Canadian Markets for U.S. Dollars

Oscar L. Altman*

HE OPERATIONS of Canadian banks in foreign currencies,

T principally in U.S. dollars, have been growing rapidly in recent years.1 Foreign currency deposits (liabilities) increased by US$680 million in 1961, and by US$330 million in the first six months of 1962, reaching a total of US$3.7 billion.2 Approximately 16 per cent of this total consisted of deposits of banks. Deposits of nonbanking enterprises and of individuals accounted for the remainder and were a larger proportion than they had been for several years. Although a substantial part of these foreign currency (principally U.S. dollar) deposits were made in accordance with normal customer and trade relationships, the increases in recent years are largely the result of the willingness of Canadian banks to pay interest rates higher than those paid by New York banks and of their ability to find profitable outlets for these additional funds. In 1961, two other factors served to stimulate the growth of U.S. dollar deposits: the Canadian withholding tax on corporate dividends (i.e., tax deducted at the source) was increased from 5 per cent to 15 per cent, and some deposits in Canadian dollars were shifted to U.S. dollars in anticipation of changes in the Canadian exchange rate. In 1961, increases in deposits with other banks and in loans other

* Mr. Altman, Advisor in the Research and Statistics Department, is a graduate of Cornell University and the University of Chicago. He taught economics at Ohio State University and was on the staff of the National Resources Planning Board and of the French Supply Council. He was Director of Administration of the Fund until 1954. He is the author of Savings, Investment, and National Income and of a number of papers published in technical journals. 1 The role of Canada as a foreign market for U.S. dollars was discussed in "Foreign Markets for Dollars, Sterling, and Other Currencies," by Oscar L. Alt- man, in Staff Papers, Vol. VIII (1960-61), pp. 313^2. A number of points have here been corrected or clarified; and the discussion has been brought to date and made more comprehensive. This paper is an adjunct to one on "Recent Developments in Foreign Markets for Dollars and Other Currencies" which will appear in the next issue of Staff Papers. 2 In published reports, foreign currency assets and liabilities of the Canadian chartered banks are given in Canadian dollars. Because of the variations in the exchange rate, the figures are restated in this paper in U.S. dollars, to measure flows of funds more accurately. Therefore, all dollar figures quoted are U.S. dollars, unless otherwise specified. At the end of June 1962, foreign currency deposits stated in Canadian dollars were $4 billion (Appendix I). 297

©International Monetary Fund. Not for Redistribution 298 INTERNATIONAL MONETARY FUND STAFF PAPERS than "street" loans (call and short-term loans to brokers and dealers in New York) were unusually large and accounted for practically all of the increase in foreign currency assets ($716 million). Deposits with other banks increased by $431 million, to $965 million. These deposits represented funds placed in Euro-dollar markets, largely London, but also Paris and other continental centers; they further increased the important role of Canadian banks as suppliers of Euro-dollars. Other current loans increased by $208 million, to $1,025 million. This increase largely represented commercial loans made in U.S. dollars to U.S. and Canadian corporations in Canada and to corporations in the United States. Foreign currency assets (largely dollars) of Canadian banks at the end of 1961 consisted of deposits with other banks, 28 per cent; securities, mostly short-term U.S. Government securities, 19 per cent; "street" loans, 23 per cent; other loans, 30 per cent. Considerably more than half of the total represented liabilities of the U.S. Government and U.S. residents. A sharp decline in the volume of "street" loans in New York in the second quarter of 1962 paralleled that of prices in the stock market. Although the share of the Canadian banks in outstanding "street" loans remained about the same, their amount decreased to $547 million, and to 15 per cent of total assets. Holdings of securities increased to 27 per cent of the total. Canadian statistics report the assets and liabilities of commercial (chartered) banks in foreign currencies, but provide no detail on the distribution by currency or by residence of owner. This is unfortunate in view of the large operations of Canadian banks in foreign currencies and their importance for better understanding of capital movements and the balance of payments. It is nevertheless estimated that in 1961 deposits held by residents of the United States increased by at least $150 million, and perhaps by as much as $250 million. These figures may be compared with the U.S. balance of payments deficit of $2.4 billion reported by the Department of Commerce for 1961.

Position of Canadian Agencies in New York The New York agencies of Canadian banks, like other agencies of foreign banks, cannot accept deposits in the United States. They can, however, obtain large volumes of deposits denominated in U.S. dollars for their Canadian offices.8 When a U.S. depositor, or a Canadian or other

3 These may be the head offices or designated Canadian branches. In what follows, these are summarily referred to as the "head offices."

©International Monetary Fund. Not for Redistribution CANADIAN MARKETS FOR U.S. DOLLARS 29 foreign depositor, transfers his deposit denominated in U.S. dollars from a U.S. bank to a Canadian bank, the depositor is credited with a deposit denominated in U.S. dollars, and the head office acquires a deposit in a U.S. bank. If the head office subsequently (or simultaneously) advances these funds to the New York agency, the agency acquires the deposit in a U.S. bank and shows a corresponding amount as due to the head office in Canada. The head offices supervise with close attention—and often transaction by transaction—the activities of agencies and branches with respect to obtaining deposits. They determine the amount of deposits sought, the rates of interest to be paid, and the investment of the deposited funds. In addition, the head offices may themselves obtain U.S. dollar deposits. The assets represented by any of these deposits may be invested by the head offices, by the New York agencies, or by foreign branches in Europe. They may be invested in the United States, in Canada, or in other countries. The New York agencies of foreign banks, Canadian and other, are not required to maintain reserves in the United States against funds advanced to them by their head offices. Reserves are required against deposits, and advances are legally not deposits. Legislation adopted by New York in 1961 made it possible for foreign banks to have branches in New York, which can accept deposits. Though a number of foreign banks have since established branches in New York, or converted their agencies to branches, the Canadian banks have not. The latter can attract such a large volume of dollar deposits—to some extent through their head offices, but principally through their New York agencies—that they see little advantage in converting their agencies to branches. Indeed, given this ability, there is some advantage in retaining agency status. It is sometimes said that Canadian agencies have a competitive advantage in the New York money market by virtue of the fact that U.S. banks must maintain reserves against their deposits while Cana- dian agencies need not do so against advances by their head offices. A detailed examination of this proposition (Appendix II) suggests, however, that any such competitive advantage is not of major signifi- cance.

