This chapter presents the main elements of central banks’ traditional functions as gatekeepers of monetary and broader financial and economic stability and outlines some emerging considerations relating to central banks’ enhanced role as guardians of public interest. With regard to the...

In the "new normal" for monetary policy, central bank balance sheets are likely to be larger and used more actively than before the Global Financial Crisis. Those who manage assets for central banks should take account of the asset and liability choices of many other policy-makers - those...

Central banks often hold far more assets, and issue more liabilities to finance those assets, than is necessary to provide their domestic payments systems with adequate liquidity. That is to say, their balance sheets are "large" (See Stella (2010) Minimising monetary policy (BIS Working Paper...

This chapter explains how domestic and foreign exchange reserves are accumulated and why they are held by central banks. Following a summary of trends in global foreign exchange reserves, this chapter provides a brief review of the benefits and costs associated with holding reserves. It then...

Reserves and institutional asset managers have to constantly monitor and assess risk-return trade-offs in the markets where they invest. Among the various tools and indicators that they employ, understanding the balance sheet strength of commercial banks is indispensable. This is because of the...

This chapter describes the foreign reserve management framework of the European Central Bank (ECB) and the related decision-making process. The ECB's decentralized foreign reserve management system is unique among central banks around the world, as it involves all of the national central banks...

The management of central bank foreign exchange reserves is a topic in which best practices do not remain constant but evolve. For a number of countries, the international reserves have become a significant national asset. For other countries, the reserves are still seen in the context of...

This chapter reviews the Strategic Asset Allocation (SAA) at the Bank of Lithuania (BoL) and presents its transformation from a capital preservation approach based on historical data to a new framework which rests on three pillars: a forward-looking regime aware asset return simulation...

Risk management is an evolving discipline. Its contribution to protect the integrity of an organization is well-known. The primary objective of the risk function is to establish a structural and process-driven environment that facilitates the achievement of the organization’s objectives,...

There are several factors that can lead to successful outcomes in asset management at central banks and monetary authorities. For instance, having a robust asset allocation model, highly experienced portfolio managers, and sophisticated quantitative tools for implementing investment strategies....