The value of active management for central banks

During the global crisis, the management of foreign exchange reserves played a key role. Central banks decreased their exposure to credit and in so doing acted in a manner that amplified the procyclical tendencies of the credit cycles.1 It is estimated that reserve managers pulled about $500 billion of deposits and other investments from the banking sector.

Such a fact has important governance implications when one considers that reserve managers pulled these deposits from the system while their