Fees from securities brokerage activities, from the sale and servicing of mutual funds, and
from the purchase and sale of securities and money market instruments, where the bank is
acting as agent for other banking institutions or customers (if these fees are not included in
item 5C ‘fiduciary activities’)
5C Fiduciary activities
Report income received from services provided by the bank as agent, without the bank having
a direct beneficial interest in the underlying transaction.
5D Insurance
Report income from insurance agency and brokerage operations (includes sales of annuities
and supplemental contracts) and service charges, commissions and fees from the sale of
insurance and related services.
PL / Page 6 September 2004 – Updated (Effective January 2005)
PL Item
5E Securitisation
Only include fees earned from securitisation transactions. Exclude realised and unrealised
losses on securitisation transactions (place in item 8B).
5F Loans and advances
Added o/a Income earned from fees and commissions related to lending. This does not include fees on
Stats
Notice credit cards (place in item 5H).
2003/03
5G Bank charges for current account facilities
Include charges for both current account and overdraft facilities.
5H Other
Any items not included in 5B-5G above.
6 Fees and commissions payable
Banks should report payments on a gross basis; only those unable to ascertain gross figures
Added o/a
Stats should report on a net basis. It is acceptable to report here on an amortised basis, as opposed
Notice
2004/06 to a contractual basis, as outlined within International Accounting Standards (see Introduction
above)
7 Net fees and commissions
Fees and commissions receivable (item 5) minus payable (item 6).
8 Dealing profits
Include all profits or losses (including revaluation profits or losses) arising from both the
purchase and sale of trading instruments (foreign exchange, securities and derivatives). Item to
be reported net on a marked-to-market basis, as at the end of the reporting period (31 March,
30 June, 30 September or 31 December).
Exclude interest earned from these instruments, where they are already reported under items 1
and 2.
Where transactions between group entities occur, these should be shown at market value or
estimated market value if necessary. Refer to the appendix to the Notes of Form PL for further
details of the treatment of transfer pricing.
8A Foreign exchange
Enter here all profits / losses from spot / forward purchases / sales of foreign currencies. This
figure should be reported net.
8B Securities
Enter here all profits / losses from spot purchases / sales of securities. This figure should be
reported net.
8C Derivatives
Enter here all profits / losses from spot / forward purchases / sales of derivatives. This figure
should be reported net.
Derivatives are defined as financial instruments that are linked to the price performance of an
underlying asset and which involve the trading of financial risk. Include here all items currently
reported on the DQ form, such as profit and losses from trade in options, future / forwards,
swaps, FRAs, caps, floors, collars, warrants and certain credit derivatives.
September 2004 – Amended (effective January 2005) PL / Page 7
PL Item
Of which – net spread earnings
8AA, Net spread earnings are a measurement of service income (value added) from dealing
8BA, activities.
Added
o/a Stats 8CA Ideally, this should capture the difference between the sale/purchase price and the mid-market
Notice
2003/03 price at the time of the transaction. This is only required with non-bank counterparties, as inter-
bank business will net to zero overall. If spread earnings from all dealing activities are not
available, institutions may report information on “retail” trades (e.g. with private non-financial
corporates and households).
8AA, If data are not explicitly available, institutions may report an estimate of the service earnings
8BA,
calculated from the use of management information that measures the contribution of sales
8CA
Added cont’d activity in the trading business.
o/a Stats
Notice If institutions are not able to report on the above basis, they should discuss their reporting
2003/03
methodology with their usual contact at the Bank of England.
Net spread earnings should be reported for foreign exchange (item 8AA), securities (item 8BA)
and derivatives (item 8CA). Derivatives (item 8CA) need only be reported by banks which are
Updated
o/a Stats likely to generate over £25mn a quarter. If this is the case and you need to discuss possible
Notice
2006/01 methodologies please contact the Bank at plissues@bankofengland.co.uk. The reporting for
derivatives (item 8CA) is optional.
Total rents receivable
9A Include here rents received on land and buildings. To be reported gross (rental expenses
should be reported in item 12BAA).
Finance charges receivable on assets leased out under finance leases
9B Interest and the other charges component of rentals receivable on finance leases. A financial
lease is a lease that transfers substantially all the risks and ownership of an asset to a lessee.
In this sort of lease, rentals will normally be calculated to allow the lessor to recover the cost of
the asset and to make a profit over the period of the lease. Hire purchase arrangements and
the provision of operational leasing facilities are NOT regarded as financial leases.
Include all charges relating to assets under items XD, XFAB, XFBB, XFCB, XFDB, XFEB,
XFFB, XFGB, XFJB, XFKE, XFLA on form QX. Broadly this item represents total rentals
receivable from finance leases less depreciation of the net investment.
Exclude unearned finance charges.
Capital repayments receivable on assets leased out under finance leases
9C This item represents the difference between total rentals received on finance leases and
finance charges.
Other
9D All items of other operating income not covered in 9A-C above.
PL / Page 8 January 2006 - Updated
PL Item
9DA Of which: intra-group transfer pricing
Enter the income element from intra-group transfer pricing / management recharges. This is
the income received by the UK reporting institution from another UK group entity or non-
resident subsidiaries, group-companies or associates.
Refer to the appendix to the Notes of Form PL for further details of the treatment of transfer
pricing and intra-company recharges. The methodology used should be the same as that used
to complete tax returns.
