STATEMENT OF CHANGES IN EQUITY
NOTE 5 FOREIGN EXCHANGE RESERVES
FRAMEWORK FOR THE MANAGEMENT OF NORGES BANK’S FOREIGN EXCHANGE RESERVES Norges Bank’s foreign exchange reserves shall be available for use as part of the conduct of mone-tary policy with a view to promoting financial sta-bility and to meet Norges Bank’s international commitments to the IMF and individual countries.
The reserves are divided into a long-term portfo-lio, a money market portfolio and a petroleum buffer portfolio. Norges Bank Investment Man-agement manages the long-term portfolio, while the money market portfolio and petroleum buffer portfolio are managed by Norges Bank Markets and Banking Services.
The foreign exchange reserves shall be invested so that at least SDR 10bn, including the entire money market portfolio, can be used within a single trading day without having to realise any appreciable losses. The money market portfolio shall be between SDR 3.5bn and SDR 4.5bn and be invested in short-term fixed income instru-ments. The benchmark index for the money market portfolio is a composite of USD and EUR
overnight money market indices and Treasury bill indices for the same currencies. The long-term portfolio shall be invested in equities and fixed income instruments. The benchmark index for the long-term portfolio is a composite of global equity and bond indices. The equity allocation in the strategic benchmark index is 40%.
The purpose of the petroleum buffer portfolio is to ensure that the Government Pension Fund Global (GPFG) is provided with an adequate supply of fresh capital. Norges Bank builds up the portfo-lio by regularly purchasing foreign exchange from the State’s Direct Financial Interest in petroleum activities (SDFI) and by purchasing foreign exchange in the market. Transfers from the port-folio to the GPFG are normally made each month.
The petroleum buffer portfolio is invested in short-term fixed income instruments. No bench-mark index has been set for the petroleum buffer portfolio.
Tables 5.1 and 5.2 show income statements and balance sheets, respectively, for the foreign exchange reserves by portfolio as described above.
Table 5.1 Foreign exchange reserves by portfolio
Amounts in NOK millions PORTFOLIOS 2014
Interest income, lending associated with reverse
repurchase agreements - 9 28 - 37
Net income/expenses - gains/losses from: -
- Equities and units 18 704 - - - 18 704
- Bonds and other fixed income instruments 13 634 24 - - 13 658
- Financial derivatives 4 - - - 4
Interest expense, borrowing associated with repurchase
agreements -1 - - -1 -
Tax expense -47 - - - -47
Other financial income/expenses - -1 -6 -7
Net income from financial instruments before foreign
exchange gains/losses 32 297 32 25 1 32 353
Foreign exchange gains/losses 41 705 8 013 7 595 -39 57 352
Net income from financial instruments* 74 002 8 045 7 620 -38 89 705
Amounts in NOK millions PORTFOLIOS 2013
Income statement
Long-term Money market
Petro-leum buffer
Not included in exchange reserves
Total exchange reserves
Interest income, deposits and claims 37 1 1 24 15
Interest income, lending associated with reverse
repurchase agreements - 3 21 - 24
Net income/expenses - gains/losses from: - - - - -
- Equities 30 386 - - 30 386
- Bonds and other fixed income instruments -2 293 34 - - -2 259
- Financial derivatives 11 5 - - 16
Interest expense, borrowing associated with repurchase
agreements -22 - - -22 -
Tax expense -17 - - - -17
Other financial income/expenses 1 - 1
Net income from financial instruments before foreign
exchange gains/losses 28 103 43 22 2 28 166
Foreign exchange gains/losses 17 822 3 472 3 898 148 25 044
Net income from financial instruments* 45 925 3 515 3 920 150 53 210
* For the long-term portfolio, Net income from financial instruments includes profit and loss items associated with outstanding balances with the GPFG. These profit and loss items are excluded from the term foreign exchange reserves presented in Norges Bank’s annual financial statements (cf. IMF definition).
