debra kuntz richard mcgee brian mullarkey dejana neskovic kenneth aberbach melissa harris james...

Debra KuntzRichard McGeeBrian MullarkeyDejana Neskovic

Kenneth AberbachMelissa HarrisJames GreerApril 14, 2004

Debra Kuntz

History and Use of Foreign Portfolio Investment Data

3

OverviewOverview

Part of an integrated systemPart of an integrated system

Used in conjunction with monthly flow dataUsed in conjunction with monthly flow data

Annual data are detailed, but not timelyAnnual data are detailed, but not timely

Monthly data are very timely, but less preciseMonthly data are very timely, but less precise

Used together to create U.S. cross-border portfolio Used together to create U.S. cross-border portfolio

investment statisticsinvestment statistics

4

HistoryHistory

Security-level data first collected in 1974Security-level data first collected in 1974

Measured foreign investment in U.S. securitiesMeasured foreign investment in U.S. securities

Congressional concern over growing foreign Congressional concern over growing foreign

influenceinfluence

Existing TIC data collected monthly and quarterly, but Existing TIC data collected monthly and quarterly, but

lacked detaillacked detail

5

HistoryHistory

Security-level collections of foreign Security-level collections of foreign holdings of U.S. securities data continued at holdings of U.S. securities data continued at 5-year intervals5-year intervals

These were large, benchmark collections These were large, benchmark collections with hundreds of reporterswith hundreds of reporters

6

HistoryHistory

Crisis of 1997-1998 caught most by surpriseCrisis of 1997-1998 caught most by surprise

Lack of key data helped mask the problemLack of key data helped mask the problem

Led to recognition that greater financial Led to recognition that greater financial

transparency was requiredtransparency was required

Implies higher quality and faster data neededImplies higher quality and faster data needed

7

Changes RequiredChanges Required

Lack of detailed, timely data on Reserve Lack of detailed, timely data on Reserve

Assets and External Debt positions Assets and External Debt positions

identified as major gapsidentified as major gaps

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Changes Implemented Changes Implemented

Improved Reserve Asset reporting operationalImproved Reserve Asset reporting operational

IMF’s External Debt Reporting System (EDRS) IMF’s External Debt Reporting System (EDRS)

operationaloperational

Countries are expanding collections and accelerating Countries are expanding collections and accelerating

publication of external debt data publication of external debt data

9

EDRSEDRS

U.S. Government strongly supports the U.S. Government strongly supports the

systemsystem

Greater transparency required in an integrated Greater transparency required in an integrated

world financial systemworld financial system

Hopefully an early warning systemHopefully an early warning system

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EDRSEDRS

Required many changes to the U.S. reporting systemRequired many changes to the U.S. reporting system

Annual security-by-security reporting implemented Annual security-by-security reporting implemented

in 2002 in 2002

Reporting in 4 out of every 5 years will be from the Reporting in 4 out of every 5 years will be from the

largest reporters onlylargest reporters only

Shorter submission periodsShorter submission periods

11

EDRSEDRS

Quarterly reporting of external debt, with a one Quarterly reporting of external debt, with a one

quarter lag, by sector (gov’t, bank, other) and type quarter lag, by sector (gov’t, bank, other) and type

of debt (bond, loan, etc.) requiredof debt (bond, loan, etc.) required

Forward debt repayment schedules strongly Forward debt repayment schedules strongly

encouragedencouraged

Currency composition of debt also encouragedCurrency composition of debt also encouraged

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EDRSEDRS

U.S. will augment reported data with estimated data U.S. will augment reported data with estimated data

Precise measurement would require quarterly security-by-Precise measurement would require quarterly security-by-

security collectionssecurity collections

Too much burden on reporter and compilers, therefore Too much burden on reporter and compilers, therefore

annual data will be combined with monthly flow dataannual data will be combined with monthly flow data

Result = credible estimatesResult = credible estimates

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Institute of International Finance Recommendations

Institute of International Finance Recommendations

IIF strongly urged changesIIF strongly urged changes

IIF recommended a more rigorous system than will IIF recommended a more rigorous system than will

be implemented be implemented

“…“…private sector participants in these markets private sector participants in these markets

bear a responsibility for full and timely disclosure bear a responsibility for full and timely disclosure

of information on their activities.”of information on their activities.”

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UsersUsers

Financial industry analystsFinancial industry analysts

International organizationsInternational organizations

U.S. Government U.S. Government

Academic researchAcademic research

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UsesUses

U.S. Government - BoP, IIP, country exposureU.S. Government - BoP, IIP, country exposure

Reduced net debtor positionReduced net debtor position

Current account sustainabilityCurrent account sustainability

Help to explain $US strength?Help to explain $US strength?

16

UsesUses

Annual data provide more precise geographyAnnual data provide more precise geography

Monthly long-term securities report is based on Monthly long-term securities report is based on location of purchaser/sellerlocation of purchaser/seller

Results in heavy bias towards financialResults in heavy bias towards financial centers centers such as the United Kingdomsuch as the United Kingdom

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UsesUses

Security-level collection allows for greater Security-level collection allows for greater

data editingdata editing

June 2002 data decreased estimated level of June 2002 data decreased estimated level of

foreign holdings by $130 billionforeign holdings by $130 billion

Shows investment by IndustryShows investment by Industry

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Increasingly ImportantIncreasingly Important

Foreign ownership increasingForeign ownership increasing

DD

DD

Securities flows now much greater than bank Securities flows now much greater than bank

lendinglending

Year Overall U.S. Treasuries

1974 4.8% 14.7%

2002 12.2% 40.7%

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SummarySummary

Changes have increased the burden on both Changes have increased the burden on both

reporters and compilersreporters and compilers

By combining estimates with reported data we are By combining estimates with reported data we are

attempting to limit the burdenattempting to limit the burden

Timely, accurate data from reporters is the key Timely, accurate data from reporters is the key

Who Must ReportWho Must Report

Richard McGee

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All U.S.-resident entities that received a All U.S.-resident entities that received a copy of the instruction booklet are required copy of the instruction booklet are required to complete and return Schedule 1.to complete and return Schedule 1.

All U.S.-resident entities that meet or All U.S.-resident entities that meet or exceed the exemption level are required to exceed the exemption level are required to file.file.

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Exemption LevelExemption Level The exemption level is determined on a The exemption level is determined on a

consolidated basisconsolidated basis All areas of an organization must be taken into All areas of an organization must be taken into

consideration and their holdings aggregatedconsideration and their holdings aggregated SubsidiariesSubsidiaries AffiliatesAffiliates Custodial businessCustodial business Foreign issuancesForeign issuances

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Exemption LevelExemption Level U.S.-resident entities must report detailed U.S.-resident entities must report detailed

Schedule 2 information if the total fair market Schedule 2 information if the total fair market value of all reportable U.S. securities owned by value of all reportable U.S. securities owned by foreign residents meets or exceeds $100 million.foreign residents meets or exceeds $100 million.

If your organization meets or exceeds the If your organization meets or exceeds the exemption level and did not receive a copy of the exemption level and did not receive a copy of the instruction booklet you are still required to file.instruction booklet you are still required to file.

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Why did my organization receive a copy of the Why did my organization receive a copy of the instruction booklet?instruction booklet? Reporters who filed Schedule 2s on the 2000 SHL Reporters who filed Schedule 2s on the 2000 SHL

and the 2003 SHLAand the 2003 SHLA Issuers of bearer bondsIssuers of bearer bonds TIC S and TIC B filersTIC S and TIC B filers Agencies and GSEsAgencies and GSEs Mutual fundsMutual funds Large privately held companiesLarge privately held companies

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Proper classification of U.S. and foreignProper classification of U.S. and foreign Reporting organizationReporting organization Owners of securitiesOwners of securities

Categories of reportersCategories of reporters U.S.-resident custodiansU.S.-resident custodians U.S.-resident central securities depositoriesU.S.-resident central securities depositories U.S.-resident issuersU.S.-resident issuers

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Proper Classification of U.S. and Foreign


Definition of United StatesDefinition of United States The fifty states of the United StatesThe fifty states of the United States The District of ColumbiaThe District of Columbia The Commonwealth of Puerto RicoThe Commonwealth of Puerto Rico American Samoa, Baker Island, Guam, Howland American Samoa, Baker Island, Guam, Howland

Island, Jarvis Island, Johnston Atoll, Kingman Reef, Island, Jarvis Island, Johnston Atoll, Kingman Reef, Midway Island, Navassa Island, Northern Mariana Midway Island, Navassa Island, Northern Mariana Islands, Palmyra Atoll, U.S. Virgin Islands, and Wake Islands, Palmyra Atoll, U.S. Virgin Islands, and Wake Island Island

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Definition of U.S. residentDefinition of U.S. resident Any individual, corporation, or other entity located in the Any individual, corporation, or other entity located in the

United States, including :United States, including : branches branches subsidiariessubsidiaries foreign entities located in the United States. foreign entities located in the United States.

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International and regional organizations are International and regional organizations are foreign residents, even if located in the United foreign residents, even if located in the United StatesStates

IBRD; World BankIBRD; World Bank Inter-American Development Bank (IADC)Inter-American Development Bank (IADC) International Finance Corporation (IFC)International Finance Corporation (IFC) Appendix D of instructions provides a partial listAppendix D of instructions provides a partial list www.treas.govwww.treas.gov

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Corporations incorporated in the United States are Corporations incorporated in the United States are U.S. residents even if they have no “physical U.S. residents even if they have no “physical presence” in the United States.presence” in the United States.