10 Total non-interest income
SUM of dividend income (item 4), net fees and commissions (item 7), dealing profits (item 8)
and other operating income (item 9).
11 Operating income
SUM of net interest income (item 3) and total non-interest income (item 10).
12A Administrative expenses: staff costs
Remuneration of employees either in cash or in kind, in the period. If elements of this
breakdown are considered too sensitive to include in the return, they can be provided
separately, by letter. Banks choosing this option are asked to contact the Bank to agree a
Added o/a
Stats procedure. From 2005, in line with International Accounting Standards, software development
Notice
2004/06 costs should be capitalised and therefore excluded from staff costs.
12AA Wages and salaries
Gross wages and salaries are defined as total compensation in cash payable to all employees.
Include
(a) Overtime payments
(b) Bonuses
(c) Commissions
(d) Any other cash benefit payments
Exclude
(a) Employers’ National Insurance contributions
(b) Employers’ contribution to pension and welfare schemes
(c) Redundancy and severance payments
(d) Payments to a working proprietor, partners and executive directors not in receipt of a
regular salary, fee or commission.
(e) Payments to staffing agencies for services of staff employed by them
12AB Pension contributions
Employers’ contributions to pension funds (including lump sum contributions). Employers’
pension contributions should represent actual amounts rather than notional values.
September 2004 – Updated (Effective January 2005) PL / Page 9
PL Item
12AC Other social contributions
Social contributions are payments made to individuals, in cash or in kind, attempting to relieve
them from the financial burden of a number of risks or needs. Include in this item social
benefits not included in items 12AA-AB or 12AD-12AG paid in connection with sickness,
invalidity, occupational accident or disease, old age, death in service, survivors, maternity,
family, promotion of employment, unemployment, housing, education and general neediness.
12AD Employers’ NI contributions
Includes rebates from National Insurance Redundancy Fund.
12AE Redundancy and severance payments
Include Golden Handshakes
Exclude Accrued holiday pay
12AF Benefits in kind – expenditure items
Include
Items where the cost is separately identifiable and would normally fall within expenditure, such
Amended as staff canteens, luncheon vouchers, sport club membership, nurseries and health care.
o/a Stats
Notice
2003/03
The basis for this figure is the cost to the reporting institution rather than a measure of the
benefit to the employee.
12AG Other
Any other form of staff cost not included in 12AA-AF above.
12B Administrative expenses: other
Items included in operating expenses that exclude staff costs (12A) and depreciation and
amortisation (12C).
12BA Occupancy costs
Include here costs relating to land and other buildings, such as rent, non-domestic rates and
energy costs.
12BAA Of which - rents
Include rents payable on land, rentals paid on buildings and other dwellings. To be reported
gross (rental income should be reported in item 9A).
12BAB Of which – energy costs
Include all fuels (e.g. electricity, gas, oil, etc.) relating to occupancy costs supplied for own
consumption.
12BB Finance lease charges
Interest and the other charges component of rentals payable on finance leases. A financial
lease is a lease that transfers substantially all the risks and ownership of an asset to a lessee.
In this sort of lease, rentals will normally be calculated to allow the lessor to recover the cost of
PL / Page 10 May 2003
PL Item
the asset and to make a profit over the period of the lease. Hire purchase arrangements and
the provision of operational leasing facilities are NOT regarded as financial leases.
Include all charges relating to assets leased in whether for own use or for leasing out. This item
represents the difference between total rentals payable on finance leases and the depreciation
on the assets leased in.
12BC Capital repayments under finance leases
This item represents the difference between total rentals payable on finance leases and
finance charges payable.
12BD Other expenditure
Include
(a) Any items of other administrative expenses not included in items 12BA-12BC above
(b) Expenditure from intra-group transfer pricing
12BDA Of which – advertising and marketing costs
Report the payments for advertising and marketing campaigns, including payments for
television or radio media time, newspaper or billboard space.
Exclude internal staff costs relating to advertising and marketing (see item 12A).
12BDB Of which – legal services
Amounts payable for the services of solicitors and any other legal agents.
12BDC Of which – accountancy services
Amounts payable to others for the services of accountants, auditors and other accountancy
agents.
12BDD Of which – non-life insurance premiums
The premiums payable to provide cover against various events or accidents resulting in
damage to goods or property, or harm to persons as a result of natural or human causes (fires,
floods, crashes, collisions, sinkings, theft, violence, accidents, sickness, etc.) or against
financial losses resulting from events such as sickness, unemployment, accidents, etc.
12BDE Of which – lease costs (excluding finance leases)
Include
(a) Rentals payable on the hire or lease of assets under operating leases and similar
arrangements (but excluding finance leases).
(b) The costs incurred in the course of any hire purchase or other deferred payment
agreements entered into.
Exclude
The capital value of the asset(s) subject to any such credit arrangements mentioned in (b).
12BDF Of which – computer and related services (excluding hardware and software purchases)
Include services related to the installation, maintenance and upgrading of IT systems.
Exclude purchases of hardware and software
May 2003 PL / Page 11
PL Item
12BDG Of which – intra-group transfer pricing
Enter the expenditure element from intra-group transfer pricing / management recharges.
These are the costs paid by the UK reporting institution to another UK entity within the same
group or non-resident subsidiaries, group-companies or associates.
Refer to the appendix to the Notes of Form PL for further details of the treatment of transfer
pricing and intra-company recharges. The methodology used should be the same as that used
to complete tax returns for the Inland Revenue.