Table 5.2 Foreign exchange reserves by portfolio
Amounts in NOK millions 31 Dec. 2014 PORTFOLIOS
Balance sheet
Long-term Money
market Petroleum buffer
Not included in exchange reserves
Total exchange reserves FINANCIAL ASSETS
Deposits in banks 362 5 573 26 285 - 32 220
Lending associated with reverse repurchase
agreements 756 24 548 25 499 - 50 803
Unsettled trades 720 - - - 720
Equities and units 133 821 - - - 133 821
Equities lent 6 404 - - - 6 404
Bonds and other fixed income instruments 206 634 32 271 - - 238 905
Financial derivatives 8 - 19 - 27
Other financial assets 125 - - 60 65
Total financial assets 348 830 62 392 51 803 60 462 965
FINANCIAL LIABILITIES
Cash collateral received 762 - - - 762
Unsettled trades 755 12 495 - - 13 250
Financial derivatives - 1 - - 1
Other financial liabilities 1 - 384 - 385
Total financial liabilities 1 518 12 496 384 - 14 398
Net foreign exchange reserves* 347 312 49 896 51 419 60 448 567
Amounts in NOK millions 31 Dec. 2013 PORTFOLIOS
Balance sheet
Long-term Money
market Petroleum buffer
Not included in exchange reserves
Total exchange reserves FINANCIAL ASSETS
Deposits in banks 59 3 207 2 948 - 6 214
Lending associated with reverse repurchase
agreements 1 365 5 628 15 201 - 22 194
Unsettled trades 2 - - - 2
Equities and units 114 272 - - - 114 272
Equities lent 4 355 - - - 4 355
Bonds and other fixed income instruments 154 467 30 953 - - 185 420
Financial derivatives 7 1 - - 8
Other financial assets 158 - - 108 50
Total financial assets 274 685 39 789 18 149 108 332 515
FINANCIAL LIABILITIES
Cash collateral received 1 365 - - - 1 365
Unsettled trades - 1 528 - - 1 528
Financial derivatives 12 - 9 - 21
Other financial liabilities - - 1 278 - 1 278
Total financial liabilities 1 377 1 528 1 287 - 4 192
Net foreign exchange reserves* 273 308 38 261 16 862 108 328 323
* For the long-term portfolio, Net foreign exchange reserves include outstanding balances with the GPFG. Outstanding balances are excluded from the term foreign exchange reserves presented in Norges Bank’s annual financial statements (cf. IMF definition).
Table 5.3 shows the foreign exchange reserves broken down by the currencies most used during the year.
Table 5.3 Foreign exchange reserves by currency
Amounts in NOK millions 31 Dec. 2014
USD CAD EUR GBP CHF JPY Other TOTAL
FINANCIAL ASSETS
Deposits in banks 7 862 93 24 062 6 - 119 78 32 220
Lending associated with reverse repurchase
agreements 44 918 - 5 885 - - - - 50 803
Unsettled trades 654 - 36 30 - - - 720
Equities 78 443 5 192 14 487 10 785 4 574 9 816 10 524 133 821
Equities lent 2 515 32 657 10 47 2 193 950 6 404
Bonds and other fixed income instruments 116 716 - 81 863 21 254 - 19 072 - 238 905
Financial derivatives 16 - 10 - - - 1 27
Other financial assets 6 - 17 9 33 - - 65
Total financial assets 251 130 5 317 127 017 32 093 4 654 31 200 11 554 462 965 FINANCIAL LIABILITIES
Cash collateral received 756 - - 6 - - - 762
Unsettled trades 11 355 -21 1 844 42 - 18 12 13 250
Financial derivatives - - 1 - - - - 1
Other financial liabilities 384 - - 1 - - - 385
Total financial liabilities 12 495 -21 1 845 49 - 18 12 14 398
Net foreign exchange reserves 238 635 5 338 125 172 32 044 4 654 31 182 11 542 448 567 Amounts in NOK millions
31 Dec. 2013
USD CAD EUR GBP CHF JPY Other TOTAL
FINANCIAL ASSETS
Deposits in banks 6 082 3 60 32 - 18 19 6 214
Lending associated with reverse repurchase
agreements 11 585 - 10 609 - - - - 22 194
Unsettled trades 2 - - - - 2
Equities 62 215 4 556 13 826 10 224 4 014 9 700 9 737 114 272
Equities lent 1 725 43 658 41 40 1 005 843 4 355
Bonds and other fixed income instruments 90 326 - 63 375 16 119 - 15 600 - 185 420
Financial derivatives 1 - - - - - 7 8
Other financial assets 5 - 10 4 31 - - 50
Total financial assets 171 941 4 602 88 538 26 420 4 085 26 323 10 606 332 515
FINANCIAL LIABILITIES
Cash collateral received 1 365 - - - - 1 365
Unsettled trades 1 528 - - - - 1 528
Financial derivatives - - 9 12 - - - 21
Other financial liabilities 1 278 - - - - 1 278
Total financial liabilities 4 171 - 9 12 - - - 4 192
Net foreign exchange reserves 167 770 4 602 88 529 26 408 4 085 26 323 10 606 328 323