Overview of “Other Capital” in Balance of Payments

This chapter and several that follow examine aspects of “other capital” flows—flows other than direct investment, portfolio investment, and liabilities constituting foreign authorities’ reserves. “Other capital” completes the four capital account categories in standard balance of payments structures. Like the other three, the “other capital” account would balance to zero for all countries in the world if all inflow and outflow entries were fully consistent with one another in coverage, timing, and value. In the Balance of Payments Statistics Yearbook, these entries do not balance and, for recent years, there is an excess of inflows that averages $66 billion for 1986 through 1989. The imbalances appear in Table 3 in Chapter 1, and they are repeated at the top of Table 23.

Table 23.

Global Discrepancy on “Other Capital” Flows, Sector Balances, and Adjustments, 1986–89

(In billions of U.S. dollars; outflows ( – ))

¹Balance of Payments Statistics Yearbook, 1990.

Table 23.

Global Discrepancy on “Other Capital” Flows, Sector Balances, and Adjustments, 1986–89

(In billions of U.S. dollars; outflows ( – ))

			1986	1987	1988	1989	1986–89 average
“Other capital” discrepancy1			32.7	110.5	76.6	45.6	66.4
	Sector balances
		Resident official	26.6	−17.0	2.0	−9.1	0.6
		Deposit money banks	59.0	101.3	90.0	46.7	74.3
		Other sectors	−52.8	26.2	−15.4	7.8	−8.6
Adjustments to “other capital”			−41.8	−102.9	−25.6	−63.9	−58.6
	By sector
		Resident official	−8.5	−15.6	−14.7	−14.3	−13.3
		Deposit money banks	−9.4	−55.2	−25.0	0.3	−22.3
		Other sectors	−23.9	−32.1	14.1	−49.9	23.0
Adjusted “other capital” discrepancy			−9.1	7.6	51.0	−18.4	7.8
	Sector balances
		Resident official	18.1	−32.6	−12.7	−23.4	−12.7
		Deposit money banks	49.6	46.1	65.0	47.0	51.9
		Other sectors	−76.8	5.9	−1.3	−42.0	−31.5

¹Balance of Payments Statistics Yearbook, 1990.

View Table

Table 23.

Global Discrepancy on “Other Capital” Flows, Sector Balances, and Adjustments, 1986–89

(In billions of U.S. dollars; outflows ( – ))

			1986	1987	1988	1989	1986–89 average
“Other capital” discrepancy1			32.7	110.5	76.6	45.6	66.4
	Sector balances
		Resident official	26.6	−17.0	2.0	−9.1	0.6
		Deposit money banks	59.0	101.3	90.0	46.7	74.3
		Other sectors	−52.8	26.2	−15.4	7.8	−8.6
Adjustments to “other capital”			−41.8	−102.9	−25.6	−63.9	−58.6
	By sector
		Resident official	−8.5	−15.6	−14.7	−14.3	−13.3
		Deposit money banks	−9.4	−55.2	−25.0	0.3	−22.3
		Other sectors	−23.9	−32.1	14.1	−49.9	23.0
Adjusted “other capital” discrepancy			−9.1	7.6	51.0	−18.4	7.8
	Sector balances
		Resident official	18.1	−32.6	−12.7	−23.4	−12.7
		Deposit money banks	49.6	46.1	65.0	47.0	51.9
		Other sectors	−76.8	5.9	−1.3	−42.0	−31.5

¹Balance of Payments Statistics Yearbook, 1990.

“Other capital” is a broad and heterogenous category, and it lacks the definition of instrument that can be used in testing direct investment and portfolio flows. The major subdivisions of “other” flows are by sector rather than instrument, with detail for (1) resident official, (2) deposit money banks, and (3) “other” sectors. These sectors are a convenient structure for collecting statistics and for analysis, but they are not a basis for testing consistency among countries. World balances for the individual sectors within the “other” category need not separately add to zero because for the world as a whole there can be, for example, net capital flows from banks to or from nonbanks.⁷⁹ The sum of the three sector balances should add to zero, but there is no detail within the totals that adds insight to statistical problems. “Other capital,” therefore, cannot be tested for statistical quality by reference to the bilateral data that are available in direct investment and portfolio flows. However, certain checks can be made against data from external sources.⁸⁰