12C Depreciation and amortisation
The amount of fixed assets depreciation, during the period of consideration, as a result of
normal wear and tear and foreseeable obsolescence. Where possible, calculate using the
straight-line method, by which the value of a fixed asset is written off at a constant rate over the
whole lifetime of the good.
Added o/a
Stats Also include
Notice
2004/06 a) depreciation of software development
b) amortisation of cash-back payments
12CA Of which – property depreciation
The amount of property depreciation as a result of normal wear and tear and foreseeable
obsolescence. Property revaluations should be included as an other item (see 14 below).
13 Operating profit before provisions and tax
Operating income (item 11) less operating expenses (item 12).
14 Other items, including those which are exceptional or extraordinary
Enter other items such that ‘pre-tax profit on ordinary activities before provisions’ (item 15)
corresponds to the reporting entities’ figures in published accounts.
Include:
(a) Revaluation effects from items other than those relating to trading.
(b) Material items that derive from events or transactions that fall outside the ordinary activities
of the company and which are therefore expected not to recur frequently or regularly.
15 Pre-tax profit on ordinary activities before provisions for bad and doubtful debts
Operating profit before provisions and tax (item 13), but after other items, including those which
are exceptional and extraordinary (item 14).
16 Tax
Tax is to be completed on the same basis as published accounts. Corporation tax and Capital
Gains tax should be separated out under items 16A and 16B respectively.
17 Dividends paid
Enter the value of dividends paid during the period (this should also include the cash value of
any scrip issues). Include all dividends paid on equity. Figures should be reported gross of tax
and on a cash basis.
Exclude dividends within dealing profits / losses (item 8).
18 Other transfers from post-tax profit
Include here all transfers affecting post-tax profit that are not included in items 1-17 above.
PL / Page 12 September 2004 – Updated (Effective January 2005)
PL Item
19 Retained profit before provisions for bad and doubtful debts
Pre-tax profit on ordinary activities before provisions for bad and doubtful debts (item 15) minus
tax (item 16) minus dividends paid (item 17) and other transfers from post-tax profit (item 18).
Note that this item should approximate to the movement in QX form item 19CD5
20A Net provisions for bad and doubtful debts
Enter here the P&L charge for bad debt provisions. Net provisions are defined as specific and
general provisions for debts considered to be bad or doubtful made against impaired financial
assets, including interest, less releases and recoveries. This includes financial assets
(including income) assessed individually and/or collectively as impaired.
Amended
o/a Stats Further detail on provisions should be provided in lines 20AA – 20AE. Where the breakdown
Notice
2004/06 requested does not easily follow from practice within an individual bank please contact any of
the Form PL team at the Bank to discuss. including specific provision charge, releases,
recoveries, general provision charge and write-offs. Specific Provision charge (20AA),
recoveries (20AC), and write-offs (20AE) should be broken down by sector into: UK local
authorities, UK public corporations, other financial corporations, private non-financial
corporations, households, non-profit institutions and non-residents. The definition of these
sectors is as defined in section III of the Classification of Accounts guide.
20B Final level of provisions
Amended The final balance sheet level of outstanding on the specific and general provisions account, at
o/a Stats
Notice the end of the reporting period, relating to debts considered to be bad or doubtful.
2004/06
21 Retained profit after provisions for bad and doubtful debts
Retained profit before provisions (item 19) less net provisions (item 20A).
22 Number of full-time equivalent employees
The number of employees converted into full-time equivalents. Figures for the number of
persons working less than the standard working time of a full-year full-time worker should be
converted into full-time equivalents, with regard to the working time of a full-time full-year
employee in the unit. Included in this category are people working less than a standard working
day, less than the standard number of working days in the week or less than the standard
number of weeks/months in the year. The conversion should be carried out on the basis of the
number of hours, days weeks or months worked.
Added o/a
Stats Exclude contract workers who are not directly on your payroll, but paid by the company/agency
Notice
2003/03 you have a contract with.
23 Benefits in kind (other than in 12AF)
Include
(a) Items where the cost is a reduction in income rather than an expenditure item, such as
the cost of subsidising loans
(b) Any other item not included in line 12AF, but which would appear in Inland Revenue
returns as “benefits in kind”
The basis for this figure is the cost to the reporting institution rather than a measure of the
benefit to the employee.
September 2004 – Amended (Effective January 2005) PL / Page 13
PL Item
M Translation of foreign currency items into sterling
Code Foreign currency items should be translated into sterling at the exchange rate prevailing at the
name
amended time of the receipt or payment, or at an average daily rate. Average daily rates are available
o/a Stats
Notice from the Bank of England - they are published monthly on the Internet. The intention of these
2003/03
instructions is to make the data reflect as closely as possible, in sterling terms, the value of the
receipt or payment at the time of the transaction. Reporters are asked to discuss their
preferred method for calculating these figures with the Bank of England if there is any risk of
significant distortions, which may affect their figures. In addition, banks wishing to change their
translation method are requested to inform the Bank of England prior to any change.
(i) All reporters using the exchange rate prevailing at the time of receipt or payment
All banks that translate foreign currency items into sterling at the exchange rate prevailing at
the time of receipt or payment should enter a ‘1’ into box 23. This is our preferred treatment.
(ii) Quarterly reporters using average exchange rates
Banks should either translate their foreign currency income and expenditure into sterling at the
average daily rate for the whole quarter, or, if they revalue their foreign currency income and
expenditure into sterling on a monthly basis, they may translate each month’s currency income
and expenditure using the appropriate average monthly exchange rate - the quarterly value
would then be an average of 3 monthly figures. These banks should enter a ‘0’ in box 23.
