Appendix 2: Survey responses and comments

Below are comments provided by reserve managers to the survey questions.

1. Which in your view are the most significant risks facing reserve managers in 2025?

Difficult to rank – these are all significant risks.

Geopolitical risks and US protectionist policies are the top concern due to their potential to disrupt global trade and impact monetary policies and financial markets.

Geopolitics has become more relevant, given its impact on market volatility.

I would be afraid of US isolation from the rest of the world and, as a consequence, weaker USD and lower demand for US assets.

In my opinion, geopolitical escalation poses the most significant risk for reserve managers, creating heightened risk for balancing, to protect the value and liquidity of reserves with the realities of an increasingly uncertain global landscape, which alters portfolio composition.

Inflation has been proving to be a major factor affecting institutional portfolios for a while now, and a period when it remains too volatile probably will have relevant short-term impacts in reserves management.

Market reactions to decisions taken by the US administration are likely to be the biggest risks for reserve managers. Geopolitical escalation (Ukraine, Taiwan, Panama, etc) will also be major risks.

On the one hand, we believe geopolitical actions and future protectionist policies worldwide by themselves pose huge risks, and are most difficult to predict in advance, but, besides these, on the other hand, also might have second-round effects on very important factors [such] as global inflation and economic growth.

Overall, policy divergence and inflation volatility are the biggest risks reserve managers need to manage now, while geopolitical shocks and slowing growth remain major concerns. Fiscal risks and US protectionist policies are longer-term, but still lurking in the background.

The changes that inflation might [undergo] will cause changes in the US Federal Reserve’s monetary policy. In consequence, the UST [US Treasuries] yield curve would have significant changes.

The fact that President Trump is resorting to protectionism [could] result in lower-than-expected global growth, resulting in lower interest rates and lower returns for reserves.

The increasing adoption of protectionist measures by the US – such as trade tariffs, export controls and restrictions on foreign investments – is creating heightened volatility in financial markets. These policies can disrupt global trade flows, weaken international co-operation, and lead to retaliatory actions by other nations, all of which can negatively impact reserve portfolios.

The new administration in the US and the large fiscal deficit could be the main challenge in 2025 due to its impact on global growth and inflation.

The re-election of President Trump and his commitment to ‘America first’ policies are expected to have global ramifications on geopolitics and trade. The administration’s approach appears to be geared towards extracting maximum concessions from trading partners by stepping up the threat of tariffs, which will likely lead to headline-induced volatility. A universal tariff would likely result in [a] more meaningful impact on price inflation. Hence, markets are likely to struggle with uncertainty over the extent to which the Trump administration will pursue its trade agenda, which will ultimately impact investment portfolios. Geopolitical issues (such as deterioration of US-China relations, Israeli-Hamas conflict, unsettled Ukraine-Russia war), as well as potential trade and capital flow fragmentation, are also significant concerns. Increased interest rate divergence, especially between the eurozone, which continues to cut rates successively, and the US, which is now indicating some restraints on its rate cut plan, may be a cause of concern to the effectiveness of co-ordinated monetary policy responses and global financial stability, which may increase market volatility, especially in the FX [foreign exchange] space.

The recent policy changes of the US will have an impact on the free movement of goods and services globally, which will impact the reserves of countries, whether negative or positive is yet to be seen.

Trump policies and geopolitical tensions are the key risks to reserve managers.

Uncertainty on US policies (trade, foreign relations) and impact on economy (growth, inflation, etc).

US Federal Reserve policy-makers may be able to reduce interest rates a couple of times this year, but concerns remain due to the policies of the Trump administration.

US protectionist policies (tariffs) have the potential to slow economic growth and fuel inflation in the US, constraining the Fed’s policy easing space and making it more careful about lowering rates. A full-blown trade war might push economies into recession if retaliatory measures are implemented. Higher rates for longer would exacerbate the already elevated US fiscal deficit by increasing the debt service costs (particularly troubling, given that, in 2025, around 25% of the total debt is set to mature).

US protectionist policies against major economies pose a great threat to global economic growth.

US protectionist policies and volatile inflation pose major risks by impacting trade flows and reserve asset returns, while geopolitical tensions add uncertainty to asset security and liquidity management.

US protectionist policies might lead to retaliatory actions and in consequence significantly impact the geopolitical situation, global growth, inflation and financial markets (including risk-off flows). Although the first decisions taken by the new US administration indicate the likelihood of limiting and spreading protectionist measures over time, uncertainty in this area remains high. Besides, the fiscal position of several advanced economies remain deteriorated with the threat of rating downgrades.

We assume that the most significant risk facing reserve managers in 2025 will be global monetary policy and interest rate divergence, since global monetary policy has the most important influence on interest rate movements. In addition to global monetary policy, we assume that US trade policy will have a significant impact on global economic growth.

We believe that US policy (especially tariffs and fiscal policy) and its impact on the economy and financial markets will be important for reserve managers in 2025. We believe that the short-term impact of US policies will support global monetary policy and interest rate divergence, especially in the first half of the year. On the other hand, we expect fixed income portfolios to be subject to significant price volatility due to fiscal deficit concerns and political uncertainties. We have therefore placed these three themes at the forefront for 2025.

We believe that volatile inflation, unsustainable fiscal deficits and US protectionist policies are the most significant risks in 2025.

We believe the diversity with regard to growth uncertainty across the eurozone as compared to other developing countries, and divergence of monetary policy thereof, will create a divergency of response going forwards, rather than other factors.

We may add: climate risks and cyber security threats!

With our reserves predominantly invested in the US fixed income sector, we are concerned about the implications of President Trump’s fiscal policies on inflation and monetary policy.

2. What do you think will be the most important factors affecting your reserve management over the next five years?

All should be very important.

Artificial intelligence and technology are becoming critical for optimising reserve management, while inflation, interest rates and USD movements will continue to shape asset allocation and risk management strategies.

As a commodity exporter, energy prices and production levels will continue to have a significant impact on our reserve management.

Bringing bitcoin and crypto into the discussion about including them among reserves may create a lot of headache for traditional reserve management strategy creators. As the only value of bitcoin is its price so far and because the traditional statistical measures are useless due to the sharp and volatile changes of bitcoin price, the inclusion of bitcoin among reserves seems to be a hard job. There is no anchor and there are a lot of new technologies involved.

Difficult to rank, these are all significant risks.

Driven primarily by the significant exposure in the fixed income securities.

Economic activity and monetary policy in major economies will be critical to our reserve management decisions, particularly for our fixed income portfolios. The US dollar exchange rate is also important for the foreign exchange composition of our reserves.

Fiscal positions of several advanced economies remain deteriorated with the threat of rating downgrades, which may stimulate the review of strategic asset allocation [SAA]. The risk of [an] emerging bubble [in] the equity markets (especially US) might discourage further diversification of foreign reserves.

From the perspective of our portfolios, most of our holdings are in government debt focused on short to medium maturities. The risk from a returns perspective is focused on duration risks from volatility in rates.

Geopolitics is right now the most decisive factor for reserve management. Commercial war, sanctions, tariffs are all geopolitical weapons. So, geopolitics will definitely negatively affect reserve management.

In this part, we gave mark 3 to sustainability, since the environmental, social and governance [ESG] topic has reached a very important/strong level of influence [in] every segment of the economy. But we assume that inflation and interest rates (following inflation rates) will still be the key factors when managing our reserves.

Interest rates and a reversal of the interest rate cycle will remain the core risk over the longer term.

Our foreign investments are denominated in US dollars and are concentrated in the United States, hence the volatility in interest rates and inflation rates has a significant impact on our portfolio.

Such factors bring uncertainties to reserve management, which strongly signals for diversification.

The advancement of artificial intelligence will transform the management of international reserves by enhancing data analysis, optimising decision-making, and improving risk assessment.

The effect from Trump’s policies on inflation and on the Fed monetary policy could create interest rate/yield volatility. At the same time, given the high public debt, there’s limited room for fiscal response in the eurozone.

The expectation of structurally higher interest rates compared to pre-pandemic levels will influence reserve management especially since central banks’ portfolios are fixed income-centric. While higher rates make entry points in fixed income assets more attractive in general, they also pose challenges for managing existing portfolios due to the price impact on duration assets. Geopolitical issues, such as US-China relations and potential trade and capital flow fragmentation, are of significant concerns. China’s retaliation could take a harder line leading to greater regionalisation and trading blocs. Financial fragmentation may make EM [emerging market] economies more vulnerable to shocks, which will limit opportunities for reserves portfolios to diversify into these economies, hampering risk diversification. Long-term geopolitical tensions may impact the appetite for risk assets and exacerbate demand for safe-haven assets [USTs], which will make these more expensive.

[The] US dollar exchange rate is also an important factor to consider, especially for portfolios having a dollar numeraire. Currently, markets are grappling with uncertainty over the extent to which the US will pursue its trade agenda. A lack of clarity around tariffs is likely to weigh on market sentiment and support the USD near term.

While it is clear reserve managers are adapting their strategies in response to emerging risks and a changing economic climate, another factor influencing their strategies is AI. AI is mostly viewed to have a positive impact on their future activities. Already some data analytics/news vendors such as Bloomberg are capitalising on AI to optimise their operations and allow clients to have more streamlined and enhanced data-driven insights. Going forwards, reserve managers would look forward to taking advantage of AI to identify optimal asset allocation, for example, rebalancing strategies, risk-adjusted returns, and tax efficiency for each portfolio. AI could also execute trades, monitor portfolios, adjust asset weights, and generate reports automatically and efficiently.

The US dollar will be the most important factor affecting our reserve management over the next five years, given its dominance in global trade and finance, along with its stability and performance.

The US is on an unsustainable fiscal path that might continue to push yields higher by increasing the term premium. Besides, Donald Trump’s America First foreign policy might be disrupting and create volatility (even if it is yet to be deployed).

Trump’s tariffs.

