Chapter

1. Overview of the Reserves Data Template

Author(s):
International Monetary Fund. Statistics Dept.
Published Date:
October 2013
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1 International financial crises, such as in the late 1990s, have underscored the importance of disseminating comprehensive information on countries’ international reserves and foreign currency liquidity1 on a timely basis. Deficiencies in such information made it difficult to anticipate and respond to crises by obscuring financial weaknesses and imbalances (see Box 1.1). Moreover, both the complexity and the importance of such information have increased as a result of the ongoing globalization of financial markets and financial innovation. The international financial activities2 that countries’ central banks and government entities undertake occur in myriad forms, involve multiple domestic and foreign entities, and span locations around the globe. To assess countries’ foreign currency liquidity requires supplementing data on international reserves that cover largely cross-border and balance-sheet activities with those on other foreign currency positions and off-balance sheet activities.

2 Timely disclosure of such information serves a number of purposes. It can strengthen the accountability of the authorities by better apprising the public of the authorities’ policy actions and risk exposure in foreign currency. It can spur a more timely correction of unsustainable policies and possibly limit the adverse effects of contagion in times of financial turbulence. It can allow market participants to form a more accurate view of the condition of individual countries, of the vulnerability of regions, and of possible international consequences, thereby limiting uncertainty and the associated volatility in financial markets. Enhanced data transparency also can assist multilateral organizations to better anticipate emerging needs of countries.

An Innovative Data Framework to Help Strengthen the International Financial Architecture

3 Information on international reserves and foreign currency liquidity will best inform public and private decision making if countries disclose it in a coherent, common framework. As part of the effort to strengthen the architecture of the international financial system, the International Monetary Fund (IMF) and a working group of the Committee on the Global Financial System (CGFS) of the Group of Ten central banks in 1999 developed such a framework in the form of a data disclosure template for countries’ use.3

4 The Reserves Data Template, which is shown in Appendix 2, was devised in consultation with country authorities, statistical compilers, international organizations, market participants, and users. It reflects the efforts of all to balance the anticipated benefits of increased data transparency and potential costs of adding to the authorities’ reporting burden. This first revision to the 2001 Guidelines takes account of the updates included in the Balance of Payments and International Investment Position Manual, sixth edition (BPM6), and the changes introduced to the original template in 2009.4

Box 1.1Data Deficiencies as Revealed by Financial Crises in the 1990s

Financial crises in the 1990s revealed a number of data deficiencies, including:

Incomplete information on reserve assets

  • Pledged assets (for example, assets used as collateral for third party’s loans) frequently were not identified, and assets of a similar nature, such as securities lent and repurchase agreements,1 often were included in reserve assets without separate identification, distorting information on the liquidity positions of the authorities.

  • Deposits held in financially weak domestic banks and their foreign affiliates, which were not available for use in a crisis, often were included in reserve assets, leading to overestimation of reserves.

  • Valuation practices could depart significantly from market values, complicating assessments of the realizable value of reserve assets.

  • Coverage of international reserve assets varied among countries, impeding cross-country comparisons.

Lack of publicly available information on official short-term foreign currency obligations

  • Public information was lacking in many countries on the off-balance-sheet activities of the authorities that could affect foreign currency resources. An absence of data on forward commitments of foreign exchange under financial derivative contracts,2 for example, could result in understatement of encumbered reserve assets.

  • Lack of information on the authorities’ financial derivative activities (for example, in foreign currency futures and forwards) could also obscure the risk exposure of government entities, which could lead to sudden sharp drains on foreign currency resources. Significant drains could occur, for example, in the event of changes in exchange rates. Similarly, unavailability of information on options written and bought by the authorities could hinder assessment of potential inflows and outflows of foreign currency when the options were exercised.

  • Inadequate information on actual and potential foreign currency liabilities of the monetary authorities and central government could hamper monitoring of drains on foreign currency resources. Such inadequacies included incomplete information on principal and interest payments on loans and bonds falling due in the short term, on the authorities’ foreign exchange guarantees, and on contractual provisions in debt instruments that allow creditors to demand early payment in the face of changing economic conditions.

