Central Bank Reserve Management Practices

 Insights into Public Asset Management from the Second RAMP Survey

Reserve Management Practices of Central Banks

Most central banks measure reserve adequacy in one way or another. They most frequently use the import coverage method followed by short-term external debt ratio, broad money ratio, and the IMF’s Assessing Reserve Adequacy (ARA) metric.                                                     

Full survey

Determinants of Currency Composition of Reserves

The way central banks manage their foreign reserve assets has evolved over the past decades. One major trend is managing reserves in two or more tranches—liquidity tranche and investment tranche—especially for those with adequate reserves. Incorporating reserve tranching, this paper develops a central bank’s reserve portfolio choice model to analyze the determinants of the currency composition of reserves. 

Post crisis reflections on Central Bank Reserve Management

"Mechanistic reliance on credit ratings can lead to forced selling in stressed market conditions (thus making the stabilization task of other central banks more difficult) and unintentionally increase concentration risk in the remainder of the portfolio".

http://www.imf.org/en/Publications/WP/Issues/2018/02/16/Central-Bank-Reserve-Management-and-International-Financial-Stability-Some-Post-Crisis-45635

Fees and fog

¨Providing a figure that includes all transaction costs, implicit as well as explicit, is a challenge."