Data Template on International Reserves Data Template on International Reserves and Foreign Currency Liquidityand Foreign Currency Liquidity

Presented By:Presented By:

Ghulam RabbaniGhulam RabbaniAssistant DirectorAssistant Director

Financial Accounts Division,Financial Accounts Division,Accounts Department, SBP, KarachiAccounts Department, SBP, Karachi

Data Template on International Reserves Data Template on International Reserves and Foreign Currency Liquidityand Foreign Currency Liquidity

Presented By:Presented By:

Ghulam RabbaniGhulam RabbaniAssistant DirectorAssistant Director

Financial Accounts Division,Financial Accounts Division,Accounts Department, SBP, KarachiAccounts Department, SBP, Karachi

BackgroundBackground BackgroundBackground

International Financial crisis in the late 1990s International Financial crisis in the late 1990s

Country experiences highlighted the importance of accessing foreign Country experiences highlighted the importance of accessing foreign exchange liquidity from a broader perspective exchange liquidity from a broader perspective

IMF and the working group of the Bank for International Settlements IMF and the working group of the Bank for International Settlements (BIS) Committee on the Global Financial System, jointly developed in (BIS) Committee on the Global Financial System, jointly developed in 1999 the new data template 1999 the new data template

On March 1999, the template was made a component of the Special On March 1999, the template was made a component of the Special Data Dissemination Standard (SDDS) established by the IMF in 1996 Data Dissemination Standard (SDDS) established by the IMF in 1996

Data Deficiencies Revealed by Financial Crisis in Data Deficiencies Revealed by Financial Crisis in the 1990s:the 1990s:

Data Deficiencies Revealed by Financial Crisis in Data Deficiencies Revealed by Financial Crisis in the 1990s:the 1990s:

Some countries include pledged assets in reserve assetsSome countries include pledged assets in reserve assets

foreign currency deposits held in financially weak domestic banksforeign currency deposits held in financially weak domestic banks

Valuation practices could depart significantly from market values Valuation practices could depart significantly from market values

Coverage of international reserve assets varied among countries Coverage of international reserve assets varied among countries

Lack of Publicly Available Information on Official Lack of Publicly Available Information on Official Short-term Foreign Currency Obligations:Short-term Foreign Currency Obligations:

Lack of Publicly Available Information on Official Lack of Publicly Available Information on Official Short-term Foreign Currency Obligations:Short-term Foreign Currency Obligations:

off-balance sheet activitiesoff-balance sheet activities

data on forward commitments of foreign exchange under financial data on forward commitments of foreign exchange under financial derivative contractsderivative contracts

information on options information on options

information on principal and interest payments in foreign currency on information on principal and interest payments in foreign currency on loans and advances loans and advances

Information on government foreign exchange guarantees and callable Information on government foreign exchange guarantees and callable debt.debt.

unused conditional lines of credit unused conditional lines of credit

The New Data Template FrameworkThe New Data Template Framework The New Data Template FrameworkThe New Data Template Framework

The new data template captures several dimensions of country’s The new data template captures several dimensions of country’s international reserve and related currency obligations and addresses international reserve and related currency obligations and addresses the inadequacies described beforethe inadequacies described before

Takes account of the off-balance sheet activitiesTakes account of the off-balance sheet activities

Takes note of the future schedule and potential flows of contracts Takes note of the future schedule and potential flows of contracts involving financial derivatives such as options, forwards and futures involving financial derivatives such as options, forwards and futures as well as un-drawn credit lines and loan guaranteesas well as un-drawn credit lines and loan guarantees

The template includes information on the liquidity of country’s The template includes information on the liquidity of country’s international reserves, identifying encumbered assets, and on its international reserves, identifying encumbered assets, and on its exposure to exchange rate fluctuationsexposure to exchange rate fluctuations

Forestalling Future CrisisForestalling Future Crisis Forestalling Future CrisisForestalling Future Crisis

strengthen the accountability of the authorities on policy action and strengthen the accountability of the authorities on policy action and foreign currency exposure foreign currency exposure

correction of unsustainable policies and limit the adverse effects of correction of unsustainable policies and limit the adverse effects of contagion in times of financial turbulence contagion in times of financial turbulence

It allows market participants to form a more accurate view of the It allows market participants to form a more accurate view of the condition of individual countries condition of individual countries

Access to more transparent data may also enhance the effectiveness of Access to more transparent data may also enhance the effectiveness of the multilateral organizations.the multilateral organizations.