  • Publicly available information on reserves generally did not take account of unused unconditional lines of credit, which could represent either a complementary source of foreign exchange in times of need or a potential drain on such resources.

1 Securities lent and repurchase agreements are discussed in detail in Chapter 2 and Chapter 5.2 Forwards, futures, and options are financial derivative instruments. Various aspects of these instruments are discussed later in this chapter and in all other chapters of these guidelines.

5 The Reserves Data Template is comprehensive; it integrates the concepts of international reserves and foreign currency liquidity in a single framework. In addition to covering the traditional balance-sheet information on international reserves and other selected external assets and liabilities of the authorities, the Reserves Data Template takes account of their off-balance-sheet activities5 (such as in forwards, futures, and other financial derivatives, undrawn credit lines, and loan guarantees). It also notes future and potential inflows and outflows of foreign exchange associated with balance-sheet and off-balance-sheet positions. Moreover, it includes data intended to illustrate how liquid a country’s foreign currency assets are (such as the identification of assets pledged and otherwise encumbered) and to reveal a country’s risk exposure to exchange rate fluctuations (including that relating to options contracts and indexed instruments).

6 The Reserves Data Template is forward looking. It covers not only the authorities’ foreign currency resources on a reference date, but also inflows and outflows of foreign exchange over a future one-year period. The one-year horizon is consistent with the convention of defining “short-term” to cover a 12-month period.

7 The rest of this chapter elaborates on the underlying framework of the Reserves Data Template and delineates its key characteristics and structure. Chapters 2 through 5 provide guidelines on how the data called for in the various sections of the Reserves Data Template should be reported.

Concepts of International Reserves and Foreign Currency Liquidity

8 The underlying framework of the Reserves Data Template is built on two related concepts, international reserves and foreign currency liquidity, which are integral to the structure and coverage of the template. The two concepts and their linkages are explained below.

International Reserves (Reserve Assets)

9BPM6 sets forth the underlying concept of international reserves. A country’s international reserves refer to “… those external assets that are readily available to and controlled by monetary authorities for meeting balance of payments financing needs, for intervention in exchange markets to affect the currency exchange rate, and for other related purposes (such as maintaining confidence in the currency and the economy, and serving as a basis for foreign borrowing)” (BPM6, paragraph 6.64).6 As defined, the concept of international reserves is based on the balance-sheet framework, with “reserve assets” being a gross concept. It does not include external liabilities of the monetary authorities.7 However, for further analysis, BPM6 defines reserve-related liabilities and provides an additional analytical framework for analyzing foreign currency liquidity of the authorities.

10 Underlying the concept of international reserves is the distinction between residents and nonresidents,8 with reserve assets representing selected claims of the monetary authorities on nonresidents. The reserve assets of countries in a currency union should include only those assets that represent claims on nonresidents of the currency union and otherwise meet the definition of reserve assets (see BPM6, Appendix 3, paragraph A3.29).

11 Also integral to the concept of international reserves are the provisos “readily available to” and “controlled by” the monetary authorities. That is, only assets that meet these criteria can be considered reserve assets.

12 Reserve assets include monetary gold, special drawing rights (SDRs), reserve position in the IMF, and other reserve assets.

13Chapter 2 explains in detail the concept and coverage of reserve assets as set forth in the BPM6. It also discusses how the terms “readily available” and “controlled by” can be invoked in practice to identify reserve assets.

14 In the Reserves Data Template, reserve assets are often referred to as “official reserve assets.”

Foreign Currency Liquidity

15 Foreign currency liquidity is a broader concept than that of international reserves. In the Reserves Data Template, foreign currency liquidity has two dimensions. It refers to (1) the foreign currency resources (including both official reserve assets and other foreign currency assets) at the disposal of the authorities that readily can be mobilized to meet demands for foreign exchange, and (2) both predetermined (known or scheduled) and contingent (potential) inflows and outflows (referred to hereafter as “net drains”)9 of foreign currency resources resulting from short-term10 foreign currency liabilities and off-balance-sheet activities of the authorities. Underlying the liquidity concept is the notion that prudent management of this position requires managing foreign currency assets along with foreign currency obligations to minimize the vulnerability to external shocks.