Table 23 brings together the effects of adjustments proposed in several chapters of this report for the “other capital” category. Altogether these adjustments reduce the imbalance in “other capital” from a 1986–89 average credit balance of $66 billion to $8 billion. “Other capital” is often used as a repository for entries that are not clearly specified in source statistics, or as a residual, leading to classification inconsistencies across the capital account. As noted in Chapter 4, several countries put some or all security transactions into “other capital” rather than into portfolio flows. Reclassifications shown in Chapter 4 shift $11 billion of inflows, on average, from “other capital” to portfolio investment. A further $9 billion of the reduction results from shifting inflows attributable to reserve transactions out of “other capital” and into LCFAR. This amount is sufficient to balance LCFAR with official reserve flows that are invested in “other capital” instruments such as bank deposits and short-term securities. Information sources on reserve composition are described in Chapter 8.

Data adjustments proposed in the following chapters make up most of the remaining $38 billion annual average of adjustments to “other” flows. For the resident official sector, some of these changes are revisions to data for international organizations, discussed in Chapter 10, and the rest are for the U.S.S.R., discussed in Chapter 13. For deposit money banks, Table 23 includes an average $10 billion of increased net outflows for offshore financial centers and elsewhere. Finally, a net average $23 billion of capital outflows for the 1986–89 period is added to “other sectors” (nonbank private sectors); most of this adjustment is based on the use of international banking data as an alternative data source for capital flows of nonbanks, as discussed in Chapter 6.

After all of these adjustments, the sector balances—at the bottom of Table 23—show large net inflows to deposit money banks and net outflows for official and private nonbanks on a world basis. World balances like these imply that banks as a group are raising funds from foreign sources to finance their domestic nonbank customers. Such a relation undoubtedly exists, but Table 23 overstates it to some extent. Deposit money banks also have sizable net outflows into portfolio securities, but portfolio investment is excluded from the table as a different category in the balance of payments system.

It must be noted that the adjustments shown in Table 23 apply to only selected aspects of the “other capital” category. Prominently missing from the adjustments in this report are transactions directly between private nonbanks. Trade credit, an important form of such flows, is treated in many different ways in national accounts. Countries have, for example, major inconsistencies in their accounting for trade credit flows among affiliates in a corporate structure. In principle, such flows should be recorded under direct investment (see Chapter 3), but in practice they are sometimes found under “other capital.” Bankers’ acceptances are closely related to trade credit, and they also get many different accounting treatments from one country to another.

Other poorly covered activities are finance-company lending and equipment leasing, which have been rapidly growing forms of finance in domestic and international markets. Insurance companies also are important nonbank transactors because they not only invest heavily in portfolio instruments, but they also make direct loans to credit customers. All of these flows are in “other capital,” and they are probably not well covered in balance of payments statements. If the reporting of these forms of credit follows the common pattern, liability flows are recorded more completely across the world than asset flows, accounting for some of the $8 billion average credit balance that remains in “other capital” after the Working Party’s adjustments. Domestic financial statistics in major countries are probably promising sources for estimating such flows, but they have not yet been applied to the question fully.

Short-Term Marketable Instruments

Competition in international financial markets and the trend toward securitized forms of lending during the 1980s broadened the choice of instruments available to borrowers, both at the long and short end of the maturity spectrum. Several new forms of short-term instruments came into common use in the international market.

According to the Balance of Payments Manual, transactions in marketable financial instruments that have an original term to maturity of one year or less are to be recorded as part of “other short-term capital” in the standard components of the capital account.⁸¹ The classification of “other capital” is very abbreviated, and a separate category is not shown for short-term marketable instruments. Compilation systems in many countries do not distinguish these transactions from other kinds of short-term capital. In the Working Party’s Special Questionnaire, separate provision was made for short-term instruments in an attempt to assess the adequacy of available data, but the reported data were too incomplete to quantify fully the global discrepancy in this type of capital. After review of several external data sources on short-term instruments, the Working Party made several adjustments to existing figures that, on balance, raised global capital outflows by about $2 billion a year; these adjustments are summarized in Table 24 and discussed in the following sections.

Table 24.

Adjustments to “Other Capital” Flows Relating to Cross-Border Transactions in Short-Term Instruments, 1986–89

(In billions of U.S. dollars; outflows ( – )

Table 24.

