Governors, Heads of Agencies, Deputy Governors, Directors of Reserves Management, Distinguished Guests, Ladies and Gentlemen, it is my pleasure and honor to welcome you to this year’s Executive Forum.
This is our 16th year of hosting this flagship event of the Reserves Advisory and Management Program (RAMP). We also have the largest forum yet, with over 150 participants from more than 70 countries, representing central banks, national pension funds, sovereign wealth funds, and other official institutions. For the past 17 years, the World Bank Treasury has had the privilege of sharing its expertise, knowledge and experience through the RAMP program. This has helped clients adopt best practice in reserves management and achieve risk-adjusted returns in line with their policy objectives.
Evolution of RAMP and WB Treasury Engagement
Since its founding in 2001, the RAMP program has grown from 3 to 65 clients, including many institutions represented here today. RAMP’s assets under management have grown from $650 million to $21 billion. I am grateful for your confidence, and assure you that my colleagues and I will continue to do our utmost best to sustain your trust in our ability to support your mandate as public-sector asset managers.
Today, World Bank Treasury manages almost $200 billion in assets across a diversified client base including RAMP clients. In addition to our core experience in short to medium duration fixed income securities, we have developed a wealth of experience in other asset classes, ranging from public equities, direct lending, private equity to alternatives through our $27 billion pension asset portfolio. We are also championing various initiatives in respect of sustainable investing including thought leadership on the integration of environment, social and governance factors. Our over 70-year engagement with financial markets and as pioneer in financial innovation enables us to support your laudable mandate of building financial resilience and contributing to the success of your entities and nations. Our practitioner to practitioner model means that we put at your disposal the same team and infrastructure that manages the World Bank Group portfolios of over $100 billion.
Also, unique, is RAMP’s focus on capacity building, learning and keeping abreast of best practice. For example, RAMP now hosts 30 technical workshops and conduct over 100 technical-assistance missions each year, on wide array of asset management topics that are relevant to our clients.
Highlights of RAMP Survey Results
Fostering knowledge-sharing opportunities among peer institutions is an important part of the capacity and community building mission of the RAMP. In this respect, we launched Survey on the Reserves Management Practices of Central Banks, in November 2017.
The objectives of the survey are a) to develop a credible and representative picture of reserves management practices in the present environment, and b) to provide central banks an opportunity to benchmark their practices and perspectives against peer institutions.
We are extremely grateful for the support we have received from the global central banking community. Overall, we received 99 responses from the world’s 125 central banks.
As you may recall, the survey covers the key areas of reserves management—governance & policy, strategic asset allocation, portfolio management, risk management, and performance reporting & transparency.
To make the most out of the wonderful opportunity this data set provides, we are proceeding carefully and deliberately. To date, we have completed processing and harmonizing the data across responses. We will be continuing our analysis in the coming months and expect to share our findings with you, before the end of the year. Our preliminary findings are nonetheless as follows:
First, and as might be expected, central banks have generally maintained their conservative stance as public investors. Most of our survey respondents continue to invest most of their reserves in traditional high-grade asset classes such as government bonds. Nevertheless, in what appears to be a search for yields, some central banks with adequate reserves have augmented their investable asset classes to include spread products such as mortgage backed securities, corporate bonds, and, even equities, in a few cases.
Second, central banks have continued to diversify the currency composition of their assets, expect to further increase their allocation to US dollar, the Australian dollar, the Canadian dollar and the Renminbi over the next few years, and at the expense of the Euro and the British Pound. In addition, exposure to Renminbi as a reserve currency has increased to levels comparable to some G7 currencies, fostered by the admission of the Renminbi into the Special Drawing Right (SDR) basket, in 2016.
Third, in line with the increase in risk and diversity of their investment operations, central banks have made efforts to strengthen their risk management capabilities. Central banks that invest in a broader credit spectrum including securities with BBB credit ratings should ensure the robustness of their credit risk management framework.
One caveat to these preliminary findings is the varied institutional histories and management styles of various central banks. Country-specific factors also have an impact. There is therefore is no one-size-fits-all approach to reserves management. On the whole, central banks continue to strengthen reserve management and are adapting to the unprecedented conditions that resulted from the global financial crisis.
Let me conclude with a few words about on the agenda for this year’s Forum. As you would have observed from the program, we selected the theme - “Navigating Policy Normalization” – as central banks and other asset managers are indeed navigating the synchronization of global economic growth and the consequent gradual reversal of accommodative monetary policy by major central banks. I am delighted that we have an excellent lineup of keynote speakers and panelists including the 2001 Nobel Laureate in Economics, Professor George Akerlof, Professor Carmen Reinhart. Professor Randall Kroszner, Professor Charles Goodhart, Dr Amlan Roy, General James Mark, several central bank governors, economists and financial market experts. We will cover topics related to a) unwinding unconventional monetary policy; b) emerging market vulnerabilities, c) public asset management in an era of monetary policy normalization; d) Integrating ESG factors into investments; e) blockchain, crypto currency, and reserves management; (f) Implications of demographic changes (g) Geopolitical risks
I very much look forward to engaging, thought-provoking discussions and useful deliberations over the next two days. Thank you.