16 The concept of foreign currency liquidity is broader than that of international reserves in at least three respects: (1) while reserve assets refer to external assets of the monetary authorities, foreign currency liquidity concerns foreign currency resources and drains on such resources of the monetary authorities and the central government, referred to hereafter in combination as “the authorities,” as opposed to “monetary authorities” (see next section on “institutions covered”); (2) while reserve assets represent the monetary authorities’ claims on nonresidents, foreign currency liquidity relates to the authorities’ foreign currency claims on and obligations to residents and nonresidents; and (3) while the concept of reserve assets is based on the balance-sheet framework, the concept of liquidity encompasses inflows and outflows of foreign currency that result from both on-and off-balance-sheet activities of the authorities.

17 The concept of foreign currency liquidity is also broader than the notion of net international reserves. Although there is not a standard statistical definition of net international reserves, this term is often defined to refer to reserve assets net of outstanding reserves-related liabilities (usually, only short-term liabilities are included in the calculation) at a point in time, with such assets and liabilities representing the monetary authorities’ readily available claims on and liabilities to nonresidents. Foreign currency liquidity takes account of foreign currency drains on existing foreign currency resources arising from the authorities’ financial activities vis-à-vis residents and nonresidents in the coming 12-month period. Information on whether a country’s short-term foreign currency drains are significant relative to its foreign currency resources could be used, along with other information, to analyze the country’s external vulnerability.

18 To enhance the transparency of data on countries’ international reserves and their foreign currency liquidity, the template calls for comprehensive disclosure of the authorities’ (1) official reserve assets, (2) other foreign currency assets, (3) predetermined short-term net drains on foreign currency assets, (4) contingent short-term net drains on foreign currency assets, and (5) other related information. As discussed later in this chapter, these data components form the structure of the Reserves Data Template.

19 A schematic presentation of the framework of the Reserves Data Template, showing the linkages between the concepts of international reserves and foreign currency liquidity, is provided in Figure 1.1.

Figure 1.1.Linkage between Concepts of International Reserves and Foreign Currency Liquidity

(a schematic presentation)

Key Features of the Reserves Data Template

The Reserves Data Template sets forth the institutions that are to be covered and their financial activities over a certain time horizon in order to facilitate analysis of the authorities’ foreign liquidity and risk exposure.

Institutions Covered

20 The Reserves Data Template is intended to apply to all public-sector entities responsible for, or involved in, responding to currency crises. In practice, this coverage includes the monetary authorities, which manage and hold the international reserves, and the central government (excluding social security funds),11 which, together with the monetary authorities, account for most of the official foreign currency obligations. Demands for the authorities’ foreign currency resources also could fall upon other entities in the public sector. These other public entities generally are not covered in the template because of the difficulties of obtaining the data from these entities on a timely basis. Nonetheless, these other public-sector entities should be included if their foreign currency activities are of material significance. Where data on such other entities are included, they should be clearly indicated in country notes accompanying the data. The coverage of Special Purpose Government Funds, sometimes known as Sovereign Wealth Funds (SWFs), in the Reserves Data Template should be assessed and their activities should be recorded based on the requirements of the Guidelines.12 So, if the activities of Special Purpose Government Funds are on the books of the central bank or an agency of the central government, then, in the absence of legal or administrative impediments, the foreign exchange activities of the Special Purpose Government Funds should be recorded in the Reserves Data Template consistent with other foreign currency activities of the central bank and central government.13 If the Special Purpose Government Fund is a long-term fund with a separate legal identity, owned and controlled by the central government, and its resources are available for balance of payments purposes, the liquid foreign exchange assets of the Fund should be included in Section I, but as it has a separate legal identity, its other foreign exchange activities are not included in the Reserves Data Template unless they pertain to the management of reserve assets.

