UK OFFICIAL HOLDINGS OF INTERNATIONAL RESERVES:

Part I: UK Government Foreign Currency Assets and Liabilities - December 2001

1. The UK Government's net reserves fell by $102 million in December, bringing the end-December total to $13,480 (£9,261 million¹) compared with $13,582 (£9,525 million²) at the end of November.

	US $ million: market values
	end November 2001		end December 2001
Gross Reserves³	40,682		39,359

Liabilities	-27,100		-25,879
of which
foreign currency forwards and swaps (net)⁴	-16,127		-15,704
repo transactions⁵	-528		-162

Net reserves⁶	13,582		13,480

Change in net reserves		-102
of which
valuation effects		-107
transactions against sterling		5
of which
UK public sector customers		-305
Other		310

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 December.

Part II: Bank of England Foreign Currency Assets and Liabilities - December 2001

The Bank of England's net holdings of foreign currency and gold rose by $5 million in December, bringing the end-December total to $64 million (£44 million¹) compared with $59 million (£41 million²) at the end of November.

	US $ million: market values
	end November 2001*		end December 2001
Assets³	9,803		10,366

Liabilities	-9,744		-10,302
of which
foreign currency forwards and swaps (net)⁴	-751		-1,075
repo transactions⁵	-400		-486

Net assets⁶	59		64

Change in net holdings		5
of which
valuation effects		3
transactions against sterling		2
of which
UK public sector customers		-
Other		2

*revised figures; see paragraph 2 below

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Revisions to previously published figures

2. The previously published end-month figures for the Bank of England's net holdings of foreign currency and gold for November 2001 have been revised. These revisions along with the consequential revisions to the end-month net assets figure and the change between months in the level of net assets are detailed below.

	US $ million: market values
	Published	Revised	Variance
Assets	9,803	9,803	-

Liabilities	-9,761	-9,744	18
of which
foreign currency forwards and swaps (net)⁴	-768	-751	18
repo transactions⁵	-400	-400	-

Net Assets	41	59	18
Changes in Net Reserves#	4	21	18
of which
valuation effects	2	19	18
transactions against sterling	2	2	-
of which
UK public sector customers	-	-	-
Other	2	2	-

# Change from the October levels.

3. 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 such intervention operations were undertaken by the Bank in December.

4. The Bank of England's foreign currency assets and liabilities arise from banking 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 and Note programme, and other capital items. Foreign exchange swaps may be 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.

1 When converted at the closing market rate (4pm) of £1 = $1.4555 on 31 December 2001.

2 When converted at the closing market rate (4pm) of £1 = $1.4260 on 30 November 2001.

3 In this presentation gross reserves exclude 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.

Notes to Editors

Background

1. 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".

2. The UK began to disclose additional information on its foreign currency assets and liabilities required under the International Monetary Fund's Special Data Dissemination Standard (assets, liabilities and derivatives) from July 1999. Data for end-July 1999 onwards can be found on the Bank of England's website at www.bankofengland.co.uk/statistics/reserves.

Methodology and definitions

3. The Bank of England's website also provides information on the methodology now used and definitions of the main conventions employed.

A National Statistics publication

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Internet version

5. If you have access to the Internet, you can find this news release and other Treasury information on the Treasury's web site.

Next publication date

6. The figures for January 2002 will be published on Tuesday 5 February 2002.

Enquiries

7. Media enquiries about this press release should be addressed to Simon Moyse in the Treasury Press Office on 020 7270 4420.

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Email: Public Enquiries

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