Risk control, compliance monitoring and reporting

Manzanares, Andrés; Schwartzlose, Henrik

doi:10.1017/cbo9780511575716.006

Cited by 5 publications

(2 citation statements)

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“…19 It is unfortunately not possible to quantify the contribution of the risk control framework at the aggregate level, because the details of most frameworks are not publicly available. Even in the few cases where detailed information about the framework is public -such as the framework of the ECB (Manzanares and Schwartzlose, 2009)-some key parameters for the calibration of limits are unavailable. 20 Strong assumptions are needed to estimate the impact of rating changes on limits and, ultimately, positions.…”

Section: Procyclicality In Credit Limit Frameworkmentioning

confidence: 99%

Procyclicality in Central Bank Reserve Management: Evidence From the Crisis

Pihlman

Hoorn²

2010

IMF Working Papers

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This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.A decade-long diversification of official reserves into riskier investments came to an abrupt end at the beginning of the global financial crisis, when many central bank reserve managers started to withdraw their deposits from the banking sector in an apparent flight to quality and safety. We estimate that reserve managers pulled around US$500 billion of deposits and other investments from the banking sector. Although clearly not the main cause, this procyclical investment behavior is likely to have contributed to the funding problems of the banking sector, which required offsetting measures by other central banks such as the Federal Reserve and Eurosystem central banks. The behavior highlights a potential conflict between the reserve management and financial stability mandates of central banks. This paper analyzes reserve managers' actions during the crisis and draws some lessons for strategic asset allocation of reserves going forward.

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Section: Procyclicality In Credit Limit Frameworkmentioning

confidence: 99%

Procyclicality in Central Bank Reserve Management: Evidence From the Crisis

Pihlman

Hoorn²

2010

IMF Working Papers

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“…The assets under management reflect the share of each NCB in the ECB's capital. The ECB sets a common benchmark, thus generating competition among managers (Koivu, Monar and Nyholm, 2009;Manzanares and Schwartzlose, 2009). Every month their individual performance is computed and made known by the ECB to all managers.…”

Section: Introductionmentioning

confidence: 99%

Market Timing and Performance Attribution in the ECB Reserve Management Framework

Potente

Scalia

2016

SSRN Journal

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We study the performance of a group of foreign exchange reserve managers that are responsible for investing the ECB's official reserves in US dollars, for a value of around $43 billion, using a new dataset which includes detailed portfolio holdings from 2006 to 2010. The ECB reserve managers display a positive ability at security selection overall. Two portfolio managers show market timing ability after adjusting for the non-linearity of the benchmark returns. For one portfolio manager, market timing ability is significantly related to the efficient use of public information. To pin down market timing, we develop a performance attribution model which identifies the contribution of the key portfolio managers' strategies (duration, curve, and spread). We find that, among the active layers, the spread contribution seems the most significant; curve and duration bets, with some exceptions, have generally provided little value added. Our analysis supports the view that portfolio managers adopt diversified investment styles. This may explain the non-negligible result of the aggregate reserve portfolio, averaging 10 basis points on an annual basis, net of transaction costs. The more diversified the investment styles are, the more likely it is that portfolio managers make independent bets, which in turn may positively affect the risk-adjusted return of the aggregate portfolio.

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Procyclicality in Central Bank Reserve Management: Evidence from the Crisis

Pihlman

Hoorn

2010

SSRN Journal

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Risk control, compliance monitoring and reporting

Cited by 5 publications

References 0 publications

Procyclicality in Central Bank Reserve Management: Evidence From the Crisis

Procyclicality in Central Bank Reserve Management: Evidence From the Crisis

Market Timing and Performance Attribution in the ECB Reserve Management Framework

Procyclicality in Central Bank Reserve Management: Evidence from the Crisis

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