21 Consistent with the BPM6 (paragraph 6.66), the Reserves Data Template defines “monetary authorities” as “a functional concept” encompassing the central bank (and other institutional units such as the currency board, monetary agency, etc.) and certain operations usually attributed to the central bank but sometimes carried out by other government institutions or commercial banks. Such operations include the issuance of currency; maintenance and management of international reserves, including those resulting from transactions with the IMF; and the operation of exchange stabilization funds. In some countries and currency unions, the monetary authority may be defined as including central banks only (such as the Eurosystem14 in the European Monetary Union); however, the inclusion in the Reserves Data Template of short-term foreign currency liabilities of central governments is important for liquidity analysis.

22 In conformity with existing international guidelines, the Reserves Data Template defines the central government to include a central group of departments or ministries that make up a single institutional unit; plus in many countries, other units operating under the authority of the central government with a separate legal identity and enough autonomy to form additional government units (Government Finance Statistics Manual (GFSM 2001) paragraph 2.50). The central government excludes state and local government. Social security funds could be merged with their appropriate level of government or distinguished all together as one subsector of the general government sector (2008 System of National Accounts (2008 SNA), paragraphs 4.128–4.132); the requirement to disclose relevant information on a timely basis precludes the inclusion of these elements in the data to be reported. Social security funds are “social insurance schemes covering the community as a whole, or large sections of the community, that are imposed and controlled by government units” (2008 SNA, paragraph 4.124).

23 It is preferable if a single Reserves Data Template is prepared for each country covering foreign currency activities of both the monetary authorities and the central government (excluding social security funds) (see also Chapter 2).

Financial Activities Covered

24 For the purpose of liquidity analysis, the Reserves Data Template specifies that only instruments settled (i.e., redeemable) in foreign currency are to be included in resources and drains (Sections I through III of the Template). The rationale is that, as concerns future inflows and outflows of foreign currency arising from the authorities’ contractual obligations, only instruments settled in foreign currency can directly add to or subtract from liquid foreign currency resources. Other instruments, including those denominated in foreign currency or with a value linked to foreign currency (such as foreign currency options) but settled in domestic currency, will not directly affect liquid resources in foreign exchange.15

25 Instruments denominated in foreign currency or indexed to foreign currency but settled in domestic currency (and other means) are to be reported as memorandum (memo) items in Section IV of the Reserves Data Template. These instruments can exert substantial indirect pressure on reserves during a crisis, particularly when expectations of a sharp depreciation of the domestic currency lead holders to exchange the instruments for foreign currency. Among such instruments are domestic currency debt and derivatives that are indexed to foreign currency and settled in domestic currency.

Treatment of Financial Derivatives Activities16

26 The Reserves Data Template covers various aspects of financial derivative activities, including (1) predetermined foreign currency flows pertaining to the authorities’ forwards (including nondeliverable forwards (NDFs)), futures, and swap contracts; (2) potential transactions arising from options positions; and (3) the net, marked-to-market value of outstanding financial derivative contracts. The extensive coverage of financial derivatives activities in the template is based on the fact that measures of risk associated with such activities are relevant only when constructed on an overall portfolio basis, taking into account notional (and nominal) values and cash market positions, and offsets between them.

27 The focus of the Reserves Data Template is on financial derivatives settled in foreign currencies. (Nondeliverable forwards, futures, and options settled in domestic currency are to be disclosed as memo items.) Such information is especially important in times of crisis when there is strong pressure to devalue the domestic currency and when considerable official obligations in foreign currencies are already outstanding.

28 Because inflows and outflows of foreign currency related to the authorities’ financial derivative activities may involve different counterparties, risks, and maturities, the Reserves Data Template calls for reporting separate information on long and short positions. Long positions correspond to inflows that augment the foreign currency resources of the authorities; short positions represent outflows that diminish such resources.

29 The net, marked-to-market values of financial derivatives to be reported in the Reserves Data Template are those of outstanding contracts that will be settled in foreign currency. In some instances, derivatives should be reported on a marked-to-market value basis, and in other instances, on a nominal/notional value basis (see specific instructions).