Country where legally incorporated, otherwise Country where legally incorporated, otherwise legally organized, or licensed determines residencylegally organized, or licensed determines residency

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How to determine residencyHow to determine residency Citizenship does not determine residencyCitizenship does not determine residency Tax formsTax forms

W-8 forms are filed by foreign residentsW-8 forms are filed by foreign residents W-9 forms are filed by U.S. residentsW-9 forms are filed by U.S. residents

Mailing addressMailing address

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Examples of U.S. Examples of U.S. residentsresidents Bayerische Bayerische

Landesbank NY Landesbank NY BranchBranch

BP America Inc.BP America Inc. General Motors General Motors

Corporation (includes Corporation (includes GMAC)GMAC)

KfW International KfW International Finance, Inc.Finance, Inc.

Examples of non-U.S. Examples of non-U.S. residentsresidents Bank of New York Bank of New York

Tokyo BranchTokyo Branch BP p.l.c.BP p.l.c. GMAC CanadaGMAC Canada International Bank for International Bank for

Reconstruction and Reconstruction and Development (IBRD; Development (IBRD; World Bank)World Bank)

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Reporting organizationReporting organization Report all U.S. securities issued directly to foreigners Report all U.S. securities issued directly to foreigners

(that is, no U.S.-resident custodian is used) by (that is, no U.S.-resident custodian is used) by allall U.S.-resident parts of your organizationU.S.-resident parts of your organization

U.S.-resident branchesU.S.-resident branches U.S.-resident officesU.S.-resident offices U.S.-resident subsidiariesU.S.-resident subsidiaries

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Holders of securitiesHolders of securities Non-U.S.-resident clientsNon-U.S.-resident clients Non-U.S.-resident custodiansNon-U.S.-resident custodians Non-U.S.-resident central securities depositoriesNon-U.S.-resident central securities depositories Non-U.S-resident parts of your organizationNon-U.S-resident parts of your organization

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Categories of ReportersCategories of Reporters

U.S.-resident custodiansU.S.-resident custodians

U.S.-resident entities that hold in custody or manage U.S.-resident entities that hold in custody or manage the safekeeping of U.S. securities for foreign residents, the safekeeping of U.S. securities for foreign residents, including foreign-resident custodians and central including foreign-resident custodians and central securities depositories.securities depositories.

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Each U.S.-resident custodian should file Each U.S.-resident custodian should file one consolidated report for:one consolidated report for: The custody accounts for which safekeeping services The custody accounts for which safekeeping services

are provided are provided Their own U.S. securities held directly by foreign Their own U.S. securities held directly by foreign

residentsresidents

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U.S.-resident custodians should exclude U.S.-resident custodians should exclude securities held in custody by their foreign-securities held in custody by their foreign-resident affiliates or subsidiaries.resident affiliates or subsidiaries.

U.S.-resident affiliates or subsidiaries of U.S.-resident affiliates or subsidiaries of foreign-resident custodians should exclude foreign-resident custodians should exclude securities held by their foreign parent.securities held by their foreign parent.

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Schedule 2 reporting:Schedule 2 reporting:

U.S.-resident custodians should report all U.S. securities held in U.S.-resident custodians should report all U.S. securities held in custody for foreign residents and securities they are safe keeping for custody for foreign residents and securities they are safe keeping for foreign-resident custodian.foreign-resident custodian.

U.S.-resident custodians should report all U.S. securities that are U.S.-resident custodians should report all U.S. securities that are

settled and cleared through foreign central securities depositories settled and cleared through foreign central securities depositories

(e.g., Euroclear)(e.g., Euroclear)

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U.S.-resident central securities depositoriesU.S.-resident central securities depositories

U.S.-resident central securities depositories should report U.S.-resident central securities depositories should report all U.S. securities they hold in custody or manage the all U.S. securities they hold in custody or manage the safekeeping of safekeeping of directlydirectly on behalf of foreign-resident on behalf of foreign-resident entities.entities.

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U.S.-resident issuersU.S.-resident issuers

Entities whose securities are held directly by foreign Entities whose securities are held directly by foreign residents, with no U.S.-resident custodian or central residents, with no U.S.-resident custodian or central securities depository involved.securities depository involved.

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Each U.S.-resident issuer should file one Each U.S.-resident issuer should file one consolidated report for:consolidated report for:

Securities issued by the reporter’s U.S.-resident Securities issued by the reporter’s U.S.-resident subsidiaries, branches, and affiliatessubsidiaries, branches, and affiliates

Their custody holdings for foreign residentsTheir custody holdings for foreign residents

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U.S.-resident issuers should exclude U.S.-resident issuers should exclude securities issued by foreign affiliates or securities issued by foreign affiliates or subsidiaries.subsidiaries.

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A U.S.-resident issuer clears and settles through a foreign central securities

depository

U.S.-ResidentIssuer

Foreign Central Securities Depository

Files Schedules 1 and 2 Does not report

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A foreign-resident investor employs a foreign-resident custodian

U.S.-Resident Issuer

Foreign-Resident Custodian

Files Schedules 1 and 2 Does not report

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A U.S.-resident custodian holds securities for a foreign resident

Foreign Resident

U.S.-ResidentCustodian

Files Schedules 1 and 2

Foreign-Resident Custodian

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Flow Chart for Bearer Bonds

Foreign Resident

U.S.-Resident Custodian

U.S.-ResidentIssuer


FRBNY eliminates duplicate reporting


What Must be Reported What Must be Reported on theon the

What Must be Reported What Must be Reported on theon the

Report of Foreign Holdings of U.S. Report of Foreign Holdings of U.S. Securities, Including Selected Money Securities, Including Selected Money

Market Instruments (SHL)Market Instruments (SHL)

Brian Mullarkey

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U.S. SecuritiesU.S. Securities

Securities issued by U.S. entities, including: U.S.-resident entities U.S. subsidiaries of foreign entities U.S. branches of foreign banks

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Exclude securities issued by International and Regional Organizations - Appendix D

Exclude securities issued by companies reincorporated outside the United States

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Information that does not contribute to Information that does not contribute to determining if a security is U.S.:determining if a security is U.S.: place of issue or location of tradesplace of issue or location of trades currency of issuecurrency of issue nationality of parent organizationnationality of parent organization guarantorguarantor

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U.S. SecuritiesExample 1


Euro denominated 2-year note issued by a Euro denominated 2-year note issued by a Daimler Chrysler affiliate incorporated in Daimler Chrysler affiliate incorporated in the United States.the United States.

Is this security reportable? Is this security reportable?

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U.S. SecuritiesExample 1 Answer


Euro denominated 2-year note issued by a Euro denominated 2-year note issued by a Daimler Chrysler affiliate incorporated in Daimler Chrysler affiliate incorporated in the United States.the United States.

Is this security reportable?Is this security reportable?

Yes. The security was issued by a Yes. The security was issued by a U.S.-resident entity.U.S.-resident entity.

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U.S. dollar-denominated 30-year Yankee U.S. dollar-denominated 30-year Yankee bond issued by the Inter-American bond issued by the Inter-American Development Bank.Development Bank.


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U.S. dollar-denominated 30-year Yankee bond U.S. dollar-denominated 30-year Yankee bond issued directly by the Inter-American Development issued directly by the Inter-American Development Bank.Bank.


No. This security was issued by a Regional No. This security was issued by a Regional Organization considered to be a foreign-resident Organization considered to be a foreign-resident entity. entity.

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U.S. dollar-denominated asset-backed U.S. dollar-denominated asset-backed security issued by Company B incorporated security issued by Company B incorporated in Hong Kong and guaranteed by the in Hong Kong and guaranteed by the parent, Company A, incorporated in the parent, Company A, incorporated in the United States.United States.


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U.S. dollar-denominated asset-backed security issued U.S. dollar-denominated asset-backed security issued by Company B incorporated in Hong Kong and by Company B incorporated in Hong Kong and guaranteed by the parent, Company A, incorporated in guaranteed by the parent, Company A, incorporated in the United States.the United States.


No. This security was issued by a foreign-resident No. This security was issued by a foreign-resident entity. The location of the guarantor does not factor entity. The location of the guarantor does not factor into the decision of whether the security is foreign or into the decision of whether the security is foreign or not.not.

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Type of Reportable U.S. Securities

Type of Reportable U.S. Securities

EquityEquity Short-Term DebtShort-Term Debt Long-Term DebtLong-Term Debt Asset-Backed SecuritiesAsset-Backed Securities

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EquityEquity

Instruments representing an ownership Instruments representing an ownership interest in U.S.-resident organizations.interest in U.S.-resident organizations.

However, ownership interests representing However, ownership interests representing direct investment are not reported.direct investment are not reported.

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EquityDirect Investment

EquityDirect Investment

Direct investment is defined as ownership Direct investment is defined as ownership or control of 10% or more of an or control of 10% or more of an organization’s voting stock.organization’s voting stock.

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EquityEquity

Reportable equity securities include:Reportable equity securities include: common stockcommon stock preferred stock preferred stock restricted stock restricted stock shares/units in U.S.-resident funds shares/units in U.S.-resident funds shares/units in unincorporated business shares/units in unincorporated business

enterprises, such as limited partnerships enterprises, such as limited partnerships

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EquityU.S.-Resident Funds


Report foreign residents’ ownership of shares/units Report foreign residents’ ownership of shares/units of funds legally established in the United States as of funds legally established in the United States as equity.equity.

