Principles of Central Bank Reserve Management (2018)

Almost every country in the world holds foreign currency reserves or “FX reserves”, which are assets of the central bank held in different reserve currencies, most commonly the US Dollar, used to back its liabilities. Foreign exchange reserves held by the Central Bank are a major national asset and a primary tool of monetary and exchange rate policy. Understanding how reserves management works is important in today's world. Foreign currency reserves make up $11 trillion of capital. The sheer size of reserves makes reserve managers some of the most important players in the global financial markets. This is in addition to the influence they have in their domestic markets on the value of their currency or on interest rates.

This course will present a 360 degree view on reserves management and will cover issues such as why central banks hold FX reserves, how much they should hold, investing in various asset classes (bonds, equities etc), managing liquidity in case the central bank needs to use the reserves, actively managing portfolios and using external managers. In addition, the course will take a look at what has changed in the post crisis world. The course will provide an understanding of strategic issues involved in setting a country's official reserves policy. The course will one to think like a reserve manager, useful for whether one works at a central bank or is exposed to any part of their operations.