(iii) Annual reporters using average exchange rates
Banks should either translate their foreign currency income and expenditure into sterling at the
average daily rate for the whole year, or, if they revalue their foreign currency income and
expenditure into sterling on a monthly (or quarterly) basis, they may translate each month’s (or
quarter’s) currency income and expenditure using the appropriate average monthly (or
quarterly) exchange rate - the annual value would then be an average of 12 monthly (or 4
quarterly) figures. These banks should enter a ‘0’ in box 23.
PL / Page 14 May 2003
PL item Part 2 – Transactions with non-residents only
The purpose of this part of the form is to collect a variety of data relevant to the current account of
the Balance of Payments. This comprises, in the first place, data on interest, dividends and fees vis-
à-vis non-residents and, secondly data on the profits or losses of entities in the UK owned by non-
residents or of UK banks’ branches and subsidiaries in the rest of the world.
Note: as with all other forms, transactions with the Channel Islands and the Isle of Man should be
reported as transactions with non-resident counterparties. Therefore, income (to or from) and direct
investment earnings data vis-à-vis the Channel Islands and the Isle of Man should be reported here.
Please note that the Channel Islands and the Isle of Man are also not part of the European Union.
Dividends (items 26 and 30) should be reported on a cash basis.
Refer to the appendix to the Notes of Form PL for the definition of a subsidiary.
Most items on the form include an ‘of which’ from / to EU countries sub-section. Refer to the
appendix to the Notes of Form PL for detail of what is included in EU countries.
24 Total interest receivable
Enter here the sum of boxes 1AA, 1BM, 1CM and 1DA in Part 1 (interest receivable on money
market instruments, loans and advances, repos / reverse repos and bonds and FRNs from non-
residents). Refer to Part 1 for definitions of these items.
24A Interest receivable on loan capital from non-resident group companies, subsidiaries and
associates
Updated
o/a Stats Enter here all interest receivable on loan capital (as defined in QX19CD3) from non-resident
Notice
2004/04 branches, subsidiaries and associates (ie. Interest receivable on outward direct investment). Interest
receivable from non-residents but channelled through a UK holding company should also be
excluded.
Exclude any interest payable by non-resident branches on working capital that has been invested in
fixed assets (BT 32J) – see 31A.
This item on an annual basis, equals item 2 on form BG.
24B Interest receivable on money market instruments (excluding those included in 24A)
Updated Enter here all interest receivable on money market instruments from non-residents (item 1AA in Part
o/a Stats
Notice 1), but exclude that receivable from non-resident branches, subsidiaries and associates entered in
2004/04
item 24A.
24C Interest receivable on ECGD Lending
Enter all interest receivable from non-residents on special scheme lending for exports (BT 27) plus
any interest receivable beneficially in respect of such lending when refinanced by government
departments, the Bank of England or UK banks authorised to refinance lending under the special
scheme.
Include any sums receivable from the ECGD under interest equalisation agreements, net of any
sums payable to ECGD under such agreements.
24D Interest receivable on other non-resident lending (excluding those included in 24A and 24C).
Updated Enter all interest receivable on loans and advances from non-residents (item 1BM in Part 1), but
o/a Stats
Notice exclude that receivable on loan capital from non-resident branches, subsidiaries and associates
2004/04
entered in item 24A and from ECGD lending entered in item 24C.
July 2004 - Updated PL / Page 15
PL item
24E Interest receivable on repos / reverse repos (excluding those included in 24A)
Updated Enter all interest receivable on repos and reverse repos from non-residents (item 1CM in Part 1), but
o/a Stats
Notice exclude that receivable from non-resident branches, subsidiaries and associates entered in item
2004/04
24A.
24F Interest receivable on bonds and FRNs (excluding those included in 24A)
Updated Enter all interest receivable on bonds and FRNs from non-residents (item 1DA in Part 1), but
o/a Stats
Notice exclude that receivable on loan capital from non-resident branches, subsidiaries and associates
2004/04
entered in item 24A.
25 Total interest payable
Updated Enter here all interest payable to non-residents. the sum of boxes 2BM and 2CM in Part 1 (interest
o/a Stats
Notice receivable on deposits and repos / reverse repos from non-residents). Refer to Part 1 for definitions
2004/04
of these items.
25A Interest payable on loan capital to non-resident group companies, subsidiaries and
associates
Enter here interest payable on loan capital (such as those defined in QX19CD3) to non-resident
Updated parents and head offices (interest payable on inward direct investment). Interest payable to non-
o/a Stats
Notice residents but channelled through a UK holding company should be excluded.
2004/04
Exclude any interest payable to non-resident branches on working capital that has been invested in
fixed assets (BT 19A) – see 32A.
This item on an annual basis, equals item 6 on form BG.
25B Interest payable on deposits (excluding those included in 25A)
Updated Enter here all interest payable on deposits (item 2BM in Part 1), but exclude that payable on loan
o/a Stats
Notice capital to non-resident parents and head offices entered in item 25A.
2004/04
25C Interest payable on repos / reverse repos (excluding those included in 25A)
Updated Enter here all interest payable on repos and reverse repos (item 2CM in Part 1)).
o/a Stats
Notice
2004/04
26 Dividends received
Enter item 4A in Part 1 of the form, but this should be separated out into sterling, euros and other
currencies.