Examples of funds:Examples of funds: closed-end and open-end mutual fundsclosed-end and open-end mutual funds real estate investment trusts real estate investment trusts money market fundsmoney market funds index-linked fundsindex-linked funds investment trustsinvestment trusts exchange traded fundsexchange traded funds

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Classification of the fund as “U.S.” is not based on Classification of the fund as “U.S.” is not based on the securities that the fund invests in.the securities that the fund invests in.

Example:Example: A fund organized in New York that only purchases A fund organized in New York that only purchases

Japanese Treasury securities is a U.S.-resident fund.Japanese Treasury securities is a U.S.-resident fund. A fund organized in Japan that only purchases U.S. A fund organized in Japan that only purchases U.S.

Treasury securities is a foreign-resident fund.Treasury securities is a foreign-resident fund.

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Funds

Report U.S. securities owned by foreign-Report U.S. securities owned by foreign-resident funds.resident funds.

Ownership of shares of foreign-resident Ownership of shares of foreign-resident funds is excluded, however, the U.S. funds is excluded, however, the U.S. securities owned by these funds are securities owned by these funds are reportable.reportable.

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Equity ExclusionsEquity Exclusions

Exclude from equity:Exclude from equity: convertible debt - reported as debt insteadconvertible debt - reported as debt instead depositary receipts if the underlying security is depositary receipts if the underlying security is

issued by a foreign residentissued by a foreign resident securities issued by companies incorporated securities issued by companies incorporated

outside of the United States as of June 30, 2004outside of the United States as of June 30, 2004 ownership that represents general partner ownership that represents general partner

interestsinterests

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Short-Term and Long-Term Debt (excluding asset-backed securities)Short-Term and Long-Term Debt

(excluding asset-backed securities)

Instruments that usually give the holder the Instruments that usually give the holder the unconditional right to financial assets.unconditional right to financial assets.

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TermTerm

Determine term, (short-term or long-term), Determine term, (short-term or long-term), based on the original maturity of the security.based on the original maturity of the security.

Original maturities of one year or less are Original maturities of one year or less are short-term.short-term.

Original maturities of greater than one year Original maturities of greater than one year are long-term.are long-term.

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TermTerm

Debt with multiple call options (multiple Debt with multiple call options (multiple maturity dates) is long-term if any of the maturity dates) is long-term if any of the maturity dates is greater than one year from maturity dates is greater than one year from the date of issue.the date of issue.

Perpetual debt is long-term.Perpetual debt is long-term.

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Term ExamplesTerm Examples

A U.S. Treasury bill issued on February 15, A U.S. Treasury bill issued on February 15, 2004 and matures on November 15, 2004 is 2004 and matures on November 15, 2004 is short-term.short-term.

A U.S. 30-year bond that matures on A U.S. 30-year bond that matures on March 26, 2005 is long-term.March 26, 2005 is long-term.

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Short-Term DebtShort-Term Debt

Reportable short-term debt includes the Reportable short-term debt includes the following instruments where the original following instruments where the original maturity is one year or less:maturity is one year or less: commercial paper - including asset-backed commercial paper - including asset-backed

commercial papercommercial paper negotiable certificates of deposit, bank notes and negotiable certificates of deposit, bank notes and

deposit notesdeposit notes U.S. government securities (e.g., U.S. Treasury U.S. government securities (e.g., U.S. Treasury

bills)bills) bankers’ and trade acceptancesbankers’ and trade acceptances

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Long-Term DebtLong-Term Debt

Reportable long-term debt includes the following Reportable long-term debt includes the following instruments where the original maturity is greater instruments where the original maturity is greater than one year:than one year: bondsbonds notesnotes debenturesdebentures convertible debtconvertible debt zero coupon securitieszero coupon securities stripped securitiesstripped securities negotiable certificates of depositnegotiable certificates of deposit

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Long-Term DebtStripped SecuritiesLong-Term Debt

Stripped Securities

Reportable stripped securities are those Reportable stripped securities are those where the issuer of the stripped security is a where the issuer of the stripped security is a U.S.-resident entity.U.S.-resident entity.

Residency of the stripped security is not Residency of the stripped security is not determined by the issuer of the underlying determined by the issuer of the underlying security.security.

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Long-Term DebtStripped SecuritiesLong-Term Debt

Stripped Securities

U.S. securities that are the underlying securities for U.S. securities that are the underlying securities for stripped securities should be reported if held by a stripped securities should be reported if held by a foreign resident.foreign resident.

Stripped securities issued by a foreign-resident Stripped securities issued by a foreign-resident entity should not be reported, even if the underlying entity should not be reported, even if the underlying security is U.S.security is U.S.

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Long-Term DebtStripped Securities Example

Long-Term DebtStripped Securities Example

U.K. Company A owns $100 million of U.S. bonds. U.K. Company A owns $100 million of U.S. bonds. U.K. Company A issues stripped securities where U.K. Company A issues stripped securities where these U.S. bonds are the underlying securities. U.S. these U.S. bonds are the underlying securities. U.S. Company B purchases these stripped securities.Company B purchases these stripped securities.

What should be reported by the U.S. custodians for What should be reported by the U.S. custodians for Company A and Company B?Company A and Company B?

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Long-Term DebtStripped Securities Example Answer

Long-Term DebtStripped Securities Example Answer

U.K. Company A owns $100 million of U.S. bonds. U.K. Company A owns $100 million of U.S. bonds. U.K. Company A issues stripped securities where these U.K. Company A issues stripped securities where these U.S. bonds are the underlying securities. U.S. U.S. bonds are the underlying securities. U.S. Company B purchases these stripped securities.Company B purchases these stripped securities.

What should be reported by the U.S. custodians for What should be reported by the U.S. custodians for Company A and Company B?Company A and Company B?

Company A’s U.S.-resident custodian reports the $100 Company A’s U.S.-resident custodian reports the $100 million of U.S. bonds. The stripped securities are not million of U.S. bonds. The stripped securities are not reported.reported.

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Additional IssuesAdditional Issues

Bearer Bonds as a single Global CertificateBearer Bonds as a single Global Certificate Matured Bonds that have not paid offMatured Bonds that have not paid off

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Debt ExclusionsDebt Exclusions

Exclude from short-term and long-term debt:Exclude from short-term and long-term debt: shares/units in U.S.-resident funds, even if the U.S. shares/units in U.S.-resident funds, even if the U.S.

fund invests in debt.fund invests in debt.

investments in U.S.-resident funds are reported, but investments in U.S.-resident funds are reported, but should be classified as equity on this report.should be classified as equity on this report.

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Exclude from short-term and long-term Exclude from short-term and long-term debt:debt: derivativesderivatives loansloans letters of creditletters of credit non-negotiable certificates of depositnon-negotiable certificates of deposit demand depositsdemand deposits

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Exclude from short-term and long-term Exclude from short-term and long-term debt:debt: asset-backed securitiesasset-backed securities

these securities are reported, but should be these securities are reported, but should be classified as asset-backed securities on this classified as asset-backed securities on this report.report.

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Asset-Backed SecuritiesAsset-Backed Securities

Securitized interest in a pool of assets, Securitized interest in a pool of assets, which give the purchaser a claim against the which give the purchaser a claim against the cash flows generated by the underlying cash flows generated by the underlying assets.assets.

79


Reportable asset-backed securities are those Reportable asset-backed securities are those where the issuer securitizing the assets is a where the issuer securitizing the assets is a U.S. resident.U.S. resident.

The underlying asset is not a factor in The underlying asset is not a factor in determining whether the ABS is a U.S. determining whether the ABS is a U.S. security.security.

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Reportable asset-backed securities include:Reportable asset-backed securities include: collateralized mortgage obligations (CMOs)collateralized mortgage obligations (CMOs)

collateralized bond obligations (CBOs)collateralized bond obligations (CBOs)

collateralized loan obligations (CLOs)collateralized loan obligations (CLOs)

collateralized debt obligations (CDOs)collateralized debt obligations (CDOs)

81


Reportable asset-backed securities include:Reportable asset-backed securities include: other securities backed by:other securities backed by:

mortgagesmortgages credit card receivablescredit card receivables automobile loansautomobile loans consumer and personal loansconsumer and personal loans commercial and industrial loanscommercial and industrial loans other assetsother assets

82

Asset-Backed Securities Exclusions

Asset-Backed Securities Exclusions

Exclude from asset-backed securities:Exclude from asset-backed securities: asset-backed commercial paperasset-backed commercial paper securities backed by a sinking fundsecurities backed by a sinking fund

These securities are reported but should be These securities are reported but should be classified as short-term or long-term debt on this classified as short-term or long-term debt on this report.report.

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Repurchase AgreementsSecurity Lending Arrangements


Repurchase agreements/securities lending Repurchase agreements/securities lending arrangements and reverse repurchase arrangements and reverse repurchase agreements/securities borrowing agreements/securities borrowing arrangements involve the temporary arrangements involve the temporary transfer of a security for cash or another transfer of a security for cash or another security. security.

84



The security lender should report the U.S. The security lender should report the U.S. security as if no repo or security lending security as if no repo or security lending arrangement occurred.arrangement occurred.

The security borrower should exclude the The security borrower should exclude the U.S. security. U.S. security.

