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NOTES TO THE FINANCIAL STATEMENTS
(expressed in Eastern Caribbean dollars)
March 31, 2017
Eastern Caribbean Central Bank
Notes to the Financial Statements
March 31, 2017
(expressed in Eastern Caribbean dollars)
3. Financial risk management
…
continued
d) Currency risk
The Bank takes on exposure to fluctuations in the prevailing foreign currency exchange rates on
its financial position and cash flows. Management seeks to manage this risk by setting limits on
the level of exposure by currency, which are monitored daily.
Available-for-sale
–
foreign investment securities
The Bank’s investment guidelines require that all non
-US dollar securities be hedged back to the
US dollar. As of March 31, 2017, the foreign securities portfolio included Euro securities of
$47.9M, Canadian securities of $23.1M and Australian securities of $16.9M. As of March 31,
2016, the foreign securities portfolio included Australian securities of $32.1M, and Euro securities
of $30.3M. The investment managers have entered into forward contracts to sell the non-USD
positions forward on a periodic rolling basis. All gains and losses arising from currency
revaluation of these assets and the forward contracts are reported in the statement of profit or loss
as they occur.
Regional and foreign currencies
The Bank facilitates the repatriation of foreign currency notes collected by member banks during
their normal course of operations. The notes are purchased from the commercial banks and
shipped to Bank of America on a monthly basis. To manage the foreign currency risk of holding
these notes, the Bank forward sells these notes on the same day of purchase for value on the date
that the counterparty receives them.
The Bank’s exposure to foreign exchange risk is limited to the minimum balances held on non
-
USD demand accounts and investment in non-USD foreign securities. As at March 31, 2017, if
exchange rates were to move by 5 per cent, profit for the year would have been $0.01M (2016:
$0.1M) lower or higher and the net on-balance sheet financial position would have been $4.4M
(2016: $3.1M) lower or higher.
108
ECCB ANNUAL REPORT 2016/2017
EASTERN CARIBBEAN CENTRAL BANK