26A On shares issued by non-resident group subsidiaries and associates
Enter all dividends received from non-resident subsidiaries and associates even though these may
relate to profits earned in an earlier period.
This item on an annual basis, equals item 1 on form BG.
26B On other shares (not included in 26A)
Enter all dividends receivable on other holdings of securities issued by non-residents whether these
are held on the banking or trading books.
Exclude
(a) Dealing profits / losses (item 8)
(b) Dividends received from non-resident subsidiaries and associates (item 26A)
PL / Page 16 July 2004 - Updated
PL item
27-28 Fees and commissions receivable and payable
For fees and commissions receivable enter the figure 5A from Part 1 of the form.
For fees and commissions payable, enter the figure 6A from Part 1 of the form.
27/28 B On new issues of securities
Enter fees and commissions receivable / payable from / to non-residents on new issues of
securities.
Include earnings from sterling as well as foreign currency issues (including eurobonds, etc.) whether
earned as sole issuer, as a member of an issuing syndicate or as underwriter.
27/28 C On investment management and securities transactions
Enter fees and commissions receivable from non-residents, whether in sterling or foreign currency,
arising from the management of portfolios of securities and other security transactions not covered
in 27B.
Enter fees and commissions payable to non-residents in relation to transactions in securities, where
separately accountable, whether undertaken for the reporting institution’s own account or for
account of clients, other than amounts covered in 28B.
27/28 D On credit and bill transactions
Enter fees and commissions on credit and bill transactions, including earnings from advising,
opening, and confirming documentary credits, and from acceptances arising thereunder; and from
the collection of bills, clean credits, endorsements and reimbursement credits.
27/28 E In connection with commitment and utilisation services.
Enter income arising from lending activities and euronote facilities (e.g. participation or front-end
fees and underwriting, commitment, facility and utilisation fees).
27/28 F In connection with derivative instruments
Enter fees and commissions receivable / payable from / to non-residents in respect of derivative
instruments such as futures and options.
Exclude premiums on options.
27/28 G In connection with foreign exchange business
Include any fees and commissions on foreign exchange business receivable / payable from / to non-
residents, which can be identified separately.
27/28 H On bank charges for current account facilities
Include charges for both current account and overdraft facilities to non-residents
27/28 J In connection with other services provided
Enter in 27J all other earnings for services provided to non-residents, e.g. executor and trustee
services, computer bureau services, fees receivable for guarantees payable under break clauses,
fees for administering loans on behalf of other lenders, and any other income (e.g. in the form of
fees) other than as entered in 27A to 27H above.
Enter in 28J all other expenses payable to non-residents for services provided, e.g. rent / royalties
payable on computer hardware / software.
May 2003 PL / Page 17
PL item
29A Tax paid to non-resident tax authorities
Amounts receivable from non-resident assets from the total interest receivable and fees and
commissions receivable sections (all items in 24 and 27) should be reported gross of all taxes.
Enter the tax element of these outward investments, which are due to the non-resident tax
authorities. All refunds of tax from non-resident authorities should be netted off against this item,
except refunds of tax on retained profits of non-resident branches, subsidiaries and associated
companies (item 31). Refunds of tax on these profits should be offset against the original profit item
on which the tax was paid.
Exclude any income or corporation taxes on profits payable to local tax authorities by non-resident
subsidiaries and branches (i.e. taxes relating to income included in item 31).
29B Tax paid to UK tax authorities
Amounts payable under liabilities to non-resident counterparties under the total interest payable and
fees and commissions payable sections (all items in 25 and 28) should be reported gross of all
taxes.
Enter the tax element of these inward investments, which are due to the UK tax authorities. All
refunds of tax from UK tax authorities should be netted off against this item, except refunds of tax on
retained profits of the reporting institutions which is a branch, subsidiary or associate of non-resident
entities (item 32). Refunds of tax on these profits should be offset against the original profit item on
which the tax was paid.
Exclude any income or corporation tax paid on profits earned by reporting institutions which are
branches, subsidiaries or associates of non-resident entities (i.e. taxes relating to income included in
item 32).
30A Dividends paid on shares held by non-resident group companies and associates
Enter those dividends paid to non-resident group companies. Include all dividends paid, even
though these may relate to profits earned in an earlier period. Refer to item 17 in Part 1 for a
definition of dividends paid.
This item, on an annual basis, equals item 5 on form BG.
Profits / losses of branches, subsidiaries and associated companies
This section need only be completed by reporting institutions which have non-resident branches,
subsidiaries or associates (31) or which are themselves the UK branches, subsidiaries or associates
of non-resident entities (32). These items also appear on the Form BG. Where a quarterly reporting
institution reports these items, the total of the four quarterly PL returns should equal the figure
reported on the BG.
Profits or losses should be shown in 31A, 31B, 32A and 32B according to the definition of post-tax
Amended
o/a Stats profit before dividend payments. retained profit (item 21 on Part 1 of the form) less dealing profits
Notice
2005/01 (defined in item 8). For reporting institutions that have non-resident branches, subsidiaries or
associates, dealing profits should be included in the supplementary item 33.
PL / Page 18 February 2005 - Amended
31A Total profits (+) / losses (-) earned by non-resident branches
Updated Refer to the appendix to the Notes of Form PL for further details on the treatment of profits and
o/a Stats
Notice losses of branches.
