The Capital Account of the Balance of Payments

Abstract

The capital account of the balance of payments is a record of all transactions which alter the external assets and/or liabilities of a country. Let us take it from the point of view of the UK. The external assets (or wealth) of the UK include shares, property, companies, and bank accounts held abroad by UK residents. Analogously, the external liabilities of a country include borrowing by residents of that country from overseas, non-resident holdings of shares, property, companies etc. and bank accounts held by non-residents in UK banks. Changes in these external assets or liabilities can result either from transactions which result from the buying or selling of goods and services (i.e. current account transactions) or from exports and imports of capital (i.e. pure financial transactions).