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Report of US Ownership of Foreign Securities Including Selected Money Market Instruments. W. Griever W. Carlucci D. Kuntz R. McGee. S. Kessel T. Grob K. Aberbach M. Harris. November 12, 2003. U.S. Portfolio Investment Surveys. William Griever. Survey Perspective.

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Report of US Ownership of Foreign Securities Including Selected Money Market Instruments


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    1. Report of US Ownership of Foreign Securities Including Selected Money Market Instruments W. Griever W. Carlucci D. Kuntz R. McGee S. Kessel T. Grob K. Aberbach M. Harris November 12, 2003

    2. U.S. Portfolio Investment Surveys William Griever

    3. Survey Perspective • Part of an integrated system • Used in conjunction with monthly flow data • Surveys are detailed, accurate, but not timely • Monthly data very timely, but less accurate • Used together to create ongoing estimates

    4. Survey History • First survey in 1974 • Measured foreign investment in U.S. securities • Congressional concern over growing foreign influence • Existing data lacked detail

    5. Survey History • Liability surveys continued at 5-year intervals • Correct amounts foreign held • Improve geography • Foreign ownership increasing • Dec. 1974 - 4.8% • June 2002 - 12.2%

    6. Asset Surveys • First in 1994 • Levels of U.S. foreign security holdings had been modest • $ 9 billion per year 1980-1989 • $65 billion per year 1990-1994 • Assets were believed to be under-counted

    7. Asset Survey Results • Measured U.S. holdings of foreign securities 60% above estimates • $870 billion vs. $540 billion • Showed need for future surveys

    8. Asset Under-Count • Worldwide problem • Measured portfolio investment flows 1991-1994 • Assets $400 billion per year • Liabilities $500 billion per year • Countries had concentrated on measuring liabilities

    9. First CPIS • Organized by the IMF, at year-end 1997 • 29 countries participated • World measured additional $750 billion • U.S. measured an additional $300 billion

    10. Problems Remain • Worldwide, at year-end 1997 • Assets $7.7 trillion • Liabilities $9.3 trillion • Difference 18% • Implied more needed to be done

    11. CPIS 2001 • 67 countries • All of the major industrial countries • Most of the major offshore financial centers • Short-term securities included

    12. Problems Remain • Worldwide, at year-end 2001 • Assets $12.6 trillion • Liabilities $15.0 trillion • Difference 16% • Implies more needs to be done

    13. The Future • Internationally-coordinated annual surveys • Annual U.S. surveys • U.S. benchmark surveys every 5 years • U.S. “Large Reporters” surveys intervening years

    14. Data Uses • Why care about these data? • U.S. is the world’s largest net debtor • Level of U.S. net debt is increasing rapidly • A cause for concern?

    15. U.S. Debt Position

    16. Debt Components

    17. Data Uses • Financial industry analysts • International organizations • U.S. Gov’t policy makers, data compilers • Academic researchers • Correct liabilities country attribution

    18. Country Attribution • Country attribution of U.S. liabilities skewed towards major financial centers • Country attribution on asset surveys accurate • Can use counter-party asset data to improve geography of U.S. liabilities data

    19. Country Attribution

    20. Data Uses • Asset data can be used to estimate other countries’ liabilities • Combined CPIS asset results yield net liability positions by country • Cross-check of reported country liability positions • Improved geography of all countries’ liabilities

    21. Who Must Report William Carlucci

    22. Who Must Report • Proper classification of U.S. and foreign • Reporting organization • Owners of securities • Securities • Categories of reporters • U.S.-resident custodians • U.S.-resident end-investors • Reporting panels • Schedule 2 and Schedule 3 reporters • Schedule 3 only reporters

    23. Proper Classification of U.S. and Foreign • Definition of United States • The fifty states of the United States • The District of Columbia • The Commonwealth of Puerto Rico • American Samoa, Baker Island, Guam, Howland Island, Jarvis Island, Johnston Atoll, Kingman Reef, Midway Island, Navassa Island, Northern Mariana Islands, Palmyra Atoll, U.S. Virgin Islands, and Wake Island

    24. Proper Classification of U.S. and Foreign • Definition of U.S. resident • Any individual, corporation, or other organization located in the United States, including : • branches • subsidiaries • foreign entities located in the United States. • Corporations incorporated in the United States are U.S. residents even if they have no “physical presence” in the United States.

