HISTORIC PRESS RELEASE : UK official holdings of foreign currency and gold – May 98 [June 1998]

The press release issued by HM Treasury on 2 June 1998.

Part I: UK Government Reserves

The overall level of the UK Government’s spot reserves fell by $13 million in May, bringing the end-May total to $34,792 million (21,325 million pounds) compared with $34,805 million (20,809 million pounds) at the end of April.

The underlying change in the reserves was a fall of $1 million.

The underlying change excludes capital transactions that are included in the overall change. In May:

• there were repayments of $13 million of public-sector borrowing for which the Government has provided an exchange-rate guarantee under the Exchange Cover Scheme (ECS); and
• receipts of $1,064 million from Government ECU Treasury bills issued exceeded capital repayments of $1,063 million on those maturing by $1 million.

Part II: Bank of England Holdings of Foreign Currency and Gold

The level of the Bank of England’s spot holdings of foreign currency and gold was $4,957 million (3,038 million pounds) at end-May compared with $4,407 million (2,634 million pounds) at the end of April.

The change in the Bank’s holdings includes changes in foreign-currency and gold deposits placed with the Bank by overseas central banks and other customers and the change in valuation over the month.

The change also includes an increase of $755 million in the Bank’s spot holdings due to the net effect of foreign-exchange swaps conducted in the course of the Bank’s money-market operations. These foreign-exchange swaps are undertaken as a supplement to the Bank’s usual money-market techniques to provide sterling liquidity to the market. The operations are purely technical in nature and have no monetary-policy significance; they are likely to be used from time to time in the future, depending on market conditions.

Notes to Editors

1. Due to the two-day settlement lag in the foreign-exchange market, both the UK Government figures and the Bank of England figures include transactions conducted in the last two working days of March exclude transactions conducted in the last two days of April.

2. The Quarterly Report on UK Official Holdings of Foreign Currency and Gold, to be published on 2 June 1998 and covering the quarter ending 31 March 1998, will contain further information about the foreign-currency and gold holdings of the Government and the Bank of England. This will include, for each, the size of the forward foreign-exchange position, the currency composition of foreign-currency assets, the size and currency composition of foreign-currency liabilities and information on intervention operations, if undertaken.

3. The Government and Bank of England figures have been produced on the basis of different accounting authorities. Therefore, no overall total for the two is shown. Details of the accounting methodologies were included in the Quarterly Report published on 3 March 1998 (covering October-December 1997) and will be included in future Quarterly Reports.

4. The underlying change in the Government’s reserves is the result of a variety of transactions, both debits and credits, including, for example, transactions for Government departments, transactions with other central banks and interest receipts and payments. For these reasons, the underlying change should not be taken as an indication of market intervention.

5. Repayments under the Exchange Cover Scheme in May were as follows:

6. Capital repayments on the ECU Treasury Bills relate solely to the repayment of the original amounts which were received when the maturing Bills were issued. The difference between the full redemption payments on the maturing Bills and this capital repayments figure (the “discount” on the Bills) is regarded for this purpose as an interest payment rather than a capital repayment, and therefore does not form part of the capital transactions which are excluded when calculating the underlying change in the reserves.

7. The figures contained in this press release can also be obtained from the Reuters Monitor (page TREA), Bridge News (page 170), Telerate (p22494) and Topic (p6800).