Adjustments to “Other Capital” Flows Relating to Cross-Border Transactions in Short-Term Instruments, 1986–89

(In billions of U.S. dollars; outflows ( – )

	1986	1987	1988	1989	1986–89 average
Adjustments to assets	—	−6.4	−2.9	−3.2	−3.1
Adjustments to liabilities	—	0.7	1.4	2.0	1.0

View Table

Table 24.

Adjustments to “Other Capital” Flows Relating to Cross-Border Transactions in Short-Term Instruments, 1986–89

(In billions of U.S. dollars; outflows ( – )

	1986	1987	1988	1989	1986–89 average
Adjustments to assets	—	−6.4	−2.9	−3.2	−3.1
Adjustments to liabilities	—	0.7	1.4	2.0	1.0

Reported Data on Short-Term Instruments

The Special Questionnaire included a separate category for transactions in short-term instruments, and the responses for the years 1987 and 1988 are summarized in Table 25. Only about a dozen countries reported data on cross-border transactions in short-term instruments and, except for a few countries, the amounts were small.

Table 25.

Cross-Border Transactions in Short-Term Instruments, 1987–88

(In billions of U.S. dollars; outflows ( – ))

Source: Special Questionnaire on International Capital Flows.

¹Excluding purchases for reserves.

²Liabilities constituting foreign authorities’ reserves; figures are based on reports from reserve holders.

Table 25.

Cross-Border Transactions in Short-Term Instruments, 1987–88

(In billions of U.S. dollars; outflows ( – ))

		1987		1988
		Assets1	Liabilities	Assets1	Liabilities
Industrial countries, total		−9.8	21.8	−10.2	30.6
	Canada	0.5	1.9	0.4	7.5
	Japan	−6.4	0.1	−11.4	−0.1
	Norway	−1.4	0.3	0.2	0.3
	United Kingdom	…	3.1	…	4.1
	United States	−2.0	13.9	0.7	17.4
	Other industrial	−0.5	2.5	−0.1	1.3
Developing countries		—	−0.2	—	0.7
Total		−9.8	21.6	−10.2	31.2
Less: LCFAR2			20.6		17.4
Total		−9.8	1.0	−10.2	13.8
Imbalance		−8.8		3.6

Source: Special Questionnaire on International Capital Flows.

¹Excluding purchases for reserves.

²Liabilities constituting foreign authorities’ reserves; figures are based on reports from reserve holders.

View Table

Table 25.

Cross-Border Transactions in Short-Term Instruments, 1987–88

(In billions of U.S. dollars; outflows ( – ))

		1987		1988
		Assets1	Liabilities	Assets1	Liabilities
Industrial countries, total		−9.8	21.8	−10.2	30.6
	Canada	0.5	1.9	0.4	7.5
	Japan	−6.4	0.1	−11.4	−0.1
	Norway	−1.4	0.3	0.2	0.3
	United Kingdom	…	3.1	…	4.1
	United States	−2.0	13.9	0.7	17.4
	Other industrial	−0.5	2.5	−0.1	1.3
Developing countries		—	−0.2	—	0.7
Total		−9.8	21.6	−10.2	31.2
Less: LCFAR2			20.6		17.4
Total		−9.8	1.0	−10.2	13.8
Imbalance		−8.8		3.6

Source: Special Questionnaire on International Capital Flows.

¹Excluding purchases for reserves.

²Liabilities constituting foreign authorities’ reserves; figures are based on reports from reserve holders.

After adjustment of reported liabilities flows for treasury bills and other short-term instruments purchased for foreign official accounts (LCFAR), the questionnaire data showed a net imbalance of $9 billion in 1987 and about $4 billion in 1988. However, these data are known to be incomplete, so these imbalances are unreliable measures of the problem.

First, as short-term instruments are not a standard component in the capital account presentation, the compilation systems in many countries do not distinguish these transactions from other types of short-term claims. The lack of data in this area is illustrated in Table 26, where figures compiled by the BIS on outstanding short-term Euronotes are compared with figures reported in the Special Questionnaire for the stock of cross-border private sector liabilities in the form of short-term instruments. (Euronotes are discussed in the following section.) The BIS data show, for instance, that Australia has been a large borrower in the Euronote market, with outstanding debt of $13 billion at the end of 1988. However, until recently, the Australian compilation system did not separately identify transactions in instruments that have an original maturity of one year or less. In other countries, such as Italy and Spain, data collection systems identify separately only official sector short-term instruments issued in the domestic market.

Table 26.

