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Federal R eserve NEW Ba n k YORK R E C T O R 4 5 , of N ew Yo r k N.Y. 2 - 5 7 0 0 March 23, 1965 To the Member Firm (New York Stock Exchange) or Investment Advisory Service Addressed: On February 10, 1965 > "^e President of the United States announced his program to improve the United States balance-of-payments situation. This program gave to the Federal Reserve System--in cooperation with the Treasury-the responsibility to work with banks and nonbank financial concerns in voluntary efforts to restrain foreign lending and investing activities. The Department of Commerce was given the responsibility for working with business concerns to effectuate a reduction in their capital outflows. On March 3, 1965 > "the Board of Governors of the Federal Reserve System issued tentative guidelines for foreign lending activities of nonbank financial institutions and on March 4 the Board issued its guidelines for foreign lending activities of commercial banks. On March 16, the Department of Commerce announced its program for business concerns. For your information, we enclose: (1) (2) (3 ) (4) a copy of our Circular No. 5627 which contains the press release of the Board on the implementation of the program with respect to nonbank financial institutions, Chairman Martin's letter and the guidelines; our Circular No. 5628 which contains the Board's press release on the guidelines for commercial banks and the guidelines; our letter of March 12 to certain nonbank financial institutions and two copies of the statistical questionnaire referred to therein; and our Circular No. 5633 containing a March 17 press release of the Department of Commerce, Secretary of Commerce Connor's letter re leased March 17, and the press release and Summary Worksheet referred to therein. Our purpose in sending this material to you is to aid you in understanding the goals of the program and the manner in which it is being implemented, and to assist you in complying with the spirit of the program in advising customers on the investment of their funds. If you hold foreign se curities or other claims against foreigners for your own account, we would appreciate your filling in one copy of the statistical questionnaire and re turning it to the Balance of Payments Division as soon as possible. If you have any questions or comments on the program to improve our balance-of-payments position, please contact our Foreign Department (Telephone Extension 1000) which is in charge of its administration at this Bank. Questions regarding statistical information should be directed to our Balance of Payments Division (Telephone Extension 2000). Your cooperation, as well as that of the banks, other nonbank financial institutions, and business concerns is essential to the continued strength of the dollar and the success of the program. Very truly yours Alfred Hayes President Enclosures Federal R eserve Ba n k NEW YORK R E C T O R 45, of N ew Y o r k N. Y. 2 - 5 7 0 0 March 12, 19^5 In his letter to you of March 3> Chairman Martin set forth the guidelines proposed by the Federal Reserve System for 1965 on the foreign lending and investing activities of financial institutions other than commercial banks. This program of voluntary restraint in institutional lending abroad, in combination with the limitations suggested on commercial bank credit extensions to foreign borrowers, constitutes a vital part of the national effort proposed by the President to improve our balance of payments position. Enclosed for your reference is a copy of our Circular No. 5627 which contains the press release of the Board of Governors on the implementation of the program with respect to non bank financial institutions, Chairman Martin's letter and the guidelines. In the absence of President Hayes, I am writing to amplify some as pects of this voluntary credit restraint program, and to request statistical information regarding the extent of your institution's foreign investment hold ings, if any. As to the program, you will note that no guideline is proposed on credits (including corporate stock) with maturities over 5 years. The aggregate volume of such credit going abroad would seem to have been effectively curtailed by application of the Interest Equalization Tax, so that no voluntary restric tion of such credit by investors seems necessary or appropriate as of now. The situation will bear watching, of course, and our intention is to set up a simple periodic survey covering both short-term and long-term foreign credits beginning with the first quarter of 19^ 5Under the voluntary program, there is no intent to restrict the rein vestment of funds received from ordinary business operations abroad. Investments representing