Reserve management

De Nederlandsche Bank (DNB) manages over EUR 50 billion in investments, which makes DNB one of the larger asset managers in the Netherlands. DNB's asset management and financial risk management activities has been allocated to the Financial Markets division, which is responsible for DNB’s gold and foreign exchange reserves.

These reserves are held to support the Eurosystem’s common monetary policy and DNB's financial stability objective. Therefore the products in which DNB invests must meet high standards, specifically in terms of their credit quality and liquidity. DNB's aim, within these parameters, is to manage the risks in its balance sheet on an integral basis and to optimise the risk-return profile of its investments. Of the profit gained on DNB’s asset management, 95% is paid out to the Dutch State, the sole shareholder of DNB.

DNB is a daily active player in the financial markets. Market awareness and market contacts are an important ancillary product of this activity. By promptly identifying, analysing and reporting market developments, DNB builds up knowledge that is vital for the proper performance of its other monetary and financial stability tasks.

At the end of 2010, DNB held reserves totalling EUR 46.9 billion, including external reserves, a euro-denominated portfolio and a portfolio of other financial assets (OFA). The external reserves break down into gold (EUR 20.8 billion), a US dollar portfolio (EUR 6.9 billion) and an SDR portfolio (SDR claims on the IMF worth EUR 1.9 billion). See below for summary notes to each of these portfolios.

In times of financial crisis, DNB's physical stock of gold serves as an ultimate reserve asset and as an anchor of trust. Gold is also held in view of the need to diversify investments.

The US dollar portfolio (EUR 6.9 billion) is held to meet a potential need for foreign exchange by the ECB, the IMF or the Dutch State, or to meet Dutch bank’s funding needs. If the ECB's own reserves are insufficient for interventions, it can call on the reserves of the central banks in the Eurosystem. The IMF may need US dollars to fund its lending operations, while the Dutch State can also call on DNB's dollar reserve to settle transactions in foreign currency. In order to be able to meet any request quickly, it is important that the dollar portfolio is sufficiently liquid. A minor part of the US dollar portfolio (EUR 0.5 bn) is invested through an external manager in Agency Mortgage Backed Securities (MBS). 

The euro portfolio (EUR 10.2 bn) is not counted among the external reserves, although it does have a historical background as such. Before the introduction of the euro, it consisted of DNB’s deutschmark (DM) reserves. From 1999, these were denominated in euro. The investment returns on this portfolio contribute to DNB's profits.

The OFA portfolio (EUR 7.0 billion) is offset against DNB’s capital and general reserves. It is invested in fixed-rate instruments and equities (EUR 5.5 billion and EUR 1.5 billion, respectively). The equity investments are held for diversification reasons and managed passively by two external managers.

Apart from its own reserves, DNB also manages part of the ECB’s reserves in Japanese yen. Finally, in the context of the European Reserve Management Services (ERMS), DNB also manages part of the euro reserves of one non-euro area central bank.