We believe that inflation and interest rates, the US dollar exchange rate and public debt sustainability are the most important factors affecting our reserve management over the next five years.

3. Where do you believe policy rates in the US and the eurozone will be at the end of 2025?
3a. How will this affect your reserve management decisions?

A bias towards USD-denominated assets, due to [the] higher-for-longer interest rate environment in [the] US. Similarly, longer-duration fixed-income assets with relatively higher coupon rates will be more attractive than short-duration assets, which could be subject to reinvestment risk.

Asset yields will drop, and reserves with longer duration strategies will be compensated for their additional risk taken. Also, reinvestment risk will rise due to the lower yield making spread strategies attractive. However, given the near- to medium-term projections of increased protectionism and weakening trade relations, there also exist scenarios where these projects may not materialise and rates may remain higher.

At the end of the last year, within our regular SAA, we already positioned the portfolios for lower rates in the eurozone and the US.

Compared to 2024 expectations, the US rate is now expected to remain higher for longer. Given uncertainties in Trump policies, inflation expectation remains uncertain for the time being. We hope to get a broader view by the end of Q1 2025. Meanwhile, we plan to minimise duration risk and invest [more] in high-rated spread products.

Decisions are made in line with defined guidelines, but do take into consideration market expectations.

Even if there is a lot of uncertainty (given the new administration and the high fiscal deficits in the US, the anaemic growth and political turmoil in Europe and the lack of effectiveness of Chinese policies to revamp the economy), we see the current environment as constructive. The carry in the portfolios is good thanks to the elevated interest rates and the potential for capital gains should the disinflation process continue (allowing central banks to keep cutting rates) is attractive. Even if rates were to increase, the elevated yields provide a cushion against market-to-market losses.

Extend portfolio duration.

Given that the declining rates affect the return profile of indexes, this can possibly affect the choice of the benchmark.

Go long global bonds.

If US policy rates end up at 3.75% and eurozone rates at 2.25% by the end of 2025 as per our projections, then our reserve management strategy will consider increasing exposure to USD-denominated assets to capitalise on higher yields. We will consider moderately extending the duration of our fixed-income portfolio to lock in these rates, while maintaining diversified currency exposure to manage FX risks effectively.

In the medium term, the plan is to add duration to the portfolio to lock in attractive yields and then benefit from yield curve normalising. In terms of currency diversification, the divergence in policy rates between the US and European Union is one of the main factors driving the underweight position in euros.

Increase duration in USD. Keep a low allocation to EUR-denominated assets.

Increase in the proportion of reserves in USD and decrease in the proportion of reserves in EUR.

Increasing duration.

Interest rates will be a basis for considering terms. If the interest rate curve changes, it would be favourable to extend investments, otherwise, to maintain short-terms.

Investment strategy shifts in relation to the duration of our fixed income portfolios, and diversifying into assets with higher yields.

It does not affect.

It will impact investment decisions and diversity in the portfolio.

It will not significantly affect reserve management decisions because of our balance sheet positioning and longer-term view.

Keen on taking more duration.

Long-term decisions not affected by short-term developments.

Look to diversify to upset the downside trends in rates.

Lower US rates will help reduce pressures on local currency and thus reduce the cost of imports, allowing reserves to appreciate. On another front, lower rates will be an incentive for investors to explore emerging capital markets, which could enhance inflows to the local financial market. In terms of [the country’s] foreign debt, the running debt services costs will likely fall down along with the drop in [the] Fed’s and ECB’s rates.

Not by much, longer-term views are taken in asset allocation.

No impact, this is our base case assumption for the SAA 2025.

Not by much, it’s already fairly priced in as we see it.

Official rates expectations are taken into account in our investment policies for our active trading portfolios as another input in the decision-making process.

OIS [Overnight Index Swap] curve.

Our allocations to currency and assets will remain more or less the same. However, we forecast slightly less income from investments based on the rates outlook.

Our investment horizon is long-term – thus, we do not expect to make any material strategic allocation changes due to changes in policy rates in the US and the eurozone. However, we could do some tactical allocation changes, which will depend on [the] individual decisions of portfolio managers.

Our reserve management decision will be affected in a way that we will look to invest in papers which have a higher interest rate than policy rates. Also means that our risk approach will have to change based on these policy rates in terms of which paper and the period.

Overweight duration given the more hawkish current pricing.

Policy rates in major world economies will impact the duration of our portfolios; in the sense of extending duration on exchange reserves portfolio. These steps have already been taken during the course of 2024.

Positive return during this period, but posing the reinvestment risk.

Pursue diversification strategies.

Relative spread trades between currencies. Divergence between EUR and US rates will increase the cost of hedging USD reserves from a EUR perspective.

Reserve management is based on long-term strategic asset allocation. From this angle, no radical change is expected. On the other hand, the tactical allocations (with shorter horizon) may adjust their exposures to exploit market dynamics.

Reserve managers will have to analyse the portfolio to see how the assets can be best allocated to manage returns.

Stay neutral due to high political and inflationary uncertainty.

Tactical positioning due to interest rate expectations.

The anticipated direction of interest rate going forward will likely result in keeping the duration of the portfolio higher, but within a tolerable risk limit, while taking advantage of the current higher yield by extending the tenor of our money market portfolio.

The [central bank] increased investments in the long term to take advantage of better yield to maturity and to mitigate any expected US Fed rate cut.

The chances of [the] lowering of the policy rates by both the US & eurozone will reduce the value of assets, which signals the [need for] reserve managers to diversify the assets to mitigate various risks and also indicates investment in safe-haven assets.

The expected level of those interest rates by the end of 2025 is confronted with several other possible scenarios, so only one expectation plays no major role in our reserve management decisions.

The portfolio is likely to remain biased to the USD than EUR, given the safe-haven sentiment of the dollar, especially with the anticipated geopolitical tensions.

The slower pace in the reduction of the interest rates will probably lead us to maintain, without significant changes, the current composition of our portfolios.

They do not affect us at all.

This shift in monetary policy will affect our SAA, so our repartition in USD vs EUR must be reviewed carefully, also the divergence between Fed/ECB as monetary policy.

We aim to minimise portfolio volatility by maintaining exposure at the shorter end of the curve, where yields remain attractive while reducing duration risk in a potentially shifting rate environment.

We are able to tilt the duration of our foreign reserve portfolios in response to our view on the future path of policy interest rates.

We are likely to take a longer duration bias for the marked-to-market portfolios, but no changes in the strategic asset allocation agreed for this year is expected to be made.

We do not expect any changes to our reserve management decisions based on current information.

We do not predict interest rates for our reserve management at this level. However, we do build long-term return expectations on an aggregate level (eg, stocks versus bonds).

We do not speculate on policy rates.

We had increased the duration and the amount of our portfolio in euros.

We have increased duration, but with the increase in US protectionist policies and market volatility, we will have to adjust as and when necessary.

We recently increased the duration of our portfolios when yields rose sharply in a short period of time. We see that the market is now pricing broadly in line with our expectations. We do not plan to make any major changes to the duration of our portfolios in the near term.

We view the impact on the portfolio for this year as highly favourable. However, the most substantial effects are expected to materialise in the coming years. This is due to the influence of cashflow fluctuations, which will determine the timing of investments and subsequently shape the average returns of the portfolio in future periods.

We will seek to diversify our holdings into high-yielding instruments and high-coupon instruments.

Will cause reallocation of funds to fixed-income securities from deposits.

4. Which of the below countries’ bond markets do you think will see relative outperformance/underperformance?

At this point, there is uncertainty about the impact that Trump’s tariffs and policies might have.

Based on one-year outlook (ie, returns for 2025).

China and European economies to underperform, leading to lower rates and therefore outperformance in bonds.

Despite concerns on trade retaliatory effects, the US bond market is expected to outperform due to a stable economic outlook, controlled inflation, and a favourable monetary policy environment. Additionally, global investor confidence further supports the market’s performance, making US bonds an attractive investment compared to other global bonds.

Due to the inverse relation between basic interest rates and bond yields, and due to our projections of further interest rates movements, we assume Europe will outperform. Japan is rated as the worst-performing market, being the only major economy where there are expectations of higher interest rates.

Expecting economic and geopolitical stability in the UK.

Fixed income ranking does not take into account currency returns.

If I had to rank them, I’d put the US and Canada at the top – strong economies and steady policies make their bond markets look solid. Australia is also in a good spot with stable growth. Germany should hold up despite high debt issuance, but France has some political and fiscal challenges that could weigh it down. Japan remains stagnant with ultra-low rates, and the UK’s rising debt is a real concern. China, though, is the biggest question mark – economic weakness and policy constraints make its bond market the least attractive.

Japan’s bond market is expected to perform well due to yield curve control and stable demand, while Australia and Germany remain attractive for their relative economic resilience. Meanwhile, China’s bond market faces headwinds from policy uncertainty and slowing growth.

The best performer when taking FX into account could be materially different when analysing relative performance from purely a rates perspective. In terms of monetary policy, the US and Japan could relatively underperform all other bond markets. In the US, strong labour market and economic data could delay rate cuts, pushing bond yields higher and rising US fiscal deficits and Treasury issuance could weigh on bonds, although this may be counterbalanced due to demand pressures for safe-haven USTs. While, for Japan, rate hikes by the BoJ [Bank of Japan] and [the] end of yield curve control would be negative for bond markets. In contrast, China is facing deflationary headwinds due to weak domestic demand and a struggling real estate sector. A dovish PBoC [People’s Bank of China] means China’s bond yields have room to decline further, supporting price appreciation. China’s bond market is largely shielded from fiscal pressures due to high domestic savings and limited external borrowing. In Europe, ECB [European Central Bank] rate cuts and weak eurozone growth favour bonds.