Dejana Neskovic

Review of Schedules

87

Review of Schedules Schedule 1


Schedule 1: Reporter Contact Identification Schedule 1: Reporter Contact Identification and Summary Financial Informationand Summary Financial Information

Required to be filed by all entities who Required to be filed by all entities who receive the reportreceive the report

Contains basic information about the Contains basic information about the institution institution

Contains summary financial information Contains summary financial information reported on Schedule 2reported on Schedule 2

88

Review of SchedulesSchedule 1


Reporter Identification Number (Line 1)Reporter Identification Number (Line 1) 10 digit number, including leading zeros, issued 10 digit number, including leading zeros, issued

by FRBNY. by FRBNY. Contact FRBNY staff at (212) 720-6300 or at: Contact FRBNY staff at (212) 720-6300 or at:

[email protected] if you do not know [email protected] if you do not know your identification number.your identification number.

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Reporter Type (Line 4):Reporter Type (Line 4): 8 categories8 categories Choose the classification code that best Choose the classification code that best

describes your entity.describes your entity. If two or more codes are appropriate, choose If two or more codes are appropriate, choose

the one that represents the largest portion of the one that represents the largest portion of your entity’s day-to-day operations.your entity’s day-to-day operations.

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Reporter Type (Line 4):Reporter Type (Line 4): Bank: Depository Institution (i.e., an institution that Bank: Depository Institution (i.e., an institution that

takes deposits) or a bank holding company.takes deposits) or a bank holding company. Other Financial Organization: Entity that acts as a Other Financial Organization: Entity that acts as a

financial intermediary, such as a finance company or financial intermediary, such as a finance company or broker/dealer, which is operated separately from an broker/dealer, which is operated separately from an entity in one of the other categories listed.entity in one of the other categories listed.

Non-Financial Organization: An entity that conducts Non-Financial Organization: An entity that conducts commercial, industrial or trade activities.commercial, industrial or trade activities.

Other: Use this code if none of the categories listed Other: Use this code if none of the categories listed describe your firm. describe your firm.

91



Name of Service Provider or Vendor Name of Service Provider or Vendor Used (Line 10)Used (Line 10) Service Provider/Vendor is an institution that Service Provider/Vendor is an institution that

provides your data or prepares the electronic provides your data or prepares the electronic submission of your report.submission of your report.

92



Technical Contact (Lines 11-14)Technical Contact (Lines 11-14) Provide the name of the person who can be Provide the name of the person who can be

contacted for technical issues regarding the contacted for technical issues regarding the electronic submission of your report. electronic submission of your report.

This person should be familiar with the file This person should be familiar with the file formats used and how the data was extracted formats used and how the data was extracted from your databases or applications.from your databases or applications.

93



Summary of Schedule 2 Information (Lines 15-19)Summary of Schedule 2 Information (Lines 15-19) Total number of Schedule 2 recordsTotal number of Schedule 2 records Total US$ fair (market) value of all equityTotal US$ fair (market) value of all equity Total US$ fair (market) value of all short-term debtTotal US$ fair (market) value of all short-term debt Total US$ fair (market) value of all long-term debtTotal US$ fair (market) value of all long-term debt Total US$ fair (market) value of all ABSTotal US$ fair (market) value of all ABS

94



Certifier Information and SignatureCertifier Information and Signature Someone from within your organization must Someone from within your organization must

sign the Schedule 1 certifying its accuracy.sign the Schedule 1 certifying its accuracy. If the data was prepared by a third-party vendor, If the data was prepared by a third-party vendor,

someone within your organization is responsible someone within your organization is responsible for certifying your data submission.for certifying your data submission.

95



Schedule 2: Details of SecuritiesSchedule 2: Details of Securities Provides specific description and numerical Provides specific description and numerical

information of each U.S. securityinformation of each U.S. security Total of all Schedule 2 US$ fair (market) Total of all Schedule 2 US$ fair (market)

values should equal the summary financial values should equal the summary financial information reported on Schedule 1information reported on Schedule 1

96



Sequence Number (Line 2)Sequence Number (Line 2) Sequence numbers should be sequential Sequence numbers should be sequential

(i.e., 1,2,3) by reporting unit for each (i.e., 1,2,3) by reporting unit for each Schedule 2 record submitted. Schedule 2 record submitted.

If multiple divisions of an organization are If multiple divisions of an organization are preparing Schedule 2 records and it is preparing Schedule 2 records and it is burdensome to create sequential sequence burdensome to create sequential sequence numbers for the consolidated report, then each numbers for the consolidated report, then each reporting unit should have unique sequence reporting unit should have unique sequence numbers.numbers.

97



Reporting Unit Code and Name (Lines Reporting Unit Code and Name (Lines 3&3a)3&3a) If data is being collected from multiple databases If data is being collected from multiple databases

or reporting systems, report the internal code or reporting systems, report the internal code used in your organization to identify the database used in your organization to identify the database or system. or system.

Enter a description or name of the reporting unit Enter a description or name of the reporting unit or division that is reporting the information.or division that is reporting the information.

98



Security ID Fields (Lines 5&6)Security ID Fields (Lines 5&6) Security ID: The security ID code used to Security ID: The security ID code used to

identify the reported security.identify the reported security. CUSIP and ISIN codes are strongly preferred.CUSIP and ISIN codes are strongly preferred. Security ID System: Enter the appropriate code Security ID System: Enter the appropriate code

that describes the Security ID. For example, if that describes the Security ID. For example, if the security ID is an ISIN, code 2 should be the security ID is an ISIN, code 2 should be entered in this field.entered in this field.

99



Type of Issuer (Line 9)Type of Issuer (Line 9) United States Department of the Treasury United States Department of the Treasury

(code 1)(code 1) Other Federal agency or federally sponsored Other Federal agency or federally sponsored

enterprise (code 2)enterprise (code 2) State or local government, including their State or local government, including their

subdivisions (code 3)subdivisions (code 3) Other (code 4)Other (code 4)

100



Security Type (Line 10)Security Type (Line 10) Equity securities are broken out into the Equity securities are broken out into the

following categories:following categories: Common Stock (code 1)Common Stock (code 1) Preferred Stock (code 2)Preferred Stock (code 2) Fund Shares (code 3)Fund Shares (code 3) All other equity (code 4)All other equity (code 4)

101



Security Type (Line 10)Security Type (Line 10) Short and Long-term debt (excluding ABS) are Short and Long-term debt (excluding ABS) are

broken out into seven categories:broken out into seven categories: Commercial Paper (code 5)Commercial Paper (code 5) Negotiable CD (code 6)Negotiable CD (code 6) Convertible Debt Security (code 7)Convertible Debt Security (code 7) Zero-Coupon Bond or Note (code 8)Zero-Coupon Bond or Note (code 8) Bond or Note, unstripped (code 9)Bond or Note, unstripped (code 9) Bond or Note, stripped (code 10)Bond or Note, stripped (code 10) All Other Debt (code 11)All Other Debt (code 11)

102



Security Type (Line 10)Security Type (Line 10) Asset-Backed Securities have been broken out Asset-Backed Securities have been broken out

into their own separate code (code 12)into their own separate code (code 12)

103



Registered/Bearer Indicator (Line 11)Registered/Bearer Indicator (Line 11) If a security is a registered instrument (e.g., a If a security is a registered instrument (e.g., a

bond that is recorded in the name of the holder), bond that is recorded in the name of the holder), it should be reported with a registered indicator it should be reported with a registered indicator (code 1).(code 1).

If a security is a bearer instrument, (i.e., If a security is a bearer instrument, (i.e., possession of the bond certificate is the only possession of the bond certificate is the only proof of ownership), it should be reported with proof of ownership), it should be reported with a bearer indicator (code 2).a bearer indicator (code 2).

104



Country of Foreign Holder (Line 14)Country of Foreign Holder (Line 14) Identifies the location of the beneficial owner of Identifies the location of the beneficial owner of

the security or its custodian.the security or its custodian. Type of Foreign Holder (Line 15)Type of Foreign Holder (Line 15)

An abbreviated list of Foreign Official An abbreviated list of Foreign Official Institutions can be found in Appendix D of the Institutions can be found in Appendix D of the instructions. instructions.

A complete list can be found on the Treasury A complete list can be found on the Treasury website at www.treas.gov/tic/forms.htm.website at www.treas.gov/tic/forms.htm.

105



US$ Fair (Market) Value of Foreign Held U.S. Security US$ Fair (Market) Value of Foreign Held U.S. Security (Line 16)(Line 16) Report the US$ fair (market) value of securities as of Report the US$ fair (market) value of securities as of

close of business on June 30, 2004.close of business on June 30, 2004. Fair (Market) Value in Currency of Denomination of Fair (Market) Value in Currency of Denomination of

Foreign Held U.S. Security (Line 16a)Foreign Held U.S. Security (Line 16a) Enter the fair (market) value of the security in the Enter the fair (market) value of the security in the

currency of original issue. currency of original issue. If the currency is denominated in US$ then enter the US$ If the currency is denominated in US$ then enter the US$

fair (market) value. fair (market) value.

