Chapter

4. Contingent Short-Term Net Drains on Foreign Currency Assets (Nominal Value): Section III of the Reserves Data Template

Author(s):
International Monetary Fund. Statistics Dept.
Published Date:
October 2013
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Defining Contingent Net Drains

180 Section III of the Reserves Data Template covers contingent short-term net drains on foreign currency resources. As discussed in Chapter 3, net drains refer to outflows (reductions in foreign currency resources) net of inflows (increases in foreign currency resources). Contingent outflows and inflows simply refer to contractual obligations that give rise to potential or possible future additions or depletions of foreign currency assets. Contingent drains are reported as off-balance-sheet activities, since only actual assets and liabilities should be reflected on balance sheets. Section III of the Reserves Data Template differs from Section II because foreign currency flows to be reported in Section III are contingent upon exogenous events. As with predetermined foreign currency drains covered in Section II of the Reserves Data Template, contingent drains can arise from positions with either residents or nonresidents.

181 Section III covers two different types of contingent flows: (1) those that emanate from potential assets and liabilities (for example, undrawn and unconditional credit lines, and contingent liabilities in the form of foreign exchange guarantees); and (2) those that reflect possible future inflows and outflows of foreign currency arising from the authorities’ positions in existing options contracts, if and when the options are exercised.

182 Data on options required in Section III of the Reserves Data Template are more detailed than those disclosed on forwards, futures, and swaps in Section II, which emphasizes short and long positions. In Section III, in addition to short and long positions, call and put options are distinguished, as are written and bought options. The additional information is needed in view of the nonlinear nature of the payoffs from options to determine which contracts will result in foreign currency outflows when the options are exercised and which ones will result in inflows. The information also may reveal whether the authorities play an active (for example, as purchasers of options) or passive (as writers of options) role in the execution of the contracts, which may reflect their risk exposures.

183 Section III also calls for stress testing of the exposure (in terms of foreign exchange liquidity) arising from the options positions to different exchange rate scenarios. The stress testing is an encouraged but not a prescribed item of the SDDS.1

184 Notwithstanding these differences between Sections II and III, most of the general guidelines on reporting data for Section II of the Template also apply to Section III. For example, appropriate signs must accompany the data, that is, the plus (+) sign for inflows, and the minus (–) sign for outflows.

185 Short-term inflows and outflows of foreign currency are determined by the remaining maturities of the financial instruments, which cover three periods of the time horizon of one year. As in Section II of the Reserves Data Template, the “total” column shown in Section III should reflect the sum of the three subperiods.

186 For financial derivatives, the distinction between short and long positions, which reflect future outflows (i.e., contingent decreases in foreign currency resources) and inflows (i.e., contingent increases in foreign currency resources), respectively, is maintained.

187 The institutional units covered are those of the monetary authorities and the central government, excluding social security funds. As stated in footnote 11 in paragraph 20, the existence of a currency board does not remove the requirement of reporting data pertaining to the central government in the Template.

188 Except for options, which are to be based on notional values, all other contingent inflows and outflows of foreign currency are to be presented in nominal values.

189 Market values of options are to be reported in Section IV of the Reserves Data Template under memo items.

190 The rest of this chapter focuses on the identification of (1) contingent liabilities of the authorities, (2) potential outflows within one year or less (decreases in foreign currency resources) associated with securities with embedded options (puttable bonds), (3) contingent inflows and outflows pertaining to undrawn and unconditional credit lines, and (4) possible foreign currency flows arising from the authorities’ positions in options contracts.

Contingent Liabilities

Contingent Liabilities in Foreign Currency—Item III.1 of the Reserves Data Template

191 Item III.1 of the Reserves Data Template is used to report the authorities’ contingent liabilities in foreign currency, including collateral guarantees and other contingent liabilities. In principle, only contractual obligations of the authorities are included here. In practice, financial instruments issued with the support of government (public mandates) may also be covered, even though no explicit financial backing is provided by the authorities.2 Nonetheless, when such instruments are reported in the Reserves Data Template, they should be separately identified in country notes accompanying the data.

192 The reporting of guarantees is confined to those of foreign currency obligations falling due in one year or less. Such obligations include debt service and other payments that are triggered by specific events as set forth in the guarantees.

