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Foreign exchange reserves of the National Bank of Poland
 

Foreign exchange reserves of the National Bank of Poland

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IF ADOPTING EURO, THE POLISH CENTRAL BANK WOULD NEED TO TRANSFER ~6%* OF ITS TOTAL FX RESERVES (4 billion EUR in foreign currencies (not EUR) and 18 metric tonnes of monetary gold) TO THE EUROPEAN ...

IF ADOPTING EURO, THE POLISH CENTRAL BANK WOULD NEED TO TRANSFER ~6%* OF ITS TOTAL FX RESERVES (4 billion EUR in foreign currencies (not EUR) and 18 metric tonnes of monetary gold) TO THE EUROPEAN CENTRAL BANK.

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    Foreign exchange reserves of the National Bank of Poland Foreign exchange reserves of the National Bank of Poland Presentation Transcript

    • FOREIGN EXCHANGE RESERVES OF THENATIONAL BANK OF POLANDOverviewDecember2010/January 2011Intelace Research
    • FOREIGN EXCHANGE RESERVES OF THE NATIONAL BANK OF POLAND ARE GROWING QUICKLY Foreign exchange reserves value Annual growht rate (EUR billion) (%) 80 140 Reserves value 70 120 FOREIGN EXCHANGE RESERVES OF NBP 60 100 50 80 40 60 30 40 Over last 5 years reserves have been constantly growing with exception of a short period: 20 Annual growth 20 Dec-08 to Aug-09 rate of reserves (right axis %) 10 0 0 -20 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jan-06 Mar-06 Jan-07 Mar-07 Jan-08 Mar-08 Jan-09 Mar-09 Jan-10 Mar-10 May-06 May-07 May-08 May-09 May-10 Feb-06 Sep-06 Dec-06 Feb-07 Sep-07 Dec-07 Feb-08 Sep-08 Dec-08 Feb-09 Sep-09 Dec-09 Feb-10 Sep-10 Dec-10 Apr-06 Nov-06 Apr-07 Nov-07 Apr-08 Nov-08 Apr-09 Nov-09 Apr-10 Nov-10 Jun-06 Aug-06 Oct-06 Jun-07 Aug-07 Oct-07 Jun-08 Aug-08 Oct-08 Jun-09 Aug-09 Oct-09 Jun-10 Aug-10 Oct-10 2 Intelace ResearchSource: NBP, Intelace Research
    • MOST OF RESERVES IS HELD IN SHORT TERM GOVERNMENT SECURITIES DENOMINATED IN EUR, USD, JPY, GBP AND OTHER Composition of foreign exchange reserves, 2006-2010 CAGR* Share of gold in fx reserves by country, (EUR billion) As of 2010 (in percent) 69991 +17 Funds held in SDR, reserves at IMF and Portugal 81.1 5551 +54 other Greece 78.7 Germany 70.3 Italy 68.6 55221 FOREIGN EXCHANGE RESERVES OF NBP France 67.2 4300 Slovakia 65.4 Euro Area 60.7 Netherlands 57.5 44693 44139 Cyprus 50.8 1470 Total 5671 Foreign exchange: Spain 38.6 36833 Held mostly in short Belgium 36.8 Other 993 term government ECB 27.9 60947 +16 securities and Finland 20.6 deposits in: EUR, USD, GBP, JPY UK 16.8 48387 and other Switzerland 16.4 Slovenia 13.4 40637 Ireland Foreign 34242 37141 11.8 Sweden 11.1 Poland holds relatively exchange Poland 5.0 small portion of its fx Latvia 4.0 reserves in gold Monetary gold: Lithuania 3.8 102,9 metric tons, of Denmark 3.3 which 98 tons +22 Czech Rep. 1.2 Gold** 1598 1881 2032 2534 3493 held/leased abroad and 5 tons stored Hungary 0.3 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 locally Estonia 0.3 3* Compound annual growth rate** Latest significant addition in 1988: 73 metric tonnes at ~286US$ per t.oz. Intelace ResearchSource: NBP, WGC, Intelace Research
    • FOREIGN EXCHANGE RESERVES ARE ON A SATISFYING LEVEL IN RELATION TO BOTH IMPORTS AND THE PUBLIC DEBT 0.53 0.54 Reserves / Imports • Ratio of fx reserves to imports is 0.37 0.38 increasing over the long term 0.32 • ratio Fx reserves could cover more than six months worth of FOREIGN EXCHANGE RESERVES OF NBP imports Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Adequate level of foreign exchange reserves Reserves/ public debt Held by residents • Ratio of fx reserves to public 0.34 0.38 debt is also increasing 0.30 0.31 ratio 0.28 • Fx could cover more than 80% ~55%* of public debt held by non- residents ~45%* Held by non-residents Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 4*Estimates according to Ministry of Finance Intelace ResearchSource: NBP, Intelace Research