reserves on insurance policies sold abroad are specifically excluded from the program's coverage, as will be any other similar investments required by the nature of foreign operations, when and if they are brought to our attention. Individual institutional restraint in lending is sought principally on loans, investments and other credits carrying final maturities of 5 years or less. The suggested 5 per cent ceiling on growth in such holdings this year is comparable to that requested of the commercial banks, and is needed on the grounds of equity among financial institutions as well as to help guard against a shifting of credit demands from banks to other lenders. In addition, we are proposing that holdings of foreign deposits and money market instruments be (over) 2 limited to no more than the 1964 year-end amounts, and that a gradual reduction to the 1963 year-end level should be accomplished over the remainder of this year. Care should be taken, however, to avoid repatriating liquid funds so rapidly that the foreign markets in which they are invested become unduly constricted. The purpose of this program is to improve our balance of payments, but other national objectives should also be kept in mind. It seems clear that credit tied directly to the financing of U.S. exports should be accommodated to the ex tent possible under the guidelines, since exports also enter into the balance of payments. Also, priority should be given to the sound and potentially productive credit needs of less developed countries, in view of our national objective of facilitating the economic growth and development of such nations. Finally, care should be taken to avoid restrictive policies that would place an undue burden on Canada and Japan, which are heavily dependent upon U.S. financial markets, and on the United Kingdom, which is suffering from balance of payments difficulties. The guidelines that we propose are tentative (though they should be regarded as effective until further notice) mainly because we have only limited information regarding the extent and character of the foreign credits held by institutional lenders. For this reason, I am enclosing two copies of a statisti cal form designed to provide us with bench-mark information on your foreign in vestments at the ends of 19&3 and 1964. Most institutions will hold only a few of the classes of investments included in the questionnaire, and some probably will have none. In any event, however, we would appreciate your completing the form and returning one copy to this Federal Reserve Bank on or before March 26, 1965* Any information concerning the position of individual institutions will be held in strict confidence, for the use only of this Bank and of the Federal agencies involved in the President's balance of payments program. If you have any questions or comments regarding the program, please contact our Foreign Department (Telephone Extension 1000) which is in charge of its administration at this Bank. Questions regarding the statistical form should be directed to our Balance of Payments Division (Telephone Extension 2000). We sincerely trust that we can count on you for your cooperation in this matter. Substantial improvement in the balance of payments is essential to the continued strength of the United States in international, economic and financial affairs. Very truly yours, William F. Treiber First Vice President Enclosures INSTRUCTIONS Statistical Questionnaire on Foreign Assets of U.S. Nonbank Financial Institutions and Nonprofit Organizations Introduction The information requested on this statistical questionnaire is needed by the Federal Reserve System for the purpose of administering, at the request of the President of the United States, a voluntary program of restraint in foreign lending and investing to improve the U.S. balance of international payments. Data from the reports of individual institutions will be held in strict confidence among those Federal agencies involved in the President’s balance-of-payments program. Procedure The questionnaire should be completed and returned by March 26, 1965 to the Balance of Payments Division, Federal Reserve Bank of New York, New York, N. Y. 10045. Questions encountered in completing the questionnaire may be addressed to the Balance of Payments Division. Institutions having no foreign assets should note this fact on the question naire and return it. Coverage The questionnaire is intended to cover all foreign assets held by the reporting institution as of the end of 1963 and the end of 1964. Foreign assets should be reported gross, without deduction of any offsets, except that item IB is to be reported net. A U.S. institution that has foreign branches or affiliates (as defined