2004/04
Enter profits / losses net of corporation tax and other known local taxes, earned during the period,
whether or not remitted to the reporting institution. Add to profits all interest accruing to the reporter
on working capital (BT 32J) net of any withholding taxes payable to the non-resident tax authorities.
Refunds of Tax paid on profits (under, for example, double taxation agreements), should be netted
off against the profit items themselves, not the taxation items 29A / 29B.
This item, on an annual basis, is equal to item 3 on the BG.
31B Reporter’s share of total profits (+) / losses (-) earned by non-resident subsidiaries and
associated companies
Updated Refer to the appendix to the Notes of Form PL for further details on the treatment of profits and
o/a Stats
Notice losses of subsidiaries and associated companies.
2004/04
Enter the share of profit / loss in accordance with the reporter’s proportionate holding of ordinary
shares in the subsidiary or associated company, net of corporation taxes, and all other known local
taxes. Refunds of Tax paid on profits (under, for example, double taxation agreements), should be
netted off against the profit items themselves, not the taxation items (29A / 29B). Enter profits /
losses whether or not remitted to the reporting institution.
Include
(a) The pro rata share of all profits / losses earned during the period
(b) Undistributed earnings, whether or not dividends in respect of these earnings have been
declared.
Exclude profits / losses channelled through a UK incorporated holding company.
This item, on an annual basis, equals item 4 on form BG.
32A Total profit (+) / loss (-) earned by the reporting institution which is a branch, subsidiary or
associate of an non-resident entity
Updated Refer to the appendix to the Notes of Form PL for further details on the treatment of profits and
o/a Stats
Notice losses of branches, subsidiaries and associated companies.
2004/04
Enter profits / losses net of corporation tax and other known local taxes, earned during the period,
whether or not remitted to the non-resident entity. Add to profits all interest accruing to the non-
resident head office on working capital (BT 19A). Refunds of Tax paid on profits (under, for
example, double taxation agreements), should be netted off against the profit items themselves, not
the taxation items 29A / 29B.
This item, on an annual basis, is equal to item 7 on the BG.
32B Non-resident investor’s share of reporting subsidiary / associate’s total profits (+) / losses (-)
Updated Refer to the appendix to the Notes of Form PL for further details on the treatment of profits and
o/a Stats
Notice losses of subsidiaries and associated companies.
2004/04
Enter the share of profit / loss in accordance with the non-resident investor’s proportionate holding
of the reporting institutions’ ordinary shares, net of corporation taxes, and all other known local
taxes. Refunds of Tax paid on profits (under, for example, double taxation agreements), should be
netted off against the profit items themselves, not the taxation items (29A / 29B). Enter profits /
losses whether or not remitted to the non-resident investor.
July 2004 - Updated PL / Page 19
PL item
32B Include
cont’d
(a) The pro rata share of all profits / losses earned during the period
(b) Undistributed earnings, whether or not dividends in respect of these earnings have been
declared.
Exclude profits / losses channelled through a UK incorporated holding company.
This item, on an annual basis, equals item 8 on form BG.
33 Dealing profits of non-resident branches, subsidiaries and associated companies
Refer to item 8 on Part 1 for a definition of dealing profits.
PL / Page 20 July 2004 - Updated
Form PL: Profit and Loss return
Appendix to Definitions
This appendix highlights the treatment of the subjects listed below, and should act as an
accompaniment to the PL definitions.
(i) Revisions and adjustments to prior period data
(ii) Repo-related transactions (including security borrowing/lending and repo buy/sell back)
(iii) Transfer pricing and intra-company recharges
(iv) Branches, subsidiaries and associates
(v) EU countries
Deleted o/a (vi) Profits/losses of branches, subsidiaries and associated companies
Stats
Notice
2004/04
Revisions and adjustments to prior period data
As the PL data is used in the compilation of GDP and Balance of Payments, it is essential that
the data be captured in the correct period. Therefore, if there are any revisions to previous
quarters/years, please resubmit the correct figures for these quarters/years.
If there are adjustments to be made relating to prior periods and you are unsure how they should
Amended
o/a Stats be treated, contact the appropriate person at the Bank of England.
Notice
2003/03 If any revisions or adjustments total less than £1 million and as such they are not seen as
material within the overall context of your figures, they need not be included. If you need any
further guidance of materiality, contact the appropriate person at the Bank of England.
Repo-related transactions (including security borrowing / lending and repo buy /sell back)
The treatment for transactions involving cash collateral and security for security trades is set out
in the attached flow charts.
A repurchase agreement (repo) is an arrangement involving the sale of securities at a specified
price with a commitment to repurchase the same or similar securities at a fixed price on a
specified future data or on a date subject to the discretion of the borrower. The economic nature
of a repo and security borrowing / lending is similar to that of a collateralised loan. This is
because the borrower of the security is providing funds (backed by the securities) to the seller for
the period of the agreement and is receiving a return from the fixed price when the repurchase
agreement is reversed.
Buy / sell back transactions are a method of achieving a repo without the dedicated settlement
systems. For the purposes of this form, the main difference with a repo is that under a buy / sell
back, there are no manufactured dividends.
