Methodological Notes on the Compilation of the International Reserves and Foreign Currency Liquidity Data Template

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1 NATIONAL BANK OF SERBIA ECONOMIC ANALYSIS AND RESEARCH DEPARTMENT Methodological Notes on the Compilation of the International Reserves and Foreign Currency Liquidity Data Template March 2011 Authors: Biljana Savic, Maja Gavrilovic

2 Abstract Methodology of the International Reserves and Foreign Currency Liquidity Data Template is fully in accordance with "Balance of Payments Manual, Fifth Edition, International Monetary Fund, 1993 (BPM5) and International Reserves and Foreign Currency Liquidity Guidelines for Data Template, International Monetary Fund, The International Reserves and Foreign Currency Liquidity Data Template is an important macroeconomic indicator and reporting of its progress is obligatory for all members of Special Data Dissemination Standard (SDDS). Metodology gives an overview of main caracteristics of the International Reserves and Foreign Currency Liquidity Data Template, namly definitions of main concepts, institutional coverage, time horizont, periodicity, and data sources. 2

3 Contents 1. Main Concepts of the Reserves Data Template Key Features of the Reserves Data Template Institutional Coverage Financial Activities Covered by the Reserves Data Template Valuation Principle Time horizon Resident criteria Structure of the Reserves Data Template Periodicity Data Revision Policy Data Dissemination Contacts

4 Methodological Notes on the Compilation of the International Reserves and Foreign Currency Liquidity Data Template The National Bank of Serbia has the obligationto compile the International Reserves and Foreign Currency Liquidity Data Template (Reserves Template). The Balance of Payments Statistics Division, within the Economic Analyses and Research Department, is responsible for compiling and publishing ofthe Reserves Template. The Reserves Data Templateis an important macroeconomic indicator and reporting of its progress is obligatory forallmembers of SDDS Main Concepts of the Reserves DataTemplate The Reserves Data Template is compiled in accordance with the Balance of Payments Manual, Fifth Edition, International Monetary Fund, 1993 (BPM5) 2 and International Reserves and Foreign Currency Liquidity Guidelines for Data Template, International Monetary Fund, The Reserves Data Templateintegrates the concepts of (1) international reserves and (2) foreign currency liquidity in a single framework. According to the BPM5, the international reserves concept is defined as: external assets that are readily available to and controlled by monetary authorities for direct financing of payments imbalances, for indirectly regulating themagnitude of such imbalances through intervention inexchange markets to affect the currency exchange rate,and/or for other purposes. (BPM5, Para. 424). The foreign currency liquidity concept is broader than that of international reserves, and refers to (1) foreign currency resources that are readily available to the monetary authorities and central government to meet a sudden increase in the demand for foreign exchange, and (2) predetermined and potential net drains on foreign currency resources resulting from the short-term foreign currency liabilities and offbalance-sheet activities of the authorities. 2. Key Features of the Reserves Data Template 2.1 Institutional Coverage Accordingto the Law on the National Bank of Serbia (2010),Article 4. Para 2: The task of the National Bank of Serbia shall be to: manage foreign reserves. The Reserves Data Template covers activities of the National Bank of Serbia, as the monetary authority, and those of the central government (excluding social security funds), which together account for the bulk of the official foreign currency obligations. 1 Special Data Dissemination Standard

5 2.2 Financial Activities Covered by the Reserves Data Template The Reserves Data Template covers only instruments in foreign currencies and instruments in Serbian dinars denominated in or indexed to foreign currency. Foreign assets in nonconvertible currencies, as well as all other assets that do not meet reserve assets concept, are excluded from the Reserves Data Template. 2.3 Valuation Principle Data in the Reserves Data Template are reported in millions of EUR. Instruments in other currencies are converted according to the official exchange rate on the last day of the reporting period. Securities positions are valued daily according to the market price of instruments concerned, while gold is valued on a monthly basis according to its market price. Predetermined and contingent net drains are valued in nominal terms. Accrued interest on official international reserves and other foreign currency assets is included in Table I. 2.4 Time horizon The time horizon of the Reserves Data Template is short-term. The ReservesData Template is based on the residual maturity concept and includes: short-term instruments (original maturity up to one year or less), instruments with longer original maturity whose remaining maturity is one year or less, and principal and interest payment falling due within one year on instruments with original maturity of more than one year after reference date. The data on predetermined and contingent net drains are broken down into three categories: (1) up to one month, (2) more than one month and up to three months and (3) more than three months and up to one year. 2.5 Resident criteria International reserves represent the monetary authority s claims on non-residents, while the foreign currency liquidity relates to the authorities (both monetary and central government) claims on and obligations to residents and non-residents. Resident criteria are based onbpm5. 5

