FX reserve management: elements of a framework

In recent years, issues related to the management of foreign exchange reserves have gained prominence, and reserve management practices have evolved rapidly. Against this background, the Monetary and Economic Department of the Bank for International Settlements organised an ad hoc meeting of senior central bankers from both industrial and emerging market countries responsible for the management of reserves, which took place on 1-2 March 2007. The meeting covered key issues in foreign exchange reserve management, including the broad framework in which it is conducted, asset allocation at the strategic, tactical and portfolio management levels, risk measurement and management, organisational structures and disclosure. This paper was prepared as background and provides a general framework to help organise the various issues that arise in the context of FX reserve management.

JEL classification: F31, G11, G32, E58