Overview of the Data TemplateOverview of the Data TemplateThe ScopeThe Scope

Overview of the Data TemplateOverview of the Data TemplateThe ScopeThe Scope

Reserve Assets:Reserve Assets: ““External Assets that are readily available to and controlled by External Assets that are readily available to and controlled by

monetary authorities for direct financing of payments imbalances, for monetary authorities for direct financing of payments imbalances, for indirectly regulating the magnitude of such imbalances through indirectly regulating the magnitude of such imbalances through intervention in exchange markets to affect the currency exchange rate, intervention in exchange markets to affect the currency exchange rate, and /or for other purposes.” (BPM5 para. 424)and /or for other purposes.” (BPM5 para. 424)

Foreign Currency LiquidityForeign Currency Liquidity Foreign Currency LiquidityForeign Currency Liquidity

““Amount of foreign exchange resources that is readily available taking Amount of foreign exchange resources that is readily available taking into account both predetermined and contingent/potential net drains.”into account both predetermined and contingent/potential net drains.”

Broader concepts of reserves foreign Currency liquidity includes:Broader concepts of reserves foreign Currency liquidity includes:

A-Foreign Currency Resources:A-Foreign Currency Resources:

            Official ReservesOfficial Reserves

            Other Foreign Currency AssetsOther Foreign Currency Assets

B-Predetermined and contingent net drains on foreign currency B-Predetermined and contingent net drains on foreign currency resources.resources.

Reserve Assets Foreign Currency Liquidity 

Reserve Assets of Monetary Authorities

Foreign Currency resources of monetary authorities and central governments (authorities) and drains on these resources.

Claims on nonresidents Foreign currency claims on and obligations to residents and non-residents.

Based on balance-sheet framework

Foreign currency inflows and outflows resulting from both on and off-balance sheet activities.

Foreign Currency Liquidity

Foreign Currency Resources   Foreign Currency drains (Outflows net of inflows)

International Reserves(official Reserve Assets)

Other foreign currency assets

Predetermined drains Contingent drains

Foreign currency liabilities

Financial derivative:Positions on forwards, swaps and future.

Contingent foreign currency liabilities

Financial derivative: Positions on options.

Key Features and Coverage of the Template Key Features and Coverage of the Template

A) Institutions Covered:A) Institutions Covered:

Key Features and Coverage of the Template Key Features and Coverage of the Template

A) Institutions Covered:A) Institutions Covered:

Monetary AuthoritiesMonetary Authorities - - It is a functional conceptIt is a functional concept - Hold and manage international reserves- Hold and manage international reserves - Encompass the central bank and certain central banking operations - Encompass the central bank and certain central banking operations

carried out by government institutions or commercial banks. carried out by government institutions or commercial banks.

Central government (excluding social security fund):Central government (excluding social security fund): - - The political authority of the central government extends over the The political authority of the central government extends over the

entire territory of the country.entire territory of the country. - State and local governments and social security funds at all levels - State and local governments and social security funds at all levels

are excluded.are excluded.

B)B) Financial Activities covered:Financial Activities covered: B)B) Financial Activities covered:Financial Activities covered:

Only instruments settled in foreign currency are to be included in Only instruments settled in foreign currency are to be included in resources and drains. As these can directly add to or subtract from the resources and drains. As these can directly add to or subtract from the liquid foreign currency resources.liquid foreign currency resources.

Instruments denominated in or linked to foreign currency but settled Instruments denominated in or linked to foreign currency but settled in domestic currency will not directly affect liquid foreign exchange, in domestic currency will not directly affect liquid foreign exchange, but can exert substantial indirect pressurebut can exert substantial indirect pressure

C)    Treatment of financial derivative activities:C)    Treatment of financial derivative activities:C)    Treatment of financial derivative activities:C)    Treatment of financial derivative activities:

The template covers:The template covers:            Predetermined foreign currency flows pertaining to the authorities’ Predetermined foreign currency flows pertaining to the authorities’

forwards, futures, and swap contractsforwards, futures, and swap contracts

            Potential flows arising from options positionsPotential flows arising from options positions

            Net, marked to market value of outstanding financial derivative Net, marked to market value of outstanding financial derivative contractscontracts

The template focuses financial derivatives settled in foreign The template focuses financial derivatives settled in foreign currencies. (NDF and options settled in domestic currency are currencies. (NDF and options settled in domestic currency are reported as memo items.reported as memo items.

Separate information is to be reported for short and long positions.Separate information is to be reported for short and long positions. Stress testing is to be included to assess risk exposure to fluctuations Stress testing is to be included to assess risk exposure to fluctuations

in exchange rates.in exchange rates.

D) Valuations Principals:D) Valuations Principals: D) Valuations Principals:D) Valuations Principals: Positions are to be valued at market prices on the reference date or at Positions are to be valued at market prices on the reference date or at

approximate market values.approximate market values.

