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3 August 2000

UK OFFICIAL HOLDINGS OF INTERNATIONAL RESERVES:

Part I: UK Government Foreign Currency Assets and Liabilities - July 2000

1. The UK Government's net reserves fell by $62 million in July, bringing the end-July total to $13,913 million (£9,291 million(1)) compared with $13,974 million (£9,229 million(2)) at the end of June

US $ million: market values
end June 2000 end July 2000
Gross Reserves(3) 41,308 41,527
Liabilities -27,334 -27,615
of which
foreign currency forwards and swaps (net)(4) -8,201 -9,049
o/a repo transactions(5) -1,003 -609
Net reserves(6) 13,974 13,913
Changes in net reserves -62
of which
valuation effects -76
transactions against sterling 14
of which
UK public sector customers -243
other 257

2. As set out in the Chancellor's letter of 6 May 1997 to the Governor of the Bank of England, if the Government so instructs then the Bank, acting as its agent, may intervene in the foreign exchange market by buying or selling the government's foreign exchange reserves. If intervention is undertaken, the monthly press release will provide details of the amount and date of the intervention and an explanation of why it was undertaken. No intervention operations were undertaken in July.

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Part II: Bank of England Foreign Currency Assets and Liabilities - July 2000

1. There was no change in the Bank of England's net holdings of foreign currency and gold in July, the end-July total remaining at $84 million (£56 million(1) compared with £55 million(2) at the end of June).


US $ million: market values
end June 2000 end July 2000
Assets(3) 9,906 8,737
Liabilities -9,822 -8,654
of which
foreign currency forwards and swaps (net)(4) 22 28
o/a repo transactions(5) 0 0
Net assets(6) 84 84
Changes in net holdings 0
of which
valuation effects -1
transactions against sterling 1
of which
UK public sector customers 0
other 1


2. As set out in the Chancellor's letter of 6 May 1997 to the Governor of the Bank of England, the Bank may also undertake foreign exchange operations to intervene in support of its monetary policy objective. If intervention is undertaken, the monthly press release will provide details of the amount and date of intervention and an explanation of why it was undertaken. No intervention operations were undertaken in July.

3. The Bank of England's foreign currency assets and liabilities arise from foreign currency and gold deposits placed with the Bank by overseas central banks and other customers, the net effect of foreign exchange swaps conducted in the course of the Bank's money market operations, UK participation in the TARGET system, the Bank's Euro Bill programme, and other capital items. The foreign exchange swaps are undertaken as a supplement to the Bank's usual money market techniques to provide sterling liquidity to the market, and are purely technical in nature. The proceeds of the Bank's Euro Bills are used to finance the provision by it of intra-day liquidity, on a secured basis, to participants in CHAPS euro, as part of the arrangements for TARGET.

4. The Bank's participation in the TARGET system gives rise to large and variable euro balances with other central banks operating the system. These are largely off-set by similar balances that the other central banks hold at the Bank, and lead to small net liabilities to commercial banks participating in the system. The resulting assets and liabilities are shown net in the table above, where they increased assets and liabilities by $249 million at the reporting date. The Bank's gross claim on other central banks was $31,782 million at the end of the month.

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Notes to Editors

1. The figures for August 2000 will be published on Tuesday 5 September 2000.

2. The UK's international reserves are now being published in accordance with the methodology developed by the International Monetary Fund in the context of revisions to their Special Data Dissemination Standard (SDDS), and the G10 central banks in their report "Enhancing transparency regarding authorities' foreign currency liquidity position".

3. The United Kingdom began to disclose additional information on its foreign currency assets and liabilities from July 1999: data for end-July 1999 onwards can be found on the Bank of England's web-site at the address below.

4. The Bank of England's web-site also provides information on the methodology now used and definitions of the main conventions employed.

1. When converted at the closing market rate (5pm) of £1 = $1.4975 on 31 July 2000.
2. When converted at the closing market rate (5pm) of £1 = $1.5141 on 30 June 2000.
3. In this presentation gross reserves exclude marked to market valuation of foreign currency forwards and swaps. These derivatives are shown (excl sterling leg) within liabilities.
4. Net present value of foreign currency forwards, interest rate and cross currency swaps (excl sterling leg).
5. Market value of liabilities to repay foreign currency received in repo transactions.
6. Figures may not sum due to roundings.

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