Foreign Currency Deposits in Canadian Banks In Canadian banks, deposits denominated in foreign currencies have for many years been increasing much more rapidly than those de-

©International Monetary Fund. Not for Redistribution 300 INTERNATIONAL MONETARY FUND STAFF PAPERS nominated in Canadian dollars. Thus, since 1956, the former increased by 165 per cent, and the latter by 25 per cent. Between the end of 1960 and the end of June 1962, Canadian dollar deposits increased by 10 per cent and foreign currency deposits (expressed in U.S. dollars), by 35 per cent (Table 1).

TABLE 1. CANADA: DOLLAR AND FOREIGN CURRENCY DEPOSITS OF CHARTERED BANKS, END OF YEAR OR QUARTER, 1956-62

Foreign Currency Deposits Canadian Dollar Deposits Amount Increase (billion Can. dollars) (billion U.S. dollars) (million U.S. dollars) 1956 11.2 1.4 369 1957 11.4 1.9 429 1958 12.7 2.2 298 1959 12.3 2.5 336 1960 12.9 2.7 175 1961 14.2 3.3 681 1962 I 13.9 3.6 254 II 14.2 3.7 77 Sources: Canadian dollar deposits are from Bank of Canada, Statistical Summary; foreign currency deposits are data from Appendix I, infra, converted to U.S. dollars at the exchange rate prevailing at the end of the period. The foreign currency deposits are given in U.S. dollars in Table 1, because their amount varies with additions and withdrawals in foreign currency (largely U.S. dollars). The difference between changes in deposits stated in the two currencies is substantial, since the exchange rate of the Canadian dollar fluctuated between approximately US$0.95 and US$1.08 during the period. For example, in 1961, the increase in foreign currency deposits measured in Canadian dollars was $835 million; but restated in U.S. dollars, which better measure the inflow of funds, the increase was $681 million. Foreign currency deposits in the past few years have shown a marked seasonal pattern as well as an upward trend.4 In general, they reach a peak for window-dressing purposes at the end of October or November, corresponding to the close of the fiscal year of the major Canadian banks. A number of Canadian banks engage in window dressing to increase their size—their assets and their liabilities—rather than, as do German, Swiss, and some other European banks, to change the currency or the maturity composition of their assets. Thereafter, following the window-dressing dates, the chartered banks7 demand for deposits decreases somewhat. The supply of funds also decreases, in response to the year-end adjustments of depositors for dividend transfers, tax payments, and the like. These seasonal increases and de-

4 Quarterly data, 1956-58, and monthly data, January 1959-June 1962, are shown in Appendix I.

©International Monetary Fund. Not for Redistribution CANADIAN MARKETS FOE U.S. DOLLARS 301 creases are absorbed smoothly, without noticeable effect upon interest rates. Since 1956, more than four fifths, and in 1962 all, of the increase in foreign currency deposits is attributable to customers other than banks (Table 2).

TABLE 2. CANADA: GKOWTH OF FOREIGN CURRENCY DEPOSITS BY BANKS AND OTHERS, END OF YEAR OR QUARTER, 1956-62 (In millions of U.S. dollars)

By Banks By Others Amount Increase Amount Increase

1956 244 138 1,183 232 1957 274 30 1,581 398 1958 443 169 1,710 129 1959 556 113 1,933 223 1960 649 93 2,015 82 1961 674 25 2,671 656 1962 I 744 70 2,855 184 II 603 -141 3,073 218 Source: Data from Appendix I converted to U.S. dollars at the exchange rate prevailing at the end of the period.

Deposits denominated in foreign currencies (largely dollars) may be expected to increase year after year because of the growing number of foreign branches and agencies of the chartered banks, the expanding international financing of these banks, the growth of U.S. interests in Canada, and the large transactions of Canadian provincial and munici- pal governments and of Canadian business enterprises in U.S. capital markets. But the increases in recent years, and especially in 1961, are far greater than can be accounted for by such factors. They consist largely of increasing deposits of U.S. dollars. The data in Table 1 suggest that such foreign currency deposits have by now reached a total of about $1.5 billion.5 Five factors have been important in stimulating foreign currency operations: (1) To obtain dollar funds, the chartered banks are willing to pay interest at rates higher than those prevailing in the New York market because they have found profitable outlets for such additional funds. In the early days of Euro-dollar operations, in 1957 or 1958, the interest differentials required to attract deposits from New York banks were substantial—of the order of 1 per cent or more. As familiarity with these foreign dollar operations, and the role of Cana- dian banks in them, have increased, interest differentials have nar-

5 Based on the increase in foreign currency deposits from 1957 or 1958, adjusted for the rate of increase of Canadian dollar deposits. Some banking opinion would estimate this total at $2 billion.

©International Monetary Fund. Not for Redistribution 302 INTERNATIONAL MONETARY FUND STAFF PAPERS rowed and are currently perhaps % per cent to % per cent on 90-day deposits and % per cent to *4 per cent on shorter-dated deposits. The differentials vary with the need of the chartered banks for funds and the rates of interest that they can earn on these funds. These differentials attract U.S. dollar deposits from residents of many areas—the United States, Canada, Europe, and elsewhere. (2) Even without the incentive of slightly higher interest rates, U.S. corporations, particularly those with Canadian branches or affiliates, have had an increased tax incentive, beginning in 1961, to transfer funds to Canada. At the end of 1960, the Canadian withholding tax on dividends sent out of the country was increased from 5 per cent to 15 per cent; the Dominion corporation income tax rate, however, remained about 50 per cent6 (including social security tax) and the income tax for corporations in the Provinces of Ontario and Quebec was (after Dominion tax credit) about 52 per cent. On the assumption that all after-tax income was paid out in dividends, the effective tax rate would approach 59 per cent.7 Since the maximum credit in the United States against U.S. income tax is 52 per cent, this situation created unused tax credits for U.S. parent companies with Canadian subsidiaries or affiliates; that is to say, it gave them an incentive to generate additional income in Canada in forms subject to lower rates of taxation than 52 per cent, so as to bring their average rate of tax down to 52 per cent. This they could do by placing funds in bonds, stocks, or bank deposits, and, for income tax purposes in the United States, consolidating such investment income with their Canadian subsidiaries' net profit and with income earned in the United States. U.S. corporations thus had a strong incentive to disinvest in the United States and invest in Canada in order to use up the tax credit that would otherwise have been wasted.8 This incentive must have