30 The Reserves Data Template incorporates the results of “stress testing” to assess the authorities’ risk exposure to fluctuations in exchange rates (the provision of this information is encouraged, not prescribed, for subscribers to the IMF’s Special Data Dissemination Standard). Stress testing involves examining the effect of large movements in key financial variables on a portfolio. It is different from historical simulation in that it may cover situations absent from the historical data. Rigorous stress testing can alert the authorities to the risk exposure they face. In the Reserves Data Template, stress testing is applied to the authorities’ options positions.

31 Under the Reserves Data Template’s “stress test,” information on the value of “in-the-money” options should be reported under several exchange rate scenarios. “In-the-money” options refer to option contracts that would be exercised on the basis of the assumptions specified in the scenarios—that is, options which, when exercised, could entail foreign currency flows.17 Within the “stress test,” notional values of the options should be reported in Section III of the Reserves Data Template, except that, in the case of cash-settled options,18 the estimated future cash flow should be reported; see Appendix 4.

Valuation Principles

32 In the Reserves Data Template, most values reported in Sections I and IV should reflect market values, that is, the values of foreign currency resources that could be obtained in the market if the instrument were liquidated; that is, at market prices on the reference date. In cases where determining market values on a frequent basis is impractical, approximate market values can be substituted during the intervening periods (see Chapter 2 for details).

33 Drains on foreign exchange resources, including predetermined and contingent drains, are to be valued in nominal terms; in this context, this means the cash-flow value when the currency flows are due to take place. Generally, this means the principal repayments reflect the “face value” of the instrument and the interest payments reflect contractual amounts due to be paid.19

34 Inflows and outflows of foreign currency related to forwards (including NDFs), futures, and swaps are to be reported at nominal or notional values. For options, the Reserves Data Template requires disclosure of the notional value. Market values of outstanding financial derivative contracts (i.e., positions) are to be disclosed on a net, marked-to-market basis (see also Chapter 5).

Time Horizon

35 Consistent with the focus on liquidity, the horizon covered in the Reserves Data Template is short term. For practical purposes, “short-term” is defined as “up to and including one year.”20 Finer breakdowns of time horizons of “up to one month,” “more than one month and up to three months,” and “more than three months and up to and including one year” are included to enable policymakers and market participants to assess the authorities’ liquidity positions within the one-year time frame.

36 The term “residual maturity” is used in the Reserves Data Template to indicate the types of “short-term” foreign currency flows to be reported for the various subperiods of the one-year time horizon. Residual (remaining) maturity is commonly referred to as the time remaining until the final repayment of the outstanding obligations. Accordingly, applying the “residual maturity” concept, one should include (1) flows emanating from short-term instruments with original maturities of one year or less, and (2) flows arising from instruments with longer original maturities whose residual (remaining) maturity is one year or less. In addition, in the Reserves Data Template, this concept also includes principal and interest payments falling due within one year on instruments with original maturities of more than one year that are not already covered in (2).

Other Reporting and Dissemination Considerations

37 The Reserves Data Template does not specify the currencies (domestic, U.S. dollar, euro, or others) in which the data are to be reported. It is recommended, however, that compilers report data in the Reserves Data Template in the same currency they normally use to disseminate data on official reserve assets. This will enhance the analytical usefulness of data disclosed in the Reserves Data Template and promote reconciliations among different data sets. To facilitate data comparability over time and among countries, it is preferable that the reporting currency be a reserve currency or, at a minimum, a stable one.

38 The reference date in the Reserves Data Template is the end date of the reporting period (e.g., the reference date for September refers to the last day of September). For position data, data to be reported refer to outstanding stocks of assets (and liabilities, as applicable) on that date. For flow data, data to be reported refer to the anticipated amount on the reference date of future outflows and inflows of foreign currency, associated with known predetermined or contingent positions outstanding on the reference date. Where appropriate, the convention of applying a plus (+) sign should be used to denote assets, long positions, and inflows of foreign currency, and a minus sign (–) should be used to denote liabilities, short positions, and outflows of foreign currency.