Collateral Guarantees—Item III.1(a) of the Reserves Data Template

193 Collateral guarantees in the Template refer to guarantees provided by the authorities backed by collateral; that is, in exchange for incurring the obligations, the authorities (the guarantors) would gain a claim on the collateral or other assets of the defaulting entity. The guarantees referred to in the Reserves Data Template are pledges of repayment by the authorities in the event of default by another entity or other guarantee triggering events.

194 Data to be reported under this item of the Template are the foreign currency flows that would occur if the guarantees are exercised, and not the value of any collateral backing the guarantees. When the value reported for the guarantees is net of the disposal value of the collateral that may be claimed, this should be made fully transparent in country notes accompanying the data.

195 Examples of collateral guarantees on debt falling due within one year, with the monetary authorities and other central government entities as the guarantors, include (1) guarantees on loans and securities with remaining maturities of up to one year, (2) deposit insurance covering foreign currency deposits with a remaining maturity of up to one year in banks that offer such insurance coverage, and (3) foreign exchange guarantees the authorities provide to fix the domestic currency costs to resident entities of international commercial transactions, whereby the authorities bear the risk of loss (or stand to gain) due to exchange rate changes. Because of the differing nature of collateral guarantees, additional information should be provided in country notes accompanying the data to specify clearly the types of collateral guarantees covered by the reported data.

Other Contingent Liabilities—Item III.1(b) of the Reserves Data Template

196 Other contingent liabilities refer to other legal or contractual obligations of the authorities that are contingent on some future event or action. The criterion for reporting the contingent obligation in this item is that the authorities be “demonstrably committed” to meet the obligations when called upon to do so. Contingent liabilities are to be disclosed when the legal and contractual obligations take force.

197 Examples of other contingent liabilities are letters of credit, securities underwriting agreements, and foreign currency loan commitments the authorities provide to other domestic entities. Other examples are term deposits with remaining maturity of more than one year held at the monetary authorities by resident and nonresident depositors, which are redeemable subject to payments of penalties, and which are not covered in item II.(1) of the Reserves Data Template. Also included are foreign currency deposits held at the monetary authorities by commercial banks of the reporting country in respect of the regulatory reserves/liquidity requirements and which are not covered in item II.(1) of the Reserves Data Template. Foreign currency deposits with a remaining maturity of one year or less are included in item II.(1).

198 Contingent liabilities are to be disclosed in their nominal values to reflect the amount of the foreign currency flows when they occur.

Securities with Embedded Options (Puttable Bonds)

Foreign Currency Securities Issued with Embedded Options (Puttable Bonds)—Item III.2 of the Reserves Data Template

199 Item III.2 of the Reserves Data Template calls for the disclosure of information on puttable bonds. The latter generally refer to publicly traded debt instruments with embedded put options settled in foreign currency that allow creditors to demand early repayment of loan principal under specified conditions.3 To assess contingent demands on foreign currency resources, the Template requires the disclosure of data on bonds with put options (“puttable bonds”): this is the case because, when creditors exercise the put options, the authorities immediately have to repay their medium- and long-term debt in advance of the original maturity of the instrument.

200 Only bonds with a residual maturity of greater than one year (with embedded put options that can be exercised, and so demand payment, in one year or less) should be reported in item III.2, as bonds with shorter maturities already are covered in Section II of the Reserves Data Template.

201 A bond recorded as a two-year bullet,4 with a put after one year, for example, should be included in the total column under III.2, since creditors see such an instrument as a one-year bond with the option of a one-year extension.

202 Creditors are likely to elect to exercise the put option, once the contractual conditions are satisfied, if it is advantageous to them to do so.5 When creditors exercise put options, from the perspective of the bond issuer, foreign currency outflows will occur because the issuer is required to redeem the bond using foreign currency resources. Some puts can only be exercised following specified “credit events,” such as a borrower’s credit rating falling below a prespecified threshold. Discrete puts are puts that may be exercised only on specified days.6

203 Only “hard puts” such as those discussed above are to be reported in the Reserves Data Template. “Hard puts” refer to put options embedded in securities under contractual provisions. “Soft puts” refer to the covenants that allow acceleration of repayment of the debt if the covenants are breached. “Soft puts” are not to be reported because they are general in nature and are difficult to identify.7

204 Data on puttable bonds are to reflect the nominal values of principal and relevant interest payments due.

205 Because cash flows of puttable bonds are intrinsically uncertain, no breakdown of data by the three time periods under the one-year time horizon is required.