However, when FX is taken into account (assuming a USD numeraire), US exceptionalism is expected to remain undisputed under Trump 2.0. In fact, the US is the only country that has returned to its pre-pandemic potential growth path and still retains its role as a global demand engine. While there might be inflationary repercussions from the tariff impositions, demand for UST/US credit is expected to be strong, and will impact positively on the bond market. [The European] bond market is expected to be supported by the ECB’s ongoing rate cut cycle. However, the European model is still facing challenges, with France facing a fiscal reckoning and downside risks persisting in Germany as domestic demand remains depressed, pricing power wanes, and labour costs continue to rise. This is expected to lead to a credit spread widening. In the EM space, China is expected to be hit the hardest. Higher-for-longer US rates will outweigh potential inflows. In fact, tariff policy usually drives a stronger USD, and reshoring is expected to be funded from divestment from the local EM markets.

The development of bond markets could be driven by protectionist policies, as well as growth and [the] fiscal position of particular economies.

The European countries may underperform due to the lingering economic uncertainty, relatively high inflation risks and the potential volatility from geopolitical challenges.

The fall of inflation and slower growth in the US will drive the interest rates down and the prices of the bonds up. It will also happen in the UK. [The] eurozone is in stagflation, and the interest rates are already very low, so bonds will not see meaningful variation. The same with Japan.

The Fed is expected to continue easing, but at a much lower pace relative to other Group of 10 peers. The Fed’s easing cycle will also be challenged by Trump’s fiscal agenda, which could put upward pressure on inflation and yields. On the other hand, other central banks – such as the ECB, BoC [Bank of Canada], RBA [Reserve Bank of Australia] and BoE [Bank of England] – are expected to ease at a faster pace than the Fed and therefore their bond prices should appreciate. Risks to bond price appreciation in France, Germany and Canada will be political, while risks to that of the UK’s will be based on the fiscal deficit. Lastly, Japanese bonds will underperform as the BoJ hikes its key rate.

The Federal Reserve’s higher-for-longer stance means that US interest rates will remain elevated relative to other developed markets. This makes US bonds more attractive to global investors, as they offer higher real yields compared to European and Japanese bonds, where rates are either negative in real terms or significantly lower.

[The] US, Japan, Germany and Canada are safe-haven assets, and their performance will be fuelled by the uncertainty from the shift in US trade and foreign policies. Australia’s economic indicators seem to put them ahead of the curve with their inflation stabilising close to target and labour remaining relatively strong, as well as its energy production drive. Eurozone countries will underperform significantly due to strained relations with the US. [The] UK is stagnating, and is the most likely economy to see no growth. The Chinese property crisis is expected to show deeper cracks within the Chinese economy.

This ranking only considers the interest rate factor.

We do not follow the other markets except the UK, US and Europe.

We expect the US economy to outperform others, given President Trump’s proposed fiscal policies.

We see best outperforming markets where the current monetary policy rates are higher than the neutral rates for the current cycle, combined with potentially slower economic growth going forwards.

We think the US economy will continue to outperform, but interest rates may remain elevated for longer. In the case of Europe, the weak growth and political turmoil could affect the valuation of risky assets. China and Canada might suffer, given Trump protectionist policies (tariffs). Japan is expected to continue increasing its policy rate, which might hurt the performance of fixed income assets, and Australia is yet to begin its cutting cycle, which is a positive for fixed rate assets.

We would refrain from ranking euro area jurisdictions.

5. Are geopolitical risks incorporated in your risk management/asset allocation decision-making?

Decrease in the proportion of reserves in EUR. [Fewer] Asian counterparties. Lower investments in deposits and higher investment in bonds!

Geopolitical risk can be incorporated in risk management as a variety of improvements concerning all aspects of investment management. In particular, as central banks are typically conservative investors, the safety and liquidity aspects of reserve operations are primary concerns for reserve managers. Deeper research on counterparties, further diversification of investment infrastructure and avoidance of transactions that at some point could be reached by sanctions are among measures that can be carefully implemented by reserve managers in light of the rise in geopolitical risk.

Geopolitical risks are not a core attribute of our asset allocation system, but based on special events, our top management might reconsider allocations on short-/mid-term [investments] and changes can be made accordingly.

Geopolitical risks can impact the credit rating of countries or counterparties. This can then impact our ability to gain exposure – due to credit limits.

Making changes every time to meet our risk directives. Mostly changes in currency, issuers and region.

The central bank considers these issues when allowing for investment in an asset, but we very seldom change allocation based on geopolitical risks alone, although it is a part of the overall asset allocation analysis.

The central bank has introduced gold as an asset class to enhance reserve levels by purchasing domestically produced gold using local currency while also diversifying reserve assets.

The central bank takes into account the following geopolitical issues when making asset allocation decisions:

• Geoeconomic fragmentation: US/China decoupling, sanctions, and friendshoring affect trade and reserve currency preferences.
• Sanctions and asset freezes: The freezing of Russian FX reserves in 2022 set a precedent that non-western countries consider in asset allocation.
• Geopolitical conflict and war: Middle East tensions, Taiwan risk, and energy security impact asset valuations.
• Deglobalisation and trade wars: Supply chain realignment shifts FX preferences and reserve diversification.

Reserve managers should assess the political stability of issuing countries, alongside traditional credit ratings. Incorporating stress-testing models that account for geopolitical shocks (eg, a sudden regime change or international sanctions) is critical. To this end, the team relies on external geopolitical risk dashboards. Gold’s traditional role as a hedge against geopolitical risk becomes more prominent during times of uncertainty. The geopolitical landscape in 2025 suggests that gold will remain an essential part of a reserve portfolio, with heightened demand in periods of global instability. We also favour multilateral institutions (multilateral development banks and supranational bonds) for liquidity and stability.

[The central bank’s] willingness to move into new assets and currencies has been pinned on strategy.

The geopolitics is incorporated through its impact on rates that go into the actual asset allocation optimisation exercise.

The review of counterparties takes into account geopolitical risks, with gold onboarded as a hedge trade.

The trade disputes, technology restrictions and escalated political tensions have raised geopolitical risks in China, and, as a result, the exposure to China was significantly decreased and no new exposure is envisaged for the time being.

We carefully monitor the emerging geopolitical risks, but, so far, the development of the geopolitical situation has not made us adjust our investment policy that is determined with safety as the top priority of foreign reserves management. We take [the] geopolitical situation into account while determining strategic asset allocation and choosing our counterparties. Increased geopolitical risk was one of the drivers of the decision to increase gold holdings.

We have increased our gold allocation by conducting domestic gold ore purchases against domestic currency. The reason was not to hedge geopolitical risks, but to accumulate reserves. However, we have enjoyed the secondary benefit of gold reserves, as gold is seen as a safe-haven against geopolitical risks. By choosing ‘considered changes’, we do not mean that we intend to make changes in the near future, but rather we are taking the geopolitical risks into consideration in our risk analysis for these areas.

We increased investment in gold, but we haven’t [made] any significant changes in asset classes, issuers or counterparties.

6. Is the ‘weaponisation’ of reserves, notably the seizure of Russia’s assets, consequential for the future of reserve management?

1. Increased focus on sanctions risk. 2. Acceleration of de-dollarisation and use of other currencies. 3. Shift towards non-traditional reserve assets (gold purchases by central banks have increased). 4. Potential fragmentation of the global financial system if [the] US dollar is perceived as politically risky.

All actions of this kind are negative for trust, and likely have some impact on how reserve managers think about which assets to invest in, and/or how much. However, it is probably far from decisive for most reserve managers.

Asset allocations shifting from traditional assets into commodities such as gold.

Assuming current geopolitical risks’ intensification, more countries could be a target for the reserves ‘weaponisation’.

Countries around the world have started accumulating gold as a reserve asset, which is kept in a local vault.

Emerging countries will now think twice before allocating their reserves regionally, in terms of currency and type of assets.

Given the heightened geopolitical risks and the potential for weaponisation of reserves, there is rising demand for gold as a reserve asset.

Gold could be an asset of choice for some countries as a way of reducing reliance on the USD, especially during sanctions.

Growing efforts by China, Brics nations [Brazil, Russia, India, China and South Africa] and others to reduce dependence on the US dollar may impact USD-denominated reserves.

If central bank reserves are subject to seizure in some domiciles, it might affect the investment decisions of reserves managers who seek to protect the reserves.

In a more fragmented world, investments will likely be more skewed towards those more geopolitically aligned. Some assets may be brought ‘closer to home’, such as keeping more gold reserves domestically.

In our view, some central banks may take this development into account in their reserve management decisions.

In the long run, it might have an effect trying to invest away from USD, especially by the countries that are [adversarial] to the US, but it will take years to have meaningful effects.

It enforces the existing, slow trend of de-dollarisation.

It has resulted in the increased need to diversify the reserve assets to other assets and currencies – for instance, the increased allocation to the gold asset class.

It is definitely consequential, it removes the notion of the sovereignty of reserve management operations, and geopolitical analysis has become increasingly important.

It may influence strategic asset allocations.

It might lead to some discussions about the role and dominance of the US dollar, and some countries might even consider diversifying their holdings [out of fear] of losing access to their dollars/reserves, but given that, at present, there are no alternatives to the US dollar, it is unlikely that we will see any significant changes in the foreseeable future (maybe a tilt to gold holdings). Currently, the dollar is very entrenched, making it costly for anyone to operate without it.

Managers should take the case into consideration as geopolitical issues are augmenting. Perhaps not focus all allocation because of it, but do take it into consideration.

Nobody wants to get in conflict with European Union and US foreign policies. EUR and USD are the major reserve currencies for us.

Regarding investments made in dollars, there have been almost no relevant consequences, but it is always good to be alert to any changes.

Reserve managers are likely to diversify away from politically sensitive assets. This could mean increased allocations to gold.

Reserve managers have to review the risk of sanctions when making investment decisions.

Reserve managers will need to place greater emphasis on geopolitical risks and strike a balance between asset safety and liquidity in their strategies. This could speed up the move towards de-dollarisation and the adoption of alternative currencies and reserve systems, potentially resulting in a more fragmented global reserve landscape in the future.