6 Actual rates were 21 per cent on the first $35,000 of net income and 50 per cent on the remainder. 7 The tax rate usually used for illustrative purposes is 57% per cent (see The New York Times, April 9, 1962; Financial Post, Montreal, May 19, 1962). But this maximum does not take into account provincial income taxes of 11 per cent in Ontario and 12 per cent in Quebec. In 1961, the Dominion allowed a credit on this account of 9 per cent and 10 per cent, respectively, against its own income tax. 8 Following is an example prepared by the U.S. Treasury: "a United States corporation doing business in Canada through a branch might be subjected to a combined Canadian tax of 57% per cent consisting of the normal 50 percent Canadian corporate rate plus a branch profits tax [or withholding tax on dividend payments] of 15 percent on its remaining income (if not reinvested in certain assets in Canada). If the corporation has $50,000 of Canadian business income, and was subjected to a tax of $28,750 by Canada (57% percent of $50,000) it

©International Monetary Fund. Not for Redistribution CANADIAN MARKETS FOE U.S. DOLLARS 303 led to large capital outflows in 1960 and 1961.9 Fixed-term deposits in Canadian banks are probably the most attractive of all the Cana- dian investments that can be used to generate additional income on a short-term basis.10 Interest on such deposits is exempt from with- would be allowed a credit by the United States of only $26,000 (52 percent of $50,000). This would leave the corporation with an unused foreign tax credit in the amount of $2,750. However, t9 avoid this result, the taxpayer might transfer sufficient of its funds invested in the United States to bank accounts or investments in Canada to produce $7,500 of investment income. Assuming that this investment income was subjected to only a 15 percent withholding tax by Canada, the corporation would pay a Canadian tax on this investment income of $1,125. Its total Canadian taxes now would be $28,975 which is only slightly less than $29,900 (52 percent of its total Canadian income, $57,500). Accord- ingly, under present law the corporation would be allowed full credit for all of its Canadian tax payments. Similarly full credit would also be allowable if the investment income had been obtained from a different foreign country also imposing a 15 percent withholding tax provided that the overall limitation (rather than the per-country limitation) had been elected by the taxpayer." See Revenue Act of 1962: Hearings Before the Committee on Finance, United States Senate, on HJi. 10650 (87th Congress, 2nd Session), Part 1, April 2, 1962, pp. 243-44. In this example, the effect of allowing use of the unused credit of $2,750 would be to raise the corporation's after-tax return on the $7,500 of investment income from $3,600 ($7,500 less 52 per cent of $7,500) to $6,350 ($7,500 less the Canadian withholding tax of $1,125 less additional UJS. tax of $25). The gross yield (before tax) would be $7,500 of interest on funds invested in Canada plus $2,750 of tax saved in the United States, or a total of $10,250. On the assumption that interest is earned in Canada at 3% per cent, the gross yield is equal to 4.8 per cent. The amount of capital, at 3% per cent, required to yield $7,500 of interest is $214,287. A larger income (and investment) would be required to average the tax rate payable in Canada from 59 per cent down to the 52 per cent which may be recovered in U.S. taxes, on the assumption that there is payment of an additional 2 per cent by reason of Quebec or Ontario income tax. 9 Dividend payments by Canadian subsidiaries to U.S. parent corporations in 1961 were estimated at $245 million by the U.S. Department of Commerce. The example given in the preceding footnote suggests that the ratio between outflows of capital to use up tax credits and dividend payments to the United States (net of taxes) was about 10:1, on the assumption of an effective Canadian income tax rate of 57^ per cent. At a higher tax rate, or at a lower interest rate, the ratio would be considerably greater. Thus, the maximum amount of funds that might be invested in Canada to take advantage of unused tax credits could be $2 billion or more. Part of this would have been transferred when the withholding tax on dividends was 5 per cent prior to 1961; a large amount was probably transferred when the rate was raised to 15 per cent beginning in 1961. 10 The advantages to U.S. corporations of averaging their foreign income taxes "down" to the U.S. level of 52 per cent apply to all income earned abroad, and not only to income earned in Canada. In recent years, the United States has changed its policies, first one way and then the other, with respect to the crediting against domestic income tax of foreign taxes on income earned abroad, and particularly on income from foreign portfolio investments. For some years before 1960, foreign tax credits were calculated on a country by country basis. For 1960 and 1961, the facilities for averaging "down" were broadened. An amendment to the Revenue Code made it possible to calculate tax credits for all foreign countries combined, i.e., on a global basis (United States Code Annotated, Title 26, Internal Revenue Code, 1961 Cumulative Annual Pocket Part, s. 904, incorporating Public Law 86-780 of September 14, 1960). The purpose of this amendment and objections to it were described in Senate Report No. 1353,

©International Monetary Fund. Not for Redistribution 304 INTERNATIONAL MONETARY FUND STAFF PAPERS holding tax, whereas dividends, and interest on Dominion and provincial issues dated later than December 1960, are subject to a withholding tax of 15 per cent. This investment incentive was sharply curtailed in 1962 by a change in the U.S. tax law.11 (3) The chartered banks have wished to attract foreign currency deposits in order to improve their competitive position at home and abroad, to expand the scope of their operations, and to engage in year-end window dressing. The last sometimes requires paying rates of interest that result (when available short-term outlets are taken into account) in negligible profits or even losses. (4) Part of the increase in U.S. dollar deposits reflects the attempt by chartered banks to pay higher yields to some Canadian customers, in order to prevent these deposits from moving elsewhere. Like the banks in other countries, the chartered banks have working agreements or understandings with respect to the rate of interest paid on notice deposits. If the banks wish to pay higher rates on some Canadian dollar deposits to some customers, one way to do this is to denominate the account in U.S. dollars, to which the prevailing interest rates do not apply.12 This involves, although perhaps not universally, swapping Canadian dollars for U.S. dollars. (5) Finally, some of the increases in U.S. dollar deposits in 1961 and 1962 represent speculation against the Canadian dollar rather than a