Undrawn, Unconditional Credit Lines

Undrawn, Unconditional Credit Lines—Items III.3 and III.4 of the Reserves Data Template

206 Items III.3 and III.4 are used for reporting undrawn, unconditional credit lines. Credit lines are contingent mechanisms that provide a country liquidity; they represent potential sources of additional reserve assets and foreign currency assets of the authorities. Consistent with the nature of reserve assets and other foreign currency assets covered in Section I of the Reserves Data Template, unconditional credit lines refer to those readily available to the authorities (that is, ones that are highly liquid and do not have material conditionality attached). In addition, only such credit lines that are undrawn should be reported.

207 The amounts to be entered over the three periods of the time horizon should reflect the credit committed for the respective time frames. If the credit commitment is available on demand with no period segmentation, it should be reported under the item “Up to one month.”

208 Two different sets of data are to be differentiated under Section III in the Template: (1) credit lines provided to the authorities are to be recorded under item III.3; and (2) credit lines provided by the authorities are to be recorded under item III.4. Countries are to report either (1) or (2), depending on whether they are the debtors or the creditors. In cases where both (1) and (2) are applicable, they should be separately reported in the Reserves Data Template.

209 Only credit lines in foreign currencies are to be recorded in Section III of the Reserves Data Template. A creditor should not include in Section III of the Reserves Data Template credit lines it provides in its domestic currency. A debtor only should report credit facilities committed in foreign currency.

210 While undrawn credit lines are to be reported in Section III of the Reserves Data Template, actual assets and liabilities (principal and interest) are incurred when the credit lines are drawn. Thus, credit lines that have been drawn should be reported in Sections I and II of the Reserves Data Template accordingly: increases in foreign currency resources in Section I are counterbalanced by predetermined future loans and securities obligations in Section II of the Reserves Data Template. In cases where countries treat swap drawings as repurchase agreements (see the discussion below of reciprocal currency arrangements), such information also should be disclosed in Section IV of the Reserves Data Template under securities lending and repurchase agreements. Credit lines the authorities provide are to be treated symmetrically.

211 Credit lines covered in the Template include reciprocal currency arrangements among central banks and with the Bank for International Settlements (BIS), financing agreements between central banks and consortia of private financial institutions that allow the central banks to acquire new funding under specified circumstances, and certain elements of credit arrangements between countries and the IMF.

212Reciprocal currency arrangements are short-term arrangements among central banks and with the BIS that afford the central banks temporary access to the foreign currencies they need for intervention operations to support their currencies. When such a credit line is drawn, a swap transaction takes place. This involves a spot (immediate delivery) transaction, in which one central bank transfers securities (it might involve foreign or domestic currency) to another central bank in exchange for foreign currency. It might also be structured as an exchange of currencies. The transaction entails a simultaneous forward (future delivery) transaction, in which the two central banks agree to reverse the transactions, typically three months in the future. The central bank that initiates the swap transaction pays its counterpart interest on the foreign currency drawn. In view of the reversible nature of these transactions, it is recommended that, when the credit lines are drawn, they be treated as loans in the Reserves Data Template with appropriate entries recorded in Sections I, II, and IV of the Reserves Data Template. Reciprocal currency arrangements should only be included if they are unconditional. Both counterparties should report the credit line under “credit lines provided by,” and neither counterparty need report the reciprocal swap arrangement as “credit lines provided to” the other because they are lending their own, not foreign, currency to one another. If the reporting party is providing foreign exchange and not domestic currency to a counterpart, then it should be recorded as “credit lines provided to.” A swap credit line that requires foreign currency assets as collateral should not be included in items III.3 and/or III.4, although it should be noted in country notes.

213 Credit lines between central banks and private financial institutions can take different forms and generally involve the payment of a regular commitment fee by a potential borrower to a provider of credit in exchange for opening and maintaining a credit line, with provisions allowing for renewals. Some credit lines are in the form of swap facilities: at the time a credit line is drawn upon, domestic currency securities owned by the authorities are swapped for foreign currency. Others are pure credit facilities.8

214 Commitments by countries to the IMF under the GAB and the NAB9 are not to be included in Section III of the Reserves Data Template. This is because lending to the IMF under the GAB and the NAB results in an increase in the countries’ reserve positions at the IMF (which is part of official reserve assets), and thus does not result in a reduction in the level of official reserve assets.10

215 Similarly, countries’ commitments to lend to IMF Managed Trust Accounts and similar bilateral lending arrangements are not to be reported in Section III of the Reserves Data Template.11 Creditor claims under these lending agreements are considered part of a member’s reserve assets, provided the terms of the agreement indicate that the claims are readily redeemable if the creditor represents a balance of payments need, and thus do not result in a reduction in the level of reserve assets.