    25. Examples of U.S. residents General Motors Corporation (includes GMAC) BP America Inc. Societe Generale New York Branch KfW International Finance, Inc. Examples of foreign residents GMAC Canada BP p.l.c. Bank of New York Tokyo Branch Tyco International, Ltd. International Bank for Reconstruction and Development (IBRD; World Bank) Proper Classification of U.S. and Foreign

    26. Proper Classification of U.S. and Foreign • How to determine residency • Country where legally incorporated, otherwise legally organized, or licensed • Tax forms • W-8 forms are filed by foreign residents • W-9 forms are filed by U.S. residents • Mailing address

    27. Proper Classification of U.S. and Foreign • Citizenship does not determine residency • International and regional organizations are foreign residents, even if located in the United States • IBRD; World Bank • Inter-American Development Bank (IDC) • International Finance Corporation (IFC) • Appendix E of instructions provides a complete list

    28. Proper Classification of U.S. and Foreign • Reporting organization • Report foreign securities held or managed by all U.S.-resident parts of your organization • U.S.-resident branches • U.S.-resident offices • U.S.-resident subsidiaries

    29. Proper Classification of U.S. and Foreign • Owners of securities • U.S.-resident clients • U.S-resident parts of your organization • Securities • Issued by foreign organizations • Issued by foreign parts of your organization

    30. Categories of Reporters • U.S.-resident custodians • U.S.-resident organizations that hold foreign securities in custody for other U.S. residents • Invest in foreign securities for their own account

    31. Categories of Reporters • U.S.-resident end-investors • U.S.-resident organizations that invest in foreign securities on behalf of other U.S. residents • Invest in foreign securities for their own account

    32. Categories of Reporters • Examples of U.S.-resident end-investors • Managers of private and public pension funds • Managers of mutual funds, country funds, unit-investment funds, exchange-traded funds, collective-investment trusts • Insurance companies • Foundations • Institutions of higher learning (e.g., university endowments) • Trusts and estates

    33. Reporting Panels • Schedule 2 and Schedule 3 reporters • Required to file in the same manner as they did on the December 31, 2001 report • Schedule 3 only reporters • Required to file Schedule 3 in the same manner as they did on the December 31, 2001 report • Data that was reported on Schedule 2 in December 31, 2001 submission will now be reported on Schedule 3 for the annual reports

    34. Schedule 2 and Schedule 3 ReportersExemption Levels • No Schedule 2 exemption level. • Securities entrusted to U.S. resident custodians should be reported on Schedule 3 if the fair (market) value of the foreign securities aggregated over accounts owned and/or managed equals $100 million or more as of December 31. • This exemption level applies to each U.S.-resident custodian used.

    35. Schedule 3 Only ReportersExemption Levels • “Schedule 3 Only” reporters are exempt from reporting Schedule 2. • Securities entrusted to U.S. resident custodians should be reported on Schedule 3 if the fair (market) value of the foreign securities aggregated over accounts owned and/or managed equals $100 million or more as of December 31. • This exemption level applies to each U.S.-resident custodian used.

    36. Schedule 3 Only ReportersExemption Levels • Securities held directly with foreign-resident custodians, including: • foreign-resident offices of U.S. banks • foreign-residents of U.S. broker/dealers • foreign-resident central securities depositories • should be reported on Schedule 3 if the fair (market) value of the foreign securities aggregated over accounts owned and/or managed equals $100 million or more as of December 31.

    37. Schedule 3 Only ReportersExemption Levels • Securities held directly, managed directly, or held with U.S.-resident central securities depositories, (for which no U.S.-resident custodian is used), should be reported on Schedule 3 if the fair (market) value of the foreign securities aggregated over accounts owned and/or managed equals $100 million or more as of December 31.