e.g., in United States Code, Congressional and Administrative News (86th Con- gress, 2nd Session, 1960), Vol. 2, pp. 3770 ff. Thus, hi 1960 and 1961 a UJ3. corporation that paid taxes anywhere equal to more than 52 per cent on corporate profits plus dividends remitted (for example, in Germany) had an incentive to disinvest in the United States and to make additional money market investments somewhere (for example, in Canada or the United Kingdom). Even if made in short-term securities, such investment became essentially long-term because of the U.S. tax code. Investment was en- couraged by allowing foreign tax credits on a global rather than a country by country basis, and by allowing credits for all kinds of income combined rather than for different kinds of income separately. 11 Revenue Act of 1962 (H.R. 10650), sec. 10, which provides that the foreign tax credit for investment income, with certain exceptions, be computed apart from that for all other foreign income, and, moreover, on a country by country basis. For a discussion of this change, see Revenue Act of 1962: Report of the Committee on Finance, United States Senate, to Accompany H.R. 10650 (87th Congress, 2nd Session, Report No. 1881), August 16,1962, pp. 72-74. 12 The interest rate on savings deposits was 2% per cent in 1961; this was raised to 3 per cent in mid-1962. Interest rates "on deposit receipts of $100,000 and more for periods of up to one year, which previously had been set below yields on treasury bills of comparable maturity, were raised in January 1961 and maintained through the year at levels somewhat above treasury bill yields. The initial range of 3^4 to 4% per cent was adjusted from time to time; by June the range was 2^ to 3% per cent and this was maintained virtually unchanged through the second half of the year" (Bank of Canada, Annual Report, 1961, pp. 35-36). For the longer maturities, these rates were below the maxima paid by A U.S. banks on time deposits hi the United States—and still further below the rates paid by Canadian banks, which paid higher rates on time deposits of U.S. dollars than the New York City banks.

©International Monetary Fund. Not for Redistribution CANADIAN MARKETS FOR U.S. DOLLARS 305 search for higher interest yields. It should be recalled that there was some official Canadian comment on exchange rate policy and on the level of the Canadian exchange rate in December 1960. Some holders of Canadian dollar deposits considered these comments as foreshadow- ing changes in the rate. At the end of 1960, the exchange rate with the U.S. dollar was virtually at parity (Can$0.996 per U.S. dollar). A premium gradually developed in the next five months, which was 1.3 per cent at the beginning of June 1961. Between June 1 and June 20, the Canadian dollar fell to parity. A major shift in exchange rate policy was announced in the Budget Message on June 20; it included a declaration of intention to intervene in the exchange market in order to force the rate down. Immediately following the budget presentation, the Canadian dollar was at a discount of 3.5 per cent. The discount gradually increased to more than 4 per cent at the end of the year; by May 1962, it was 9 per cent; and at the end of June, 8.2 per cent. In these circumstances, it would be unrealistic to suppose that there was not a protective movement by Canadians and others from Cana- dian dollars into U.S. dollars.13 This would account for part of the unusually large increases of foreign currency deposits in 1961, and particularly those in the second quarter, which were equal to Can$510 million (US$360 million).

Investment of Foreign Currency Deposits

The U.S. dollars obtained in the form of dollar deposits are invested in four types of assets: deposits with other banks, securities (principally short-dated U.S. Government securities), "street" loans, and other loans. There was a marked change in the pattern of investments in 1961-62, as is evident from Table 3. Foreign currency assets, measured in U.S. dollars, increased by $716 million in 1961, and by $145 million in the first six months of 1962; the distribution was as follows:

Change (million U.S. dollars) Percentage distribution at end of period End 1960 End 1961 to to end June end 1961 June 1962 1961 1962 Deposits with other banks 431 86 28 29 Securities 85 302 19 27 "Street" loans -8 -262 23 15 Other loans 208 19 30 29 Total 716 145 100 100

13 The distribution of deposits between Canadian and U.S. dollars may also have been affected by a shift in leads and lags.

©International Monetary Fund. Not for Redistribution 306 INTERNATIONAL MONETARY FUND STAFF PAPERS This tabulation shows that deposits placed with other banks increased by $431 million in 1961 and accounted for 28 per cent of all foreign currency assets at the end of the year. They increased steadily during 1961, and totaled $965 million at the end of the year. They increased further, by $86 million, in the succeeding six months, to $1,051 million at the end of June 1962. These deposits represented funds placed in Euro-dollar markets, largely in London, but also in Paris and other continental centers, and increased the already important role of Canadian banks as suppliers in Euro-dollar markets. It should be noted that these figures are not a complete measure of dollar funds invested in Europe by Canadian banks. They do not include TABLE 3. CANADA: FOREIGN CURRENCY ASSETS OF CHARTERED BANKS, END OF YEAR OR QUARTER, 1956-62l (In millions of dollars)

Distribution of Assets (U.S. dollars) Total TDepositl s Other Can. U.S. with other "Street" current dollars dollars banks Securities loans loans 1956 1,411 1,470 329 391 359 391 1957 1,905 1,935 384 438 585 528 1958 2,118 2,197 358 512 636 691 1959 2,392 2,510 379 552 746 833 1960 2,717 2,727 534 559 817 817 1961 I 2,848 2,879 621 787 709 763 II 3,318 3,206 776 686 929 814 III 3,457 3,355 871 834 801 850 IV 3,592 3,443 965 644 809 1,025 1962 I 3,694 3,519 858 845 784 1,032 II 3,881 3,588 1,051 946 547 1,044 Source: Data from Appendix I converted to U.S. dollars at the exchange rate prevailing at the end of the period. 1 Excluding gold and coin outside of Canada (about $1 million) and government and bank notes other than Canadian (which total less than $45 million).

funds swapped into sterling and loaned to local authorities and finance companies in the United Kingdom, nor do they include commercial loans made in U.S. dollars in Europe or elsewhere outside Canada and the United States. It is understood, however, that such amounts are small compared with deposits made with other banks. During 1961, the interest rate on 90-day dollar deposits in London averaged approximately 3.58 per cent; at the end of December 1961, when the chartered banks had maximum funds placed on deposit with other banks, the rate was approximately 3.88 per cent. Rates paid in continental centers were certainly no lower. Maximum rates paid by U.S. banks on time deposits for 90-180 days were 2^ per cent. On the assumption that interest rates paid by Canadian banks were perhaps

©International Monetary Fund. Not for Redistribution CANADIAN MARKETS FOE U.S. DOLLARS 307 1A to % per cent higher than those paid by U.S. banks, these data suggest a gross interest margin of at least ^ per cent, and a gross profit (on an average volume of $600 million placed with other banks) of at least $3 million in 1961. Direct expenses involved in these transactions must necessarily have been minor. Foreign currency (mostly U.S. dollar) loans made by the chartered banks are classified into those made to brokers ("street" loans) and all other loans. As shown in Table 4, Canadian banks have a large share of the "street" loan market in New York. In the past few years, these loans have usually constituted about two fifths of all the "street"

