S.127 Captive financial institutions and money lenders

Sector S.127 consists of such independent financial corporations and quasi-corporations that are themselves neither engaged in financial intermediation nor in providing financial auxiliary services. In practice, the sector includes such financial institutions that operate in a restricted environment, for instance, within a corporate group. The sector also includes units that lend exclusively their own funds or those of only one client. In particular, the following fi nancial corporations and quasi-corporations are classified into sector S.127:

• Trusts recognised as legal entities, estates, agencies accounts and brass plate companies;
• Captive financial institutions recognised as separate institutional units that, for instance, raise funds to be used by their parent corporation;
• Foreign controlled pure holding companies that hold owning controlling-levels of equity of a group of subsidiary corporations and whose principal activity is owning the group without providing any other service to the businesses in which the equity is held;
• Units that provide financial services exclusively with own funds, or funds provided by only one sponsor, to a range of clients and incur the financial risk of the debtor defaulting. These include instant loan companies and other money lenders;
• Corporations engaged in lending to students or for foreign trade purposes from funds received from a sponsor such as a government unit or a non-profit institution, and pawnshops that predominantly engage in lending;
• Sovereign wealth funds if they are classified as financial corporations.

Regarding pure holding companies, only foreign controlled units are included in sector S.127. Corresponding resident agents do not fulfil the criterion for an independent institutional unit. Resident pure holding companies and SPE units are treated as artificial subsidiaries.

Captive financial institutions and money lenders
are divided into sub-sectors. [0]

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