below) should report only the foreign assets of the U.S. parent institution. It should not report the foreign assets of its foreign branches or affiliates, but should report, under item I, its own investment in such branches and affiliates. Valuation and Estimation Foreign assets should be valued in the same way as on the books of the reporting institution. Assets carried on the institution’s books in terms of foreign currencies should be converted into U.S. dollars at the exchange rates prevailing on the date for which the assets are reported. Where it is impracticable to provide accounting data, estimates should be used and this fact should be noted. Definitions For purposes of this questionnaire, the following definitions apply: “ Foreign assets” include assets in, or claims on residents of, all countries other than the United States; foreign assets also include claims on international institutions. The United States includes Puerto Rico, American Samoa, the Canal Zone, Guam, Midway Island, Virgin Islands, and Wake Island. “ Foreign branches and affiliates” are foreign enterprises in which the reporting U.S. institution holds 10 per cent or more of the equity ownership. “ Maturity” is measured to the date of final repayment in the case of contractual obligations that fall due in instal ments. Obligations payable on demand are classified as “ short-term.” Common and preferred stocks are classified as “ long-term.” “ Deposits” include both demand and time deposits (including negotiable certificates of deposit) held with foreign banks, foreign branches of U.S. banks, and other depositary institutions. “ Money market instruments” include short-term securities of foreign governments and their instrumentalities, foreign commercial paper, foreign finance company paper, foreign bankers’ acceptances, and all other negotiable instruments (except certificates of deposit and paper accepted by a U.S. bank or corporation) issued by foreign obligors and maturing in one year or less. “ Other developed countries” are: Australia, Austria, Belgium, Denmark, France, Germany (Federal Republic), Hong Kong, Italy, Liechtenstein, Luxembourg, Monaco, Netherlands, New Zealand, Norway, Republic of South Africa, San Marino, Spain, Sweden, Switzerland, and the United Kingdom. (Please fill in and return to Balance of Payments Division by March 26, 1965— See Instructions on reverse side) (Name of Reporting Institution) FEDERAL RESERVE BAN K OF New Y ork Statistical Questionnaire President’s Balance of Payments Program, March 1965 (Reporting official) Foreign Assets of U.S. Nonbank Financial Institutions and Non-Profit Organizations (In thousands of dollars) December 31, 1963 Canada I. Japan Investment in foreign branches and affiliates: A. Permanent c a p ita l........................ B. Net loans and advances................ Total II. .......................................... Other foreign assets: A. Short-term assets (with original maturities of one year or less) : 1. Deposits in U.S. dollars .. . 2. Deposits in foreign currencies ........................ 3. Money market instruments. 4. Loans and m ortgages.......... 5. Other short-term assets . . . . Total short-term assets . . B. Medium-term assets (with original maturities of more than one year but not more than 5 years) : 1. 2. 3. 4. D e p o sits................................ Loans and m ortgages........ Bonds .................................. Other medium-term assets. . Total medium-term assets C. Long-term assets (with original maturities of more than five years) : 1. 2. 3. 4. 5. 6. D e p o sits................................ Mortgages ............................ Other lo a n s .......................... Bonds .................................. Stocks .................................. Other long-term assets . . . . Total long-term assets . . . III. Grand total of foreign assets listed above ................................................ 1 Listed in instructions. 2 Including international institutions. Other Developed Countries1 December 31, 1964 Other Countries2 Total Canada Japan Other Developed Countriesi Other Countries2 Total Federal Reserve B ank of N ew Y o r k N e w Y O R K 4 5 , N. Y. R E c t o r A l f r e d Ha 2 - 5 7 0 0 yes P r e s id e n t March 23, 19^5 As you know, since the issuance last month of the Executive Order extending the Interest Equalization Tax to certain foreign debt obligations acquired by commercial banks, each bank that has foreign branches has been required to file two or, in a number of cases, three new forms with the Commissioner of Internal Revenue: Form 3953 j "U.S. Commercial Bank Weekly Information Return"; Form 3954, "U.S. Commercial Bank Monthly Information Return"; and, if a bank has foreign subsidiaries, Form 