Institutional Units and Sectors 33
- Is the institutional unit providing fi nancial aux-
iliary services, such as supervisory authorities of
fi nancial intermediaries and fi nancial markets?
A positive answer to this question will place the
institutional unit in the public fi nancial corpora-
tions subsector (see paragraph 2.54). - Is the public corporation involved in producing
fi nancial services? Th e answer to this question
will place the institutional unit in the public fi -
nancial or public nonfi nancial corporations sub-
sector (see paragraphs 2.114–2.121).
Practical Application of Sector Classifi cation Principles.
Identifying Quasi-corporations
2.125 Quasi-corporations (as defi ned in paragraph
2.33) satisfy the criteria to be separate institutional
units and function as if they were corporations. Th ey
are treated in macroeconomic statistics as if they were
corporations—that is, as institutional units separate
from the units to which they legally belong. Th us,
quasi-corporations owned or controlled by govern-
ment units are grouped with public corporations in
the public nonfi nancial or public fi nancial corpora-
tions sectors.
2.126 Th e existence of, or possibility to construct, a
complete set of accounts, including balance sheets, for
the enterprise is a necessary condition for the entity
to be treated as a separate institutional unit. Also, the
government must grant management of the enterprise
discretion to operate as if it were a separate corpora-
tion. In practice this should apply with respect to both
the management of the production process and the
use of funds, including maintaining their own work-
ing balances and business credit, and being able to
fi nance some or all of their capital formation out of
their own saving, fi nancial assets, or borrowing. Th e
ability to distinguish fl ows of income and fi nance be-
tween quasi-corporations and general government
units implies that, in practice, their operating and
fi nancing activities must be separable from govern-
ment revenue or fi nancing statistics, despite the fact
that they are not separate legal entities.
2.127 Entities such as national railways, port au-
thorities, post offi ces, government publishing offi ces,
public theaters, museums, swimming pools, hospi-
tals, education centers, and other entities that provide
goods and services on a market basis should be treated
as public corporations if these units satisfy the criteria
to be quasi-corporations. Similar market producers
that do not satisfy the requirements to be recognized
as quasi-corporations are treated as market establish-
ments integrated with the general government unit
that controls them. In cases where government pro-
ducers of similar goods and services sell their prod-
ucts at nonmarket prices, they remain a part of the
nonmarket activities of general government.Distinguishing Head Offi ces and Holding Companies
2.128 Large groups of corporations may be created
whereby a parent corporation (or government in the
case of public corporations) controls several subsid-
iaries, some of which may control subsidiaries of their
own. Each individual corporation that satisfi es the
criteria to be an institutional unit should be classifi ed
as a separate institutional unit, regardless of whether
it forms part of a group. Th e parent corporation in
such circumstances is oft en referred to as a holding
company. Th ere are two diff erent types of holding
companies:- Th e fi rst type is the head offi ce that is actively en-
gaged in production by exercising some aspects
of managerial control over its subsidiaries. Th is
class of corporations includes overseeing and
managing other units of the company or enter-
prise; undertaking the strategic or organizational
planning and decision-making role of the com-
pany or enterprise; exercising operational con-
trol; and managing the day-to-day operations
of their related units. Such units are allocated
to the nonfi nancial corporations subsector un-
less all or most of their subsidiaries are fi nancial
corporations, in which case they are treated by
convention as fi nancial auxiliaries in the fi nan-
cial corporations sector. - Th e second type is a unit that holds the assets
of subsidiary corporations but does not under-
take any management activities. Th is class of
corporations includes the activities of holding
companies—that is, units that hold the assets
(owning controlling-levels of equity) of a group
of subsidiary corporations and whose principal
activity is to own the group. Th e holding compa-
nies in this case do not provide any other service
to the enterprises in which the equity is held—