Comparison of Euronotes and Private Sector Cross-Border Short-Term Paper Liabilities by Country, Year-end 1988

(In billions of U.S. dollars)

¹BIS; includes short-term Euronotes and Eurocommercial paper.

²Special Questionnaire on International Capital Flows.

Table 26.

Comparison of Euronotes and Private Sector Cross-Border Short-Term Paper Liabilities by Country, Year-end 1988

(In billions of U.S. dollars)

Country of issuer	Euronotes1	Short-term instruments2
Australia	13.1	…
United States	8.4	19.9
United Kingdom	7.7	4.4
Netherlands	5.3	…
France	5.0	2.6
Sweden	3.7	…
Italy	3.1	…
Finland	2.3	0.7
Norway	2.1	1.8
Denmark	2.0	…
Spain	1.5	…
Canada	1.5	4.5
Belgium-Luxembourg	1.4	1.1
New Zealand	1.4	…
All other	7.4	3.8
Total	65.9	38.9

¹BIS; includes short-term Euronotes and Eurocommercial paper.

²Special Questionnaire on International Capital Flows.

View Table

Table 26.

Comparison of Euronotes and Private Sector Cross-Border Short-Term Paper Liabilities by Country, Year-end 1988

(In billions of U.S. dollars)

Country of issuer	Euronotes1	Short-term instruments2
Australia	13.1	…
United States	8.4	19.9
United Kingdom	7.7	4.4
Netherlands	5.3	…
France	5.0	2.6
Sweden	3.7	…
Italy	3.1	…
Finland	2.3	0.7
Norway	2.1	1.8
Denmark	2.0	…
Spain	1.5	…
Canada	1.5	4.5
Belgium-Luxembourg	1.4	1.1
New Zealand	1.4	…
All other	7.4	3.8
Total	65.9	38.9

¹BIS; includes short-term Euronotes and Eurocommercial paper.

²Special Questionnaire on International Capital Flows.

Second, banks have been important borrowers in the Euronote market and accounted for $22 billion—or one-third—of the Euronotes outstanding at the end of 1988. These liabilities are regarded as certificates of deposit and are recorded as part of deposit money banks’ liabilities. On the other hand, investment in bank paper by nonbanks could be recorded in capital account presentations either as short-term instruments or as deposit claims. Such factors make it difficult to compare claims and liabilities at the global level on the basis of the existing data.

Some countries have included, in reports they make to the Fund, transactions in short-term instruments as part of portfolio investment. Based on information reported in the Special Questionnaire, adjustments were made to reclassify these transactions to the “other capital” category. The adjustments amounted to about $1 billion a year and are included, with others, in Table 24.

As the reported balance of payments entries for short-term instruments are too incomplete to show the extent of cross-border activity in these claims, data from various private and official sources are pulled together in the following section to gauge the size of this market as regards cross-border positions and, where possible, to identify gaps in recorded capital flows.

Forms of Short-Term Marketable Instruments

Euronotes

In the 1980s, note issuance facilities and Eurocommercial paper (ECP) programs became important sources of finance in the international market. NIFs (or Euronote facilities) are medium-term arrangements that allow borrowers to issue in the Euromarket short-term notes that are backed by underwriting commitments of commercial banks. If notes cannot be placed with investors at agreed-upon spreads over LIBOR, underwriting banks are required to purchase them or to provide standby credit, and thus assure borrowers of medium-term funding. Eurocommercial paper programs, which are an offshoot of Euronote facilities, involve the sale by banks and dealers of short-term notes that are not backed by any underwriting commitments. Dealers and banks act as agents; thus funding is available to borrowers to the extent that notes can be placed with investors. ECP programs became increasingly important after 1986.

According to data published by the BIS, the value of Eurocommercial paper outstanding at the end of 1989 totaled $58 billion, while that of short-term Euronotes totaled only $11 billion.⁸² Total short-term borrowings in these markets nearly doubled in a period of less than three years, with most of the growth coming from issuance by Australia and the United Kingdom (Table 27).

Table 27.

Outstanding Debt in the Euronote Market, by Country, 1987-89

(In billions of U.S. dollars)

Source: BIS; includes short-term Euronotes and Eurocommercial paper.

Table 27.

