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Reserve Management at Danmarks Nationalbank: Combining Liquidity Tiers with an Adaptive Risk Budget

In: Asset Management at Central Banks and Monetary Authorities

Author

Listed:
  • Morten Kjærgaard

    (Danmarks Nationalbank)

  • Rasmus Vahle

    (Danmarks Nationalbank)

  • Jacob Wellendorph Ejsing

    (Danmarks Nationalbank)

Abstract

Over the recent years, Danmarks Nationalbank has transformed its approach to reserve management. The new framework is organized around two main pillars—a tiered liquidity management framework and an overall risk budget. Together they provide a framework for handling large balance sheet fluctuations—a consequence of the fixed exchange-rate policy—while aligning long-term exposure to investment risk with the primary policy objectives. The anchoring of the risk budget to a “policy portfolio” clarifies the risk and return implications of the bank’s multiple objectives and highlights the rationale for diversification.

Suggested Citation

  • Morten Kjærgaard & Rasmus Vahle & Jacob Wellendorph Ejsing, 2020. "Reserve Management at Danmarks Nationalbank: Combining Liquidity Tiers with an Adaptive Risk Budget," Springer Books, in: Jacob Bjorheim (ed.), Asset Management at Central Banks and Monetary Authorities, edition 1, chapter 0, pages 211-224, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-43457-1_13
    DOI: 10.1007/978-3-030-43457-1_13
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