Drains on foreign currency resources are to be valued at nominal terms. Drains on foreign currency resources are to be valued at nominal terms. (i.e cash flow value when the currency flows are to take place.)(i.e cash flow value when the currency flows are to take place.)

For financial derivatives:For financial derivatives:

Inflows and outflows in nominal terms for forwards, futures, and Inflows and outflows in nominal terms for forwards, futures, and swapsswaps

    Notional values for optionsNotional values for options

    Net, marked to market values for outstanding financial derivative Net, marked to market values for outstanding financial derivative contracts.contracts.

E) Time Horizon:E) Time Horizon: E) Time Horizon:E) Time Horizon:

As the focus is on liquidity, the time horizon is short-term, up to one As the focus is on liquidity, the time horizon is short-term, up to one year. Further time horizon is proposed for assessing liquidity positionsyear. Further time horizon is proposed for assessing liquidity positions

          up to one monthup to one month

          More than one month and up to three monthsMore than one month and up to three months

          More than three months and up to one yearMore than three months and up to one year

Residual maturity is used to determine the time horizon.Residual maturity is used to determine the time horizon.

Other Reporting and Dissemination Considerations :Other Reporting and Dissemination Considerations : Other Reporting and Dissemination Considerations :Other Reporting and Dissemination Considerations :

Currency:Currency: Currency same as used to disseminate data on official reserves.Currency same as used to disseminate data on official reserves.

Reference Date:Reference Date:End date of reporting period. (Usually month end)End date of reporting period. (Usually month end)

            Positions are the outstanding stocks.Positions are the outstanding stocks.            Flows are anticipated amount within the reference period.Flows are anticipated amount within the reference period.            Transaction dates are used for determining time of recordingTransaction dates are used for determining time of recording ..

Sign Conventions:Sign Conventions:            Plus (+) for assets and inflowsPlus (+) for assets and inflows            Minus (-) for liabilities and outflowsMinus (-) for liabilities and outflows            Items not applicable are left blankItems not applicable are left blank

Other Reporting and Dissemination ConsiderationsOther Reporting and Dissemination ConsiderationsOther Reporting and Dissemination ConsiderationsOther Reporting and Dissemination Considerations

Country Notes to Disclose Information:Country Notes to Disclose Information:            Country-specific exchange rate arrangementsCountry-specific exchange rate arrangements            Specific reserve management policiesSpecific reserve management policies            Accounting PracticesAccounting Practices            Statistical treatment of some financial transactionsStatistical treatment of some financial transactions

SBP data template is disseminated on its website SBP data template is disseminated on its website http://www.sbp.org.pk/ecodata/liquidity.pdfhttp://www.sbp.org.pk/ecodata/liquidity.pdf

Monthly frequency of disseminationMonthly frequency of dissemination

More details on data template standards at IMF:More details on data template standards at IMF: http://www.imf.org/external/np/sta/ir/index.htmhttp://www.imf.org/external/np/sta/ir/index.htm

Major Sources of DataMajor Sources of DataMajor Sources of DataMajor Sources of Data

Accounts Department, SBPAccounts Department, SBP SBP Banking Services Corporation BankSBP Banking Services Corporation Bank Exchange Policy Department, SBPExchange Policy Department, SBP Exchange and Debt Management Department, SBPExchange and Debt Management Department, SBP

STATE BANK OF PAKISTAN

(Information to be disclosed by monetary authorities and other central government, excluding social security)

(Million US $)

A.Official reserve assets 10,954.06

(1) Foreign currency reserves (in convertible foreign currencies) 9,561.47

(a) Securities 3,172.55

of which: Issuer headquarted in reporting country but located aboard.

(b) total currency and deposits with: 6,388.92

(i) other national central banks,BIS and IMF 304.69

(ii) banks headquartered in the reporting country

of which:located abroad 63.82

(iii) banks headquartered outside the reporting country 6,020.41

of which:located in the reporting country

(2) IMF reserve position 0.17

(3) SDRs 218.00

(4) Gold (including gold deposits and,if appropriate,gold swapped) 1,174.42

— volume in millions of fine troy ounces 2.065

(5)other reserve assets (specify)

— financial derivatives

— loans to nonbank nonresidents

— other

B.Other foreign currency assets (specify)

— securities not included in official reserve assets

— deposits not included in official reserve assets

— loans not included in official reserve assets

— financial derivatives not included in official reserve assets

— gold not included in official reserve assets

— other

I.Official reserve assets and other Foreign Currency Assets (approximate market value)

As on 31st January 2006

International Reserves and Foreign Currency Liquidity

Up to More than 1 More than 31 month month and up months and

to 3 months up to 1 year

Principal -1,338.68 -153.56 -232.73 -952.39Interest -752.79 -56.98 -83.67 -612.14Principal