July 2004 - Updated PL Appendix / Page 1
CASH COLLATERAL
Is the deal
REPO/REVERSE REPO OR SECURITY BORROWING / LENDING or BUY / SELL BACK REPO
Are you a Are you a
BORROWER or LENDER BORROWER LENDER
Put the difference between Put the difference between
the sale and repurchase the sale and repurchase
price in price in
INTEREST RECEIVABLE INTEREST PAYABLE INTEREST RECEIVABLE INTEREST PAYABLE
(item 1C in Part 1 and item (item 2C in Part 1 and item (item 1C in Part 1 and item (item 2C in Part 1 and item
24E or 24A in Part 2) 25C or 25A in Part 2) 24E or 24A in Part 2) 25C or 25A in Part 2)
Treatment of dividends Treatment of dividends
and coupon interest and coupon interest
Record under DIVIDENDS Record under INTEREST Record under REPO Record under REPO
RECEIVED / INTEREST RECEIVABLE (item 1 in Part 1 INTEREST RECEIVABLE INTEREST PAYABLE (item
RECEIVABLE (items 4/1 in and item 24 in Part 2): (item 1C in Part 1 and items 2C in Part 1 and items 25C or
Part 1 and items 26/24 in 24E or 24A in Part 2):
Part 2): 25A in part 2) and THE
- The receipts of dividends / - The receipts of any
- Any difference between RELEVANT INCOME
coupon interest on the dividends / coupon RECEIVABLE ITEM (item 1A
the original receipt of
respective instrument. or 1D in Part 1 and items 24B,
dividends / coupon interest
interest from the issuer 24F or 24A in Part 2):
and the subsequent - The value of any
payment to the lender (in dividends / coupon interest you
most cases should be should have received (had you
zero) not repoed the security on a
buy-sell back repo deal)
PL Appendix / Page 2 May 2003
TRANSACTIONS INVOLVING SECURITY FOR SECURITY
Is the deal
REPO/REVERSE REPO OR SECURITY BORROWING / LENDING or BUY / SELL BACK REPO
Are you a Are you a
BORROWER or LENDER BORROWER LENDER
Put the difference between Put the difference between
the sale and repurchase the sale and repurchase
price in price in
FEES AND COMMISSIONS FEES AND COMMISSIONS FEES AND COMMISSIONS FEES AND COMMISSIONS
RECEIVABLE (item 5 in Part 1 PAYABLE (item 6 in Part 1 RECEIVABLE (item 5 in Part 1 PAYABLE (item 6 in Part 1
and item 27 in Part 2) and item 28 in Part 2) and item 27 in Part 2) and item 28 in Part 2)
Treatment of dividends Treatment of dividends
and coupon interest and coupon interest
Record under DIVIDENDS Record under DIVIDENDS Record under REPO - Record under DIVIDENDS
RECEIVED / INTEREST RECEIVED / INTEREST INTEREST RECEIVABLE RECEIVED / INTEREST
RECEIVABLE (items 4/1 in RECEIVABLE (item 4/1 in Part (item 1C in Part 1 and items RECEIVABLE (items 4/1
Part 1 and items 26/24 in 24E or 24A in Part 2):
Part 2): 1 and item 26/24 in Part 2): in Part 1 and items 26/24
- The receipts of any in Part 2): the receipt of
- Any difference between - The receipts of dividends /
coupon interest on the dividends / coupon any dividends / coupon
the original receipt of
respective instrument. interest
dividends / coupon interest
interest from the issuer - Record an adjusted repo
and the subsequent interest flow to account for
payment to the lender (in the non-receipt of any
most cases should be dividends/ coupon interest
zero)
May 2003 PL Appendix / Page 3
Transfer pricing and intra-company recharges
There are two aspects to transfer pricing:
(a) the value attached to transactions between group entities
(b) the location for the booking of costs and income for internal transactions.
The general principles in national and commercial accounting guidelines, which should be followed
here, are that transfer pricing should reflect market value or estimated market value if an appropriate
market comparison is not possible. Costs and income should be matched to the location where the
work was conducted.
This practice should be in line with Inland Revenue requirements for completion of tax returns.
Branches, subsidiaries and associates
A company is defined as an “associate undertaking” of another company if this other company
meets two conditions. Firstly, if it has between 10% and 50% of the voting shares and, secondly if it
exercises influence over its operating and financial policy without it being a direct subsidiary.
A company is defined as a “subsidiary undertaking” of another company if either of the following two
conditions are met. Firstly, if this other company has over 50% of the voting shares. Or, secondly, if
Amended
o/a Stats it controls the composition of its board of directors, including the right to appoint or remove a
Notice
2003/03 majority of this board. For a more detailed definition of a subsidiary, see section 736 of the
Companies Act 1985, as amended by section 21 of the Companies Act 1989 at the end of these
notes. It should noted that this corresponds to the wider definition of subsidiaries given in section
5(a) of the General Notes and Definitions, covering partly, as well as wholly, owned subsidiaries,
rather than that implicit in the definition of ‘non-resident offices’ in section 5(c) of the General Notes.
An operation is defined as a branch of a company where it is part of that legal entity.
NOTE for direct investment reporting purposes “participating interest” is defined as a 10% holding as
opposed to the 20% stated in section 260 (2).
For further information on direct investment as it relates to banks, see the definitions for Forms QX
(section 7) and Forms HI and HO.
Items within 24A, 25A, 26A and 30A need be completed only by reporting institutions that have any
of the following, head office, parent, branches, subsidiaries or associates, as a non-resident. Items
31 and 33 only need to be completed by reporting institutions that have any of the following
branches, subsidiaries or associates, that are non-resident. Item 32 only needs to be completed by
reporting institutions which have a head office, parent or other direct investor located outside the UK.
