Captive Financial Institutions: Definition, Typology, Motives and Empirical Insights for the Euro Area

The United Nations Statistical Commission has recently published the System of National Accounts 2025 (SNA2025), a new version of SNA2008 which formed the basis of the European System of Accounts 2010 (ESA2010). The latter is the current reference manual used by all European Union Member States to ensure the comparability of their economic, social and commercial statistics. The SNA2025 may, in turn, form the basis of the next revised version of the ESA2010. Regarding captive financial institutions (CFIs, sector S.127), SNA2025 notably builds upon the IMF (2018)’s work and improves upon ESA2010 significantly by offering a broader list of entities and more detailed definitions. This paper provides a comprehensive overview of CFIs by reviewing their definitions and highlighting the main differences between SNA2025 and ESA2010. Additionally, it reviews the typology of CFIs proposed by ECB-Eurostat-OECD (2013), as well as IMF (2018) which is based on prototype balance sheets. The paper also lists the main reasons why investors may use CFIs. From an empirical perspective, the paper draws insights about CFIs in the euro area from specific datasets. On average over the period Q1 2015 - Q4 2025, CFIs account for 20% of the financial sector’s total financial assets or liabilities in the euro area. In addition, the importance of CFIs varies substantially across euro area jurisdictions, with Luxembourg, Malta, Cyprus, the Netherlands and Ireland hosting the majority. Unlisted shares are the most significant asset and liability on CFIs’ aggregate balance sheets, followed by loans and debt securities. This is consistent with CFIs’ activities, which include holding unlisted shares in group affiliates, financing group affiliates by granting intragroup loans, and raising funds from entities outside the group by issuing debt securities or sourcing loans. 
JEL codes: F23, F30, G29, G30 
Keywords: Captive Financial Institutions, Sector S.127