216 In general, IMF arrangements are conditional lines of credit and thus should not be included in Section III of the Reserves Data Template. However, where a country has not drawn amounts that have become available (for instance, because it treats an arrangement as precautionary), these amounts can be shown in Section III as available over the period up to the next “test date.”12, 13 It should be noted that inclusion, in precautionary arrangements, of amounts available only up to the point of the next test date will cause the amount of unconditional lines of credit to fluctuate over time.14 In addition, countries are encouraged to indicate in the country notes the amounts of Fund arrangements that are scheduled to become available, subject to observance of the relevant conditions, over the next one, three, and twelve months. The unconditional credit facilities that arise from memberships of regional pooling arrangements such as the Latin American Reserve Fund (LARF) should be included in Section III.3(a) “other national monetary authorities, BIS, IMF, and other international organizations,” with a footnote provided explaining the nature of these credit lines.

217 When the authorities provide the credit lines, the data should be accompanied by a minus (–) sign, indicating potential outflows of foreign currencies. Where the authorities receive the credit lines, the data should be preceded by a plus (+) sign, showing potential inflows of foreign currencies.

218 Credit facilities and commitments associated with the BIS, the IMF, national monetary authorities, and other international organizations can be separately identified under item III.3(a) (provided by these organizations), and item III.4(a) (provided to these organizations), with appropriate signs.

219 The coverage of banks is the same as that defined in Chapter 2 (see paragraph 92). The term “other financial institutions” refers to nonbank financial institutions.

220 The distinction between banks and other financial institutions that are “headquartered in the reporting country” and those “headquartered outside the reporting country” is the same as that defined in Chapter 2 (paragraphs 103–105).

221 Data are to reflect nominal values of the credit lines.

Options

Short and Long Positions in Options—Item III.5 of the Reserve Data Template

222 Item III.5 of the Reserves Data Template discloses information on the authorities’ options positions.15 An option agreement is a contract giving the holder the right, but not the obligation, to buy (i.e., call) or sell (i.e., put) a specified underlying asset at a pre-agreed price (the strike price), either at a fixed point in time (the European option) or at a time chosen by the holder until maturity (the American option).16 In the case of foreign currency options, the amount of foreign exchange that can be purchased or sold by the exercise of the option is the notional value of the option contract.

223 The Reserves Data Template calls for information in notional values on short positions covering (1) bought puts and (2) written calls (assuming that the purchaser of the put or writer of the call will deliver foreign exchange—not its domestic currency—if these options are exercised). It also includes information on long positions covering (1) bought calls and (2) written puts (assuming that the purchaser of the call or writer of the put will receive foreign exchange—not its domestic currency—if these options are exercised). (See Box 4.1 for definitions of these terms.)

224 For a conservative measure of the possible drain arising from an option position, where there is more than one exercise date for an option, the earliest date should be used to determine its maturity. (This treatment, for example, applies to American- and Bermudan-style options with and without margin calls.)

225 To estimate the possible future inflows and outflows in foreign exchange arising from the position in options, information to be disclosed includes (1) the notional value of all the options with maturities up to one month, more than one month and up to three months, and more than three months and up to a year; and (2) the notional value of options (short and long positions) in the money for each maturity category, under several exchange rate scenarios (depreciation of domestic currency by 5 and 10 percent and appreciation of domestic currency by 5 and 10 percent).

226 “In-the-money” options are ones that would produce a profit for the holder if the options were exercised.

227 The notional value of the overall position is a good proxy of the maximum exposure resulting from the options positions.

228 To facilitate the reporting of data on options, selected terms and basic characteristics of option contracts are summarized in Box 4.2.

Box 4.1Definitions of Puts and Calls

Bought puts: Foreign currency put options give buyers the right (but not the obligation) to sell foreign currency at agreed prices on or before specified dates. Data on “bought puts” refer to the amounts of foreign currency that the central bank and the central government (as buyers of the put options) will have to part with if they exercise the option (i.e., sell the foreign currency).

Written calls: Foreign currency call options give buyers the right (but not the obligation) to buy foreign currency at agreed prices on or before specified dates. Data on “written calls” refer to amounts of foreign currency that the central bank and the central government (as writers of the call options) will have to part with if the buyers exercise the options (i.e., buy the foreign currency).

