1. Data Template on International Reserves and Foreign Currency Liquidity Presented By: Ghulam Rabbani Assistant Director Financial Accounts Division, Accounts Department, SBP, Karachi

2. BackgroundBackground  International Financial crisis in the late 1990s  Country experiences highlighted the importance of accessing foreign exchange liquidity from a broader perspective  IMF and the working group of the Bank for International Settlements (BIS) Committee on the Global Financial System, jointly developed in 1999 the new data template  On March 1999, the template was made a component of the Special Data Dissemination Standard (SDDS) established by the IMF in 1996

3. Data Deficiencies Revealed by Financial Crisis in the 1990s: Some countries include pledged assets in reserve assets Some countries include pledged assets in reserve assets foreign currency deposits held in financially weak domestic banks foreign 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

4. Lack of Publicly Available Information on Official Short-term Foreign Currency Obligations: off-balance sheet activities off-balance sheet activities data on forward commitments of foreign exchange under financial derivative contracts data on forward commitments of foreign exchange under financial derivative contracts information on options information on options information on principal and interest payments in foreign currency on loans and advances information on principal and interest payments in foreign currency on loans and advances Information on government foreign exchange guarantees and callable debt. Information on government foreign exchange guarantees and callable debt. unused conditional lines of credit unused conditional lines of credit

5. The New Data Template Framework The new data template captures several dimensions of country’s international reserve and related currency obligations and addresses the inadequacies described before The new data template captures several dimensions of country’s international reserve and related currency obligations and addresses the inadequacies described before Takes account of the off-balance sheet activities Takes account of the off-balance sheet activities Takes note of the future schedule and potential flows of contracts involving financial derivatives such as options, forwards and futures as well as un-drawn credit lines and loan guarantees Takes note of the future schedule and potential flows of contracts involving financial derivatives such as options, forwards and futures as well as un-drawn credit lines and loan guarantees The template includes information on the liquidity of country’s international reserves, identifying encumbered assets, and on its exposure to exchange rate fluctuations The template includes information on the liquidity of country’s international reserves, identifying encumbered assets, and on its exposure to exchange rate fluctuations

6. Forestalling Future Crisis strengthen the accountability of the authorities on policy action and foreign currency exposure strengthen the accountability of the authorities on policy action and foreign currency exposure correction of unsustainable policies and limit the adverse effects of contagion in times of financial turbulence correction of unsustainable policies and limit the adverse effects of contagion in times of financial turbulence It allows market participants to form a more accurate view of the condition of individual countries It allows market participants to form a more accurate view of the condition of individual countries Access to more transparent data may also enhance the effectiveness of the multilateral organizations. Access to more transparent data may also enhance the effectiveness of the multilateral organizations.

7. Overview of the Data Template The Scope Reserve Assets: Reserve Assets: “External Assets that are readily available to and controlled by monetary authorities for direct financing of payments imbalances, for indirectly regulating the magnitude of such imbalances through intervention in exchange markets to affect the currency exchange rate, and /or for other purposes.” (BPM5 para. 424) “External Assets that are readily available to and controlled by monetary authorities for direct financing of payments imbalances, for indirectly regulating the magnitude of such imbalances through intervention in exchange markets to affect the currency exchange rate, and /or for other purposes.” (BPM5 para. 424)

8. Foreign Currency Liquidity “Amount of foreign exchange resources that is readily available taking into account both predetermined and contingent/potential net drains.” “Amount of foreign exchange resources that is readily available taking 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:  Official Reserves  Other Foreign Currency Assets B-Predetermined and contingent net drains on foreign currency resources.

9. Reserve AssetsForeign Currency Liquidity Reserve Assets of Monetary Authorities Foreign Currency resources of monetary authorities and central governments (authorities) and drains on these resources. Claims on nonresidentsForeign 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.

10. Foreign Currency Liquidity Foreign Currency Resources Foreign Currency drains (Outflows net of inflows) International Reserves (official Reserve Assets) Other foreign currency assets Predetermined drainsContingent drains Foreign currency liabilities Financial derivative: Positions on forwards, swaps and future. Continge nt foreign currency liabilities Financial derivative: Positions on options.

11. Key Features and Coverage of the Template A) Institutions Covered: Key Features and Coverage of the Template A) Institutions Covered: Monetary Authorities Monetary Authorities - It is a functional concept - It is a functional concept - Hold and manage international reserves - Hold and manage international reserves - Encompass the central bank and certain central banking operations carried out by government institutions or commercial banks. - Encompass the central bank and certain central banking operations 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 entire territory of the country. - The political authority of the central government extends over the entire territory of the country. - State and local governments and social security funds at all levels are excluded. - State and local governments and social security funds at all levels are excluded.

12. B) Financial Activities covered: B) Financial Activities covered: Only instruments settled in foreign currency are to be included in resources and drains. As these can directly add to or subtract from the liquid foreign currency resources. Only instruments settled in foreign currency are to be included in resources and drains. As these can directly add to or subtract from the liquid foreign currency resources. Instruments denominated in or linked to foreign currency but settled in domestic currency will not directly affect liquid foreign exchange, but can exert substantial indirect pressure Instruments denominated in or linked to foreign currency but settled in domestic currency will not directly affect liquid foreign exchange, but can exert substantial indirect pressure

13. C) Treatment of financial derivative activities: The template covers: The template covers:  Predetermined foreign currency flows pertaining to the authorities’ forwards, futures, and swap contracts  Potential flows arising from options positions  Net, marked to market value of outstanding financial derivative contracts The template focuses financial derivatives settled in foreign currencies. (NDF and options settled in domestic currency are reported as memo items. The template focuses financial derivatives settled in foreign currencies. (NDF and options settled in domestic currency are 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 in exchange rates. Stress testing is to be included to assess risk exposure to fluctuations in exchange rates.

14. D) Valuations Principals: Positions are to be valued at market prices on the reference date or at approximate market values. Positions are to be valued at market prices on the reference date or at approximate market values. 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.) 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.) For financial derivatives: For financial derivatives:  Inflows and outflows in nominal terms for forwards, futures, and swaps  Notional values for options  Net, marked to market values for outstanding financial derivative contracts.

15. E) Time Horizon: As the focus is on liquidity, the time horizon is short-term, up to one year. Further time horizon is proposed for assessing liquidity positions As the focus is on liquidity, the time horizon is short-term, up to one year. Further time horizon is proposed for assessing liquidity positions  up to one month  More than one month and up to three months  More 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.

16. 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)  Positions are the outstanding stocks.  Flows are anticipated amount within the reference period.  Transaction dates are used for determining time of recording. Sign Conventions: Sign Conventions:  Plus (+) for assets and inflows  Minus (-) for liabilities and outflows  Items not applicable are left blank

17. Other Reporting and Dissemination Considerations Country Notes to Disclose Information: Country Notes to Disclose Information:  Country-specific exchange rate arrangements  Specific reserve management policies  Accounting Practices  Statistical treatment of some financial transactions SBP data template is disseminated on its website http://www.sbp.org.pk/ecodata/liquidity.pdf SBP data template is disseminated on its website http://www.sbp.org.pk/ecodata/liquidity.pdf Monthly frequency of dissemination Monthly 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.htm http://www.imf.org/external/np/sta/ir/index.htm

18. Major Sources of Data Accounts Department, SBP Accounts Department, SBP SBP Banking Services Corporation Bank SBP Banking Services Corporation Bank Exchange Policy Department, SBP Exchange Policy Department, SBP Exchange and Debt Management Department, SBP Exchange and Debt Management Department, SBP

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