    • IF ADOPTING EURO, THE POLISH CENTRAL BANK WOULD NEED TO TRANSFER ~6%* OF ITS TOTAL FX RESERVES TO ECB FX-RESERVES AND ADOPTION OF EURO In EUR billion When adopting Euro the National Bank of Poland will 70 need to transer part of its In foreign reserves (fx and gold) to ECB. currency ) ~ 5.5% FOREIGN EXCHANGE RESERVES OF NBP In particular NBP will need to : USD, JPY** 4 etc.) - Pay its share in the capital NBP reserves Due to ECB* of the ECB - Contribute to ECB foreign exchange reserves in foreign In metric tonnes currencies and gold - Contribute to ECB other reserves and provisions In ~ 17.5% monetary 103 gold 18 In total: ~ 4,5* billion EUR NBP reserves Due to ECB* As percent of total NBP fx reserves and monetary gold: ~ 6.4% 5* Estimation as of 1 January 2011** To be negotiated between NBP and ECB Intelace ResearchSource: NBP, Intelace Research
    • FOREIGN EXCHANGE RESERVES MANAGEMENT: KEY CHALLENGES Key Challenges Implications for NBP 1 • Countries like USA and Japan are loosing their financial superpower FOR DISCUSSION status. At the same time the role in the global economy of China, India Changes in global and many countries in South-East Asia and South America is growing economy rapidly. • China already surpassed Japan as the world’s second-largest economy in 2010. According to economic institutes* China will surpass USA in terms • Need to rebalance foreign exchange reserves of nominal GDP around the year 2018. according to present and expected role of Issuers country in the global economy 2 FOREIGN EXCHANGE RESERVES OF NBP • High public debt levels combined with weak economic growth ratios • Consider adding assets issued in South-East Asia and increase sovereign default risks. Ratings of major economies go down (eg. South America. Consider adding new assets from Changes in risk S&P cut the credit rating of Japan from AA to AA- in Jan. 2011). Also the low-debt emerging markets US is likely to lose its triple-A soon, due to large budget deficits. patterns • Multiple asset classes including mortgage backed securities, municipal • Consider higher exposure to assets in commodity debt etc., are today perceived much more riskier than ever. rich/exporting countries • No riskless assets. Need to accept the risk of either default or inflation • Further increase holdings denominated in EUR in relation to US$ and JPY 3 • Several large central banks including Federal Reserve, Bank of Japan, Bank • Reduce holdings of assets that are already loosing or of England and also ECB have exhausted their traditional policy instruments may soon loose value due to inflation (e.g. assets Risk of inflation by cutting interest rates to near zero. Pressured for further move in reviving denominated in US$ ). Take exceptionally rigorous economies, central banks are implementing non-standard policy measures risk-based approach to securities issued by countries (direct asset purchases) on a smaller or larger range. Unfortunately this where non-standard policy measures are policy is likely to ignite high inflation at some point. implemented on a large scale. • Consider increasing holdings of monetary gold and adding commodity related investments 4 • Central banks of advanced economies stopped sales of gold holdings and do not use limits allowed by the third „Central Bank Gold Agreement „ Gold and • Central banks in emerging economies (e.g. China, Russia, India) are adding commodities as gold to their reserves since trust in quality of traditional reserve currencies (USD, JPY) is falling reserve assets • Gold is still the key part of foreign reserves for many developed countries (Germany: 70%, Italy 69%, France 67%, Spain 38%) 6* eg. The Economist 2010 Intelace ResearchSource: Intelace Research