39^4, "Weekly Information Return with Respect to Foreign Commercial Banking Subsidiaries". The first weekly returns were filed for the week ended February 19 , 19&5 (and were accompanied by special returns for the close of business on February 5, 1965). The first monthly form is due on or before March 30, to cover information as of the end of February 1965• You may recall that on February 16 I wrote to your bank requesting permission for the Federal Reserve Bank of New York to use, in helping to implement the President's Balance of Payments Program, the information you submit to the Treasury Department in connection with the Interest Equalization Tax. Your bank has kindly consented to this. We would therefore very much appreciate your making available directly to us copies of the reports that you will be filing with the Treasury on the forms mentioned above, as well as copies of the reports you have already filed during the past few weeks. The Treasury Department has given its approval of this procedure. The envelopes containing these forms should have the same address as you have been using for the delivery to us of the Commercial Bank Information Return covering loans and commitments to foreign obligors (Form No. 48-R4l6.l), namely: Secretary of the Treasury IET Form c/o President, Federal Reserve Bank of New York New York, New York 10045 Thank you for your cooperation. Yours sincerely, Alfred Hayes Federal R eserve NEW Ba n k YORK R E C T O R 4 5 , of N ew Yo r k N.Y. 2 - 5 7 0 0 March 23, 1965 In order to implement the portion of the President's balance-ofpayments program that involves the banking community, the Federal Reserve System will need information in addition to that already reported on Treasury Foreign Exchange Forms B-2 or B-3* This information will also be useful to your bank to measure your progress in achieving the objectives of the program. Accordingly, there are enclosed 12 copies of Form FR 391* which, has been designed to supplement the information reported on Treasury Forms B-2 or B-3* Instructions concerning those items not reported on Forms B-2 or B-3 appear on the reverse of Form FR 391* You will note from the general instruc tions relating to the form that your report as of December 31> 19&4, and as of February 28, 1965, should be filed by April 10, 1965* For your information, all banks in the United States that do not report on Treasury Forms B-2 or B-3 are being requested to file quarterly re ports if they have foreign claims of $100,000 or more. Questions concerning Form FR 391 should be addressed to our Balance of Payments Division (Telephone Extension 2000). Other questions concerning the balance-of-payments program should be addressed to our Foreign Department (Telephone Extension 1000). Very truly yours, Alfred Hayes President Enclosures Form F .R . 391 Federal Reserve System Budget Bureau No. 55-R221 C O N F ID E N T IA L _________________________________ Name o f R eporting Bank Report as o f__________ Date Federal Reserve Bank o f New York O ffic ia l Signature M onthly Report on Foreign C laim s (In thousands of d o lla rs) See In s tru c tio n s on Reverse Side (1) T o ta l cla im s reported on Treasury Foreign Exchange Forms B-2 and B-3 (2) C laim s include d in (1) for custom ers $________ (3) P a rtic ip a tio n s in in d iv id u a l E xport-lm port Bank loans, and loans to foreigners guaranteed or insured by E xport-lm port Bank, reported on Forms B-2 and B-3 -------------- (4) Sum o f Item 2 and 3 (5) Item 1 le ss Item 4 (6) Foreign long-term s e c u ritie s held fo r own account -------------- (7) Investm ents in foreign s u b s id ia rie s , a ffilia te d and associated com panies, and branches -------------- (8) Other foreign holdings for own account -------------- (9) Sum of Items 6, 7 and 8 (10) Grand to ta l (Sum o f Item 5 and Item 9) (11) December 31, 1964 base (Item 10 on your report as o f December 31, 1964) (12) 105 per cent o f Item 11 (13) Item 12 m inus Item 10 (14) Memorandum Item New loans made during the month to dom estic o b lig o rs guaranteed by foreigners. (A p p lic a b le only to reports beginning w ith A p ril, 1965.) GENERAL INSTRUCTIONS F.R. 391 IN T R O D U C T IO N . T h is report form is designed fo r use in im plem enting the v o lu n ta ry e ffo rt to c u rta il fo re ig n c re d it by banks, in acco rd a n ce w ith th e g u id e lin e s issu e d by th e Federal R eserve S ystem . WHO S H O U LD R E P O R T . A ll U .S. banks and banking in s titu tio n s th a t report on T re a su ry F o re ig n E xchange Form s B-2 or B -3. B anks w ith d o m e stic Edge A c t or Agreem ent C o rp o ra tio n s u b s id ia rie s may e ith e r su b m it a c o n s o lid a te d report w h ich in c lu d e s th e c la im