Foreign exchange reserve management

Foreign exchange reserves of the ECB

In accordance with the Statutes of the Eurosystem and in line with its share in the ECB’s capital key, the BCL transferred € 74.6 million in foreign exchange assets to the ECB. As a result of the EU’s enlargement and the relative growth of GDP and population in Luxembourg, the BCL’s share in the ECB’s capital key has been 0.2030% since 1 January 2014.

The tactical benchmark is established for each currency in line with the strategic benchmark. This tactical benchmark reflects the ECB’s risk/return medium‑term preference in regards to market conditions. A change in the tactical benchmark may affect different risk categories (for example, modified duration or liquidity risk). The Value at Risk of the tactical benchmark may differ from that of the strategic benchmark in the context of fluctuation margins announced, in advance, by the ECB.

Regarding the management of this portfolio, the prime task of the BCL is to invest foreign exchange reserves on behalf of the ECB within the prescribed fluctuation bands and fixed risk limits, the objective being to maximise return. The amount of passively managed assets in gold is determined by the ECB, taking into account strategic considerations and market conditions.

Own funds in USD

BCL manages a foreign reserves portfolio in USD. This portfolio is part of the own reserves.