TABLE 4. "STREET" LOANS IN NEW YORK, END OF YEAR OR QUARTER, 1958-62

Canadian Chartered Banks All New York As per cent of City Banks Total1 N.Y. City banks' (million U.S. dollars) (million U.S. dollars) loans

1958 1,652 636 38 1959 1,740 746 43 1960 1,574 817 52 1961 1,956 809 41 1962 I 2,031 784 39 II 1,512 547 36 Sources: Data for New York City banks are from the Federal Reserve Bulletin. Data for Canadian chartered banks are from Appendix I, infra,' they have been converted to U.S. dollars at the exchange rate prevailing at the end of the period. The two sets of data, though not precisely comparable, can serve to suggest the situation. 1 Principally through their New York agencies. loans in New York. At their high point in September 1960, the "street" loans of chartered banks were more than $1 billion, equivalent to about 60 per cent of the total. This proportion fell in the following months and reached 41 per cent at the end of 1961. When the stock market declined sharply in the second quarter of 1962, "street" loans of all New York City banks declined by about 30 per cent and the chartered banks held their share of the market. To obtain and keep this volume of business, the Canadian banks have, according to general indications, shaded the rates charged by U.S. banks by perhaps *4 per cent.14 Under present conditions and investment alterna- tives, this volume probably represents maximum penetration of the "street" loan market by Canadian banks. It also reflects the unwill- ingness of brokers and dealers to switch additional parts of their lines

14 European banks generally charge rates even lower than those of Canadian banks. The differentials largely reflect the stability of these nominally short- term lines of credit. The loans of New York City banks, reflecting strong customer relationships, are the most stable and are rarely called; those of European banks are much more impersonal and may be called (or not renewed) if funds become tight.

©International Monetary Fund. Not for Redistribution 308 INTERNATIONAL MONETARY FUND STAFF PAPERS of credit with U.S. banks to Canadian agencies, since such action might interfere with their customer relationships with U.S. banks. Other current loans of the chartered banks totaled $1 billion at the end of 1961 and continued at this level during the first six months of 1962. These loans, largely denominated in U.S. dollars, were made to customers in Canada, the United States, and elsewhere. The rates of interest charged on such loans are competitive with U.S. rates. Chartered banks are said to charge the U.S. prime rate (4% per cent), or one somewhat lower, to customers entitled to it in the United States. Even if their stated rates are the same as the prime rate, however, their effective rates would be lower since they do not require compensating balances.15 Holdings of foreign currency securities, which are overwhelmingly short-term U.S. securities, have for the most part constituted 20-25 per cent of the total foreign currency assets. As pointed out in Appen- dix II, these securities may be considered a liquidity reserve; together with Euro-dollar deposits and money placed in the federal funds market,16 they are the most flexible assets of the chartered banks. As such, they absorb the major part of the short-period or unpredicted changes in their assets or liabilities. The investment policy of the chartered banks may thus be charac- terized as maximizing profits within three conditions: maintaining foreign currency assets approximately equal to foreign currency liabilities; operating with a minimum of risk, including placing dollar deposits with first-rate names; and investing a substantial portion of foreign currency assets in highly liquid form in order to avoid calls upon their Canadian currency assets. This policy results in keeping a substantial part of their foreign currency assets in short-dated securities, day-to-day and call loans to brokers, and federal funds. Rates of interest on these assets are relatively low. It is unlikely that, on the average, they could exceed the average rates of interest paid by the chartered banks on time deposits. Hence, about half of the chartered banks7 U.S. dollar business is at best conducted without any gross interest margin, and without taking into account other direct expenses and applicable overhead. On the other hand, this portion of the business makes it possible to engage in Euro-dollar operations with

15 Cf. D. J. Powell, "Banking in Canada," The Bankers' Magazine (London), June 1962, pp. 477-78. 16 Canadian agencies are always sellers of federal funds, i.e., deposit balances in the Federal Reserve Banks in the United States. Since they are not themselves members of the Federal Reserve System, they hold federal funds through cor- respondent banks or through domestic affiliates (if any) which are members. Cf. Board of Governors of the Federal Reserve System, Federal Funds Market (Washington, 1959), especially Chapter IV.

©International Monetary Fund. Not for Redistribution CANADIAN MAEKETS FOR U.S. DOLLARS 309 other banks and to make commercial loans, which do offer oppor- tunities for substantial profits.

Ownership of Foreign Currency Deposits

There is general agreement, though no statistical proof, that the large increases in recent years in foreign currency assets and deposits (identified in Canadian banking statistics as being in currencies other than Canadian) are due to operations in U.S. dollars. Unfortunately, there are no Canadian banking statistics on the distribution of these foreign currency assets and liabilities by currency, or by country or area of residence, or by any cross-classification of these criteria. Even if complete data were not published, it would be helpful if over-all or sample statistics were collected and made available for confidential analyses. The presence or the absence of such banking statistics for Canada and other countries made little difference when short-term capital movements were relatively small. They have now become extremely important for understanding capital flows, interest arbitrage, the balance of payments, and movements of reserves. Banking statistics of this nature are presently compiled in con- siderable detail, though published in somewhat less detail, by the United States, Germany, and Italy. It is to be hoped that Canada and other industrial countries, notably the United Kingdom, France, the Netherlands, and Switzerland, will move in this direction as rapidly as possible.

Dollar Operations and the U.S. Balance of Payments

U.S. dollar deposits transferred by U.S. residents from U.S. banks to Canadian banks or other foreign banks are treated by the U.S. Depart- ment of Commerce for balance of payments purposes as an item that contributes to the balance of payments deficit, i.e., as a short-term capital outflow, shown above the line, financed by an increase in U.S. liquid liabilities to foreigners, shown below the line.17 As already noted, banking statistics are not available for analyzing the changes

17 When a U.S. resident transfers a dollar deposit from a London bank to a Canadian bank, or when a non-U.S. resident transfers a deposit from any financial center (including New York) to any other financial center, there is no effect upon the U.S. balance of payments.

