South Korea's foreign currency reserves,
how far is "deceive other"?
2020/03/04
https://www.youtube.com/watch?v=OTGU7qh1dAw
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At that time, a certain anonymous bulletin board on the Internet made a big fuss, “The balance of cash deposits has dropped sharply!” It has been sensationally picked up, but there is also a lack of studying.
As is often misunderstood by the public, "foreign currency reserves" are not limited to cash and deposits. Or, to be more precise, a large percentage of "foreign currency reserves" is made up of securities.
Rather, securities are more important.
The reason for this is simple: interest is not high if the cash is intact, and interest is generally not too high for deposits.
(* Why the deposit interest rate is low is not dealt with in this paper.
I'd like to take it up if I have the opportunity)
Eligibility requirements for securities
In reality, most of the foreign exchange reserves are managed by securities, regardless of age, east or west.
This is not to say that any securities that can be included in foreign currency reserves can be any securities. Regarding securities included in foreign currency reserves, the IMF's manual (P. 19-20) stated as follows.
1.
79.Securities Should include highly liquid, marketable equity and debt securities; liquid, marketable, long-term securities (such as 30-year US Treasury bonds) are included.Securities not listed for public trading are, in principle, excluded unless such securities are deemed liquid enough to qualify as reserve assets.
2.
80.Only Foreign currency securities issued by non resident entities should be included in this item of the Reserves Data Template.
Suddenly, many people will find it difficult to show a sentence that is in English and contains many technical terms that appear to be very difficult (at first glance), but in fact, Not too difficult. The early story,
1. Marketable stocks and bonds with very high liquidity
2. Long-term bonds, such as US 30- year bonds , are highly liquid and marketable
3. If the company is not listed, it may not be eligible for foreign exchange reserves due to lack of liquidity
4. The items that can be included in foreign currency reserve are limited to securities issued by overseas residents.
That is to say, incorporating shady junk bonds is a rule violation, and if the Bank of Korea incorporates bonds issued by its own company into foreign currency reserves, in light of paragraph 80 of the manual, That's obviously "out".
Reconcile with external data
By currency, the US dollar is more than 60%
When discussing foreign currency reserves, another important thing is the data on which currencies constitute foreign currency reserves.
According to the “ Currency Composition of Official Foreign Exchange (COFER)” published by the IMF, or “Currency Composition of Official Foreign Exchange (COFER)”、as of the end of December 2019 , foreign currency reserves held by countries around the world The total is $ 11,829.5 billion.
Of which, the breakdown by currency is $ 11,078.4 billion, of which the US dollar accounts for slightly more than 60 %, followed by the euro and Japanese yen ( Chart 2 ).
Figure 2 IMF's share of global reserves
(As of the end of December 2019 )
|
currency |
Amount of money |
Composition ratio |
|
U.S. dollar |
$ 6,745.7 billion |
60.89% |
|
Euro |
$ 2,276.0 billion |
20.54% |
|
Japanese yen |
$ 631.4 billion |
5.70% |
|
GBP |
$ 511.8 billion |
4.62% |
|
CNY |
$ 217.7 billion |
1.96% |
|
Canada dollar |
$ 208 billion |
1.88% |
|
Australian dollar |
$ 187.3 billion |
1.69% |
|
Swiss franc |
$ 17 billion |
0.15% |
|
Other |
$ 283.6 billion |
2.56% |
|
Breakdown total |
$ 11,078.4 billion |
100.00% |
|
* Breakdown unknown |
$ 751.1 billion |
|
|
Foreign currency reserve totals |
$ 11,829.5 billion |
|
(Source: IMF
Author created from “Currency Composition of Official Foreign Exchange” )
However, foreign currency reserves held by central banks and monetary authorities around the world are not always at this rate.
In Figure 2, the euro's share is slightly less than 20 %, because in practice it is assumed that countries close to the euro area, such as Switzerland, have a significant share of the euro in foreign currency reserves.
In particular, Switzerland had a foreign exchange protection of "1 euro = 1.20 francs" from 2011 to 2015, but a considerable percentage of foreign exchange reserves, which are estimated to exceed $ 800 billion, It is assumed to be the euro.
Therefore, if foreign currency reserves, such as Switzerland, are subtracted from the euro, the US dollar's share of global reserves should rise to 65 % to 70 %.
South Korea is also a country that relies heavily on the US dollar, and it is hard to think naturally that it incorporates 20 % of the euro into its foreign exchange reserves.
However, in the following discussion, it is assumed that the US dollar-denominated assets in Korea's foreign currency reserves accounted for about 60% of the total, according to this IMF composition ratio.