Interest

-245.00 -145.00 -100.00 0.00

0.00 0.00 0.00 0.00

      —trade credit (+)

      —other accounts payable (–)

      —other accounts payable (+)

3.   Other (specify)

      —outflows related to repos (–)

      —inflows related to reverse repos (+)

      —trade credit (–)

      (a) Short positions (–)

      (b) Long positions (+)

      —outflows (–)

      —inflows (+)2.Aggregate short and long positions in forwards and futures in foreign currencies vis-à-vis the domestic currency (including the forward leg of currency swaps)7

1.   Foreign currency loans, securities,

-1,564.53      and deposits6 -2,091.47 -210.54 -316.40

II. Predetermined short-term drains on foreign currency assets (nominal value)

Total

Maturity breakdown (residual maturity)

Up toMore than

1 More than 3

1 monthmonth and up months and

to 3 months up to 1 year

1. Contingent liabilities in foreign currency

    (a)  Collateral guarantees on debt falling due within 1 year 2,700.00 * 2,700.00       (b)  Other contingent liabilities 1,755.25 ** 1,755.25

2. Foreign currency securities issued with embedded options (puttable bonds)8

3.   Undrawn, unconditional credit lines9 provided by:

(a)  other national monetary authorities,

            BIS, IMF, and other international

            organizations

   —other national monetary authorities (+)

            —BIS (+)

            —IMF (+)

III. Contingent short-term net drains on foreign currency assets (nominal value)

Total

Maturity breakdown (residual maturity,where applicable)

      (b)  with banks and other financial

            institutions headquartered

            in the reporting country (+)

      (c)  with banks and other financial

            institutions headquartered

            outside the reporting country (+)

      Undrawn, unconditional credit lines

      provided to:

      (a)  other national monetary authorities,

            BIS, IMF, and other international

            organizations

   —other national monetary authorities (–)

            —BIS (–)

            —IMF (–)

      (b)  banks and other financial institutions

     headquartered in reporting country (–)     (c)  banks and other financial institutions

      headquartered outside the reporting

      country (–)

      country (–)

4.   Aggregate short and long positions

      of options in foreign currencies

      vis-à-vis the domestic currency 10

      (a)  Short positions

            (i)  Bought puts

            (ii)  Written calls

      (b)  Long positions

            (i)  Bought calls

            (ii)  Written puts

PRO MEMORIA: In-the-money options11

(1)   At current exchange rate

            (a)    Short position

            (b)    Long position

(2)      + 5% (depreciation of 5%)

            (a)    Short position

(2)      + 5% (depreciation of 5%)

            (a)    Short position

            (b)    Long position

(3)      – 5% (appreciation of 5%)

            (a)    Short position

            (b)    Long position

(4)      + 10% (depreciation of 10%)

            (a)    Short position

            (b)    Long position

(5)      – 10% (appreciation of 10%)

            (a)    Short position

            (b)    Long position

(6)      Other (specify)

Guarantees have been issued on behalf of Central Government and bodies/authorities controlled by it.

Other contigent liabilities include Letter of credits issued on behalf of Central Government and bodies/authorities controlled by it.

IV. Memo items

(1)  To be reported with standard periodicity and timeliness: 12  

      (a)    short-term domestic currency debt indexed to the exchange rate       (b)    financial instruments denominated in foreign currency and settled by other

              means (e.g., in domestic currency) 13 

              —nondeliverable forwards                   —short positions                   —long positions               —other instruments 

      (c)    pledged assets 14                —included in reserve assets               —included in other foreign currency assets 

      (d)    securities lent and on repo 15                —lent or repoed and included in Section I               —lent or repoed but not included in Section I               —borrowed or acquired and included in Section I               —borrowed or acquired but not included in Section I 

      (e)    financial derivative assets (net, marked to market) 16   (-) 245.00              —forwards  (-) 35.00              —futures               —swaps  (-) 210.00              —options               —other       (f)    derivatives (forward, futures, or options contracts) that have a residual             maturity greater than one year, which are subject to margin calls.               —aggregate short and long positions in forwards and futures in foreign

                 currencies vis-à-vis the domestic currency (including the forward                 leg of currency swaps)      (a)    short positions (–)       (b)    long positions (+)               —aggregate short and long positions of options in foreign currencies                  vis-à-vis the domestic currency       (a)    short positions               (i)    bought puts               (ii)    written calls       (b)    long positions               (i)    bought calls               (ii)    written puts (2)  To be disclosed less frequently:       (a)    currency composition of reserves (by groups of currencies)               —currencies in SDR basket  10,908.24               —currencies not in SDR basket  45.82

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