Outstanding Debt in the Euronote Market, by Country, 1987-89

(In billions of U.S. dollars)

		March 1987	Years ended
			1987	1988	1989
Industrial countries, total		33.2	47.3	61.9	64.8
	of which:
	Australia	7.5	11.1	13.1	17.2
	United Kingdom	1.2	2.1	7.7	8.8
	United States	6.1	6.6	8.4	8.0
	France	2.9	4.1	5.0	5.0
	Netherlands	3.0	4.3	5.3	4.5
	Italy	1.7	2.3	3.1	3.8
Developing countries		3.3	2.7	3.6	4.2
International institutions		0.4	0.1	0.4	0.6
Total		36.9	50.1	65.9	69.6
Of which:
	Eurocommercial paper	19.9	33.3	50.6	58.4
	Short-term Euronotes	16.9	16.8	15.2	11.2

Source: BIS; includes short-term Euronotes and Eurocommercial paper.

View Table

Table 27.

Outstanding Debt in the Euronote Market, by Country, 1987-89

(In billions of U.S. dollars)

		March 1987	Years ended
			1987	1988	1989
Industrial countries, total		33.2	47.3	61.9	64.8
	of which:
	Australia	7.5	11.1	13.1	17.2
	United Kingdom	1.2	2.1	7.7	8.8
	United States	6.1	6.6	8.4	8.0
	France	2.9	4.1	5.0	5.0
	Netherlands	3.0	4.3	5.3	4.5
	Italy	1.7	2.3	3.1	3.8
Developing countries		3.3	2.7	3.6	4.2
International institutions		0.4	0.1	0.4	0.6
Total		36.9	50.1	65.9	69.6
Of which:
	Eurocommercial paper	19.9	33.3	50.6	58.4
	Short-term Euronotes	16.9	16.8	15.2	11.2

Source: BIS; includes short-term Euronotes and Eurocommercial paper.

Among developing countries, several offshore financial centers accounted for most of the borrowings. Small adjustments for 1988 and 1989, using the BIS data, were made to flows of “other capital” liabilities. These adjustments were mostly to account for borrowings by nonbank entities in the Cayman Islands, which reports no balance of payments data to the Fund.

Foreign Commercial Paper in the U.S. Market

Commercial paper is a short-term, unsecured promissory note issued by a company. Foreign borrowers have issued debt in the U.S. commercial paper market since 1974. According to a monthly survey conducted by the Federal Reserve Bank of New York (FRBNY), the outstanding amount of such foreign paper was $63 billion at the end of 1989, or about 12 percent of the market total.⁸³ The outstanding stock of these foreign borrowings in the United States has more than doubled since 1986. The FRBNY survey of commercial paper is based on data provided on a voluntary basis by a sample of market participants (16 as of mid-1990). The survey does not provide geographic details concerning which countries issue the paper.

Moody’s Investors Service, an agency that rates commercial paper issuers, also maintains a data base on commercial paper issued in the U.S. market. The data base identifies the average quarterly amounts of paper outstanding by each of the foreign issuers. The Working Party obtained these data and derived geographic information on foreign issuers.⁸⁴ Stock estimates derived from the Moody’s data base indicate that foreign issuers had nearly $46 billion of outstanding U.S. commercial paper at the end of 1989, some $17 billion less than the figure reported on the FRBNY commercial paper survey. Neither source purports to cover all of the foreign paper issued in the U.S. market.

Inquiries to several U.S. dealers show that little foreign paper issued in the U.S. market is placed with nonresident investors; sales are mainly to domestic investors. In the United States, money market funds and bank trusts are the largest investors in foreign commercial paper. In Table 28, the Moody’s and FRBNY figures are compared with U.S. balance of payments data on holdings of short-term foreign marketable instruments. The Treasury figures include commercial paper and other foreign short-term instruments.

Table 28.

Comparison of U.S. Holdings of Foreign Short-Term Instruments with Foreign Commercial Paper Issued in the U.S. Market, Year-end 1989

(In billions of U.S. dollars)

¹Source: U.S. Treasury Department; includes banks’ custody holdings for domestic customers of negotiable CDs and other short-term negotiable instruments. Figures reported by nonbanks include short-term financial claims other than deposits and CDs.

²Estimates derived from information obtained from Moody’s Investors Service.

Table 28.