For call options to purchase foreign currency, the notional value refers to amounts of foreign currency that the central bank and the central government (as buyers of the call options) will receive if they decide to exercise the call options (i.e., buy the foreign currency).

For put options to deliver currency, the notional value refers to amounts of foreign currency that the central bank and the central government (as writers of the put options) will receive if the buyers of options exercise the put options (i.e., sell the foreign currency).

Bought puts and written calls, therefore, reflect potential foreign currency outflows, hence, short positions. Bought calls and written puts reflect potential inflows, hence, long positions. However, the purchase of puts or calls on any two currencies provides foreign exchange inflows on bought puts and written calls, if the contracts so specify.

229 In completing items III.5(a) and III.5(b) of the Reserves Data Template, note that holding an option that gives one the right to buy a given amount of foreign exchange at a specified local currency price is equivalent to holding an option that gives one the right to sell a given amount of local currency in exchange for foreign currency at the same price.

230 All options should, if necessary, first be converted into puts and calls in foreign currency, instead of local currency (see Appendix 4 for detail).

Pro-Memoria: In-the-Money Options

231 The notional value of all options in the portfolio provides an approximate measure of possible additions or subtractions to foreign exchange resources that might arise from the options portfolio. It is not an exact measure because in many circumstances only a fraction of the options will be exercised and because it gives no sense of conditions under which the options will be exercised. To describe all possible scenarios in which the options position would affect foreign exchange resources, however, would require a much more elaborate template. The Pro Memoria section conveys a sense of when the options would be exercised without engaging in elaborate stress testing. The idea is to look at five simple scenarios for the local currency exchange rate and to gauge the impact of the options on foreign exchange resources for each scenario.17 In all scenarios, it is assumed that the cross rates among foreign currencies remain unchanged from the current rates.

232 The first scenario assumes the local currency exchange rate remains unchanged relative to all foreign currencies. The Template asks for the notional value of the options in the money at current exchange rates. This gives a sense of the options that would be exercised and hence the drain and additions to foreign exchange resources if there were no further change in exchange rates.

233 The second scenario assumes a 5-percent depreciation of the local currency relative to all foreign currencies and no further change in exchange rates thereafter. The Template asks for the notional value of the options that would be in the money under such a scenario. The third scenario poses a 5-percent appreciation of the local currency against all foreign currencies, and no further change in exchange rates. The fourth and fifth scenarios are similar but examine a 10-percent depreciation and appreciation, respectively.

234 A put option is “in the money” if the market price is below the strike price. A call option is “in the money” if the market price is above the strike price. Where long positions are held, calls are exercised if the market price is above the strike price; and puts are exercised when the market price is below strike price. When these options are exercised, they will add to foreign currency resources.

235 An example of these stress-testing scenarios is shown in Appendix 4.

Box 4.2Definitions of Selected Terms on Options

Call option: A call option gives its holder the right, but not the obligation, to purchase a fixed amount of foreign currency (the notional value) at a prespecified local currency price (the strike price) at one or more dates in the future (the exercise date(s)).

Put option: A put option gives its holder the right, but not the obligation, to sell a fixed amount of foreign currency (the notional value) at a prespecified local currency price (the strike price) at one or more dates in the future (the exercise date(s)).

Strike price (or exercise price): For options to purchase or sell currencies, the strike price is the prespecified price at which the option holder may exchange one currency for another currency. Throughout this discussion, this will be expressed in terms of the local currency price of foreign exchange.

Notional value: The notional value of the contract is the amount of foreign exchange that can be purchased or sold by the exercise of the option. Throughout the Guidelines, this will be expressed in terms of units of foreign currency.

Exercise date(s): These are the dates on which the option holder may exercise the option. The last, and perhaps only, date at which the option can be exercised is the expiration date of the option.

European-style option: A European-style option has only one exercise date and that is the expiration date of the option.

American-style option: An American-style option can be exercised at any date up to and including its expiration date.

In the money: A foreign currency option is in the money if the current market price for foreign exchange is different from the option’s strike price and the price differential makes it advantageous for the holder of the option to exercise it. A call option is in the money if the market price is above the strike price. The holder of the option could make a profit by exercising the option—and thus acquire foreign exchange at the strike price—and immediately resell the foreign exchange at the higher market price. Similarly, a put option is in the money if the market price is below the strike price.