106



If US$ Fair (Market) Value is Zero (Line 17)If US$ Fair (Market) Value is Zero (Line 17) If the fair (market) value is determined to be If the fair (market) value is determined to be

zero, list the reason why on the appropriate zero, list the reason why on the appropriate line. Examples of zero fair (market) value are:line. Examples of zero fair (market) value are:

Securities that are thinly or never tradedSecurities that are thinly or never traded Stock is impaired or security in defaultStock is impaired or security in default Entity that issued the security is in receivershipEntity that issued the security is in receivership

107



Reporting an Equity Security Reporting an Equity Security Security type must be either 1, 2, 3, or 4Security type must be either 1, 2, 3, or 4 Number of Shares (line 18) must be providedNumber of Shares (line 18) must be provided Line items 19 through 25 pertain to debt Line items 19 through 25 pertain to debt

securities and should be left blank or nullsecurities and should be left blank or null

108



Reporting a Debt Security Other than ABSReporting a Debt Security Other than ABS Security type must be either 5, 6, 7, 8, 9, 10, or 11Security type must be either 5, 6, 7, 8, 9, 10, or 11 The face value in the currency of denomination (line The face value in the currency of denomination (line

19) must be reported19) must be reported Face value should be rounded to the nearest whole Face value should be rounded to the nearest whole

currency unitcurrency unit If the security is traded in units, report the face value If the security is traded in units, report the face value

by multiplying each unit by the number of units heldby multiplying each unit by the number of units held An issue date and maturity date must be reportedAn issue date and maturity date must be reported

109



Reporting an Asset-Backed SecurityReporting an Asset-Backed Security Security type must be 12Security type must be 12 The original face value in the currency of denomination (line The original face value in the currency of denomination (line

22) must be reported 22) must be reported * Original face value is the amount that would still be outstanding if no Original face value is the amount that would still be outstanding if no

principal had been repaidprincipal had been repaid

Remaining principal outstanding in currency of denomination Remaining principal outstanding in currency of denomination must be reported (line 23)must be reported (line 23)

* The remaining principal outstanding will only equal the original face The remaining principal outstanding will only equal the original face value if no principal has been repaidvalue if no principal has been repaid

How We Review Your Data How We Review Your Data

Kenneth Aberbach

111

Three Levels of Review Three Levels of Review

Reporter levelReporter level Analyzing your data for reasonabilityAnalyzing your data for reasonability Trend analysisTrend analysis

Security levelSecurity level Comparing attributes of reported securities to one Comparing attributes of reported securities to one

another, and to commercial data sources.another, and to commercial data sources.

Macro levelMacro level Additional comparisons on a broader levelAdditional comparisons on a broader level

112

FRBNY Calculations FRBNY Calculations

Based on reported market value and quantity Based on reported market value and quantity fields, FRBNY calculates:fields, FRBNY calculates: Implicit PricesImplicit Prices Factor ValuesFactor Values Exchange RatesExchange Rates

These calculations assist us in determining the These calculations assist us in determining the quality of your reported market values and quality of your reported market values and quantities.quantities.

113

FRBNY Price Calculations (from Schedule 2)


Equity Example: Equity Example: If the US$ Fair (Market) value is $10 If the US$ Fair (Market) value is $10 million, and the number of shares is 100,000, what is the million, and the number of shares is 100,000, what is the implicit price? implicit price?

Implicit Price = Implicit Price = US$ Fair (Market) Value (line 16)US$ Fair (Market) Value (line 16) Number of Shares (line Number of Shares (line

18)18)

Implicit Price =Implicit Price =

114




Implicit Price = Implicit Price = US$ Fair (Market) Value (line 16)US$ Fair (Market) Value (line 16) Number of Shares (line 18)Number of Shares (line 18)

Implicit Price = Implicit Price = $10,000,000 (Market Value) = $10,000,000 (Market Value) = 100,000 shares100,000 shares

115




Implicit Price = Implicit Price = US$ Fair (Market) Value (line 16)US$ Fair (Market) Value (line 16) Number of Shares (line 18)Number of Shares (line 18)

Implicit Price = Implicit Price = $10,000,000 (Market Value) = $10,000,000 (Market Value) = $100 per share$100 per share 100,000 shares100,000 shares

116



Non-ABS Debt Example:Non-ABS Debt Example: If the Fair (Market) value in currency If the Fair (Market) value in currency of denomination is $1 million, and the face value in currency of of denomination is $1 million, and the face value in currency of

denomination is $900,000, what is the implicit price?denomination is $900,000, what is the implicit price?


Fair (Market) Value in Currency of Denomination (line 16a) Face Fair (Market) Value in Currency of Denomination (line 16a) Face Value in Currency of Denomination (line 19)Value in Currency of Denomination (line 19)


117



Non-ABS Debt Example:Non-ABS Debt Example: If the Fair (Market) value in currency of If the Fair (Market) value in currency of denomination is $1 million, and the face value in currency of denomination is $1 million, and the face value in currency of



Fair (Market) Value in Currency of Denomination (line 16a) Face Fair (Market) Value in Currency of Denomination (line 16a) Face Value in Currency of Denomination (line 19)Value in Currency of Denomination (line 19)

Implicit Price = $Implicit Price = $1,000,000 (Market Value) = 1,000,000 (Market Value) = $900,000 (Face Value) $900,000 (Face Value)

118



Non-ABS Debt Example:Non-ABS Debt Example: If the Fair (Market) value in currency of If the Fair (Market) value in currency of denomination is $1 million, and the face value in currency of denomination is $1 million, and the face value in currency of



Fair (Market) Value in Currency of Denomination (line 16a) Face Value Fair (Market) Value in Currency of Denomination (line 16a) Face Value in Currency of Denomination (line 19)in Currency of Denomination (line 19)

Implicit Price = $Implicit Price = $1,000,000 (Market Value) = 1,000,000 (Market Value) = 1.111.11

$900,000 (Face Value)$900,000 (Face Value)

119



Asset-Backed Securities Example:Asset-Backed Securities Example: If the Fair (Market) value in If the Fair (Market) value in currency of denomination is ¥100,000, and the remaining principal currency of denomination is ¥100,000, and the remaining principal outstanding in currency of denomination is ¥110,000, what is the outstanding in currency of denomination is ¥110,000, what is the implicit price? implicit price?


Fair (Market) Value in Currency of Denomination (line 16a)Fair (Market) Value in Currency of Denomination (line 16a)

Remaining Principal Outstanding in Currency of Denomination (line 23)Remaining Principal Outstanding in Currency of Denomination (line 23)


120



Asset-Backed Securities Example:Asset-Backed Securities Example: If the Fair (Market) value in currency If the Fair (Market) value in currency of denomination is ¥100,000, and the remaining principal outstanding in of denomination is ¥100,000, and the remaining principal outstanding in currency of denomination is ¥110,000, what is the implicit price? currency of denomination is ¥110,000, what is the implicit price?




Implicit Price = Implicit Price = ¥100,000 (Market Value) = ¥100,000 (Market Value) = ¥110,000 (Remaining Principal) ¥110,000 (Remaining Principal)

121



Asset-Backed Securities Example:Asset-Backed Securities Example: If the Fair (Market) value in currency If the Fair (Market) value in currency of denomination is ¥100,000, and the remaining principal outstanding in of denomination is ¥100,000, and the remaining principal outstanding in currency of denomination is ¥110,000, what is the implicit price? currency of denomination is ¥110,000, what is the implicit price?




Implicit Price = Implicit Price = ¥100,000 (Market Value) = ¥100,000 (Market Value) = .909.909

¥110,000 (Remaining Principal)¥110,000 (Remaining Principal)

122



Equity:Equity: US$ Fair (Market) Value (line 16)US$ Fair (Market) Value (line 16)

Number of Shares (line 18)Number of Shares (line 18)

Debt (Non-ABS)Debt (Non-ABS): Fair (Market) Value in Currency of Denomination (line : Fair (Market) Value in Currency of Denomination (line 16a)16a) Face Value in Currency of Denomination (line 19)Face Value in Currency of Denomination (line 19)

ABS : ABS : Fair (Market) Value in Currency of Denomination (line 16a)Fair (Market) Value in Currency of Denomination (line 16a) Remaining Principal Outstanding in Currency of Denomination (line Remaining Principal Outstanding in Currency of Denomination (line 23)23)

123

FRBNY Factor Calculations (from Schedule 2)


Factor Value Example: Factor Value Example: If the original face value in currency of If the original face value in currency of denomination is £900,000, and the remaining principal denomination is £900,000, and the remaining principal outstanding in currency of denomination is £700,000, what is the outstanding in currency of denomination is £700,000, what is the implicit factor value?implicit factor value?

Factor Value =Factor Value =


Original Face Value in Currency of Denomination (line 22)Original Face Value in Currency of Denomination (line 22)

Factor Value = Factor Value =

124



Factor Value Example: Factor Value Example: If the original face value in currency of If the original face value in currency of denomination is £900,000, and the remaining principal denomination is £900,000, and the remaining principal outstanding in currency of denomination is £700,000, what is the outstanding in currency of denomination is £700,000, what is the implicit factor value?implicit factor value?

Factor Value =Factor Value =



Factor Value = Factor Value = ££ 700,000700,000 £ 900,000 £ 900,000

125



Factor Value Example: Factor Value Example: If the original face value in currency of If the original face value in currency of denomination is £900,000, and the remaining principal outstanding denomination is £900,000, and the remaining principal outstanding in currency of denomination is £700,000, what is the implicit factor in currency of denomination is £700,000, what is the implicit factor value?value?

Factor Value =Factor Value =Remaining Principal Outstanding in Currency of Denomination (line 23)Remaining Principal Outstanding in Currency of Denomination (line 23)


Factor Value = Factor Value = ££ 700,000700,000 = = 0.780.78

£ 900,000£ 900,000

126

FRBNY Exchange Rate Calculations (from Schedule 2)


Exchange Rate Example: Exchange Rate Example: If the US$ Fair (Market) value is If the US$ Fair (Market) value is $100,000 and the Fair (Market) value in currency of $100,000 and the Fair (Market) value in currency of denomination is £85,000, what is the exchange rate?denomination is £85,000, what is the exchange rate?

