SUPPORTING STATEMENT

Request for approval of U.S. Treasury International Capital (TIC)
Annual Survey
of Foreign-Residents’ Holdings of United States Securities
as of the last business day of each June (OMB No. 1505-0123)

B.  Collections of Information Employing Statistical Methods

1.	Describe (including a numerical estimate) the potential reporting universe and any sampling or other respondent selection methods to be used.

This survey will measure foreign ownership of U.S. securities for portfolio investment purposes. These foreign holdings can be held in three different ways.  
(a) They can be purchased directly from the U.S. firms that issue these securities (direct registered holdings).  In this case, the issuer of the security has the information pertaining to foreign ownership.  
(b) They can be held indirectly by being held in the name of a U.S. financial intermediary, such as a U.S. bank or broker dealer.  In this case, the issuer of the security has no direct knowledge of the foreign holding, and the information must be collected from the U.S. custodian.
(c) If they are bearer bonds issued outside the United States by U.S. entities, their owners do not have to disclose any ownership information.  Data on the amount of these bonds outstanding are obtained directly from the U.S. issuers, and are augmented and cross-checked with information available from commercial sources.

The potential reporting universe consists of over 500 U.S. custodians and the many thousands of U.S. private and governmental organizations that issue securities.

On the quinquennial benchmark surveys (SHL), all institutions believed likely to be significant sources of information on foreign ownership of U.S. securities will be included in the survey.  This group will include the largest U.S. custodians, U.S. custodians that are subsidiaries of foreign banks, all U.S. issuers of Eurobonds, and the largest U.S. corporations. These firms will be identified based on past survey filings, industry surveys, the financial press, other TIC system reports, information from the FDIC, and data from commercial vendors.  In addition, other firms believed to be possible, although less likely, sources of data will be sampled.

On the annual survey (SHLA), the reporting panel will be drawn primarily from the approximately 100 largest reporters from the last quinquennial benchmark survey and from the largest monthly SLT reporters of foreign holdings of U.S. securities.  On the survey as of June 2013, these reporters accounted for almost 99 percent of all data reported on the survey.  The data collected on the annual surveys will be grossed up appropriately to arrive at estimates of total foreign holdings.

The response rate will be 100 percent, as responses are required by law.  The response rate on the previous survey was 100 percent.

2.	Describe the procedures for the collection of information including: (a) Statistical methodology for stratification and sample selection, (b) Estimation procedure, (c) Degree of accuracy needed for the purpose described in the justification, (e) Unusual problems requiring specialized sampling procedures, and (g) Any use of periodic (less frequent than annual)data collection cycles to reduce burden.

Two important types of adjustments are made to the survey data. 
First, to avoid double counting the data are adjusted downward to subtract out identified cases of over-reporting. Over-reporting can occur if an issuer reported that debt securities issued directly into foreign markets were 100 percent foreign-held, but U.S. custodians also reported foreign holdings of those securities. For the 2013 survey, a total of $63 billion was deducted to account for over-reporting.

Second, the reported data are adjusted upward so the final annual survey results reflect the
more comprehensive coverage typically obtained in a larger benchmark survey, and to account for new reporting since the last benchmark survey that are identified with the TIC form SLT. To do that, synthetic securities are created using SLT data from reporters on the SLT panel that were not included on the annual survey panel (“non-survey SLT reporters”). The SLT data provides the aggregate market value for these holdings of non-survey SLT reporters by major security type, by country of foreign holder and by type of foreign holder (official or private). To determine the distribution of securities holdings across other relevant characteristics not available from the SLT (i.e. maturity, currency, industry, and detailed security type such as type of equity), data were used from reporters on the annual survey panel that were considered to be similar to those non-survey SLT reporters. Securities with a market value below a minimum threshold of $1 million were omitted to reduce the number of adjustment securities created. Total of such adjustments amounted to $180 billion in5 2013, or about 1.3 percent of total foreign holdings.

There is no pre-determined or externally set level of accuracy needed from this survey.  What is sought is the best accuracy possible without undue reporter burden or government cost.  We believe that a reasonably high degree of accuracy will be achieved by using the above technique.
 
The results of the quinquennial full benchmark surveys will be used to check on the accuracy of the annual surveys and to meet the requirements of the  International Investment and Trade in Services Act.

3.	Describe methods to maximize response rates and to deal with issues of non-response.

This survey is required by law and failure to report is punishable by fine and/or imprisonment.  Non-reporters are reminded of their reporting responsibility and required to report.  If necessary, a letter is sent from the Treasury Department’s General Counsel’s office to the chief legal officer of the institution in question reminding the institution of its reporting responsibility and the applicable penalties for non-compliance.  In one case, a letter was sent to an institution stating that the failure to provide necessary information within a stated time period would result in the Treasury Department recommending to the Justice Department that legal proceedings be instituted.  However, in the 25 year history of these surveys this is the only instance where such measures were required, and this case occurred about 20 years ago.  

4. Describe any tests of procedures or methods to be undertaken.

To see how well our technique works, we compared it to a simplified method of assuming that the panel of large reporters in each annual survey reports a constant percentage of the total holdings of U.S. long-term securities. In the 2011 annual survey, the grossup amounted to $96.5 billion, or about 0.83% of the total $11,561 billion holdings of long-term U.S. securities.  So in the case of the 2013 survey with total holdings of $13,532 billion, the simplified method would imply a grossup of roughly $113 billion. However, our technique resulted in a larger grossup of $180 billion, better reflecting, we think, the growing number of monthly SLT reporters since 2011 when the report began.

5.		Provide the name and telephone number of individuals consulted on statistical aspects of the design and the name of the agency unit, contractor(s), grantee(s) or other person(s) who will actually collect and/or analyze the information for the agency. 

The statistical methods to be employed were reviewed by representatives of the Department of the Treasury, the Department of Commerce (Bureau of Economic Analysis), the Board of Governors of the Federal Reserve System, and the Federal Reserve Bank of New York.

Anthony Guglielmo		212-720-8002		Federal Reserve Bank of New York
Ed Sapozhnikov			212-720-6455		Federal Reserve Bank of New York	
		Jason Stein			212-720-2752		Federal Reserve Bank of New York
		Carol Bertaut			202-452-3476		Board of Governors of Federal Reserve
											System
Christopher Gohrband		202-606 9564		Department of Commerce
Dwight Wolkow			202-622-1276		Department of the Treasury

The actual data collection will be conducted by the Statistics Function of the Federal Reserve Bank of New York, in conjunction with the Federal Reserve Board of Governors, International Finance Division.

February 2015