39 In determining outstanding foreign currency resources and flows, it is recommended that transaction dates (not settlement dates) be used. Transaction dates are the preferred basis of recording because the time lags for countries’ settlement practices differ and at that time economic exposures change. Where settlement dates are used, they should be applied consistently from period to period and mentioned in country notes accompanying the data (see also paragraph 3.55 of BPM6).

40 The Reserves Data Template is designed for use in diverse economies, including dollarized and economies with currency boards. Therefore, not all items in the Reserves Data Template are applicable to all countries. Accordingly, items that are not applicable (i.e., in which there are no stock positions or transactions) should be left blank in the Template. Where the value of an item is zero, an entry denoting zero should be shown.

41 In view of the varied information called for in the Reserves Data Template, data in the different sections of the Template are not to be added to or subtracted from one another to derive a single number for the whole Template. Various analyses, however, can be made by examining data reported by countries in the various sections of the Template.

42 To enhance the analytical usefulness of the data and to minimize the prospect that users will misinterpret information reported in the Reserves Data Template, it is recommended that country-specific exchange rate arrangements (such as the operation of a currency board or the implementation of dollarization), special features of reserves management policy (including the matching of maturities of foreign currency assets and liabilities and the use of hedging techniques), and accounting practices and statistical treatments of certain financial transactions (as discussed later throughout this document) be disclosed in country notes accompanying the data, where appropriate. It would also be useful to disclose the major sources of funds for reserve assets and other foreign currency assets, which may include foreign currency earnings from exports, issuance of foreign currency bonds, and foreign currency deposits from domestic banks (see also A5.5 in Appendix 5). Some countries present country notes in the form of a customized Section V. However, the Reserves Data Template as approved by the IMF Executive Board does not include a Section V.

43 The Reserves Data Template can be disseminated to the public on the Internet or through other media. In addition, the IMF has established a common database for the collection of reserves template data disseminated by the IMF member countries, and the redissemination of these data (in time series format) through the IMF’s external Website. Collection and dissemination of the data by the IMF are based on the structure of the Reserves Data Template presented in Appendix 2. Participation is voluntary. The redissemination of the template data by the IMF does not constitute endorsement of the quality of the data by the IMF (see: http://www.imf.org/external/np/sta/ir/colist.htm).

44 Given the comprehensive coverage of the Reserves Data Template, various data sources need to be tapped to collect the requisite information. Close collaboration between the monetary authorities and other relevant government agencies is a prerequisite for timely and accurate reporting of the template data.

Structure of the Reserves Data Template

45 The Reserves Data Template has four sections. Section I covers information on the authorities’ foreign currency resources, including official reserve assets and other foreign currency assets. Sections II and III consider data required to reveal the net drains on such foreign currency resources in the short term. Section IV specifies the memo items on which supplementary information is needed.

46 The types of data to be reported differ in the four sections. Section I concerns stock (position) data; Sections II and III cover foreign currency inflows and outflows associated with various on-balance-sheet and off-balance-sheet positions. Section IV provides supplementary information on positions and flows.

47 Specifically, Section I of the Reserves Data Template deals with the composition and magnitude of a country’s foreign currency resources, including the authorities’ holdings of various types of financial instruments. Reserve assets are distinguished from other foreign currency assets, facilitating reconciliation between existing data countries disseminate on international reserves and those in the Reserves Data Template.

48 Sections II and III, respectively, address predetermined and contingent drains (demands) on foreign currency resources in the short term in view of their different nature. Examples of predetermined drains on foreign currency resources include those relating to amortized debt service payments and known commitments in forwards, futures, and swaps contracts. Examples of contingent drains are those associated with government guarantees, options, and other contingent liabilities, such as term deposits held at the central bank by depositors, which are redeemable, subject to payment of penalties. The separate reporting of predetermined and contingent drains on foreign currency resources is intended to avoid a mingling of the authorities’ actual and contingent short-term liabilities.