s o f such s u b s id ia rie s , or subm it separate re p o rts fo r it s e lf and fo r th e se s u b s id ia rie s . In e ith e r case, the fo re ig n c la im s o f such s u b s id ia rie s sh o u ld be reported in th e a p p ro p ria te Item s, in c lu d in g Items 6, 7, and 8. F R E Q U E N C Y O F R E P O R T . R eports are to be file d fo r December 31,1964, and fo r F ebruary 28, 1965, and m o n th ly th e re a fte r. T he rep o rts for December 1964 and February ,1965 should be file d by A p ril 10, 1965. S ubsequent reports should be file d by the 20th o f the month fo llo w in g the month covered b y th e re p o rt. D E F IN IT IO N S to be used in co m p le tin g th is report are id e n tic a l w ith th o se on Forms B-2 and B -3. S P E C IF IC IN S TR U C T IO N S IT E M 2. the tru s t IT E M 3. (1) Y our In clu d e any a s s e ts h e ld fo r do m e stic custom ers by any departm ent of your bank, in c lu d in g departm ent, and reported on T re a su ry Forms B-2 or B-3. E n te r th e am ounts in clu d e d on T re a s u ry Forms B-2 and B-3 w h ich represent the fo llo w in g : p a rtic ip a tio n in in d iv id u a l loans o f th e E xp o rt-lm p o rt Bank o f W ashington w hether or not such p a rtic ip a tio n s are guaranteed by the E xp o rt-lm p o rt Bank (but not in c lu d in g yo u r h o ld in g s o f "E xim b a n k P o rtfo lio F u n d ” c e rtific a te s , s in ce such h o ld in g s are not re p o rta b le on Form B-2 or B -3); and (2) o th e r c la im s on fo re ig n e rs w h ich are guaranteed by the E x p o rt-lm p o rt Bank or insured under an in su ra n ce p o lic y issu e d by the F o re ig n C re d it Insurance A s s o c ia tio n in c o n ju n c tio n w ith the E xp o rt-lm p o rt B ank. ITEMS 6, 7, 8. T hose item s are not re p o rta b le on Forms B-2 or B-3. ITEMS 6. F o re ig n long-term s e c u ritie s are s e c u ritie s issued by " fo re ig n e rs ” (as d e fin e d on the T re a s u ry F o re ig n Exchange Form s) w ith o u t a c o n tra c tu a l m a tu rity or w ith an o rig in a l m a tu rity o f more than one year from the date o f is s u e . (In c lu d e your h o ld in g s o f such s e c u ritie s in th is item even though th e y mature w ith in le ss than one year from the date o f th is re p o rt.) E x c lu d e sto ck inve stm ents re p o rta b le in Item 7. IT E M 7. E nter here the book v a lu e o f your perm anent c a p ita l in ve ste d in fo re ig n branches and in s u b s id ia rie s and a s s o c ia te d and a ffilia te d com panies lo ca te d o u ts id e the U n ite d S tates and its te r rito rie s . F or th is re p o rt use th e book v a lu e o f the in ve stm e n t as it appears on th e books o f the fo re ig n branch or a ffilia te d com pany, as o f the la te s t a v a ila b le date, in c lu d in g any accum ulated p ro fits or su rp lu s re s e rv e s . S u b s id ia rie s and a s s o c ia te d or a ffilia te d com panies are fo re ig n e n te rp rise s in w h ich th e respondent h o ld s 10 per cent or more o f th e e q u ity o w n e rs h ip . Do not in c lu d e c la im s rep ortable on T re a s u ry Form s B-2 and B-3 (w hich are reported in item 1) or any s e c u rity h o ld in g s reported in Item 6. IT E M 8. E n te r (a) long-term a s se ts o th e r than th o se in clu d e d in Items 1, 6 or 7— e .g ., real e sta te . ITEMS 11, 12. 13. (b) short-term a n d /o r long-term c la im s not reported on Forms B-2 or B-3 because, under th e exem ption p ro v is io n s for the re s p e c tiv e form s, you w ere not re q u ire d to file a re p o rt. (c) c la im s o f any o f your U.S. branches w h ic h you d id not in c lu d e on Forms B -2 or B-3 because o f the exem ption p ro v is io n s s e p a ra te ly a p p lic a b le to branches. T h e se Items should be com pleted fo r re p o rts b eginning w ith the one for F ebruary 28, 1965. M EMORANDUM IT E M 14. B e g in n in g w ith the re p o rt fo r A p ril 1965, e n te r the am ount o f new loans made du rin g the month to o b lig o rs lo ca te d in the U n ite d States w h ich are guaranteed by fo re ig n e rs , in c lu d in g guaranteed loans to U.S. s u b s id ia rie s , branches and other a ffilia te s o f fo re ig n banks, c o rp o ra tio n s or o th e r fo re ig n e n titie s . From This bank held foreign assets as described in your letter dated March 23, 19^5> i-n the amount of $100,000 or more on December 31* 1964, or holds them in such amount at present. http://fraser.stlouisfed.org/Date Federal Reserve Bank of St. Louis r' Signature of O fficer T itle ^ T H IS s T d E O F C A R D IS F O R A D D R E S S ) FEDERAL RESERVE Federal RANK Reserve OF P. NEW 0. Station, New York, Balance of Payments Division YORK, N. Y. 10045
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