©International Monetary Fund. Not for Redistribution 310 INTERNATIONAL MONETARY FUND STAFF PAPERS in foreign currency deposits of Canadian banks by currency or by country of residence. Nevertheless, it appears that in 1961 deposits of U.S. residents in Canadian banks increased by at least $150 million, and perhaps by as much as $250 million. These figures may be compared with the over-all balance of payments deficit of $2.4 billion reported by the Department of Commerce for 1961. There has recently been much discussion of the different meanings that may be ascribed to the balance of payments deficit (or surplus) ,18 Three points that bear on this discussion appear from the present study of Canadian banking operations: (1) These Canadian transactions do not directly affect the position of the U.S. dollar in foreign exchange markets. Deposits with Cana- dian banks are made in U.S. dollars; the assets purchased with (represented by) these deposits are denominated in U.S. dollars. Dollars used to acquire assets in other currencies (largely sterling) are minimal. (2) Those who deposit foreign currencies (largely U.S. dollars) with Canadian banks acquire assets of a short-term character. These assets often have a term of 3 months, but very rarely as long as one year. Moreover, the time-deposit arrangements of the Canadian chartered banks are flexible, and deposits can be withdrawn before the end of the agreed period with some adjustment of the agreed interest rate. The assets held by the Canadian banks as the counterpart of these deposit liabilities are of varying maturities, ranging from overnight money to commercial loans or participations for a period of 12 months or more. There is probably little difference between the average maturity of deposits and of their asset counterparts. (3) The foreign currency assets of the Canadian banks are the mirror image of their foreign currency deposits. In view of the balanced relationship of foreign currency assets and liabilities, and of current banking practices, it is virtually impossible to visualize sales by the chartered banks of dollar assets for other currencies without a parallel adjustment in their deposit liabilities. The foreign currency assets of chartered banks keep in step with their foreign currency liabilities. U.S. dollar assets and liabilities increase and decrease together and, in both practice and theory, are closely tied to each other. Hence, there is some doubt whether it is appropriate to separate the two in an analysis of the U.S. balance of payments.

18 For example, by Walter R. Gardner, "An Exchange Market Analysis of the U.S. Balance of Payments," Staff Papers, Vol. VIII (1960-61), pp. 195-211. See also Poul H0st-Madsen, "Asymmetries Between Balance of Payments Surpluses and Deficits," Staff Papers, Vol. IX (1962), pp. 182-201, and "Measurements of Im- balance in World Payments, 1947-58," infra, pp. 343-68.

©International Monetary Fund. Not for Redistribution CANADIAN MARKETS FOR U.S. DOLLARS 311 APPENDICES I. Canada, Chartered Banks: Assets and Liabilities in Currencies Other than Canadian, End of Month, 1956-June 1962 (In millions of Canadian dollars)

Assets1 Liabilities Day-to-day, call, and Deposits short-term Other Deposits with other Securi- loans to curren2t by other Other banks ties brokers loans Total banks deposits Total 1956 March 285 295 264 343 1,187 146 1,002 1,148 June 297 339 299 341 1,276 177 1,058 1,235 September 307 396 369 342 1,414 189 1,134 1,323 December 316 375 345 375 1,411 234 1,135 1,369 1957 March 322 357 407 386 1,472 220 1,231 1,451 June 309 411 493 369 1,582 281 1 ,37 1,651 September 336 463 591 442 1,832 257 1,483 1,740 December 378 431 576 520 1,905 270 1,557 1,827 1958 March 348 449 569 581 1,947 290 1 ,60 1,895 June 366 496 711 615 2,188 443 1,711 2 ,154 September 348 605 627 602 2,182 372 1,787 2 ,159 December 345 494 613 666 2,118 427 1,649 2 ,076 1959 January 352 545 663 667 2,227 539 1,671 2 ,210 February 355 608 686 679 2,328 582 1,,728 2 ,310 March 328 574 687 696 2,285 599 1,,701 2 ,300 April 334 533 765 743 2,375 744 1,,658 2 ,402 May 357 495 697 759 2,308 678 ,688 2 ,366 June 378 486 709 737 2,310 673 1,,628 2 ,301 July 329 539 770 734 2,372 694 1,,697 2 ,391 August 354 521 740 725 2,340 655 1,,752 2 ,407 September 356 505 827 736 2,424 762 1,,789 2 ,551 October 407 528 789 762 2,486 745 ,785 2 ,530 November 363 524 832 790 2,509 705 1,,819 2 ,524 December 361 526 711 794 2,392 530 1,,842 2 ,372 1960 January 396 570 801 760 2,527 682 1,,844 2 ,526 February 363 589 846 756 2,554 666 ,886 2 ,552 March 463 597 869 800 2,729 768 1,,972 2 ,740 April 415 575 938 827 2,755 817 1,,937 2 ,754 May 466 632 980 836 2,914 857 2,049 2 ,906 June 482 756 907 826 2,971 843 2,124 2 ,967 July 499 772 969 806 3,046 857 2,179 3 ,036 August 491 780 965 803 3,039 843 2,213 3,056

September 501 717 1,005 823 3,046 813 2,212 3 ,025 October 654 724 959 827 3,164 899 2,153 3 ,052

November 542 782 820 823 2,967 781 2,120 2 ,901 December 532 557 814 814 2,717 647 2,007 2 ,654 1961 January 467 777 766 702 2,712 605 2,070 2 ,675 February 610 780 763 673 2,826 596 2,158 2 ,754 March 614 778 701 755 2,848 576 2,259 2 ,835 April 717 705 758 780 2,960 526 2,361 2 ,887 May 782 704 860 772 3,118 515 2,585 3 ,100 June 803 710 962 843 3,318 559 2,785 3,344 July 869 844 908 850 3,471 551 2,918 3,469 August 854 887 858 879 3,478 570 2,948 3,518

September 897 859 825 876 3,457 591 2.957 3,548 October 1,008 836 882 918 3,644 689 3! 026 3,715

November 1,037 971 873 ,042 3,923 736 3.137 3,873 December 1,007 672 844 ,069 3,592 703 2; 786 3 ,489 1962 January 864 1,108 822 ,019 3,813 821 3,022 3 ,843 February 878 1,164 780 ,037 3,859 783 3.110 3 ,893

March 901 887 823 ,083 3,694 781 2.997 3,778 April 894 937 891 ,109 3,831 738 3; 122 3,860 May 1,041 1,087 793 ,131 4,052 737 3 ,331 4 ,068 June 1,137 1,023 592 ,129 3,881 652 3,324 3,976 Source: Statement of the Assets and Liabilities of the Chartered Banks of Canada, published monthly by the Department of Finance as a Supplement to the Canada Gazette. 1 Excluding gold and coin outside of Canada, and government and bank notes other than Canadian, which on June 30, 1962 were $1 million and $41 million, respectively. 2 Less provision for estimated loss.

