Tuesday, November 18, 2008

An introduction to TIC

The Treasury International Capital (TIC) reporting system is the U.S. government's source of data on capital flows into and out of the United States, excluding direct investment, and the resulting levels of cross-border claims and liabilities. The data is used by the Bureau of Economic Analysis in the computation of the U.S. Balance of Payments accounts and the U.S. International Investment Position. Information is collected from commercial banks and other depository institutions, bank holding companies, securities brokers and dealers, custodians of securities, and nonbanking enterprises in the United States, including the U.S. branches, agencies and subsidiaries of foreign-based banks and business enterprises. The TIC capital movement reports are filed directly with Federal Reserve Banks, who act as fiscal agents for the Treasury in this function. Beginning in late 1998, the Federal Reserve Board of Governors also performs services on behalf of the Treasury in support of this data collection system. (Data on direct investment are collected separately by the Bureau of Economic Analysis of the Department of Commerce.) The cross-border definition means that TIC data on foreign purchases of U.S. securities include only those transactions that involve both a U.S. seller and a foreign purchaser. Thus, these data exclude any U.S.-to-U.S. transactions, including, for example, transactions where the seller is a U.S. securities broker and the purchaser is a U.S.-based branch of a Japanese securities firm. They also exclude foreign-to-foreign transactions in securities, for example if a Japanese-resident securities broker purchases U.S. Treasuries from a London-based securities broker. Because many U.S. securities, including U.S. Treasury securities, trade in foreign financial markets , the TIC data will not capture all foreign transactions in U.S. securities. In addition, the TIC system measures only cross-border portfolio flows and positions, thus all cross-border direct investment activity is excluded from these data. Direct investment is defined as the ownership or control, directly or indirectly, by one person or by an affiliated group, of 10 percent or more of the voting stock of an incorporated business enterprise, or an equivalent interest in an unincorporated enterprise. Direct investment positions and flows are collected by the U.S. Department of Commerce. The TIC data also exclude cross-border capital transactions of the U.S. Government; these transactions are also published by the Department of Commerce in its regular reports on the U.S. balance of payments.

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