49 Section IV provides information on (1) positions and flows not disclosed in Sections I through III but deemed relevant for assessing the authorities’ reserves and foreign currency liquidity positions and risk exposure in foreign exchange (for example, the domestic currency debt indexed to foreign currency); and (2) additional details on positions and flows disclosed in Sections I through III (for example, the currency composition of reserves and pledged assets included in reserves).

50 Financial derivatives are explicitly covered in four different sections of the template: The disclosure of inflows and outflows of foreign currency associated with forwards and futures in nominal/notional values is addressed in Section II; notional values of options positions are covered in Section III; net, marked-to-market values of various types of financial derivatives are to be disclosed in Sections I and IV; and Section IV also covers some information on the notional value of financial derivatives.

Structure of these Guidelines

51Chapter 2 provides guidance on comprehensive coverage of the authorities’ foreign currency resources, comprising coverage of official reserve assets and of other foreign currency assets.

52Chapter 3 delineates ways to report on predetermined short-term net drains on the authorities’ foreign currency resources, including those associated with loans and securities, forward commitments, and other foreign currency inflows and outflows.

53Chapter 4 discusses how contingent demands on such foreign currency resources are to be disclosed, including those related to government guarantees, securities with embedded options, and undrawn, unconditional credit lines. It also sets forth the steps to be taken to report on the notional values of options positions and explains how stress testing can be undertaken.

54Chapter 5 presents information covering positions and flows not disclosed elsewhere in the Template but deemed relevant for assessing the authorities’ reserves and foreign currency liquidity positions and risk exposures, including short-term domestic debt indexed to foreign currency, pledged assets, market and notional values of financial derivatives, other relevant activities in foreign currency (in particular, securities lent and collateralized under repurchase agreements), and currency composition of reserve assets.

55 Item-by-item guidelines are provided for each section of the Reserves Data Template in the respective chapters. Table 1.1 presents a reference index showing where the item-by-item guidelines can be found in this document.

Table 1.1Reference Index for Item-by-Item Guidelines
Paragraph Number1
I.A. Official reserve assets
(1) Foreign currency reserves77
(a) Securities79
(b) Total currency and deposits91
(2) IMF reserve position96
(3) SDRs97
(4) Gold (including gold deposits and gold swapped)98
(5) Other reserve assets102
I.B. Other foreign currency assets119
II. Predetermined short-term net drains
(1) Loans, securities, and deposits159
(2) Forwards, futures, and swaps167
(3) Other178
III. Contingent short-term net drains
(1) Contingent liabilities191
(a) Collateral guarantees193
(b) Other196
(2) Securities with embedded options199
(3) and (4) Undrawn, unconditional credit lines206
(5) Short and long positions in options222
IV. Memo Items
(1) (a) Short-term domestic currency debt242
(b) Financial instruments denominated in foreign currency and settled by other means243
(c) Pledged assets251
(d) Securities lent and on repo252
(e) Financial derivative assets (net)259
(f) Financial derivatives that have a residual maturity greater than one year271
(2) Currency composition of reserves273

56 To facilitate the dissemination of the Reserves Data Template by countries, Appendix 2 presents a sample form for presenting all items of the Reserves Data Template and, at the same time, incorporating details called for in the footnotes of the Reserves Data Template and guidelines provided in this document. For ease of exposition, line items identified in the guidelines presented in Chapters 2 through 5 refer to those shown in the sample form contained in Appendix 2.

57 Background information on the SDDS and on strengthening the provision of information on international reserves and foreign currency liquidity within the SDDS are presented in Appendix 1. A summary of recommended guidelines for reporting specific types of activity in all parts of the Reserves Data Template is presented in Appendix 3. An illustration of stress testing of “in-the-money” options is shown in Appendix 4. Appendix 5 describes the IMF’s redissemination of countries’ Reserves Data Template data on the IMF’s Website to facilitate users’ access to the information. It also provides guidelines for countries to report the data to the IMF for such purposes. Guidelines for the reporting of reserve assets by countries in a currency union are presented in Appendix 6. Appendix 7 provides frequently asked questions (FAQs) that are useful in determining whether a particular financial instrument qualifies as a reserve asset. Appendix 8 addresses the statistical treatment of lending to the IMF, lending to IMF Managed Trust Accounts, and Special Drawing Rights (SDRs).