©International Monetary Fund. Not for Redistribution 312 INTERNATIONAL MONETARY FUND STAFF PAPERS II. Reserve Requirements Applicable to U.S. Dollar Deposits

Canadian chartered banks maintain statutory cash reserves of 8 per cent against their Canadian dollar deposit liabilities.19 These reserves are in the form of deposits at the Bank of Canada and holdings of Bank of Canada notes, and consequently do not earn any interest. Since 1954 the cash reserve ratio of the chartered banks has exceeded the statutory 8 per cent by only fractional amounts. It was 8.1 per cent at the end of 1961 and 8.2 per cent in June 1962. Furthermore, since 1956 the chartered banks have maintained, by voluntary agreement, liquid assets (statutory cash reserves, day-to-day loans, and Treasury bills) equal to at least 15 per cent of deposits. It should be noted that standards of statutory cash reserves and liquid assets apply equally to all deposits in Canadian dollars: demand, savings, and notice. The liquid asset ratio has on the average exceeded the 15 per cent target by about two percentage points; it was 18.8 per cent at the end of 1961 and 16.0 per cent in June 1962.20 Canadian banks are also required to maintain "adequate reserves against liabilities payable in foreign currencies."2 x The meaning of this requirement, however, has not been spelled out in regulations. Neither the word "adequate" nor the word "reserves" has been denned for this purpose. No specific assets have been defined as reserves. No requirement has been laid down stating whether reserves should be held in Canadian dollars or in foreign currencies. The net asset (or liability) position of Canadian banks in all foreign currencies is always small (Appendix III). Since 1958, for example, this has ranged from net assets of $149 million to net liabilities of $123 million; at the end of 1961, net foreign currency liabilities were $21 million, in relation to foreign currency assets of $3.6 billion.22 The net foreign asset or liability position of Canadian banks is defined on the basis of currencies and not on that of residence. Foreign currency assets include claims on Canadian residents denominated in currencies other than Canadian; and foreign currency liabilities include deposits by Canadians denominated in currencies other than Canadian. Of the total foreign currency assets of $3.6 billion at the end of 1961,19 per cent consisted of securities, the overwhelming part of which was short-term U.S. Government obligations, and 23 per cent of day-to-day, call, and short-term loans to brokers in New York ("street" loans). There is no published classification of these assets by maturity. Nevertheless, it is certain that, with respect to their foreign currency deposits, the Canadian banks exceeded by a wide margin the 15 per cent liquid asset ratio applicable to their deposit liabilities denominated in Canadian dollars. The New York City banks, on the other hand, are subject to a reserve requirement of 16% per cent against demand deposits and 4 per cent against time deposits. These requirements must be satisfied by deposits with the Federal Reserve System and by vault cash.23 Neither earn income. The competitive advantage, if any, derived from differences in reserve practices of Canadian chartered banks over New York City banks thus depends upon two elements: the classification of deposits and the foreign asset investment pattern of Canadian banks. A time deposit may be shifted from a U.S. bank to a

19 The 8 per cent reserve requirement was set in 1954. Prior to that date it was 10 per cent. 20 Canada Year Book, 1960, pp. 1127-40, and Bank of Canada, Statistical Sum- mary, June 1962, p. 336. 21 Bank Act of 1954, c. 48, s. 71(4). 22 There is no classification of these totals by currency. They include sums denominated in U.S. dollars, British West Indian and Latin American currencies, sterling, and other currencies. 28 For some years prior to October 1962, the reserve requirement against time and savings deposits was 5 per cent.

©International Monetary Fund. Not for Redistribution CANADIAN MARKETS FOR U.S. DOLLARS 313 Canadian bank; or a demand deposit in the former may become a notice deposit in the latter—but never the reverse. The additional income-earning possibilities may thus be greater for Canadian banks (on the assumption that they do not keep any reserves in nonincome-earning assets) over U.S. banks by as little as the income on the 5 per cent of U.S. dollar deposits which the U.S. bank has to keep in nonincome-earning assets as a reserve against time deposits, or as large as the income on the 16^ per cent of U.S. dollar deposits if, as is unlikely, the deposits are demand. Against this differential must be considered the highly liquid asset position maintained by the chartered banks against these volatile deposits, a position which tends to reduce average earnings. It is therefore difficult to conclude that Canadian agencies operating with U.S. dollar deposits have any significant competitive advantage by reason of differences in reserve requirements between the United States and Canada. The effect of these differences tends to be offset by differences in the foreign asset pattern of Canadian banks, dictated by the inherently less stable character of their foreign, especially U.S. dollar, deposits compared with their domestic ones.

III. Canada: Net Foreign Assets or Liabilities (-) of Chartered Banks, End of Month, 1958-June 1962x (In millions of Canadian dollars)

1958 1959 1960 1961 1962 January 87 44 -1 61 -55 February 108 47 6 54 -40 March 86 25 1 55 -82 April 71 -11 6 39 -54 May 78 -40 3 -6 -46 June 50 59 24 -40 -102 July 6 -14 15 -33 August 76 -60 19 -42 September 57 -123 24 -1166 October 149 -47 110 -100 November 58 -17 103 -7 December 88 21 71 21 Source: Bank of Canada, Statistical Summary, Financial Supplement, 1961, and Statistical Summary, June 1962. 1 The coverage of these figures is slightly greater than that of the figures in Appendix I.

Les marches canadiens du dollar E.U.

