De Nederlandsche Bank (DNB) maintains reserves in support of monetary policy, financial stability and trust in the financial system. Our reserves consist of financial assets and gold.
We have put together our investment portfolios on the basis of strict requirements. We aim for the best possible risk-return profile. To achieve this, we pay close attention to credit quality and liquidity, but also to sustainability. We pursue a socially responsible investment policy, which means we consider environmental, social and governance (ESG) factors in all of our investment decisions. In this way, we want to help make the economy more sustainable.
We pay out all or part of the returns on our investments to the Dutch State, our sole shareholder.
Read more about the Responsible Investment Charter
We invest our reserves in various financial assets. In doing so, we must also consider our role as a supervisory authority and central bank. In practice this means that some of our investment portfolios are managed externally and that some types of investment are excluded from the internally managed portfolios.
Internally managed portfolios
Our internally managed investments consist mainly of government bonds and bonds issued by supranational institutions and semi-government bodies. Previously, we purchased both euro and US dollar bonds. However, in view of the current interest rate climate in the euro area, we currently only purchase US dollar bonds and have almost completely phased out our euro portfolio.
The US dollar portfolio consists of short-term bonds, and we hedge foreign exchange risk. The portfolio provides for any foreign exchange needs of the European Central Bank (ECB) and the International Monetary Fund (IMF). The IMF can ask us to provide US dollars to fund its loans. Also, the ECB may request us to provide US dollars for the execution of currency interventions. In order to be able to meet such requests quickly and efficiently, our dollar portfolio must be sufficiently liquid.
Externally managed portfolios
Our externally managed portfolios mainly consist of shares and corporate bonds. The latter category can be broken down into investment grade and high-yield corporate loans. In addition to spreading the risks across the total investment portfolio, these investments also offer more possibilities for putting our socially responsible investment policy into practice. We periodically select our external asset managers, and we monitor and evaluate their performance.
Traditionally, central banks held a gold stock to meet the gold standard. Coins and banknotes could be exchanged for gold on the basis of this standard. Since the release of this standard [in 1936] , our gold stock has functioned mainly as a reserve asset and as an anchor of trust. To ensure a proper geographical spread, our gold reserves are kept in various locations in the world. Part of it is in our own vaults, and the other parts are in the United States, Canada and the United Kingdom.
Japanese yen investments
In addition to our own reserves, we also manage part of the ECB's Japanese yen reserves. Every three years, the national central banks in the Eurosystem can choose which currency they wish to manage. We chose the Japanese yen, because this would not create any conflicts of interest with the management of our own investments and foreign currency reserves.
European Reserve Management Services
DNB is one of the national central banks in the Eurosystem which provide services for the management of euro reserves of national central banks outside the euro area. These are known as Eurosystem Reserve Management Services (ERMS).