ECCB
ANNUAL REPORT 2014/2015
83
EASTERN CARIBBEAN CENTRAL BANK
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, 2015, the foreign securities portfolio included Australian securities of
$31.6M, Canadian securities of $8.7M and Euro securities of $33.1M. As of March 31, 2014, the
foreign securities portfolio included Australian securities of $70.6M. 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 consolidated statement of income 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, 2015, if exchange
rates were to move by 5 per cent, profit for the year would have been $0.1M (2014: $0.2M) lower
or higher and the net on-balance sheet financial position would have been $3.7M (2014: $3.4M)
lower or higher.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in Eastern Caribbean dollars)
March 31, 2015