6 3. Structure of the Reserves Data Template The Reserves Data Template has four sections: Section I.Official reserve assets and other foreign currency assets This section of the Reserves Data Template includes data on outstanding assets (stock) of official reserve assets and other foreign currency assets on the reference date. A. Official reserve assets Definition of the official reserve assets presented in the Reserves Data Template corresponds to the definition given in the BPM5. The types of official reserve assets of the Republic of Serbia are explicitly defined under Article 49 of the Law on the National Bank of Serbia: The foreign exchange reserves of the NBS shall encompass: 1) Receivables on the accounts of the NBS kept abroad; 2) Securities denominated in foreign currency held by the NBS; 3) Special drawing rights and the reserve position with the International Monetary Fund; 4) Gold and other precious metals; 5) Foreign banknotes and coins. Official reserve assets of the National Bank of Serbia consist of: Short-term foreign negotiable debt securities (A.1.a); Foreign cash, foreign currency demand deposits, foreign currency time deposits which can be withdrawn before maturity, and foreign currency time deposits with remaining maturity of up to one years (A.1.b); Reserve position with the International Monetary Fund (A.2); Special Drawing Rights (A.3); Gold (A.4). Section I of the Reserves Data Templatecomprises accrued interest on securities, foreign currency cash and deposits. 6

7 B. Other foreign currency assets Other foreign currency assets cover all foreign currency assets belonging to the monetary authority and central government that do not fulfill the basic requirements for inclusion into the official reserve assets. Data source:main data source are accounting data of the National Bank of Serbia. Section II. Predetermined short-term net drains on foreign currency assets Section II of the Reserves Data Templateshows predetermined short-term net drains of the monetary authority and central government referring to fixed contractual foreign currency net liabilities. The Section II. includes all net foreign currency drains on gross basis (inflows and outflows are shown separately) that fall due in the next 12 months. Remaining maturity is divided into three separate time periods: up to one month, more than one month and up to three months and more than three months and up to one year. Inflows are shown with a plus sign (+), while outflows are shown with a minus sign (-). Residency concept is not applied in Section II. Predetermined short-term net drains on foreign currency assets are shown in nominal value terms. Data source: Data on pre-determined short-term drains on foreign currency assets are based on information provided by the International Relations Department and Monetary System and Policy Department of the National Bank of Serbia. Section III. Contingent short-term net drains on foreign currency assets Section III of the Reserves Data Template covers contingent short-term net drains on foreign currency resources that might give a rise to potential future outflows or inflows of foreign currency assets. By definition, this item refers to net outflows covering off-balance sheet activities. Contingent short-term net drains on foreign currency assets are recorded in nominal value terms and cover inflows and outflows falling due in the 12 months after reporting period (remaining maturity concept). Data source: Data on contingent short-term net drains on foreign currency assets are based on information provided by the International Relations Department, Monetary System and Policy Department and accounting data base of the National Bank of Serbia. Section IV. Memo items Section IV of the Reserves Data Template should provide additional information regarding stocks and flows on foreign currency assets which are not shown in Sections I-III, but are important for the assessment of the stock of official reserve assets, foreign currency liquidity and currency risk of the Republic of Serbia. This Section covers instruments denominated in foreign currency butsettledby other means (e.g. Serbian dinars), as well as the currency structure of the reserveassets. Data source: Data are based on information provided by the Foreign Exchange Department, Monetary System and Policy Department and the accounting data base of the National Bank of Serbia. 7

8 4. Periodicity The Reserves Data Template is published on a monthly basis, four weeks after the reference period. 5. Data Revision Policy The Reserves Template data are subject to corrections in line with the official data sources. When changes to the methodology are made for the purpose of data quality improvement,the National Bank of Serbia is obliged to timely provide such information to data users. 6. Data Dissemination The Reserves Data Template is published on the National Bank of Serbia s website: 7. Contacts If there are any questions regarding the methodology applied or data published in the Reserves Template, please do not hesitate to contact the Economic Analyses and Research Department, Balance of Payments Statistics Division. National Bank of Serbia Economic Analyses and Research Department Balance of Payments Statistics Division 12 th Kralj Petar Street Belgrade Serbia biljana.savic@nbs.rs Last time updated on March 31,

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