The concepts of international reserves and foreign currency liquidity are discussed later in this chapter and elaborated in later chapters of these Guidelines.

International financial activities here refer to financial transactions and positions in foreign currencies.

Background information on SDDS and on strengthening the provision of information on international reserves and foreign currency liquidity within the SDDS are presented in Appendix 1.

Updates to the Reserves Data Template may be made at the discretion of the Executive Board of the IMF. Such updates occur very infrequently. The latest version of the template may be found at: http://www.imf.org/external/np/sta/ir/IRProcessWeb/sample.aspx.

Off-balance-sheet foreign currency activities refer to financial transactions and positions in foreign currency not recorded on the balance sheet.

For dollarized economies (i.e., economies that have adopted a foreign currency—typically the U.S. dollar, the Euro, or another widely traded international currency—as their legal tender), the need to hold reserves for the purpose of intervention in exchange markets is not relevant for defining the reserve assets of these economies.

The term “monetary authorities” is defined later in this chapter under “Key Features of the Reserves Data Template.”

In BPM6, the concept of residence is not based on nationality or legal criteria; it is based on the transactor’s predominant center of economic interest. The residence of each institutional unit is the economic territory with which it has the strongest connection expressed as its center of predominant economic interest. The economic territory of a country generally corresponds to its geographical boundaries (although it can extend beyond them). A transactor whose center of predominant economic interest is outside the economic territory of the country is considered a nonresident.

As will be elaborated in Chapter 3 of this document, “net drains” refer to outflows of foreign currency net of inflows of foreign currency.

See the definition of “short-term” as provided later under “time horizon” in this chapter.

The coverage of both the monetary authorities and the central government is explicit in the Template. The operation of a currency board (with stipulations that the central government’s foreign currency obligations are not to be met by resources of the monetary authorities) does not remove the requirement for reporting of data on the central government in the Template.

BPM6, paragraphs 6.93–6.98, provides a definition of Special Purpose Government Funds and sets out the criteria to determine whether their liquid foreign assets should be included in reserve assets or not.

It is encouraged that the total holdings of SWFs assets included in Section 1 of the Reserves Data Template be reported in the country notes.

The Eurosystem is the monetary authority of the Eurozone, the collective of European Union member states that have adopted the euro as their sole official currency. The Eurosystem consists of the European Central Bank and the central banks of the member states that belong to the Eurozone.

While there is no direct impact, there is a strong indirect impact as the claims increase in size. Also, changes in the overall supply and demand for domestic currency assets will influence the balance of payments and thus indirectly affect liquid foreign exchange resources.

Financial derivatives are financial instruments that are linked to underlying assets, reference rates, or indexes such as stocks, bonds, currencies, and commodities. Derivative instruments allow users to disaggregate risks, accepting ones that they are willing to manage, and transferring those they are unwilling to bear. Derivative contracts include forwards, futures, swaps, and options (see Chapters 3 and 4 for greater detail on this subject).

As will be explained in Chapter 4, a call option is “in-the-money” if the strike price (i.e., the pre-agreed price) is less than the market price of the underlying security. A put option is “in-the-money” if the strike price is greater than the market price of the underlying security.

Cash settled options are option contracts whereby settlement is done via the payment of cash equal to the difference between the market value and the contractual value (strike price) of the underlying item at the time of exercise or expiration. In contrast, physically settled options involve the delivery of the underlying notional value of the foreign currency.

Face value is the undiscounted amount of principal to be repaid. Under most circumstances, the nominal value of principal payments, expressed in the currency of denomination of the contract, would correspond to the face value of the instrument concerned. However, in some circumstances, the anticipated cash-flow value will differ from the face value.

This is consistent with the definition of “short-term” used in BPM6.

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