Back Matter

Back Matter

International Monetary Fund
Published Date:
April 2005
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The Guidelines can be found on the IMF’s website, A summary is contained in Appendix 1 to this document.

The focus in this document is on management of reserves by a monetary authority or a central bank acting as a principal or as an agent for another repository of reserves such as an exchange fund. A number of countries also maintain separate stabilization or national savings funds often related to nonrenewable resources. The management of such funds has not been included in the sample case studies.

Appendix 3 presents the countries that have participated in the preparation of this document and the diverse nature of their economic and financial conditions.

For insights on reserve adequacy, which is outside the scope of the Guidelines, see the following papers available on the IMF website: Issues in Reserve Adequacy and Management:; Debt- and Reserve-Related Indicators of External Vulnerability:;

In Oman, foreign currency revenues of the government in excess of budgeted prices of oil are held in a fund known as the State General Reserve Fund. This portion of the external reserves of the country is owned and managed directly by the government and may be utilized in case of a budget shortfall. There is an institutional arrangement for consultation between the central bank and the fund on various investment-related issues, such as composition of benchmark and portfolio performance.

Details can be found at the following website:

In addition, the Norges Bank also manages the government’s Petroleum Fund as a separate portfolio to Norway’s official international reserves.

The government has also entrusted the management of the foreign exchange equalization fund to the central bank.

Specific details for SDDS subscribing countries can be found on the IMF website: For countries that have their template data redisseminated by the IMF, the data, in a common format and in a common currency, are accessible on the IMF’s website at The website also provides links to subscribing countries’ websites.

The International Accounting Standards Board (IASB) publishes its standards in a series of pronouncements called International Financial Reporting Standards (IFRS). It has also adopted the body of standards previously issued by the International Accounting Standards Committee. Those pronouncements continue to be designated “International Accounting Standards” (IAS).

See paragraphs 47 to 52 on allocation of roles and responsibilities for reserve management for additional information on the laws governing institutional arrangements in the participating countries.

For reserves, the guidelines prepared by Governor’s staff are set by the Executive Board or the Governor. For the Petroleum Fund, the guidelines are given by the Ministry of Finance, except supplementary guidelines for credit risk, which are set by the Governor.

The working capital bucket covers immediate requirements, the intermediate liquidity bucket covers one year’s requirements, and the stable liquidity bucket is composed of reserves that have the least probability of being drawn.

For more discussion on efficient liquidation of assets, refer to paragraphs 150–151.

An account of the RBA’s approach to risk management is detailed in the Bank’s 2000/01 Annual Report.

Prior to the performance review in 2000, management had discretion to vary the portfolio as much as 20 percentage points either side of the benchmark.

First, the TBT is virtually all cash. Then LIT invests only in short-term bonds and money market instruments. Finally, the Pula Fund is fully diversified.

The External Asset Management Program was implemented in October of 2000 with two main objectives: to keep Depin’s team updated with the best investment practices available in the market and to be used as a reference for the performance evaluation of the internal active portfolio.

Liquid reserves consist of marketable securities and deposits denominated in U.S. dollars, euros, and yen.

In addition, the Department of Finance publishes an annual Debt Management Report and Debt Management Strategy Report, which provide an overview of foreign reserve management operations.

Canada was one of the first countries to fully meet the requirements of the IMF’s and G–10’s new format for presentation of international reserves data.

See De Leon, J., 2000–2001, “The Bank of Canada’s Management of Foreign Currency Reserves,” Bank of Canada Review; and Rochette, M., 2001–2002, “Risk Management in the Exchange Fund Account,” Bank of Canada Review.

Bank for International Settlements, 2001, A survey of stress tests and current practice at major financial institutions (April).

Johnson-Calari, Jennifer, “Risk Management Practices at the World Bank: Global Liquidity Portfolios,” Risk Management for Central Bankers (London: Central Banking Publications), defines the liquidity requirements as stable, discretional, and operational.

In 1991, the central bank defined target zones within which the market determined the exchange rate, at first through the issuance of exchange certificates until 1994.

Bussiere, Matthieu, and Christian Mulder, 1999, “External Vulnerability in Emerging Market Economies: How High Liquidity Can Offset Weak Fundamentals and the Effects of Contagion,” IMF Working Paper 99/88.

The Economic Research Department, using the Hodrick-Prescott methodology, estimated long-term component of the current account and volatility.

The main difference between FASB rules and the Colombian Superintendency of Banks has to do with the procedure involved with the valuation of derivative products, resulting in marginal differences.

After five years the employee receives a salary increase that gradually reaches a level equivalent to 20 percent of the average salary paid by the industry.

