parti: objectives and features of the new reporting system 159 - TARA

alances by transferring funds to them as and when needed to meet payments and
other obligations. 16 Such considerations led to a questioning of the appropriateness of
the procedure for allocating in-transit items between current accounts and overdrafts,
accounts and overdrafts.
Discussions with the banks and evidence from surveys carried out by them m
relation to the cost of the money transmission system indicated that items in transit
were more likely to affect indicated accounts than overdrafts and that it would be
better to allocate items in transit on a percentage basis between current accounts
and overdrafts The evidence from surveys indicated that items in transit should be
allocated between current accounts and overdrafts on a 60:40 basis, i.e., 60 per centl
of net debit items m transit should be deducted from current accounts and 40 per
cent added to overdrafts. It was decided that this adjustment for items in transit
should be reflected in the new monthly bank return proper and not simply used for
compiling certain monetary aggregates This helps to avoid 'double counting' in
aggregating banks' balance sheets and improve consistency between statistical
tables and series produced by the Central Bank.
Any system of adjusting for items in transit should not be considered to be an exact
science;. A small amount of items in transit is likely to affect deposit accounts and
Government accounts. However, the breakdown of in-transit items is not adequate
to take account of these minor problems. It is also possible that the destination of
items in transit may vaiy somewhat between mid-month bank-return dates and endquarter
dates. In due course, however, technological developments will help to
reduce substantially or even eliminate the in-transit problem. The process, known
as "truncation", whereby customers' accounts are simultaneously debited and
credited for money transfers appears likely to become a reality within a few years.
The first step in this process, i.e., cheque retention, has begun on a trial basis. While
this may not be welcome news for those who like to write the odd cheque or two in
advance of salary lodgement, from a financial statistics' standpoint it would be a
welcome development. At end-December 1983, net debit items in transit amounted
to £382 million and the adjustment carried out had the effect of reducing current
accounts by 19 per cent., while increasing overdrafts by 11 per cent.
6. Other Considerations
The quality of monetary aggregates compiled from the new monthly bank return
should also be significantly improved by the efforts that are being made to ensure
that returns are compiled on a consistent and uniform basis. In an attempt to
achieve, this objective the banks were provided with detailed notes on compiling the
returns. In addition to dealing with the issues discussed above, the notes also
provide detailed instructions of what should be included under each sub-heading in
the returns. These instructions will help to eliminate non-uniform procedures,
especially in areas such as recording of acceptances and valuation of certain assets
and liabilities.
For example, uniform procedures have been adopted for recording acceptances and
related bills, leasing agreements are valued net of grants and accumulated
depreciation, with the latter computed over the primary leasing period. In the case
of assets and liabilities denominated in foreign currencies, the Bank provides the
licensed banks with the mid-spot rates to be used in converting foreign currencies
into Irish pounds for inclusion in the bank return. These measures should help to
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