Some effects are observable in the behaviour of market participants – eg, gold accumulation.

Somewhat, but do not see considerable contagion.

The seizure of Russian assets and the broader ‘weaponisation’ of reserves has certainly set a significant precedent, and could have lasting consequences for global reserve management. Several key impacts are worth considering: diversification of reserves; impact on global trust and stability; shift towards alternatives to the dollar; changes in reserve management practices; increased demand for new reserve assets.

The ‘weaponisation’ of reserves may result in further risks in the global financial system. It highlights the importance of central banks, including reserve managers, to re-evaluate their reserve management strategies, placing more emphasis on diversification, geopolitical risks and exploring alternative reserve assets.

The worry is that central bank assets could be sanctioned, seized or tapped if geopolitical conflicts escalate or if their country has any fallout with the superpowers. This undermines the status of FX reserves as a country’s most liquid and secure store of wealth.

This action highlights the need for greater diversification to different geographical and sociopolitical regions.

This could increase diversification practices, but the dominance of the USD in the international financial market will limit potential shifts towards non-traditional assets.

This could lead to stronger diversification of reserves.

This is consequential, as it affects the prudent management of foreign reserves, particularly the liquidity of the reserve assets.

This sets a highly problematic precedent, raising concerns about the security and neutrality of reserve assets.

We acknowledge that events such as the seizure of Russia’s assets will provide a degree of motivation for some central banks to seek or develop alternative reserve management currencies. However, the safety, transparency and liquidity of US dollar debt markets places a practical limitation on the adoption of alternatives at scale.

Weaponisation of foreign reserves may impact strategic asset allocation of some central banks, but the scale of this process – and its potential impact on financial markets – would be rather limited.

Weaponisation of reserves, carried out by the West, can lead central banks across the world to strengthen their custody surveillance procedures, with possible impacts in costs and efficiency. Moreover, depending on the intensity and time length of this precedent, other countries may consider using this device and there may appear relevant tendencies towards market fragmentation.

Yes, because countries that have a tense relationship with western countries, after the mentioned case of Russia, are inclined to reduce exposure to western countries’ bonds and other assets by replacing them with other alternative assets, such as gold.

6a. Has this affected your own reserve management?

Adding more gold to the external reserves through a local gold purchase programme.

Divested from certain countries, in part due to geopolitical risks.

Given what is mentioned above and [taking] into account that the United States is our largest single trading partner, most of our country’s foreign debt is denominated in dollars, and around 98% of our exports and imports are made in USD. We do not expect any changes in the short term.

It has brought to light the greater need to diversify reserve assets across various asset classes and currencies.

Not invested in Russia-related assets.

Not yet.

Our reserves are 100% in USD-denominated assets.

The [central bank] was not directly exposed to Russia prior to the Russia-Ukraine war and the consequent seizure of Russia’s assets. Disinvestment from certain economies were affected for select strategies that had indirect exposure to Russia through externally managed funds.

The Russian ruble is not included within the [central bank]’s SAA, so this has not affected our reserves management.

This is not a relevant issue for our reserve management decisions.

We currently do not have gold as an asset class in the central bank, and are not in any talks to hold some.

We manage a hard peg against the US dollar, so alternatives are unlikely.

7. Do you see your FX and gold reserves increasing in 2025? 
7a. If yes, what would be the reasons?

Additionally, gold is seen as a store of value during inflationary periods.

An increase in the reserve is expected from the effect of the increase in the market value of the current assets in which the reserve is invested. Increase also due to new inflows from market intervention.

Due to increased diversification of reserves.

Due to increased foreign direct investments and further upward trend of remittances, we see additional potential for FX purchases on the domestic market.

Gold reserves increase in 2025.

Greater risk tolerance and budget may lead to greater reserves. New investment opportunities are also presenting themselves.

Mainly as a result of improved government revenue and lower spending. The new government has been spending relatively less, and this is expected to continue in the medium term.

No changes anticipated.

Our currency is the dollar. We do not make investments in other currencies.

Our FX reserves have been on a downward trend for some time now, as receipts from the energy sector have declined substantially while we continue to uphold FX interventions. Given the growing domestic demand for imported goods, we do not foresee any meaningful growth in our reserves in the near term.

Outlook is for reserves to decline due to lower volume of inflows.

The [central bank] has emphasised the importance of rebuilding its international reserves.

[The central bank] views strengthening international reserves [as] essential for effective monetary policy and financial stability. In this respect, as long as market conditions allow, the [central bank] will maintain its reserve build-up strategy and ensure continuation of the stable uptrend in international reserves in 2025. Also, the [central bank] will continue domestic gold ore purchases against [our] domestic currency with a view to accumulating reserves in 2025.

The lack of economic activity due to the security situation in [the jurisdiction] has limited imports and, in turn, reduced immediate pressure on USD demand. However, when conditions improve and activity picks up, we anticipate renewed pressure on the FX rate.

The most important issue will be liquidity needs.

The reserves will be accumulated to improve adequacy.

Under the [foreign reserves management framework], the [central bank’s] board and the minister of finance have agreed to an increase in the level of foreign reserve holdings.

We already have a significant exposure to gold, [which] represents more than half of our total reserves portfolio.

We are drawing on our reserves to support the economy.

We assess the magnitude of our foreign reserves as adequate, so we do not take any measures aimed at increasing their magnitude. However, the foreign reserves are expected to increase due to external flows.

We do not have gold in our FX reserves, and we are not planning to add it.

We do not hold gold as part of our reserves. On the other hand, at present, our reserves level (as measured by the IMF’s reserve adequacy ratio) is deemed adequate.

We don’t think our reserves are going to increase in the next year.

We expect our import bill to increase along with the growth of the economy.

We expect the reserves to increase in general due to positive returns.

We plan to further increase the level of our reserves due to our expectations that this will further increase the return/risk ratio of our reserves. In addition, the expected return of our reserves is higher than our cost of funding.

8. Have you intervened in FX markets in the last 12 months?

Currency purchase/sales unrelated to interventions, but from a client/business perspective only.

Dependent on market circumstances.

Despite the interventions on the domestic FX market in both directions, last year, we had the highest net FX purchases.

From January to December 2024, the central bank intervened to sell $370 million against [the domestic currency].

High liquidity in the local market, due to lower current deficit rate.

Increased our US dollar exposure.

Interventions were mostly done in the last two months of 2024. Internal FX volatility and local currency depreciation were among the factors related to the interventions.

One FX intervention to reduce excessive pressures on the domestic exchange rate.

The central bank has a pegged currency, and only needs to maintain a certain level of reserves at any given point.

The [central bank] has no commitment to any exchange rate level, and does not conduct FX buying or selling transactions to determine the level or direction of exchange rates. To ensure efficient functioning of the FX market and promote healthy price formation, the [central bank] closely monitored exchange rate developments and related risk factors, and employed suitable instruments.

The [central bank] is not involved in market operations due to law restrictions. Operates under the currency board arrangement.

The [central bank] made a net sale of local currency against EUR.

The [central bank] participates in the spot market to limit excessive [currency] volatility, whether it is appreciating or depreciating.

The intervention has been minimal. But we have both sold and bought currencies.

The main purpose of exchange rate intervention was to implement one of the central bank’s objectives, which is exchange rate stability, but without violating the free-floating exchange rate regime.

To moderate the volatility of the national currency exchange rate against the US dollar, the [central bank] has occasionally intervened [in the market] to buy and/or sell US dollars.

We have conducted operations in the local market to buy US dollars and increase our level of reserves. However, the strategy was carefully executed in order to avoid affecting the currency market.

We sell FX to support the pegged exchange rate framework.

When [the domestic currency] appreciates, the central bank can intervene by purchasing dollars to stem volatility in the forex market as well as to build forex reserves.

9. Regarding diversification, do you anticipate that over the next year reserve managers broadly will accelerate, slow down, reverse or not change the pace of diversification?

Amid increasing geopolitical tensions and elevated uncertainty, diversification across asset classes, regions and sectors is a time-proven strategy to reduce portfolio volatility. Trump volatility could also mean opportunities for active management.

An acceleration may help to reduce greater risks and uncertainties mainly associated with policies, macroeconomy and geopolitics.

As a means of minimising risk, we are seeking to greater diversify our reserve holdings.

As risks exacerbate, especially geopolitical risks.

At current interest rate levels, we consider that total rate cuts of 100 basis points in 2025 would not put too much pressure on the need for diversification to seek higher returns.

Considering the risk and return objectives of external reserves, most external reserves are already diversified in line with such objectives.

Diversification is more relevant, given market volatility.

Diversification is necessary to broaden sources of alpha.

Due to increased market uncertainties, especially in the context of trade policy, we assume that demand for safe-haven assets such as gold will increase, and investors will diversify reserves in terms of increasing the share of safe-haven assets.

Due to rising geopolitical risks, monetary policy divergence and inflation concerns, it is likely that reserve managers will be diversifying more than ever. And especially with the growing trend in ESG and the interest in sustainable investment options globally, it may be important for reserve managers to keep up with growing global trends, as well.

Due to the business model, we do not change investment counterparties to a major extent.

Especially in the case of gold.

Geopolitical uncertainty and sanctions have increased the need to rely on different reserve currencies as well as different reserve assets.

I believe reserve managers are expected to increase diversification over the next year, driven by geopolitical risks, and growing demand for gold and alternative assets. However, liquidity constraints and risk management considerations may temper the pace of this shift.

I think that [the global financial crisis], zero interest rates, Covid and [the] sharp jump [in] inflation accelerated diversification already. Therefore, between now and the end of the year, I would expect implementation steps only.

It’s definitely imperative to diversify the investment. I see them diversifying the reserves and/or adopting new forms of management to mitigate the geopolitical and commercial risks.