Comparison of U.S. Holdings of Foreign Short-Term Instruments with Foreign Commercial Paper Issued in the U.S. Market, Year-end 1989

(In billions of U.S. dollars)

		Outstanding foreign commercial paper issued in U.S. market
	U.S. holdings of foreign short-term instruments1	Moody’s Investors Service2	FRBNY Commercial Paper Survey
Total	41.1	45.6	63.0
United Kingdom	16.6	8.2	…
Other Europe	5.5	19.9	…
Canada	3.8	12.7	…
Latin America and Caribbean	5.9	0.1	…
Asia	6.3	0.5	…
All other	3.0	4.2	…

¹Source: U.S. Treasury Department; includes banks’ custody holdings for domestic customers of negotiable CDs and other short-term negotiable instruments. Figures reported by nonbanks include short-term financial claims other than deposits and CDs.

²Estimates derived from information obtained from Moody’s Investors Service.

View Table

Table 28.

Comparison of U.S. Holdings of Foreign Short-Term Instruments with Foreign Commercial Paper Issued in the U.S. Market, Year-end 1989

(In billions of U.S. dollars)

		Outstanding foreign commercial paper issued in U.S. market
	U.S. holdings of foreign short-term instruments1	Moody’s Investors Service2	FRBNY Commercial Paper Survey
Total	41.1	45.6	63.0
United Kingdom	16.6	8.2	…
Other Europe	5.5	19.9	…
Canada	3.8	12.7	…
Latin America and Caribbean	5.9	0.1	…
Asia	6.3	0.5	…
All other	3.0	4.2	…

¹Source: U.S. Treasury Department; includes banks’ custody holdings for domestic customers of negotiable CDs and other short-term negotiable instruments. Figures reported by nonbanks include short-term financial claims other than deposits and CDs.

²Estimates derived from information obtained from Moody’s Investors Service.

U.S. Treasury data show U.S. holdings of foreign short-term instruments at the end of 1989 to be $41 billion, which is $22 billion below the amount shown in the FRBNY survey for holdings of U.S.-issued foreign commercial paper alone. Moreover, holdings of Eurodollar certificates of deposit, suggested in Table 28 by large claims against the United Kingdom, and of other instruments are included in the Treasury data.⁸⁵

A regional comparison of the Treasury’s record of claims with estimates of foreign outstandings derived from the Moody’s data base shows large differences for “other Europe” and Canada, where the Treasury data show consistently lower holdings. The net borrowings implied by the stock estimates from the Moody’s data base totaled $15 billion over the three-year period 1987 through 1989, some $12 billion higher than the change implied by the Treasury figures. The Working Party made upward adjustments to U.S. capital outflows for this difference.

The large differences between the balance of payments and FRBNY versions of U.S. acquisitions of foreign commercial paper are relatively well known. The FRBNY version has been considered more reliable by some agencies that publish other U.S. economic statistics. In preparing the foreign sector of the U.S. Flow of Funds Accounts, for instance, the Board of Governors of the Federal Reserve System has for many years used the FRBNY survey in preference to balance of payments figures.⁸⁶

The underlying reason for the difference between FRBNY and balance of payments numbers on U.S. purchases of foreign commercial paper is still unclear. One possibility is that the FRBNY survey captures certain trust and customer accounts with banks and brokers that may be missed in the balance of payments collections. U.S. compilers have recently initiated a project to improve coverage of commercial paper and other short-term instruments.

Data were not available from debtor countries to conduct comparisons with the Moody’s estimate. However, on a supplementary portfolio survey sent to industrial countries, the United Kingdom and Italy indicated uncertainty on the quality of coverage of commercial paper issuance in markets abroad. A similar response was received from the United States.

Eurodollar Certificates of Deposit

A Eurodollar certificate of deposit is a negotiable instrument, evidencing a dollar deposit at a specified rate for a specified period of time, issued by a bank located outside the United States.⁸⁷ While NIFs and ECP are recent money market innovations in the Euromarket, Eurodollar CDs were first issued in London in the mid-1960s.

The Working Party structured its research program to consolidate transactions of deposit money banks (excluding direct investment and portfolio transactions) under a separate category that is discussed in Chapter 6. However, it is also useful to discuss CDs briefly in this chapter, as the United States is known to be a large investor in Eurodollar CDs, and some transactions in CDs are recorded as short-term instruments in their balance of payments accounts. Table 29 shows that U.K. banks held $57 billion of Eurodollar CDs for U.S. residents at the end of 1989, $26 billion for U.S. banks, and $31 billion for nonbanks.

Table 29.

Eurodollar CDs Held by Banks in the United Kingdom for Nonresidents, by Country, Years-end 1986–89

(In billions of U.S. dollars)

Source: Bank of England.

