Reserve Management
Our Reserve Management department manages the UAE’s official foreign exchange reserves, in line with:
- The Central Bank of the UAE Investment and External Fund Management Policies, which are approved by the CBUAE Board of Directors.
- International best practices.
Our Role
The UAE’s official reserves are managed in line with:
- The global standards outlined in the International Monetary Fund’s (IMFs) Guidelines for Foreign Exchange Reserve Management.
The policy objectives in holding the official reserves are to:
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Support confidence in the exchange rate policy.
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Reduce fluctuations arising from the balance of payments and/or the domestic banking system.
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Facilitate foreign currency transactions between government departments and the local banking system.
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Maximise returns at an acceptable level of risk.
Internal Investment Management
The Internal Investment team consists of professionals experienced in managing the foreign exchange, gold, money and capital market assets held in the official reserves. These assets are invested in global financial markets, in line with the Investment Policy and detailed Investment Guidelines. The reserves are maintained in the classical tranches mode prevalent at most central banks with the more important tranches being the ones that support CBUAE liquidity and enhance its returns. These are managed by dedicated teams on the basis of approved guidelines and policies and a governance framework approved by the CBUAE Board of Directors. Internal managers have flexibility to manage their books in line with their market expectations as long as they adhere to the prescribed asset allocation guidelines and risk parameters approved by the Board. These metrics are constantly monitored by the CBUAE risk team.
External fund management
CBUAE’s External Management & Analytics team consists of professionals with experience in the analysis, selection and oversight of external fund managers. The team is guided by the External Fund Management Policy approved by CBUAE’s Board of Directors. The rationale in using external fund managers is to improve investment returns and benefit from specialist external expertise in areas and markets where CBUAE wishes to build internal capacity. We award mandates to highly reputable asset managers who have proven experience and expertise in the area of our interest. The selection of external fund managers is a very detailed and thorough process where CBUAE issues a request for proposal (RFP) and then conducts due diligence on the shortlisted managers. The process of selection is overseen by the Monetary and Reserve Management Committee (MRMC), chaired by H.E. the Governor.
Investment ecosystem at the CBUAE
The current TMS is Calypso (now Adenza) and has been in place since 2018.
CBUAE deals only with counterparties who are in its approved list issued by the bank’s Risk Management and Compliance Department (RMCD). This list is reviewed as part of the RMCD’s annual review process and subject to the approval of CBUAE’s Board Risk Committee, a Board-level committee dedicated to risk and compliance issues. This list contains all the counterparties with whom CBUAE can place deposits and carry out FX activities. It also contains a comprehensive list of issuer limits and eligible financial institutions with whom CBUAE can conduct capital market transactions. In addition to regular reviews, CBUAE also updates the list whenever circumstances warrant a review. (For more details please refer to the link: https://www.centralbank.ae/en/our-operations/risk-management/)
Separately, there is Board-approved policy that guides its bullion transactions, which clearly details the type and kind of bullion that can be bought or sold. The policy then delegates selection of bullion banks with whom CBUAE can deal to the MRMC. These banks are selected from the list of banks with whom CBUAE has signed an ISDA.
CBUAE uses widely adopted practices and criteria in defining the list of eligible counterparties as well as in calibrating exposure limits and monitoring of credit risk exposures. CBAUE uses credit ratings provided by Fitch Ratings, Moody’s Corporation and Standard and Poor’s to support credit risk management.
CBUAE uses reputable global/dedicated custodian(s) whose appointment is subject to a robust RFP process. Our global custodians are always from the top ten such custodians in the world in terms of assets under custody.
CBUAE uses MSCI’s BarraOne as the primary risk and performance attribution system to measure, monitor and report portfolio risk and performance.
We use Oracle FLEXCUBE core banking as our accounting module. The system is interfaced with the Calypso TMS.
Auditors appointed by CBUAE are international audit firms with extensive experience of central banks
CBUAE uses reputable electronic trading systems and data providers to deliver the relevant services for CBUAE’s investment activities, namely Bloomberg and Refinitiv.
We also use Mercer database for evaluating the universe of external fund managers to support our decision making in this area.
CBUAE uses Bloomberg and ICE as benchmark data providers as part of the investment management process.
CBUAE uses IBM’s OpenPages as its Governance, Risk and Compliance (GRC) system.
Related Statistics
Statistical information on the CBUAE balance sheet assets and foreign assets.
Research and StatisticsFAQs
The official foreign exchange reserves are legally owned by the Central Bank of the UAE and form part of its balance sheet.
The official foreign exchange reserves stand at around $210 billion. The most recent data are found in the monthly statistics section of this website.
The foreign exchange reserves are prudently managed by the Central Bank of the UAE and are invested in accordance with the Investment Policy and External Fund Manager Policy approved by the Board of Directors.
The official reserves are invested in a well-diversified global bond portfolio in all major bond markets and a sizeable portfolio of money market assets. All assets are of investment grade quality and currency risk is fully hedged to the US dollar, as the Dirham is pegged to the US dollar. This ensures the assets are safe and liquid, while also obtaining a good risk-adjusted return.
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Last updated on: Tuesday 05 November 2024
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