Many central banks have already quite considerably diversified their foreign reserves, investing also in non-traditional asset classes – expanding their currency spectrum, and entering credit and equity markets.

New asset classes, as well as new investment strategies, are under consideration.

Reserve managers are likely to maintain the pace of diversification, amidst global volatility and geopolitical tensions to mitigate risks.

Reserve managers may accelerate the pace of diversification in response to the ongoing geopolitical risks and the still sticky inflation. There is also a rise in digital currencies, which may prompt reserve managers to explore digital assets to diversify their investment portfolios.

Reserves managers might reduce diversification as a response to protectionism and geopolitical events.

Somewhat change, driven by Brics’ de-dollarisation policies.

The geopolitical and economic environment is increasingly volatile, prompting reserve managers to rethink traditional asset allocation strategies. Beyond public markets (bonds and equities), reserve managers are exploring ways to integrate digital assets into their portfolios. While still a developing area, [central bank digital currencies] may become more integral to the diversification process, especially in regions like Asia, where China’s digital yuan is gaining traction.

The geopolitical risks surrounding US foreign policy, sanctions and the war in Ukraine will alter investor behaviour to a more cautious one, tilted to a more extensive use of safe-haven assets.

The reserve managers are likely to diversify the reserve assets from single composition of US markets to other geographies and currencies.

The weaponisation of reserves and sanctions on countries like Russia have prompted central banks to reduce [their] reliance on US dollar and euro assets. In addition, many central banks have been increasing their gold reserves as a hedge against geopolitical and economic uncertainty.

They will continue diversifying their portfolios to enhance yields and mitigate risks.

We anticipate that reserve managers broadly will continue to seek diversification, though at a cautious pace. Given ongoing geopolitical uncertainties, inflation concerns and shifts in global monetary policies, uncertainties over [the] US’s economic policies and their aftermath, central banks may look to reduce overreliance on any single currency or asset class. Gold may remain a preferred safe-haven asset, while some diversification into non-traditional reserve currencies could slow down.

We believe that the economic and financial environment over the next year will slow down the pace of diversification.

We do not have a strong view on this.

We’re always looking for ways to diversify our portfolio.

With ongoing geopolitical and economic uncertainties, reserve managers are likely to accelerate diversification efforts to mitigate risks, enhance resilience and optimise returns across a broader range of assets.

9a. In the last 12 months, how did you position your reserve portfolio?

As a response to intensifying geopolitical tensions and in line with global trends, in 2024, we decided to further increase our gold reserves.

As part of our strategic asset allocation’s biannual review, last year, we implemented some changes to our reserve management programme. Basically, we increased the duration of our assets (moving away from a one- to three-year benchmark to a one- to five-year benchmark) and increased the allocation to SSA [supranational, sub-sovereigns and agency] (elevating them at the asset class level – previously they were considered a tactical investment).

At the beginning of the year, we tactically reduced duration in our portfolios, taking advantage of the inverted yield curve. Nevertheless, some months later, we tactically increased duration in our portfolios, taking advantage of the rally of the bonds before the first cut of the federal funds rate.

Driven by overall SAA requirements.

Higher-duration assets, especially in the US, were preferable to lower-denomination assets, as the Federal Reserve’s higher-for-longer stance meant that US interest rates remained elevated relative to other developed markets.

In the last year, by maintaining high liquidity in a rising yield environment, we kept a lower-duration profile. Lately, given the monetary policy normalisation, we shifted the liquidity into bond investments.

In the past 12 months, we have mostly increased the duration of our active positions from short or neutral against our benchmark to more neutral or long, as central banks globally reached the start of their cutting cycles.

Increased liquidity to support the exchange rate framework.

Liquidity enhancement.

Mostly, we reduced the duration and increased the currency diversification.

No additional currencies, but change in the individual weights.

No SAA change, but active TAA [tactical asset allocation].

The focus has been on reducing duration and credit exposure while increasing liquidity to navigate market uncertainties and avoid spillover effects from a pickup in inflation coupled with fiscal problems.

The gold increase was purely a valuation effect.

We have increased our exposure towards equities that act as a reserves diversifier and enhance returns over a long-term horizon. At the same time, we decided to unwind small positions in non-traditional currencies, as their overall diversification benefits were limited and did not justify the operating costs incurred.

We have increased the duration of the portfolio to take advantage of the declining yield environment while ensuring adequate liquidity.

We have not made big changes to our reserves during [the] last year.

We have positioned our portfolio long, due to expectations of interest rate cuts in major developed central banks.

We increased investment in gold, and due to Ramp [Reserve Advisory & Management Partnership] external portfolio management, we increased currency diversification by increasing investments in US dollars, and commenced investing in US bonds. Also, we increased the duration of the portfolio under [central bank] management.

We increased our exposure in SSA assets. Also, we increment the size of our liquidity portfolio as a result of the yearly SAA evaluation.

We increased the duration of our fixed income portfolios to take advantage of higher bond yields. We also increased the proportion of fixed income instruments at the expense of money market instruments in our short-term operational portfolios. This increased the liquidity of our short-term operating portfolios and allowed us to lock in higher yields. Also, we increased our gold reserves by conducting domestic gold ore purchases against the domestic currency.

We review our asset allocation on a regular basis.

We started investing in the equity market last year.

9b. In the next 12 months, how do you anticipate positioning your reserve portfolio?

Addition of AUD.

As mentioned before, due to interest rate decrease, we have already increased the duration of our portfolio.

Currently do not foresee any big changes.

Growth of reserve and safety.

In case the USD depreciates significantly, we’d diversify a certain share of the FX reserves in USD. Additionally, if there’s a decrease in the yields, we’d decrease the duration of the portfolios as well.

In respect to duration, we are continually evaluating our position as a part of our strategic asset allocation.

In the next 12 months, we will have completed a new strategic asset allocation, for which we will likely have changes to our reserve composition – however, the extent and direction of this [are] yet to be known.

No SAA change, but active TAA.

Similarly, higher-duration assets, especially in the US, are still preferable to lower-denomination assets, as the Federal Reserve’s higher-for-longer stance implies that US interest rates will likely remain elevated relative to other developed markets. Additionally, gold as an asset class is intended to enhance reserve levels by purchasing domestically produced gold using local currency while also diversifying reserve assets.

Some temporary tactical deviations, but unlikely to see significant changes in the strategic asset allocation.

The central bank is expected to maintain a USD numeraire for the next 12 months – hence no major change is expected in the currency allocation. We also intend to increase duration in the portfolio, albeit very cautiously, as the US may face reflationary pressures amid a global trade war and supply chain disruptions. With regard to credit, spread has compressed significantly over the last 10+ years and in particular after the Fed’s rate tightening cycle, which propelled demand for high-quality credit. USD [investment-grade] excess returns are expected to be weaker when spreads are tight. The central bank would instead continue to diversify into quality through SSAs.

We are planning to increase gold holding through a local gold purchase programme and invest in [emerging market debt].

We do not foresee any new changes in the coming 12 months.

We do not have any allocations in gold.

We expect the price of … gold to continue appreciating because of the increasing geopolitical risks. So, it’s only natural to increase gold in reserves, but [we’re] trying to augment liquidity also.

We have already achieved the desired risk/return profile [in] our investment portfolios. But we will continue the process of gradually increasing gold holdings.

We may increase our exposure to the covered and corporate bonds market in 2025.

We plan to increase the asset classes and instruments in which we invest. Also, as mentioned above, the [central bank] will continue domestic gold ore purchases against domestic currency, which will lead to an increase in our gold reserves.

10. In your SAA and risk management process, do you incorporate correlation risk?

All risks are taken into account within our SAA and risk management process.

Alternative investments typically have a low correlation to more traditional asset classes (like bonds and stocks). Alternative assets therefore provide an opportunity for portfolio diversification, reducing overall risk exposure across investments.

Correlation risk is taken into consideration, yet most of our reserves are in USD.

Correlations are one of the inputs in the allocation model. The correlation risk is partially mitigated by allocating a risk buffer to absorb the shock, given changing market conditions.

Correlations of asset classes and currencies are included in market risk management and SAA. However, actively changing correlations to observe possible effects and analyse correlation risk is not conducted.

If we choose to deviate from our designated reserve currencies, we have to analyse potential risks associated with the deviation, which include correlation risks.

In our SAA, we use an asset-liability matching model, and we do not incorporate correlation risk in this model. We determine asset classes by considering liquidity and credit risk of assets. We incorporate correlation risk to calculate risk metrics such as value-at-risk and scenario analysis.

Incorporating correlation risk into the SAA process allows the central bank to build more resilient portfolios that are better able to withstand market volatility, economic shocks and geopolitical risks. Incorporating correlation risk into the SAA process is crucial for optimising the risk-return profile. Historical correlations are analysed through correlation matrices, particularly during periods of heightened geopolitical risk or financial crises. The central bank also uses stress-testing or scenario analysis to simulate extreme market conditions to assess how correlations between asset classes and currencies shift. This helps in adjusting the portfolio for these potential changes. Recognising how correlations shift in response to global events and market dynamics is key to enhancing portfolio performance and managing overall risk in a rapidly changing environment.

[It] is part of our check list before doing investments.

Mainly done as part of [a] risk budgeting exercise.

[More] precisely the asset classes.

Our currency exposure is determined by external debt.

Our portfolio optimisation process takes into account all eligible assets and their correlations.

Return expectations and covariances between all eligible asset classes are taken into account during the portfolio-optimisation process.

Scenarios where correlations change greatly and quickly are considered both in the SAA process and in the ongoing risk monitoring (certain guidelines take into account total notional value for the operations, with no reductions due to hedge or correlation effect).

The optimisation models supporting decisions regarding strategic asset allocation as well as Value-at-Risk models utilised for regular monitoring of market risk of investment portfolios incorporate correlation between all asset classes.

This is achieved by increasing the level of diversification by investing in different assets, currencies and counterparties.

We also use the correlation risk with our country’s most important external shocks.