See notes and definitions to Form QX (section 7) and Form HI and HO for definitions of "subsidiary"
and "associate". Items 24A, 25A, 26A, 30A, 31 and 32 (and also the items contained in sections 27
and 28 of this form) also appear on the annual Form BG, where additional geographical detail is
required. Annual BP reporters, all of whom will also be required to submit a Form BG, should ensure
that the totals for items 24A, 25A, 26A, 27, 28, 30A, 31A, 31B, 32A and 32B are the same on both
forms. They do not need to complete lines 24AA, 25AA, 26AA, 27A, 28A, 30AA, 31AA, 31AB, 32AA
and 32BA (the “of which EU” split for these items). Quarterly PL reporters should ensure that the
sum of the four quarterly returns equals form BG for these items.
PL Appendix/ Page 4 May 2003
UK parent banks with subsidiaries abroad, where those subsidiaries hold ordinary shares or other
equity of the parent company, should contact the Bank of England at the address shown on the front
of the form to discuss the appropriate treatment of associated interest flows. This also applies to
cases where a subsidiary of a non-resident parent bank holds ordinary shares or other equity in its
non-resident parent.
Definitions of “Subsidiary” (Companies Act 1985; section 736)
1. For the purposes of this Act, a company is deemed to be a subsidiary of another if (but only if):
(a) that other either –
(i) is a member of it and controls the composition of its board of directors, or
(ii) holds more than half in nominal value of its equity share capital, or
(b) the first mentioned company is a subsidiary of any company which is that other’s subsidiary
The above is subject to sub-section 4 below in this section.
2. For purposes of sub-section 1, the composition of a company’s board of directors is deemed to
be controlled by another company if (but only if) that other company by the exercise of some
power exercisable by it without the consent or concurrence of any other person can appoint or
remove the holders of all or a majority of the directorships.
3. For purposes of this last provision, the other company is deemed to have power to appoint to a
directorship with respect to which any of the following conditions is satisfied:
(a) that a person cannot be appointed to it without the exercise in his favour by the other company
of such a power as it mentioned above, or
(b) that a person’s appointment to the directorship follows necessarily from his appointment as
director of the other company, or
(c) that the directorship is held by the other company itself or by a subsidiary of it.
4. In determining whether one company is a subsidiary of another:
(a) any shares held or power exercisable by the other in a fiduciary capacity are to be treated as not
held or exercisable by it,
(b) subject to the following paragraphs, any shares held or power exercisable –
(i) by any person as a nominee for the other (except where that other is concerned
only in a fiduciary capacity), or
(ii) by, or by a nominee for, a subsidiary of the other (not being a subsidiary which is
concerned only in a fiduciary capacity),
are to be treated as held or exercisable by the other,
(c) any shares held or power exercisable by any person by virtue of the provisions of any
debentures of the first-mentioned company or trust deed for securing any issue of such
debentures are to be disregarded,
(d) any shares held or power exercisable, or by a nominee for, the other or its subsidiary (not being
held or exercisable as mentioned in paragraph (c)) are to be treated as not held or exercisable
by the other if the ordinary business of the other or its subsidiary (as the case may be) includes
the lending of money and the shares are held or the power is exercisable as above mentioned
by way of security for the purposes of a transaction entered into in the ordinary course of their
business.
May 2003 PL Appendix / Page 5
(e) For purposes of this Act:
(i) a company is deemed to be another’s holding company if (but only if) the other is its
subsidiary, and
(ii) a body corporate is deemed the wholly-owned subsidiary of another if it has no
members except the other and that other’s wholly-owned subsidiaries and its or their
nominees.
In this section “company” includes any body corporate.
Companies Act 1989: Selected clauses from sections 21 and 22
Section 21 An undertaking is a parent undertaking in relation to another undertaking, a subsidiary
undertaking, if:
258(2) (a) it holds a majority of the voting rights in the undertaking, or
(b) it is a member of the undertaking and has the right to appoint or remove a majority
of its board of directors, or
(c) it has the right to exercise a dominant influence over the undertaking –
(i) by virtue of provisions contained in the undertaking’s memorandum of
articles, or
(ii) by virtue of a control contract, or
(d) it is a member of the undertaking and controls alone, pursuant to an agreement
with other shareholders or members, a majority of the voting rights in the
undertaking.
Section 22 In this Part undertaking means:
259(1) (a) a body corporate or partnership, or
(b) an unincorporated association carrying on a trade or business, with or without a
view to profit.
260(1) In this Part a “participating interest” means an interest held by an undertaking in the
shares of another undertaking which it holds on a long-term basis for the purpose of
securing a contribution to its activities by the exercise of control or influence arising
from or relating to that interest.
260(2) A holding of 20 per cent or more of the shares of an undertaking shall be presumed to
be a participating interest unless the contrary is shown.
260(3) The reference in subsection (1) to an interest in shares includes:
(a) an interest which is convertible into an interest in shares, and
(b) an option to acquire shares or any such interest.
PL Appendix / Page 6 May 2003
EU countries
Updated Include the 25 countries of the EU except the United Kingdom (See the Classification of Accounts
o/a Stats
Notice Guide section III.12 (b)),
2004/04
Note:
(a) Spain includes the Balearic and Canary Islands
(b) Include the European Central Bank
(c) Include European Union Institutions
July 2004 - Updated PL Appendix / Page 7
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