The central bank is at present working on a dynamic stress test model for the balance of payments in order to determine more precisely its liquidity requirements over a one-year period. Under the current procedure liquidity requirements over a one-year period may be overestimated given that the historical volatility of the reserves reflects the prolonged period in which the country was under a crawling peg and a managed float exchange regime.

Since this is a reserve adequacy objective, a reserve account was created in the balance sheet of the institution composed of the foreign exchange profits resulting from the non-U.S. dollar exposure of the portfolio in terms of the U.S. dollar. In the case of losses this reserve account is used.

These risk-adjusted measures are implemented following the RiskMetrics methodology.

The Brinson-Fachler model measures attribution in terms of asset allocation, security selection, and an interaction effect.

Risk Contribution of nthasset=h(n)*VectorofMarginalVolatilityσ, where h(n) is the nth element of the position vector of Marginal Volatility = Σh/σ. (Σ: Covariance matrix) (h: Portfolio position vector).

With special attention to the ECB and the connected European NCBs.

For a subsequent substantive discussion on the issue, refer to the Mid-Term Review of Monetary and Credit Policy for 2002–2003 (paragraphs 30–34), RBI Bulletin, November 2002, available on the RBI website,

However, under the Bank’s current policy of nonintervention, “conduct” of intervention policy is limited to information-gathering activities, so long as the exchange rate is within the band.

Other than the use of short-term repurchase agreements for tactical liquidity management.

In brief, the Bank is permitted—within the framework of the reserves—to own gold, foreign currency, and securities that are issued or fully guaranteed by a foreign government, to invest in bank deposits and CDs, and to utilize derivatives such as futures and options, provided the underlying asset is of a type that the Bank is permitted to own.

This system was based on the 1979 study by A. Ben-Bassat, The Management of Foreign Exchange Reserves, Israel’s Experience, Research Department, Bank of Israel (Hebrew), an abridged English version of which was published in the May 1981 Bank of Israel Economic Review.

This section should be read in conjunction with paragraphs 639–642, above.

Chapter VII, Article 51, subindex III of Banco de Mexico’s Law (BDML) states: “In April of each year, a report on the implementation of monetary policy during the second semester of the previous year and, in general, on the activities of the Bank throughout said year, within the context of the domestic and international economic situation.”

The liquidity portfolio considers investments with maximum maturities of three months (although investments in instruments such as U.S. treasuries and U.S. agencies can be made liquid on a same-day basis).

This funding arrangement requires the Bank to spread its borrowing requirements to minimize its exposure to refinancing risk—i.e., minimize the risk that the Bank has to finance a substantial portion of reserves at a time when an extreme event in international markets has a significant adverse effect on borrowing (refinancing) costs.

The Bank’s Board is about to undergo a restructuring—a non-executive director will replace the Governor as Chair of the Board, and Deputy Governors will no longer hold Board positions. This follows an independent review of the operation of monetary policy in New Zealand.

Note, the effect of translating reserves management performance back into NZD is not material (but is separately disclosed) because foreign reserves are funded by foreign currency liabilities.

Guidelines and performance reports for the foreign exchange reserves and various funds managed by the Bank and invested in the international capital markets are presented on Norges Bank’s website (

Until 2000 the Executive Board delegated to the Governor to define the benchmark portfolios and the limits for relative risk (tracking error), as well as credit risk (minimum rating level). These fundamental limits are now placed with the Board itself.

For the reserves, the guidelines prepared by the Governor’s staff are set by the Executive Board or the Governor. For the Petroleum Fund the guidelines are given by the Ministry of Finance, except supplementary guidelines for credit risk, which are set by the Governor.

Most of the web pages are available in English.

In simplified terms, a tracking error of 1 percentage point means that the actual difference between the returns on the benchmark and the actual portfolio will be between −1 and +1 percentage points in 2 out of 3 years on average.

The detailed methodology for calculating the returns on the various portfolios Norges Bank manages are described in the appendix of the Government Petroleum Fund quarterly report. The report is accessible on our website.

We define “information ratio” as the average monthly excess return over time divided by the standard deviation. This figure is annualized.

In addition to the United Kingdom’s Official Reserves, the Bank of England manages its own holdings of foreign currency assets and gold. As set out in the Chancellor of the Exchequer’s letter of 6 May 1997 to the Governor of the Bank of England, the Bank can intervene in support of its monetary policy objective using the Bank’s own resources rather than those of the EEA. The Bank of England Act 1998 sets out rules governing the disclosure of any such intervention.

Refers to entities that integrate government liabilities and reserve assets.

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