Portfolio Restructuring 

Currency Composition

Table 1 below shows the change since December 1998 of the currency composition of the Bank’s investment portfolio as between euro- and non-euro-denominated assets. It can be seen that over 97 per cent of the portfolio is now denominated in euro. Furthermore, the exchange rate risk on the small non-euro portion (held in US dollars) is hedged. This ensures that the Bank has virtually no exposure to volatility of returns arising from the impact of exchange rate movements on the euro value of its investments.

 

Table 1: Currency composition (%) of the investment portfolio since EMU

Dec 98

Dec 99

Dec 00

Dec 01

Dec 02

Dec 03

Dec 04

Dec 05

Dec 06

Dec 07

Dec 08

Dec 09

Dec 10

Euro

29

28

27

28

43

68

80

95.5

96.2

96.5

97.0

97.2

97.0

Non-euro

71

72

73

72

57

32

20

4.5

3.8

3.5

3.0

2.8

3.0

Over the year, the Bank managed its investment assets (both foreign currency and euro denominated) by reference to benchmark portfolios created by Merrill Lynch on behalf of the Bank. These benchmark portfolios incorporate the Bank’s preferences for liquidity, risk and return.