Exchange Rate =Exchange Rate =

US$ Fair (Market) Value (line 16)US$ Fair (Market) Value (line 16)



127



Exchange Rate Example: Exchange Rate Example: If the US$ Fair (Market) value is If the US$ Fair (Market) value is $100,000 and the Fair (Market) value in currency of denomination is $100,000 and the Fair (Market) value in currency of denomination is £85,000, what is the exchange rate?£85,000, what is the exchange rate?




Exchange Rate = $Exchange Rate = $100,000 100,000 ==

£85,000£85,000

128



Exchange Rate Example: Exchange Rate Example: If the US$ Fair (Market) value is If the US$ Fair (Market) value is $100,000 and the Fair (Market) value in currency of denomination is $100,000 and the Fair (Market) value in currency of denomination is £85,000, what is the exchange rate?£85,000, what is the exchange rate?




Exchange Rate = $Exchange Rate = $100,000 100,000 == 1.18 1.18

£85,000£85,000

129

Reporter Level Review Reporter Level Review

Reasonability ComparisonsReasonability Comparisons Schedule 1 -vs- Schedule 2 comparisonSchedule 1 -vs- Schedule 2 comparison Schedules 1 and 2, comparison to prior year Schedules 1 and 2, comparison to prior year

(reporting trends, if you’ve reported in prior (reporting trends, if you’ve reported in prior years)years)

130

Reporter Level ReviewReporter Level Review

Reasonability AnalysisReasonability Analysis Ensuring all Schedule 2 data fields were reported. Ensuring all Schedule 2 data fields were reported.

These data must include:These data must include: Security IDSecurity ID Country of foreign-resident holderCountry of foreign-resident holder Type of foreign holder (Official or Other)Type of foreign holder (Official or Other) Number of shares held by foreign residents (equity)Number of shares held by foreign residents (equity) Face Value held by foreign residents (non-ABS debt)Face Value held by foreign residents (non-ABS debt) Remaining principal outstanding held by foreign Remaining principal outstanding held by foreign

residents (ABS)residents (ABS)

131


ReasonabilityReasonability Currency/Exchange Rate AnalysisCurrency/Exchange Rate Analysis

Currency is US$ but US$ Fair (Market) Value (item 16) Currency is US$ but US$ Fair (Market) Value (item 16) does not equal the Fair (Market) Value in currency of does not equal the Fair (Market) Value in currency of denomination (item 16a). denomination (item 16a).

Currency is not US$ and the exchange rate is not 1, but Currency is not US$ and the exchange rate is not 1, but the US$ Fair (Market) Value equals the Fair (Market) the US$ Fair (Market) Value equals the Fair (Market) value in currency of denomination. value in currency of denomination.

For each security, an implicit exchange rate is calculated.For each security, an implicit exchange rate is calculated.

132


ReasonabilityReasonability Country of foreign holderCountry of foreign holder Country of foreign holder is U.S.Country of foreign holder is U.S.

Are these coded incorrectly or should these have been Are these coded incorrectly or should these have been excluded from your report?excluded from your report?

Are securities held by international and regional Are securities held by international and regional organizations reported with the U.S. as the country of organizations reported with the U.S. as the country of foreign holder? If so, the the Country of Foreign Holder foreign holder? If so, the the Country of Foreign Holder code should be revised. code should be revised.

Are securities held in a U.S. protectorate (Puerto Rico, Are securities held in a U.S. protectorate (Puerto Rico, etc.)? If so, exclude from report.etc.)? If so, exclude from report.

133


ReasonabilityReasonability Country of foreign holder Country of foreign holder Country of foreign holder is CanadaCountry of foreign holder is Canada

Has the amount of U.S. securities held by Canadian Has the amount of U.S. securities held by Canadian investors changed substantially since the last reporting investors changed substantially since the last reporting cycle? cycle?

Were Canadian-held securities coded as U.S.-held Were Canadian-held securities coded as U.S.-held securities on your system and so were incorrectly securities on your system and so were incorrectly excluded from your report?excluded from your report?

134

ReasonabilityReasonability Bearer BondsBearer Bonds

Does your institution issue any bearer bonds?Does your institution issue any bearer bonds? All bearer bonds outstanding should be reported.All bearer bonds outstanding should be reported. Country of foreign holder code 88862 (country unknown) Country of foreign holder code 88862 (country unknown)

should be reported for bearer bonds if the country of should be reported for bearer bonds if the country of foreign holder cannot be determined. foreign holder cannot be determined.

We compare your reported bearer bonds to a list of We compare your reported bearer bonds to a list of known outstanding bearer bonds provided to the Federal known outstanding bearer bonds provided to the Federal Reserve Bank of New York by the Bank for International Reserve Bank of New York by the Bank for International Settlements (BIS).Settlements (BIS).


135


ReasonabilityReasonability Key Securities AnalysisKey Securities Analysis

Largest foreign-held securities by US$ Fair Largest foreign-held securities by US$ Fair (Market) value(Market) value

Implicit exchange rates, implicit prices, country of Implicit exchange rates, implicit prices, country of foreign holder, etc.foreign holder, etc.

Securities reported with zero quantitiesSecurities reported with zero quantities If reported correctly, these securities do not need to If reported correctly, these securities do not need to

be reported, and should be excluded from future be reported, and should be excluded from future reports.reports.

136

ReasonabilityReasonability Reporter QueriesReporter Queries

We focus on areas that were reporting problems in We focus on areas that were reporting problems in prior data submissions, such as:prior data submissions, such as:

keywords in descriptions, such as “rights,” “warrants,” keywords in descriptions, such as “rights,” “warrants,” “repurchase,” “repo,” etc. (should not be reported)“repurchase,” “repo,” etc. (should not be reported)

debt prices far above pardebt prices far above par invalid countries of foreign holderinvalid countries of foreign holder issue dates after as-of dateissue dates after as-of date additional comparisons to other reporters’ data (e.g., additional comparisons to other reporters’ data (e.g.,

implicit prices)implicit prices)

Reporter Level Review

137


ReasonabilityReasonability Consistency of data reported throughout the reporter’s Consistency of data reported throughout the reporter’s

submission submission Example: You report data for Stock A with two Example: You report data for Stock A with two

different implicit prices, which is correct?different implicit prices, which is correct?

Stock A reported with implicit price of $55.00Stock A reported with implicit price of $55.00 Stock A reported with implicit price of $65.00Stock A reported with implicit price of $65.00

138

Security Level Review Security Level Review

Data embedded in the security description, e.g., security type Data embedded in the security description, e.g., security type or maturity date, are compared to data in the relevant fields.or maturity date, are compared to data in the relevant fields.

Term of debt is calculated using issue and maturity dates and Term of debt is calculated using issue and maturity dates and compared to the reported term and the security description.compared to the reported term and the security description.

Issuer should not be a foreign resident.Issuer should not be a foreign resident.

Reincorporated organizations should not be reported.Reincorporated organizations should not be reported.

Total quantity reported across all reporters is compared to the Total quantity reported across all reporters is compared to the

total amount outstanding for a given security.total amount outstanding for a given security.

139

Macro Level Review Macro Level Review

Comparisons of various “cuts” of the Comparisons of various “cuts” of the aggregate data.aggregate data.

Equity by country and security typeEquity by country and security type Long-term debt by country and currencyLong-term debt by country and currency Short-term debt by country and currency Short-term debt by country and currency Long-term debt by country and type of securityLong-term debt by country and type of security Short-term debt by country and type of securityShort-term debt by country and type of security Debt by maturity date Debt by maturity date

Report of Foreign Holdings of U.S. Securities (SHL)/TIC

Comparison

141

Reports Used for Comparison

Foreign Holdings of U.S. Securities (SHL) Foreign Holdings of U.S. Securities (SHL) TIC ReportsTIC Reports

TIC BL-2 Customer LiabilitiesTIC BL-2 Customer Liabilities TIC BQ-2 Customer Liabilities denominated in foreign TIC BQ-2 Customer Liabilities denominated in foreign

currencycurrency

http://www.ustreas.gov/tic/ http://www.ustreas.gov/tic/

142

DifferencesDifferences

TIC - Face ValueTIC - Face Value SHL - Face Value and Market Value.SHL - Face Value and Market Value.

TIC - Aggregate per countryTIC - Aggregate per country SHL - Detailed information on each securitySHL - Detailed information on each security

143


TIC - USD or USD equivalentTIC - USD or USD equivalent SHL - Market Value in both USD and currency of SHL - Market Value in both USD and currency of

denomination. Face value in currency of denomination denomination. Face value in currency of denomination that FRBNY converts to USD.that FRBNY converts to USD.

144


There may be more than one TIC report There may be more than one TIC report filed per institution. filed per institution.

One consolidated SHL report filed per One consolidated SHL report filed per institutioninstitution For example: A U.S. entity sends in separate TIC For example: A U.S. entity sends in separate TIC

reports for the Bank Holding Company, Bank, and reports for the Bank Holding Company, Bank, and Broker/Dealer but would send in one consolidated SHL Broker/Dealer but would send in one consolidated SHL report. report.