    38. Reporting Panels • Schedule 2 and Schedule 3 reporters • U.S.-resident custodians • Schedule 2, report detailed information on foreign securities that: • hold in custody for U.S.-resident clients • invest in for own account • entrust to foreign-resident custodians or central securities depositories • entrust to U.S.-resident central securities depositories

    39. Reporting PanelsSchedule 2 and Schedule 3 ReportersU.S.-Resident Custodians Schedule 2 Reporting U.S.-resident central securities depository U.S. resident (including the reporting custodian’s own portfolio) U.S.-resident custodian Foreign-resident custodian or central securities depository The “Schedule 2 and Schedule 3” reporter submits detailed data on Schedule 2.

    40. Reporting Panels • Schedule 2 and Schedule 3 reporters • U.S.-resident end-investors • Schedule 2, report detailed information on foreign securities not entrusted to U.S.-resident custodians; that is when the end-investor: • holds the foreign securities directly • employs foreign-resident custodians or foreign central securities depositories • employs U.S.-resident central securities depositories

    41. Reporting PanelsSchedule 2 and Schedule 3 ReportersU.S.-Resident End-Investors Schedule 2 Reporting U.S. resident (including the reporting end-investor’s own portfolio) U.S.-resident end-investor (including managers) U.S.-resident central securities depository Foreign-resident custodian or central securities depository The “Schedule 2 and Schedule 3” reporter submits detailed data on Schedule 2.

    42. Reporting Panels • Schedule 2 and Schedule 3 reporters • U.S.-resident custodians and end-investors • Schedule 3, report summary information for foreign securities entrusted to the safekeeping of a U.S.-resident custodian (excluding U.S.-resident central securities depositories)

    43. Reporting PanelsSchedule 2 and Schedule 3 ReportersSchedule 3 Reporting U.S. resident (including the reporting organization’s own portfolio) U.S.-resident custodian or end-investor (including managers) U.S.-resident subcustodian The “Schedule 2 and Schedule 3” reporter submits summary data on Schedule 3 for each U.S.-resident custodian using the appropriate custodian codes. The “Schedule 2 and Schedule 3” reporter submits detailed data on Schedule 2.

    44. Reporting Panels • Schedule 3 only reporters • U.S.-resident custodians and end-investors • Schedule 3, report summary information for all foreign securities, regardless of where they are held in custody

    45. Reporting Panels • Schedule 3 only reporters • U.S.-resident custodians and end-investors • Separate Schedule 3 report for foreign securities entrusted to each U.S.-resident custodian using the appropriate custodian code • Consolidated Schedule 3 report for foreign securities entrusted to foreign-resident custodians and central securities depositories using custodian code 77 • Consolidated Schedule 3 report for foreign securities held directly or those entrusted to U.S.-resident central securities depositories using custodian code 88

    46. Reporting PanelsSchedule 3 Only Reporters U.S. resident (including the reporting organization’s own portfolio) U.S.-resident custodian or end-investor (including managers) Foreign-resident custodian or central securities depository The “Schedule 3 only” reporter submits summary data on Schedule 3 using custodian code 77.

    47. Reporting PanelsSchedule 3 Only Reporters U.S.-resident subcustodian U.S. resident (including the reporting organization’s own portfolio) U.S.-resident custodian or end-investor (including managers) The “Schedule 3 only” reporter submits summary data on Schedule 3 for each U.S.-resident custodian using the appropriate custodian codes. The “Schedule 3 only” reporter submits summary data on Schedule 3 using custodian code 88.

    48. What Must be Reported on the Report of U.S. Ownership of Foreign Securities, Including Selected Money Market Instruments (SHCA) Debra Kuntz

    49. Foreign Securities • Securities issued by foreign entities, including: • foreign-resident organizations • foreign subsidiaries of U.S. organizations • foreign branches of U.S. banks • U.S. corporations that have re-incorporated, i.e., are now incorporated under the laws of a foreign country • international and regional organizations

    50. ForeignSecurities • Information that does not contribute to determining if a security is foreign: • place of issue or location of trades • currency of issue • nationality of parent organization • guarantor