Out of the money: An option is out of the money when the market price differs from the strike price and the price differential makes it disadvantageous to exercise the option. A call option is out of the money when the market price is below the exercise price. A put option is out of the money when the market price is above the strike price.

Short position: For purposes of the Template, short positions pertain to option contracts that, if exercised, would result in a drain on foreign currency resources.

Long position: For purposes of this template, long positions pertain to option contracts that, if exercised, would result in an addition to the authorities’ foreign currency resources.

The SDDS is discussed in Appendix 1.

Examples include global bond issues of the Federal National Mortgage Association (Fannie Mae), a United States government-sponsored enterprise.

From the perspective of creditors, put options shorten the contractual minimum maturity of the debt while allowing creditors the right to maintain the original maturity on the original interest rate basis. This affords creditors the opportunity to withdraw early and benefit from any increase in yields by exercising the put and relending the resources at a higher spread, as well as the ability to continue to lock in a favorable yield if interest rates decline. Debtors write put options as a means to achieve lower spreads. Financial crises have shown that debtors accepting put options may not have fully anticipated the difficulties they would face if options were exercised at the time they experienced a substantial loss of market access. This practice has exacerbated financial crises.

A bullet loan or bond is a loan or bond whose principal repayments all take place at maturity.

This allows creditors seeking to maintain their exposure to relend the resources and to benefit from the higher spread and permits creditors wanting to unwind their exposure to do so at an attractive price.

Most puttable instruments include one or two put dates, although a few instruments are puttable semiannually. (Few instruments are puttable on a continuous basis.)

Full payment under a hard put brings closure to the issue, while a default resulting from a breach of a loan covenant may trigger cross default/cross acceleration clauses in other external debts, at least until the default has been covered by a full payment on the debt in question.

Other contingent financial arrangements are in the form of private market-based insurance: the debtor pays an insurance premium to compensate the writer of the option (the creditor) for the risks undertaken. The insurance is against adverse liquidity risks.

The GAB and the NAB are standing borrowing arrangements between the IMF and a number of lenders. They comprise a series of individual credit arrangements between lenders and the IMF. Calls under these credit lines can be made only under certain circumstances and for specific amounts. Once calls have been approved, the IMF is authorized to draw under these arrangements up to the agreed amount.

Drawings take place under the GAB in domestic currency; they also occur under the NAB in domestic currency unless the lender is an institution of a nonmember. In such cases, foreign currency (i.e., the currency of another IMF member) is used. For IMF members, although lending under the GAB and the NAB is in domestic currency, such lending increases the country’s reserve position in the IMF. A country’s claims on the IMF under the GAB and the NAB are reserve assets because the country can obtain an equivalent amount of convertible foreign currency from the IMF if it represents that it has a balance of payments need.

The reporting in the reserve data template of note purchase agreements (NPAs) with the IMF is discussed in Appendix 8.

A “test date” is a date at which end-of-period “performance criteria” in a program with the IMF (e.g., a floor on net international reserves or a ceiling on the fiscal deficit) have to be observed if any drawings are to be made thereafter without a waiver. For resources available under Fund facilities, such as the Precautionary and Liquidity Line (PLL) and the Flexible Credit Line (FCL), the recording in Section III (Lines of Credit) should conform to the specific availability provisions of the agreement with the IMF. See Appendix 7 (Question 2 of Frequently Asked Questions on the Characteristics of Reserve Assets).

Although drawings from IMF facilities generally also depend on “continuous” performance criteria, these performance criteria are generally of a form that requires the authorities to refrain from taking certain actions, and thus are not regarded as material conditionality for the purposes of the Reserves Data Template (see paragraph 206). The usual continuous performance criteria include, for instance, absence of introduction of multiple currency practices and nonoccurrence of official external payment arrears.

For instance, amounts may be available as of end-January under the “up to one month” heading (based on observance of performance criteria for end-December) that will not be available as of end-March (as continued availability will depend on observance of performance criteria for end-March, which will not be ascertained for several days or weeks).

NDF options settled in foreign currency are also included in this item. NDF options settled in domestic currency are included in Section IV.1.(b).

There are also types of option contracts that can be exercised at a number of specified times in the future (Bermudan-style options).

In the case of cash-settled options, the estimated future inflow/outflow should be disclosed. Positions are “in the money” or would be, under the assumed values.

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