HM Treasury News Release
144/98 2 September 1998
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UK OFFICIAL HOLDINGS OF FOREIGN CURRENCY AND GOLD: AUGUST 1998
Part I: UK Government Reserves
The overall level of the UK Government's spot reserves fell by
$5 million in August, bringing the end-August total to $35,289
million (#21,218 million) compared with #35,294 million
($21,580 million at the end of July).
The underlying change in the reserves was an increase of $4
million.
The underlying change excludes capital transactions that are
included in the overall change. In August there were repayments
of $9 million of public-sector borrowing for which the Government
has provided an exchange-rate guarantee under the Exchange Cover
Scheme (ECS).
$ million
end-August reserves 35,289
less
end-July reserves 35,294
OVERALL CHANGE -5
less adjustments 9
UNDERLYING CHANGE 4
Part II: Bank of England Holdings of Foreign Currency and Gold
The level of the Bank of England's spot holdings of foreign
currency and gold was $5,476 million (#3,292 million) at end-
August compared with $5,255 million (#3,213 million) at the end
of July.
$ million
end-August holdings 5,476
less
end-July holdings 5,255
OVERALL CHANGE 221
The change in the Bank's holdings includes changes in foreign-
currency and gold deposits placed with the Bank by overseas
central banks and other customers, and the change in valuation
over the month.
The change also includes a reduction of $20 million in the Bank's
spot holdings due to the net effect of foreign-exchange swaps
conducted in the course of the Bank's money-market operations.
These foreign exchange swaps are undertaken as a supplement to
the Bank's usual money market techniques to provide sterling
liquidity to the market. The operations are purely technical in
nature and have no monetary policy significance; they are likely
to be used from time to time in the future, depending on market
conditions.
Notes to Editors
1.Due to the two-day settlement lag in the foreign-exchange
market, both the UK Government figures and the Bank of England
figures include transactions conducted in the last two working
days of July and exclude transactions conducted in the last two
days of August.
2.The Quarterly Report on UK Official Holdings of Foreign
Currency and Gold, to be published on 2 December 1998 and
covering the quarter ending 30 September 1998, will contain
further information about the foreign-currency and gold holdings
of the Government and the Bank of England. This will include,
for each, the size of the forward foreign-exchange position, the
currency composition of foreign-currency assets, the size and
currency composition of foreign-currency liabilities and
information on intervention operations, if undertaken.
3.The Government and Bank of England figures have been
produced on the basis of different accounting methodologies.
Therefore, no overall total for the two is shown. Details of the
accounting methodologies were included in the Quarterly Report
published on 3 March 1998 (covering October-December 1997) and
will be included in future Quarterly Reports.
4.The underlying change in the Government's reserves is the
result of a variety of transactions, both debits and credits,
including, for example, transactions for Government departments,
transactions with other central banks and interest receipts and
payments. For these reasons, the underlying change should not
be taken as an indication of market intervention.
5.Repayments under the Exchange Cover Scheme in August were
as follows:
Organisation $ million
West Midlands County
Council 4.826
Northern Ireland
Department of
Finance 1.639
Central Regional Council 1.190
Lothian Regional Council 1.181
Other smaller repayments 0.505
Total 9.341
6.The figures contained in this press release can also be
obtained from the Reuters Monitor (page TREA), Bridge News (page
170), Telerate (p22494) and Topic (p6800).
7.If you have access to the Internet, you can find this
information at http://www.hm-treasury.gov.uk and at
http://www.bankofengland.co.uk.
Q&A BRIEFING
What are the reasons behind the changes in the levels of the
Government's reserves and the Bank's holdings?
Some explanation is provided in Parts I (Government) and II
(Bank). Further explanation will be included in the Quarterly
Report on UK Official Holdings of Foreign Currency and Gold to
be published on 2 December 1998, covering the quarter ending 30
September 1998.
Why are forward purchases and sales of currency not shown in the
monthly figures?
The aim in the monthly figures is to publish the basic
information, covering the month's change in the spot reserves as
quickly as possible. Further details, covering the currency
breakdown of assets and liabilities and forward purchases and
sales, are provided regularly in the Quarterly Reports.
Why does the Bank have holdings of foreign currency and gold on
its balance sheet?
The Bank's holdings arise mainly from foreign-currency and gold
deposits placed with the Bank by overseas central banks and other
customers in the course of their banking business with the Bank.
Why is a total for the foreign-currency and gold holdings of the
Bank and the Government not shown?
An overall total is not shown because different methodologies are
used to account for Bank holdings and the reserves in the
Exchange Equalisation Account. The principal difference relates
to the exchange rates used for valuation purposes: the Bank's
holdings are translated into US dollars at prevailing market
rates whereas the EEA's holdings are translated at "parity"
exchange rates set once per year. A combined total would
therefore be misleading.
Are the Bank's holdings of foreign currency and gold part of the
UK's foreign-exchange reserves?
The Bank's holdings are available for the purposes of
intervention in the foreign-exchange market. However, since they
mainly arise from the Bank's routine banking business, it would
be misleading to term them "reserves." It should also be noted
that, whereas the EEA reserves are under the direction of the
Treasury, the Chancellor's statement of 6 May 1997 included
provisions for the Bank to hold a separate pool of foreign-
currency assets available for intervention in support of its
monetary-policy objective.
Will the holdings on the Bank's balance sheet be used for
intervention?
The Bank's holdings could be used for a variety of purposes,
including intervention if the Bank so decided.
Will the Bank be increasing the size of its holdings by some
other means?
The Bank may change the size of its holdings in the management
of its balance sheet or to meet operational requirements.
# = pounds sterling