We are using [the Bank for International Settlements Asset Management Asset Allocation Module] model to optimise our benchmark portfolio.

We do not incorporate correlation risk.

We do not use currency for optimisation. Currency allocation is done based only on the obligations of both the central bank and government.

We use historical correlation for both assets and currencies.

While maximising risk-adjusted returns is crucial during the strategic asset allocation process, greater emphasis is often placed on asset-liability matching to ensure alignment of assets with expected liabilities.

14. Are cryptocurrencies becoming more credible as an asset class?

14a. Do you think bitcoin should be considered as a suitable asset class for reserve managers?

14b. How do you view strategic bitcoin reserve fund proposals?

Although the credibility of cryptocurrencies has increased over the past year, we still believe that this asset class does not have the necessary characteristics to be part of our investment universe.

Assets related to illegal activities.

At present, crypto assets are not a suitable asset class for central banks. They are incompatible with the traditional objectives of safety, liquidity and return. Their value can be highly volatile, and they still face an uncertain regulatory environment. The liquidity and depth of crypto asset markets would need to improve and the cost to trade those assets would need to decrease. Their volatility would have to decrease to align with the low risk tolerance of central banks. Crypto assets could be used to generate returns, but the risks from fraud and other vulnerabilities are still elevated, demanding further regulation. Crypto assets are also yet to become widely accepted mediums of exchange and stores of value. Also important is the development of robust custody and safekeeping solutions.

Bitcoin cannot be considered an investable asset due to safety and liquidity concerns. Reduction in price volatility, strengthened safekeeping, regulatory arrangements and widespread adoption may be prerequisites, among other conditions, for bitcoin to be considered in the future.

Bitcoin is currently too volatile for consideration as a reserve asset. Also, it is not a trading currency from the [central bank’s] perspective.

Bitcoin is not likely a suitable asset class for reserve managers due to its volatility, regulatory uncertainty and storage-security concerns.

Central banks are more focused on central bank digital currencies.

Cryptocurrencies are far too volatile for a reserves portfolio and lack a fundamental purpose beyond speculation, making them unsuitable for reserve management.

Cryptocurrencies like bitcoin are highly volatile, with prices subject to extreme fluctuations making them unsuitable.

I am not sure. It has its price, value, market … but it also has a lot of not nice properties like strange investors, unknown technology, unknown reasons for price changes, unknown usage other than price, weak regulation, different statistics, no interest, no dividends, specific form of ‘credit risk’ (technology hack, monopolisation, etc).

Low transparency, volatility, limited investment opportunities make … cryptocurrencies an unsuitable asset class for foreign reserves management focused on ensuring safety and liquidity of resources.

The question of whether bitcoin (or other cryptocurrencies) should be considered a suitable asset class for reserve managers is complex and depends on various factors such as volatility, regulatory concerns, liquidity and the risk profile of the reserve manager’s portfolio. One of the primary concerns with bitcoin as a reserve asset is its extreme volatility. Reserve managers typically focus on long-term stability, and bitcoin’s volatility may not align with this objective. Bitcoin and other cryptocurrencies face ongoing regulatory scrutiny around the world. In some countries, bitcoin is seen as an asset of speculation, while others are moving towards creating a more defined legal framework for digital assets. Regulatory risk is significant, and its impact on the value of bitcoin could create challenges for reserve managers. That being said, for large reserve managers (with excess reserves), bitcoin could serve as a diversification tool within the reserve portfolio (should the board have the appetite for it). Historically, bitcoin has shown low correlation with traditional asset classes like equities and bonds, and, in certain market conditions, it may act as a hedge against inflation or currency devaluation.

Given the current landscape, bitcoin may not yet be a mainstream asset class for reserve managers, especially for countries seeking stability, liquidity and low regulatory risk. Its volatility, regulatory uncertainty and security concerns make it a challenging asset to manage in the context of traditional reserve management.

This can be risky for reserve managers.

Too much volatility.

Typical volatility patterns of cryptocurrencies are way higher than usual reserve assets’ volatility. Besides, quick liquidation of relevant amounts of such assets (when countries need it) is still uncertain, which makes it difficult to classify them as proper reserve assets.

We believe that bitcoins are a type of unstable asset, with a very volatile market.

We would not consider it, we can’t, we would be actively against it.

15. Do you think de-dollarisation of global FX reserves is increasing?

A degree of de-dollarisation seems likely, partly driven by strategic competition as some economies look to boost the use of non-dollar currencies in global commerce. However, given the US dollar’s liquidity and wide degree of use, it’s unlikely to be a rapid change.

Although the importance of other currencies, especially the euro, is increasing, we believe that the US dollar will continue to be the main reserve currency in the following years.

China and Russia will affect the de-dollarisation, and countries increasingly trade bilaterally in local currencies.

Geopolitical tension stimulates de-dollarisation debate/initiatives, mainly among developing economies. But the role of [the] USD is supported by the strong economy, developed payment system, mature financial markets and a stable financial system – it would be really hard for other financial markets to achieve such a level of development over the next couple of years.

If countries’ friendships with the US become more forced, rather than optional/voluntary, and if the value of [the] USD becomes part of the US prosperity plan, then we may see [a] slight departure from USD and US assets.

It will take a long time for significant change to happen, given the dominance of [the] USD in global trade.

Mainly from countries that have problems with the US.

So far, de-dollarisation can be seen as reflecting an increase in international trade involving relevant non-USD economies.

Some reserve managers are looking into diversification of their reserve currencies to consider other currencies such as [the] EUR.

The de-dollarisation is evidenced by an increase in the share of EUR, CNY and gold holdings in central banks’ reserves portfolios. Efforts are being made to reduce reliance on [the] USD. For example, India and Russia have agreed to trade in rupees and rubles, while China and Brazil have also signed deals to use the yuan and real for trade. Nonetheless, the pace at which reserves managers are replacing [the] USD with other non-traditional assets has reduced in recent years. The USD reigns as the ultimate reserves currency due to [its] depth and liquidity, while other currencies like the CNY face challenges such as limited liquidity and macroeconomic weaknesses. Additionally, the fragmented market of the euro and economic slowdown make it challenging for the EUR to overtake the share of [the] USD. While the Brics countries are actively exploring ways to reduce reliance on the US dollar and promote alternative currencies in international trade, it is unlikely that they can fully replace the dollar in the near future.

Overall, de-dollarisation risks are exaggerated, but the ‘debasement’ trade is here to stay, and cross-border flows are also dramatically transforming within trading blocs and commodity markets.

China retaliation could take a harder line. We see greater regionalisation and trading blocs, including [the] continued alignment of the Crink countries [China, Russia, Iran, North Korea].

The direction of de-dollarisation will depend on many factors. Geopolitics will be key to that.

The dollar still remains the major currency, and will remain so for a long time.

The global economic landscape is becoming more multipolar, with the rise of emerging economies like China, India and others. These countries are seeking to reduce their reliance on the US dollar to assert greater economic independence and reduce vulnerability to US policies or sanctions.

[The] USD still has the highest return among currencies. But in commercial transactions among countries, some are using [US dollars] less.

There are some signs of de-dollarisation in the commodities space and payment systems, but, overall, the dominance of the US dollar remains well anchored. Diversification away from the US dollar is a trend, but not a particularly troubling one.

We don’t see any significant changes in de-dollarisation of global FX reserves, but it seems that the US dollar’s role has been decreasing gradually.

We expect that the US dollar will maintain its strength in the FX market.

While de-dollarisation is gaining traction, it remains a gradual process due to the dollar’s deep liquidity, stability and dominance in global trade and financial markets.

While diversification away from the dollar is a growing trend, we believe that the economic and financial environment over the next year will slow down the pace of diversification. We expect that US exceptionalism in economic activity and the divergence in interest rates will favour the US dollar.

While this is a goal for many rival countries, there is limited possibility for an alternative currency to match the depth of US dollar-denominated markets, with a safe and stable source of liquidity backed by trust on the credibility of US institutions.

Yes, good returns in USD [have] slowed down the process, but it is still occurring.

15b. If you are considering increasing your allocation to US dollar investments over the next 12 months, what is this at the expense of?

In our case, it’s mostly due to a change in the composition of our reserve currency assessment and a change in our strategic allocation set up.

Our FX reserves are predominantly invested in EUR.

The outlook suggests that USD-denominated assets are expected to deliver higher risk-adjusted returns compared to other traditional reserve assets, driven by relatively stronger growth and the Fed’s higher-for-longer monetary policy stance.

We have established absolute limits for external management of [our] USD-denominated portfolio, and don’t see space for increasing investments in USD.

15c. If you are considering decreasing your allocation to US dollar investments over the next 12 months, what is this to the benefit of?

It will be a small size change.

We are increasing the proportion of EUR currency in our FX reserves.

We have established absolute limits for external management of [our] USD-denominated portfolio, and don’t see space for decreasing investments in USD.

16. What percentage of global reserves do you think will be invested in the renminbi by the end of 2025, 2030 and 2035?

2035 is a bit far to forecast the allocation.

Although recently investors have been decreasing their RMB holdings, we believe that, in the long run, the share of RMB will continue to increase. However, based on the recent outlook, we downsized our estimates.

Certainly, the renminbi has made some progress as an international currency, but its relevance continues to be limited and not proportional to the size and weight of the Chinese economy. The share of global foreign exchange reserves held in renminbi-denominated assets has kept constant at about 2%, and since the Covid-19 pandemic, the Chinese economy has been struggling.

China’s ongoing economic expansion and its rising share of global GDP, coupled with significant financial market reforms aimed at enhancing openness, transparency and liquidity, are expected to further strengthen its global economic influence.

Renminbi may be one of the beneficiaries of the de-dollarisation trend.

Due to growth concerns [about] the Chinese economy and capital controls, the shift towards the … renminbi is expected to be slow, as was the trend from previous years.