Table 29.

Eurodollar CDs Held by Banks in the United Kingdom for Nonresidents, by Country, Years-end 1986–89

(In billions of U.S. dollars)

		1986	1987	1988	1989
United States		49.9	64.6	63.8	57.1
Belgium		7.7	9.5	6.5	7.2
Switzerland		5.8	3.3	2.9	2.4
Other		12.1	10.4	11.0	10.6
Total		75.5	87.9	84.2	77.4
Memoranda:
Holdings for U.S. residents
	Banks	23.8	40.3	31.5	25.9
	Nonbanks	26.1	24.3	32.3	31.2

Source: Bank of England.

View Table

Table 29.

Eurodollar CDs Held by Banks in the United Kingdom for Nonresidents, by Country, Years-end 1986–89

(In billions of U.S. dollars)

		1986	1987	1988	1989
United States		49.9	64.6	63.8	57.1
Belgium		7.7	9.5	6.5	7.2
Switzerland		5.8	3.3	2.9	2.4
Other		12.1	10.4	11.0	10.6
Total		75.5	87.9	84.2	77.4
Memoranda:
Holdings for U.S. residents
	Banks	23.8	40.3	31.5	25.9
	Nonbanks	26.1	24.3	32.3	31.2

Source: Bank of England.

According to U.S. Treasury data shown in Table 28 in the previous section, total U.S. nonbank holdings of short-term U.K. financial instruments were, at the end of 1989, about $17 billion. Half of this amount may be claims in the form of foreign commercial paper issued in the U.S. market. (This supposition is based on data from Moody’s Investors Service.) The remaining $8 billion consists of holdings of other short-term U.K. financial instruments and includes any negotiable CDs that U.S. banks hold in custody for domestic customers. If a large proportion of the Eurodollar CDs lodged with U.K. banks for the account of U.S. banks ($26 billion at year-end 1989) represents custody holdings for U.S. nonbanks, there could be a considerable understatement in U.S. holdings of U.K. Eurodollar CDs. The issue of U.S. nonbank claims on foreign banks, including CDs, is discussed in more detail in the following chapter.

Treasury Bills

Treasury bills are short-term debt instruments of governments. Table 30 shows the data reported on the Special Questionnaire for the stock of official sector cross-border liabilities in the form of short-term paper. These data mostly reflect treasury bills and similar short-term paper issued by the United States and, to a smaller extent, by the other G-7 governments. As shown in the memorandum item, most of the cross-border holdings of U.S. Treasury bills and certificates are by foreign monetary authorities.

Table 30.

Official Sector Cross-Border Short-Term Paper Liabilities, Years-end, 1986–88

(In billions of U.S. dollars)

Source: Special Questionnaire on International Capital Flows.

¹Balance of Payments Statistics Yearbook, 1990.

Table 30.

Official Sector Cross-Border Short-Term Paper Liabilities, Years-end, 1986–88

(In billions of U.S. dollars)

		1986	1987	1988
G-7 countries, total		104.2	117.5	139.3
	United States	90.4	101.7	115.0
	Canada	4.1	5.7	11.8
	United Kingdom	1.9	5.0	6.1
	Japan	5.9	2.5	3.9
	Germany	1.9	2.0	1.8
	France	—	0.6	0.7
	Italy	…	…	…
Other countries		0.6	1.4	1.3
Total		104.9	119.0	140.8
Memorandum:
	LCFAR of United States1	78.4	91.0	103.4

Source: Special Questionnaire on International Capital Flows.

¹Balance of Payments Statistics Yearbook, 1990.

View Table

Table 30.

Official Sector Cross-Border Short-Term Paper Liabilities, Years-end, 1986–88

(In billions of U.S. dollars)

		1986	1987	1988
G-7 countries, total		104.2	117.5	139.3
	United States	90.4	101.7	115.0
	Canada	4.1	5.7	11.8
	United Kingdom	1.9	5.0	6.1
	Japan	5.9	2.5	3.9
	Germany	1.9	2.0	1.8
	France	—	0.6	0.7
	Italy	…	…	…
Other countries		0.6	1.4	1.3
Total		104.9	119.0	140.8
Memorandum:
	LCFAR of United States1	78.4	91.0	103.4

Source: Special Questionnaire on International Capital Flows.

¹Balance of Payments Statistics Yearbook, 1990.