145

Compare - OverviewCompare - Overview

Treasury SecuritiesTreasury Securities

Negotiable SecuritiesNegotiable Securities

Negotiable CDsNegotiable CDs

Agency SecuritiesAgency Securities

Foreign CurrenciesForeign Currencies

Negotiable Securities Negotiable Securities IssuedIssued

146

CompareTreasury Securities


SHL (per country)SHL (per country) Type of Issuer = 1 (Item 9)Type of Issuer = 1 (Item 9) Term Indicator = 1(Item Term Indicator = 1(Item

12)12) Currency = USD (Item 13)Currency = USD (Item 13) Type of Foreign Holder = 1 Type of Foreign Holder = 1

(Item 15) (Item 15) Sum of face value (Item 17)Sum of face value (Item 17)

TIC BL-2 (per TIC BL-2 (per country)country) Short-Term U.S. Treasury Short-Term U.S. Treasury

Obligations to Foreign Obligations to Foreign Official Institutions Official Institutions (column 1)(column 1)

147



SHL (per country)SHL (per country) Type of Issuer = 1 (Item 9)Type of Issuer = 1 (Item 9) Term Indicator = 1(Item Term Indicator = 1(Item

12)12) Currency = USD (Item 13)Currency = USD (Item 13) Type of Foreign Holder = 2 Type of Foreign Holder = 2

(Item 15) (Item 15) Sum of face value (Item 17)Sum of face value (Item 17)

TIC BL-2 (per TIC BL-2 (per country)country) Short-Term U.S. Treasury Short-Term U.S. Treasury

Obligations to Foreign Obligations to Foreign Banks and all Other Banks and all Other Foreigners (column 4 + 7)Foreigners (column 4 + 7)

148

CompareNegotiable Securities


SHL (per country)SHL (per country) Type of Issuer = 2, 3, and 4 Type of Issuer = 2, 3, and 4

(Item 9)(Item 9) Security Type 5, 6, 7, 8, 9, 10, Security Type 5, 6, 7, 8, 9, 10,

11, and 12 (Item 10)11, and 12 (Item 10) Term Indicator = 1 (Item 12) Term Indicator = 1 (Item 12)

(Security Type 6 includes (Security Type 6 includes Term Indicator = 2)Term Indicator = 2)

Currency = USD (Item 13)Currency = USD (Item 13) Type of Foreign Holder =1 Type of Foreign Holder =1

(Item 15) (Item 15) Sum of face value (Item 17 or Sum of face value (Item 17 or

item 22 for ABS)item 22 for ABS)

TIC BL-2 (per TIC BL-2 (per country)country) Negotiable CDs and Short-Negotiable CDs and Short-

Term Negotiable Securities Term Negotiable Securities to Foreign Official to Foreign Official Institutions (column 2)Institutions (column 2)

149



SHL (per country)SHL (per country) Type of Issuer = 2, 3, and 4 Type of Issuer = 2, 3, and 4

(Item 9)(Item 9) Security Type 5, 6, 7, 8, 9, 10, Security Type 5, 6, 7, 8, 9, 10,

11, and 12 (Item 10)11, and 12 (Item 10) Term Indicator = 1(Item 12) Term Indicator = 1(Item 12)

(Security Type 6 includes (Security Type 6 includes Term Indicator = 2)Term Indicator = 2)

Currency = USD (Item 13)Currency = USD (Item 13) Type of Foreign Holder = 2 Type of Foreign Holder = 2

(Item 15) (Item 15) Sum of face value (Item 17 or Sum of face value (Item 17 or

item 22 for ABS)item 22 for ABS)

TIC BL-2 (per TIC BL-2 (per country)country) Negotiable CDs and Short-Negotiable CDs and Short-

Term Negotiable Securities Term Negotiable Securities to Foreign Banks and all to Foreign Banks and all Other Foreigners Other Foreigners (column 5 + 8)(column 5 + 8)

150

CompareNegotiable CDs

CompareNegotiable CDs

SHL (per country)SHL (per country) Security Type 6 (Item 10)Security Type 6 (Item 10) Currency = USD (Item 13)Currency = USD (Item 13) Sum of face value (Item 17)Sum of face value (Item 17)

TIC BL-2 (per TIC BL-2 (per country)country) Negotiable Certificates of Negotiable Certificates of

Deposits (column 11)Deposits (column 11)

151

CompareNegotiable Securities Issued

CompareNegotiable Securities Issued

SHL (per country)SHL (per country) Type of Issuer = 4 (Item 9)Type of Issuer = 4 (Item 9) Security Type 5, 7, 8, 9, 10, Security Type 5, 7, 8, 9, 10,

11, and 12 (Item 10)11, and 12 (Item 10) Term Indicator = 1(Item Term Indicator = 1(Item

12)12) Currency = USD (Item 13)Currency = USD (Item 13) Sum of face value (Item 17 Sum of face value (Item 17

or item 22 for ABS)or item 22 for ABS)

TIC BL-2 (per TIC BL-2 (per country)country) Negotiable Securities Negotiable Securities

Issued by Banks and Other Issued by Banks and Other Short-Term Negotiable Short-Term Negotiable Securities (Memo Lines Securities (Memo Lines 8142-6 + 8150-3)8142-6 + 8150-3)

152

CompareGeneral Government

CompareGeneral Government

SHL (per country)SHL (per country) Type of Issuer = 1 and 3 Type of Issuer = 1 and 3

(Item 9)(Item 9) Security Type 7, 8, 9, 10, Security Type 7, 8, 9, 10,




TIC BL-2 (per TIC BL-2 (per country)country) Total General Government Total General Government

(Memo Line 8144-2)(Memo Line 8144-2)

153

CompareU.S. Agency

CompareU.S. Agency

SHL (per country)SHL (per country) Type of Issuer = 2 (Item 9)Type of Issuer = 2 (Item 9) Security Type 7, 8, 9, 10, Security Type 7, 8, 9, 10,




TIC BL-2 (per TIC BL-2 (per country)country) U.S. Agencies U.S. Agencies

(Memo Line 8146-9)(Memo Line 8146-9)

154

CompareNegotiable CDs in Foreign Currency

CompareNegotiable CDs in Foreign Currency

SHL (per country)SHL (per country) Security Type 6 (Item 10)Security Type 6 (Item 10) Currency = not USD Currency = not USD

(Item 13)(Item 13) Sum of face value (Item 17)Sum of face value (Item 17)

TIC BQ-2 (per TIC BQ-2 (per country)country) Negotiable CDs Negotiable CDs

(Part 2, Memo Line 9980-5, (Part 2, Memo Line 9980-5, column 1)column 1)

155

CompareNegotiable Securities in Foreign Currency

CompareNegotiable Securities in Foreign Currency

SHL (per country)SHL (per country) Security Type 7, 8, 9, 10, Security Type 7, 8, 9, 10,

11, or 12 (Item 10)11, or 12 (Item 10) Currency = not USD Currency = not USD

(Item 13)(Item 13) Sum of face value (Item 17 Sum of face value (Item 17


TIC BQ-2 (per TIC BQ-2 (per country)country) All Short-Term Negotiable All Short-Term Negotiable

Securities (Part 2, Memo Securities (Part 2, Memo Line 9980-5, column 2)Line 9980-5, column 2)

Technical TopicsTechnical Topics

Submitting your DataSubmitting your Data

Melissa Harris

157

Technical TopicsOptions for Filing

Technical TopicsOptions for Filing

Mail InternetOn Media:•Schedule 2–No minimum record requirement

Via IESUB:•Schedule 1•Schedule 2–No minimum record requirement•Only available to reporters that are submitting both Schedules 1 & 2

On Paper:•Schedule 1•Schedule 2–Only if less than 200 records

OtherVia Fax or E-mail:•Schedule 1•Only available to reporters that are reporting as Exempt

158

Technical Topics:Media Requirements for Schedule 2 Data

Technical Topics:Media Requirements for Schedule 2 Data

High Density IBM Compatible Diskette or High Density IBM Compatible Diskette or Standard CDStandard CD

Standard Windows PC ASCII Text Files With Standard Windows PC ASCII Text Files With a .txt extensiona .txt extension

Labeled With Reporter Name & IDLabeled With Reporter Name & ID Accompanied by Dump of Data and Copy Accompanied by Dump of Data and Copy

Command Used to Create the Diskette/CDCommand Used to Create the Diskette/CD

159

Technical Topics:Unacceptable Media & File Formats

Technical Topics:Unacceptable Media & File Formats

Unacceptable MediaUnacceptable Media IBM Mainframe Tapes/Cartridges - 3480/3490 IBM Mainframe Tapes/Cartridges - 3480/3490 Round (Reel) TapesRound (Reel) Tapes

Unacceptable File FormatsUnacceptable File Formats EBCDIC FilesEBCDIC Files Compressed FilesCompressed Files Excel files (.xls)Excel files (.xls) COBOL packed decimal fieldsCOBOL packed decimal fields

160

Technical Topics:IESUB General InformationTechnical Topics:IESUB General Information

IESUB - IESUB - IInternet nternet EElectronic lectronic SUBSUBmissionmission

Data Submission Data Submission

Schedule 1 Schedule 1 Data Entry FormData Entry Form Initial and Revised Initial and Revised

DataData

Schedule 2Schedule 2 File TransferFile Transfer Initial and Revised Initial and Revised

Data Data Standard Windows PC Standard Windows PC

ASCII Text Files With ASCII Text Files With a .txt extensiona .txt extension

161

Technical Topics:IESUB General InformationTechnical Topics:IESUB General Information