It will depend on several factors, including geopolitical shifts, global trade dynamics and the continued evolution of the Chinese financial system.

Overall, [the] geopolitical situation as well as deteriorated macroeconomic conditions in China may discourage central banks from further diversification towards [the] renminbi.

Renminbi adoption in global reserves is increasing, but remains constrained by capital controls, liquidity concerns and geopolitical factors.

Since 2010–20, the renminbi has gained more popularity.

The pace will be gradual.

The renminbi’s share of global reserves is expected to grow steadily due to China’s increasing integration into the global financial system and its role in regional trade agreements. Greater acceptance of the renminbi in central bank reserves will depend on continued reforms in China’s financial markets and geopolitical dynamics.

[The] share of renminbi has been growing rather slowly in recent years (even falling in recent periods). We expect this slow trend to continue due to geopolitical risks. Other currencies might see an increase in their shares, such as EUR, GBP, JPY, SEK and NOK.

The slower growth of the Chinese economy is hindering investment.

[The] weight of the renminbi in global reserves keeps increasing. As the Chinese economy continues to grow and influence global markets, it is conceivable that central banks will also gradually adapt their allocations to reflect the importance of the most relevant economies, including the Chinese economy.

There are several other factors affecting the RMB share, as well, but the key is for China to relax capital controls if it wants the renminbi to gain share in global reserves.

We don’t consider changes to the allocation, we principally invest in USD.

We expect the percentage of global reserves invested in the renminbi to steadily increase, but [that] largely depends on the liquidity of the currency, the diversification benefit, operational difficulty and the availability of its assets.

We think that the share of total reserves investment in renminbi will remain relatively stable in the following 10 years.

Will be mostly driven by [the] expansion of trade relationships.

16a. What percentage of your reserves do you plan to invest in renminbi by the end of 2025, 2030 and 2035?

Currently, we do not have plans to invest in renminbi.

Depends on the size of imports and debt commitments in renminbi.

[It depends] on the growth of the Chinese economy.

Our main currency for investment is determined by our foreign debt. In this context, more than 98% of our debt is in US dollars. Also, we do not have any debt in renminbi.

Since the United States is our largest single trading partner, most of our country’s foreign debt is denominated in dollars and international payments are made almost entirely in USD. There is no reason to change the current allocation.

The [central bank] does not plan to invest in renminbi.

The [central bank] will continue to monitor the long-term prospects in RMB-denominated assets considering the developments in the Chinese economy and its financial markets.

We are in a currency board, and, for the time being, it is not relevant for us.

We are likely to continue increasing our allocation to Chinese assets due to the need to match our assets to liabilities, given the rising proportion of debt denominated in Chinese yuan.

We could consider investing a small portion of the foreign reserves in renminbi in the following five to 10 years.

We currently only have 0.7% of our reserves in renminbi. Our annual strategic asset allocation will determine future prospects in potential increments to the current exposure.

We do not have plans to increase the percentage for the moment.

We do not plan to invest in renminbi.

We are not considering changes to the allocation. We principally invest in USD.

We have no plans to increase our investment in renminbi at this stage.

We have trimmed down our allocation to renminbi due to the yield differential between USTs and its Chinese counterparts, as well as persistent dollar strength. We are also wary of China’s credit outlook, especially with the ongoing trade war rhetoric and continued impact on growth, which has remained persistently lower in the medium term. Over the long term, as global interest rates and global growth normalise, we may consider increasing our exposure to [Chinese] government bonds and policy bank bonds.

We hold CNY for diversification purposes as well as a consequence of the swap lines with China. However, our currency allocation is mainly determined during the SAA process that depends on [an] asset-liability matching principle. [Therefore,] we think that the share of CNY in our reserves will stay limited unless there is a significant increase in our swap lines with China.

We invested a small part of our reserves in renminbi, and we don’t have any plans to change that allocation.

Will be mostly driven by [the] expansion of [our] trade relationship.

17. Over the last year, have you changed your view on the euro as a reserve currency? 
17a. Do you plan to change euro investments in 2025?

A more accelerated pace of rate normalisation by the ECB will probably result in a weaker euro versus the dollar.

Actually, we don’t invest in EUR.

Based on foreign obligations.

Euro area central bank.

Euros are not a part of our foreign reserves, [they are] our domestic currency.

Global uncertainty, structural challenges, trade retaliatory factors, falling inflation and lower interest rates are expected to shape the euro economic outlook in 2025. These factors will hinder prospects of increasing our euro investments in 2025.

It is our local currency.

It will depend on the EU’s internal challenges and global influences.

Leaving the negative territory increased its strategic importance.

Lower returns.

Our currency allocation is determined by the SAA that is based on the asset-liability matching principle. Thereby, the share of euros in our reserve portfolios depends on the currency structure of our FX liabilities and the course it will follow, as well as the expected trajectory of the euro-dollar parity.

Our view is that the EUR offers lower expected returns than other traditional reserve currencies in an optimal portfolio.

Positive interest rates affect the attractiveness of [the] euro.

Relative attractiveness of bonds versus swaps has resulted in us considering restarting a EUR portfolio with an [interest rate swap] overlay.

Slow economic growth is impeding the currency.

The [central bank] is not planning any investment in currencies different than EUR and US dollars.

The [central bank] is part of the Eurosystem with [the] euro as a local currency.

The euro has become more attractive on fair value valuations.

The euro has seen an improvement in its relative attractiveness as a reserve currency, driven by higher interest rates compared to the historically low rates of recent past years. Additionally, our appetite [for] the euro is driven by the need to match our assets and liabilities, given the growing volume of euro-denominated liabilities.

[The] euro is our local currency and numeraire. It is not part of our FX reserves.

We already adjusted our exposure towards major reserve currencies last year, but as a result of unwinding small currency positions, not a change [in] our view on [the] USD or euro.

We are increasing our euro investments due to changes in currency composition in the context of the country’s economic profile and the weight of economic relations with EU countries.

We currently have no allocation to EUR-denominated assets.

We do not foresee any changes in the near future.

We do not invest in EUR-denominated assets.

We only allocate working capital in euros at the moment.

We think that [the] diversification benefits of investing in euros are offset by exchange rate volatility.

While the euro remains a key reserve currency, its appeal is reduced due to political and economic disparities. This fragmentation can create instability and uncertainty for investors. For example, countries like Germany and France have much stronger economies, while Italy or Greece face more structural challenges, including high public debt and slower economic growth. The eurozone is also highly vulnerable to external economic shocks, such as changes in global energy prices, trade policies and migration flows. These external shocks can have disproportionate effects on certain member states. As a result, reserve managers may see the euro as more risky or unpredictable during times of global uncertainty.

17b. What is the main hurdle for your institution to start investing in euro-denominated assets, or increase current allocations?

Although we trade with the eurozone, most of these trades are settled in USD.

As a eurozone central bank, we do not have a structural need for a EUR portfolio, therefore it is only worth investing if attractive from a return or impact perspective.

Compared to the rest of the developed world, the euro is not doing so badly. But, comparing it with the past, [the] eurozone was more homogeneous. It is more fragmented and fragile now, so … the attractiveness is lower.

Despite subdued growth prospects and [a] deteriorated fiscal situation in the eurozone, the euro offers a developed payment system, mature financial markets, stable financial system – second only to the US market.

Europe’s growth forecast is still subpar. While services-based economies (like Spain) are faring better, weakness in manufacturing-centric economies remains. Downside risks persist, and pressure on German business is concerning, as domestic demand remains depressed, pricing power wanes and labour costs continue to rise. Political turmoil in national politics in Europe is also fuelling concerns about the future of the European model. Snap elections were called in France and snap federal elections [were held on] February 23 in Germany, while Spain’s politics remain very fragmented and unstable.

Euros are not a part of our foreign reserves, it’s our domestic currency.

Given the anaemic growth, political turmoil and lack of reforms (eg, debt brake in Germany), we do not see the region as attractive. Furthermore, the eurozone faces the prospect of another debt crisis, given the combination of high debt and deficit levels, and low (long-term) growth potential. The productivity is weak, which is a headwind to economic growth, and its exports face the risk of US tariffs. Trade policy uncertainty may weigh on business sentiment.

I think the reasons above explain it all. Weak growth prospects, credit deterioration (France bonds with low credit score/rating), political risk, etc.

N/A. We are pegged against the EUR, which entails that we are mainly euro-denominated investors.

Since [this country] joined the eurozone, [the] euro is our domestic currency, not a reserve currency.

The [central bank] has pegged its currency to the euro. Therefore, more than 99% of its foreign exchange reserves are denominated in euros. There are no obstacles for the [central bank] to invest in euro-denominated assets or to increase current allocations. We also invest in US dollars, but currency diversification is strictly limited by law.

The euro generally offers lower yields compared to the US dollar, making it less attractive from a yield perspective. This disparity is primarily due to the ECB’s historically more accommodative monetary policy and lower interest rates relative to the US Federal Reserve.

The foreign exchange reserve is primarily invested in euro-denominated assets.

The foreign reserves are predominantly invested in EUR-denominated assets, as the monetary policy is targeting the nominal exchange rate of the [domestic currency] against the euro.

The main reason is related to operating issues that affect our capacity to effectively invest in euro-denominated assets.

We already invest in euro-denominated assets. However, our internal investment guidelines prevent further increasing euro allocations.

[We are a] euro area [central bank].

We don’t invest in EUR.

18. Do you see the role of gold in your reserves changing in the next year?

As mentioned above, the [central bank] will continue domestic gold ore purchases against [our] domestic currency, which will lead to an increase in our gold reserves.

At present, we do not hold gold as part of our reserves, and that is not going to change for the foreseeable future. Besides being a highly volatile asset class, the logistics and custody are more cumbersome.

Diversification and reserve accumulation.

Gold is an attractive asset class because it results in [the] enhancement of reserve levels by purchasing domestically produced gold using local currency, while also diversifying its reserve assets.