Resume Les operations des banques canadiennes en monnaies etrangeres, principalement en dollars E.U. se sont developpees a un rythme rapide ces dernieres annees. Les depots en monnaies etrangeres (engagements) ont augmente de $ E.U. 680 millions en 1961 et de $ E.U. 330 millions au cours des six premiers mois de 1962 pour atteindre le total de

©International Monetary Fund. Not for Redistribution 314 INTERNATIONAL MONETARY FUND STAFF PAPERS $ E.U. 3.700 millions. Environ 16 pour cent de ce total consistait en depots de banques. Le solde, correspondant aux depots des particuliers et des entreprises non bancaires, etait proportionnellement plus eleve qu'il ne Favait ete pendant plusieurs annees. Bien qu'une fraction importante de ces depots en monnaies etrangeres (principalement en dollars E.U.) corresponde aux transactions commerciales habituelles, les augmentations des dernieres annees s'ex- pliquent en grande partie par le fait que les banques canadiennes etaient disposees a payer des taux d'interet superieurs a ceux des banques de New York et qu'elles furent en mesure de trouver des debouches remunerateurs pour ces fonds supplementaires. Deux autres facteurs contribuerent en 1961 a stimuler Faccroissement des depots en dollars E.U., a savoir: Faugmentation de 5 a 15 pour cent de Fimpot a la source canadien sur les dividendes des societes et Fattente d'une modification du taux de change canadien qui provoqua la conversion en dollars E.U. de certains depots en dollars canadiens. L'augmentation en 1961 des depots aupres des autres banques et des prets autres que les prets a vue aux courtiers en valeurs a New York, a ete exceptionnellement importante; elle represente presque a elle seule Faccroissement des avoirs en monnaie etrangere ($ E.U. 716 millions). Les depots aupres des autres banques ont augmente de $ E.U. 431 millions pour atteindre le chiffre de $ E.U. 965 millions. Ils representaient des fonds places sur les marches d'Euro-dollar, a Londres surtout, mais egalement a Paris et dans d'autres centres europeens, soulignant encore davantage la part importante prise par les banques canadiennes dans Foffre d'Euro-dollars. Les autres prets se sont accrus de $ E.U. 208 millions pour atteindre le chiffre de $ E.U. 1.025 millions. Cette augmentation representait en grande partie des prets commerciaux consentis en dollars E.U. a des Societes ameri- caines et canadiennes au Canada et a des Societes aux Etats-Unis. Les avoirs en monnaies etrangeres (principalement en dollars) des banques canadiennes a la fin de 1961, etaient constitues de la fagon suivante: depots aupres d'autres banques, 28 pour cent; titres, essen- tiellement bons du Tresor americain, 19 pour cent; prets a vue et a court terme aux courtiers en valeurs, 23 pour cent; autres prets, 30 pour cent. Les creances sur le Gouvernement et les residents des Etats- Unis representaient plus de la moitie du total. Les statistiques canadiennes enregistrent les avoirs et engagements des banques commerciales en monnaies etrangeres, mais ne donnent aucune precision sur la repartition selon la monnaie ou selon la residence du titulaire. On estime neanmoins qu'en 1961 les depots detenus par des residents des Etats-Unis ont augmente d'au moins $ E.U. 150 millions, voire de $ E.U. 250 millions. On peut comparer

©International Monetary Fund. Not for Redistribution CANADIAN MARKETS FOR U.S. DOLLARS 315 ces chiffres avec le deficit de la balance des paiements des Etats-Unis de $ E.U. 2.400 millions annonce par le Departement du Commerce pour 1961.

Los mercados canadienses para el dolar de los Estados Unidos

Resumen Las transacciones de los bancos canadienses en divisas extranjeras, principalmente en dolares de los EE.UU., ban ido aumentando rapida- mente durante los ultimos anos. En 1961, los depositos en divisas extranjeras (pasivos) aumentaron en US$680 millones, y en el primer semestre de 1962, en US$330 millones, alcanzando un total de US$3.700 millones. De este total, el 16 por ciento mas o menos consistia en depositos de bancos y el resto, constituido por depositos de empresas no bancarias y de particulares, era la proportion mayor que se habia registrado por varies anos. Pese a que una parte importante de estos depositos en divisas (sobre todo en dolares de los EE.UU.), se efectuo tal como se hace habitual- mente entre el comercio y los clientes, los aumentos registrados durante los ultimos anos se ban debido en gran parte a que los bancos canadienses estaban dispuestos a pagar tasas de interes mas altas que los bancos de Nueva York, y a la pericia que dichos bancos despliegan para encontrar colocaciones productivas para esos fondos adicionales. Otros dos factores que contribuyeron en 1961 a impulsar el aumento de los depositos en dolares de los EE.UU., fueron: los impuestos canadienses retenidos sobre los dividendos de las sociedades (es decir, los que se deducen en la fuente misma), que fueron incrementados del 5 al 15 por ciento, y algunos depositos en dolares canadienses que ante la expectativa de que pudiera modificarse el tipo de cambio del dolar canadiense, fueron convertidos en dolares de los EE.UU. En 1961, los aumentos registrados en los depositos constituidos en otros bancos y en los prestamos, distintos de los concedidos para negocios bursatiles (a la vista y a corto plazo para corredores y agentes de bolsa en Nueva York), fueron excepcionalmente grandes y abar- caron practicamente el total del aumento registrado en los activos en divisas extranjeras (US$716 millones). Los depositos en otros bancos aumentaron en US$431 millones, alcanzando un total de US$965 millones. Dichos depositos consistian en fondos colocados en los -mercado del "Eurodolar," especialmente en el mercado de Londres,

©International Monetary Fund. Not for Redistribution 316 INTERNATIONAL MONETARY FUND STAFF PAPERS pero en parte tambien en el de Paris y en otros centres financieros del continente europeo. Estos depositos acrecentaron aun mas la im- portancia del papel que los bancos canadienses desempenan como proveedores de "Eurodolares." Los prestamos corrientes diversos aumentaron en US$208 millones, o sea que alcanzaron un total de US$1.025 millones. Este aumento representa en gran parte los prestamos comerciales en dolares de los EE.UU. otorgados a sociedades americanas y canadienses en el Canada y a sociedades en los Estados Unidos. Los activos de los bancos canadienses en divisas extranjeras, mas que todo en dolares, a fines de 1961, consistian en 28 por ciento de depositos en otros bancos; 19 por ciento de valores, principalmente valores a corto plazo del gobierno de los Estados Unidos; 23 por ciento de prestamos bancarios para negocios bursatiles; y 30 por ciento de prestamos diversos. Mucho mas de la mitad del total se concretaba a las obligaciones del gobierno de los Estados Unidos y de residentes de este ultimo pais. Las estadisticas canadienses registran los activos y pasivos en divisas extranjeras de los bancos comerciales sin especificar su distribu- cion por divisas extranjeras o por residencia del titular. No obstante, se calcula que en 1961 los depositos mantenidos por residentes de los Estados Unidos registraron un aumento de US$150 millones, por lo menos, y es posible que esa cifra haya llegado a US$250 millones. Podrian cotejarse estas cifras contra la de US$2.400 millones, que segun el informe rendido por la Secretaria de Comercio de los Estados Unidos, represento el deficit en la balanza de pagos de dicho pais durante el ano 1961.