Data ReviewData Review

Data Validation for Schedule 1Data Validation for Schedule 1

Format Validation for Schedule 2Format Validation for Schedule 2

ReceiptReceipt

FeedbackFeedback

162

Technical Topics:IESUB Security InformationTechnical Topics:IESUB Security Information

Unique User-ID and PasswordUnique User-ID and Password

128 Bit SSL Encryption128 Bit SSL Encryption

Server-side CertificateServer-side Certificate

163

Technical Topics:IESUB User Comments

Technical Topics:IESUB User Comments

User Friendly and ConvenientUser Friendly and Convenient Time SaverTime Saver Eliminates Paper and FaxEliminates Paper and Fax Confirmation of ReceiptConfirmation of Receipt File Format CheckingFile Format Checking Submission of Multiple ReportsSubmission of Multiple Reports

164

Technical Topics:IESUB Additional InformationTechnical Topics:

IESUB Additional Information

User Request Forms and System User Request Forms and System

Requirements can be found on the Internet at: Requirements can be found on the Internet at: http://www.treas.gov/tic/forms.html#benchmarkhttp://www.treas.gov/tic/forms.html#benchmark

165

Technical Topics:Schedule 2 File Formats

Technical Topics:Schedule 2 File Formats

Use Either of Two File Formats for IESUB Use Either of Two File Formats for IESUB or Media Submission:or Media Submission:

PositionalPositional Semi-colon DelimitedSemi-colon Delimited

166

Technical TopicsCorrect Positional File Example

Technical TopicsCorrect Positional File Example

Filler (space)Sequence Number

Filler (space)Reporting Unit

Filler (space)Name of Reporting Unit

Reporter ID

167

Technical TopicsCorrect Positional File Example (continued)


Number of Shares HeldFiller (space)

Face Value (Non-ABS)Debt Only - NULL

168



Number of Shares Held -NULLFiller (space)

Face Value (Non-ABS) Debt Only Filler (space)

Issue DateFiller (space)

Maturity Date

169

Technical TopicsIncorrect Positional File Example

Technical TopicsIncorrect Positional File Example

Reporting Unit Description field begins in the incorrect

position, 26. The correct position is 24.

170

Technical TopicsCorrect Delimited File Example

Technical TopicsCorrect Delimited File Example

Reporter IDDelimiter

Sequence NumberDelimiter

Reporting UnitDelimiter

Name of Reporting Unit

171

Technical TopicsCorrect Delimited File Example (continued)

Technical TopicsCorrect Delimited File Example (continued)

US$ Fair Market value

Reason for Zero - NULLNumber of Shares Held

Delimiters for 7 NULL Debt& ABS Items

Fair (Market) value

172

Technical TopicsIncorrect Delimited File Example

Technical TopicsIncorrect Delimited File Example

Delimiters for 7 NULL Debt& ABS Items are

missing

173

Technical TopicsPositional & Delimited Files Example


Number of shares

174



Face Value (Non-ABS) Debt Only

175

Technical Topics Tips & Traps

Technical Topics Tips & Traps

Date FormatDate Format Correct format MMDDYYYY. For example, the date Correct format MMDDYYYY. For example, the date

May 3, 2004 would be reported as 05032004May 3, 2004 would be reported as 05032004 Examples of incorrect date formats MM/DD/YY, Examples of incorrect date formats MM/DD/YY,

MM/DD/YYYY, MM-DDMM/DD/YYYY, MM-DD-YY, etc.-YY, etc.

Need to Have Leading ZeroesNeed to Have Leading Zeroes Reporter IDReporter ID Date FieldsDate Fields

176

Technical TopicsTips & Traps

Technical TopicsTips & Traps

Invalid Characters in the File, such as Invalid Characters in the File, such as An extended list of tips & traps can be An extended list of tips & traps can be

found on the Internet at found on the Internet at http://www.treas.gov/tic/forms.html#benchmarkhttp://www.treas.gov/tic/forms.html#benchmark, , the document is titled “Key Issues for SHL the document is titled “Key Issues for SHL Software Developers”Software Developers”

177

Technical TopicsContact Information

Technical TopicsContact Information

If you have questions about IESUB call your SRD If you have questions about IESUB call your SRD contact at the Federal Reserve Bank of New York contact at the Federal Reserve Bank of New York or call the SHL Help Line at (212)720-6300 or call the SHL Help Line at (212)720-6300

If you have questions about the file format call one If you have questions about the file format call one of the people listed belowof the people listed below

Melissa HarrisMelissa Harris (212) 720-7314(212) 720-7314IT Support Analyst IT Support Analyst

Amador CasteloAmador Castelo (212) 720-8592(212) 720-8592IT Support Analyst IT Support Analyst

Susan MaSusan Ma (212) 720-1989 (212) 720-1989 Team LeaderTeam Leader

Things to RememberThings to Remember

James Greer

179


Who Must ReportWho Must Report U.S. - resident custodians/issuers U.S. - resident custodians/issuers U.S. - resident central securities depositoriesU.S. - resident central securities depositories

180


What Must Be ReportedWhat Must Be Reported Reportable SecuritiesReportable Securities

Securities issued by U.S. residents and held by Securities issued by U.S. residents and held by foreign residents.foreign residents.

Bearer securities issued by U.S.- residents.Bearer securities issued by U.S.- residents.

181

Things To RememberThings To Remember

What Must Be ReportedWhat Must Be Reported Do Not ReportDo Not Report

Securities issued by foreign entities.Securities issued by foreign entities. Securities issued by International and Regional Securities issued by International and Regional

OrganizationsOrganizations Securities issued by companies that have reincorporated Securities issued by companies that have reincorporated

outside the United States.outside the United States.

Depositary ReceiptsDepositary Receipts Derivative ContractsDerivative Contracts

182


Review of SchedulesReview of Schedules Schedule 1Schedule 1

All entities must file a Schedule 1.All entities must file a Schedule 1. Schedule 2 Schedule 2

Exempt institutions do not have to file a Schedule 2.Exempt institutions do not have to file a Schedule 2. Make sure to include:Make sure to include:

Security Ids (line 5)Security Ids (line 5) Country of Foreign Holder (line 14)Country of Foreign Holder (line 14) Type of Foreign Holder (line 15)Type of Foreign Holder (line 15) Quantity (line 18Quantity (line 18, 19, or 23), 19, or 23)

183


Review of SchedulesReview of Schedules Properly report issuer types (line 9) Properly report issuer types (line 9)

United States Department of Treasury (code 1) United States Department of Treasury (code 1) Other federal agency and federally sponsored Other federal agency and federally sponsored

enterprise (code 2)enterprise (code 2) State or local government, including their State or local government, including their

subdivisions (code 3)subdivisions (code 3) Other (code 4)Other (code 4)

184


Review of SchedulesReview of Schedules Properly report security types (line 10)Properly report security types (line 10)

Equity Securities (codes 1, 2, 3, 4)Equity Securities (codes 1, 2, 3, 4) Debt Securities – excluding ABS Debt Securities – excluding ABS

(codes 5, 6, 7, 8, 9, 10, 11)(codes 5, 6, 7, 8, 9, 10, 11) Asset-Backed Securities (code 12)Asset-Backed Securities (code 12)

185


Quality EditsQuality Edits Properly report fair (market) values and quantitiesProperly report fair (market) values and quantities

Implicit debt and ABS prices should have an approximate Implicit debt and ABS prices should have an approximate value of 1.value of 1.

Review data for consistencyReview data for consistency Compare Schedule 2 data for identical securitiesCompare Schedule 2 data for identical securities

Prices Prices Exchange ratesExchange rates Factor values (ABS only)Factor values (ABS only) Currency (debt and ABS)Currency (debt and ABS) Issue and maturity dates (debt and ABS)Issue and maturity dates (debt and ABS)

186


Quality Edits Quality Edits Ensure term of debt (line 12) is calculated Ensure term of debt (line 12) is calculated

based on original maturitybased on original maturity Short-term (less than or equal to 1 year)Short-term (less than or equal to 1 year) Long-term (greater than one year)Long-term (greater than one year)

187


Technical IssuesTechnical Issues Ensure proper file layoutsEnsure proper file layouts

Formatting Dates Formatting Dates INCORRECT - MM/DD/YY, MM/DD/YYYYINCORRECT - MM/DD/YY, MM/DD/YYYY CORRECT - MMDDYYYYCORRECT - MMDDYYYY

Reporting too few/too many semi-colons (in a semi-Reporting too few/too many semi-colons (in a semi-colon delimited file)colon delimited file)

Not reporting all columnsNot reporting all columns

188


Technical IssuesTechnical Issues Submitting data via IESUBSubmitting data via IESUB

Obtaining access to IESUBObtaining access to IESUB Filling out the form after the seminarFilling out the form after the seminar Accessing the form at: Accessing the form at:

http://www.treas.gov/tic/forms.html#benchmarkhttp://www.treas.gov/tic/forms.html#benchmark

189

Want to Know More?Want to Know More?

Please contact the Securities Reports Please contact the Securities Reports Division of the Federal Reserve Bank of Division of the Federal Reserve Bank of New York New York Phone: (212)720-6300 Phone: (212)720-6300 Email: [email protected]: [email protected]

Published data can be found at: Published data can be found at: http:www.ustreas.gov/tic/fpis.htmlhttp:www.ustreas.gov/tic/fpis.html

debra kuntz richard mcgee brian mullarkey dejana neskovic kenneth aberbach melissa harris james...

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