Gold is held for extreme tail risk events, and is therefore not actively managed or included as part of our asset allocation exercises.

Gold reserves are not included within the [central bank’s] SAA.

Like I said before: geopolitical risk is increasing, growth is slowing. So, yes! More refuge assets.

No change is envisaged.

No gold holdings.

No plans to change for now.

The central bank already has an optimum gold allocation. Furthermore, gold is held as a strategic asset, and managed separately from the liquidity and investment tranches.

The market risk on the gold stock is not actively managed.

The volatility of the gold price poses a challenge, given our risk tolerance and risk budget.

We are passive in our gold management strategy.

We continue the process of gradually increasing gold holdings.

We do not actively manage our gold reserves.

We do not allocate to gold, and have no immediate plans to.

We do not have gold in our reserves, and there is no will or reason to add it.

We do not have gold.

We do not invest in gold.

We don’t plan to increase further investments in gold.

We plan to increase our gold holding and to actively manage.

We will probably invest in gold deposits.

Will engage more actively in the gold market, both to support liquidity and increase market intelligence.

18d. Is the current price of gold preventing you making further purchases?

Due to the significant price increase during 2024 and early 2025, the right moment to increase [the] allocation of gold assets is for sure a challenge because of its price volatility.

Given the low amount of holdings, the extent to which we want to increase is being limited due to all-time-high prices, to mitigate any future potential mark-to-market losses.

Increasing gold reserves is the strategic decision.

Not applicable. The [central bank] can source gold domestically.

Our plan is to purchase gold locally using our local currency.

The [central bank] buys gold from small miners and then starts the refining process.

[The] gold price is around the historical maximum.

The liquidity and income constraints do not allow for gold allocation.

The price is too high.

We aren’t considering buying more gold.

We do not actively manage our gold reserves.

We feel comfortable with our gold allocation.

19b. What are your reasons for using exchange-traded funds (ETFs)?

Considering investing in ETFs due to ease of use, cost advantage and liquidity.

ETFs are not included within the [central bank’s] SAA.

ETFs are used by our external managers.

ETFs come as a possible and convenient instrument for a central bank to get access to asset classes whose complexity/operational cost/specificities the institution is not ready to deal with directly.

ETFs provide an efficient and cost-effective way to gain market exposure while maintaining liquidity and flexibility in portfolio management.

Exchange-traded funds allow for broad, diversified exposure towards equity markets without operational challenges typical of direct investment (including: trading and settlement, accounting, corporate actions, taxation). Development of the ETF market supports its liquidity, lowering of fees, emergence of tailored funds (eg, taking into account ESG criteria).

Gold ETFs provide an easy way to diversify investment portfolios, as gold often has a low or negative correlation with other asset classes like bonds.

We are utilising ETFs in our internally managed portfolios as they easily facilitate diversification into spread sectors.

We prefer giving mandates to external fund managers, to better tailor allocations/engagement to our impact objectives.

We would be interested to invest in ETFs, but we are not allowed by our law currently.

We’re planning on increasing our investments in ETFs.

20. Are you considering a change in the percentage of your reserves held in equities in the next 12 months?

[A] legislative amendment would be required before we can invest our reserves in equities.

Equities are not included within the [central bank’s] SAA.

Internal management with index futures.

Investing passively via ETFs and taking mid-term (active) views using futures.

Investment in futures only for one market.

Likely we will invest in ETF (equities) this year for the first time – at least, we are hoping to be allowed to do so.

Most likely to increase exposure to equities for its long-term growth potential, but this would be dependent on our upcoming SAA review.

Mostly externally managed. [We use] futures for rebalancing and tactical asset allocation.

Not investing in equities, and not considering due to prohibition by governing legislation.

Our long-term investment strategy assumes gradual increasing of exposure towards equities, but the exact timing will depend on market conditions.

Passive replication of indices is still the cheapest way. However, ETFs would be operationally more simple. Therefore, for newcomers, ETF could be first choice if the benchmark is not very complicated.

Passively via futures.

The extant statute doesn’t allow exposure in equities.

We are in the process of moving all of our equities in funds.

21. Are you using AI or machine learning (ML) to optimise your reserve management operations?

AI can analyse vast amounts of structured and unstructured data (eg, market trends, economic indicators, geopolitical events) to provide actionable insights, improving the quality of investment decisions.

AI could improve data management, but such a process is also connected with significant risks (cyber security risk, data mismanagement, operational risk, etc).

AI technology can be beneficial for different areas: trading and execution, strategic asset allocation, reporting, etc.

Due to the risks involved, using AI to manage reserve operations is not considered an option now. However, staff are currently exploring/learning how to use AI to support other areas of reserve management, such as market monitoring and portfolio analysis.

In the future, we will consider using AI or machine learning.

Several internal studies and simulations are being performed to assess the risk/benefit relations of including this new technology in allocation processes.

The central bank is currently studying a portfolio management and risk analysis tool that incorporates AI to enhance portfolio optimisation and risk assessment.

The [central bank] has generative AI guidelines in place that allow some use cases of AI, such as helping to automate simple administrative steps, obtaining quick answers to routine questions and formatting or checking grammar.

We are actively involved in different workstreams that deal with implementing AI into [the central bank’s] processes.

[We are] implementing a machine learning ensemble model to forecast yield curves.

We are investigating how to use AI for more efficient market intelligence and synthesis of market research.

[We are] not considering using AI in the immediate future.

We don’t use AI or machine learning to optimise our reserve management operations.

[We have] started analysis on this use of AI.

We use ML techniques in the quantitative duration model as an input in our active portfolio management. We are also experimenting with AI in market monitoring, which is also an input for [the] portfolio management decision-making process.

We use traditional tools and techniques from portfolio and risk management theory. Efforts have been (and continue to be) made to incorporate AI in some areas, but it is still a work in progress.

While we have indicated no to the question, there are AI features present in some of the tools that are used in managing our reserves. For example, Bloomberg offers AI in their models for performance attribution, as well as in providing summaries of material.

21a. In which areas are you currently using or experimenting with AI?

Currently not using or experimenting with AI.

Market discipline and surveillance.

Not using AI.

Now we use R to predict data.

Other: central bank’s balance sheet analysis.

We are beginning to explore the use of AI to enhance the quality of information available to the team.

We do not use or experiment [with] AI in any area at the moment.

We don’t use AI or machine learning to optimise our reserve management operations.

While AI and machine learning offer significant potential benefits, the bank is yet to officially begin using or experimenting with these technologies in its reserve management operations.

22. Has your prioritisation of socially responsible investing (SRI) changed over the last 12 months?

Activation of green bond portfolio.

Developing a more active position towards SRI.

During 2023, we … invested in green bonds, and, during 2024, increased our interest in further investments in green bonds.

It continues to be a consideration within the investment process, but only after the traditional objectives of safety, liquidity and return have been met.

[It] remains a strong priority.

The FX reserve policy was amended to explicitly communicate the intention to contribute towards the strategic goal of the [central bank] for promoting a green sustainable economy, and making positive measurable social and climate impact. It is, however, stipulated that this goal is subordinate to the principles of safety, liquidity and profitability.

[We are] planning to include SRI in the guidelines.

We are still investigating how to be more active in this market segment.

We decided to double its dedicated green bond portfolio during the year 2024, and have successfully completed this operation.

We have included SRI considerations as one of our reserve management objectives.

We have increased our holdings of ESG-compliant assets, predominantly in green bonds.

We include sustainability as one of our investment principles, together with capital preservation, liquidity and return.

We remain interested in this topic, but we are still in the early phase, with no concrete steps taken yet.

While our prioritisation of SRI in reserve management operations has not significantly changed over the past 12 months, there has been a growing awareness among management of the importance of SRI and an increasing appreciation for SRI instruments.

Yes, prioritisation of SRI has increased, as we are required to invest 4% of our reserves into ESG bonds.

22b. Which in your view are the most significant obstacles to incorporating SRI into reserve management?

All are important, challenging to rank.

All of these challenges are relevant for us.

Any SRI considerations within reserve management only apply if they are climate- and/or biodiversity-related.

Challenges of integration with central bank mandate (long investment horizon instruments) and concern over liquidity/returns are the main obstacles we see for incorporating SRI in our FX reserves management.

Each of these factors presents unique challenges that reserve managers must navigate to effectively incorporate SRI into their portfolios. Many reserve managers may be hesitant to embrace SRI due to concerns that prioritising ESG criteria could lead to underperformance. There is an ongoing debate about the trade-off between sustainability and financial returns, particularly when short-term returns or liquidity are paramount in reserve management. The uncertainty about the long-term financial benefits of SRI investments can be a deterrent. However, the growing interest in sustainability, coupled with advancements in ESG data, green finance initiatives and regulatory changes, may help mitigate some of these barriers in the near future.

Especially for our sovereign holdings, we deem it more challenging to incorporate SRI. Our portfolio objectives are both impact and return, quantifying this trade-off (where applicable) remains difficult. Anti-ESG backlash is also a concern, as well as the additional reporting burden.

Our current challenge is measuring the impact of our ESG investments on our net carbon footprint.

The main challenge is the integration of SRI within our main goals.

There is generally a perception that prioritising SRI may come at the expense of higher returns. Additionally, the absence of uniform metrics and reporting standards makes it difficult to understand and compare the different available investments.

To incorporate SRI as an investment [criterion], we may modify our monetary reserves policy. Nevertheless, we have internal controls in order to evaluate issuers’ ESG scores.

We are in [the] process of increasing investments in green bonds, although the limiting factor in significant increase is [the] law, which allows us to invest reserves only into government bonds and not bonds issued by government agencies or supras.

While managing foreign reserves, central banks usually play the role of long-term, market-neutral investors. Sustainability goals are mainly within the government’s mandate, and such initiatives could impact [the] central bank’s independence. Besides, SRI is conditional on access to adequate, reliable, coherent, transparent data – and this is still a challenge.