Enhancing the Transparency of the Authorities' Foreign Currency Liquidity Position

The report forms part of a series of initiatives designed to improve transparency in the global financial system. These include the report on transparency and accountability released recently by a group of major industrial and emerging market economies (the Willard Group), and planned steps by the IMF to strengthen the Special Data Dissemination Standard (SDDS). The efforts under way by the BIS to improve its international banking statistics, under the aegis of the ECSC, are also part of the same process.

The recent Asian crisis and its aftermath highlighted shortcomings in the availability of information associated with the on and off-balance sheet foreign currency activities of central banks and other public sector entities. Against this background, the report recommends improvements in disclosure standards designed to address these shortcomings. The focus of the report is the authorities' foreign currency liquidity position, defined to comprise the foreign exchange resources at the disposal of the authorities that are easily mobilisable in times of need and the potential drains on these resources associated with the authorities' short-term foreign currency liabilities.

The report makes three key recommendations. First, it advocates the implementation of a disclosure template which aims to be comprehensive with respect to the coverage of both institutions and financial instruments and which prescribes valuation principles that are consistent with the focus on liquidity. Central bank technical experts are now working to develop more detailed recommendations regarding the items to be disclosed with a view to releasing a final template in the near future. The IMF is also participating in this exercise. Second, as regards standards of timeliness, the report proposes that a first step would be to adopt a standard of a one month frequency and a disclosure lag not exceeding one month, to be implemented on or before end-June 1999. This represents a significant improvement compared with current practices. Finally, the report recommends that in parallel the ECSC revisit the question of the appropriate disclosure standards for all market participants with a view to elaborating a set of good practices.

Note for editors. The Euro-currency Standing Committee is a sub-committee of the Governors of the central banks of the Group of Ten countries. It comprises senior central bank officials from Belgium, Canada, France, Germany, Italy, Japan, Netherlands, Luxembourg, Sweden, Switzerland, the United Kingdom, the United States and the European Central Bank. Its current chairman is Yutaka Yamaguchi, Deputy Governor of the Bank of Japan. The Committee is supported by a Secretariat located at the BIS.