Bank of Finland increases its foreign exchange reserves

The Bank of Finland’s statutory tasks include the holding and management of Finland’s foreign exchange reserves. Both the size and currency composition of the Bank’s holdings of foreign exchange reserves are based on the needs of national preparedness and on the obligations inherent in central banking tasks. Foreign exchange reserves have a key role when it comes to ensuring economic and financial preparedness for dealing with future uncertainties and preparing for crises that could weaken Finland’s external solvency.

The Bank of Finland Board regularly reviews the size and currency composition of the foreign exchange reserves. The Board has decided to increase the holdings of foreign exchange reserves by approximately EUR 2 billion to a total of about EUR 9 billion.* This will be achieved by purchasing mainly US dollars, but also pounds sterling and Japanese yen.  

Exchange rate risk is the most significant of the Bank of Finland’s financial asset risks. Increasing the size of its foreign exchange reserves elevates the Bank’s exchange rate risk considerably, and so the Bank is strengthening its foreign exchange rate provision by selling about 10% of its gold reserves. Following the execution of these sales, the Bank of Finland’s gold holdings now total approximately 44 tonnes, with a market value of about EUR 3.5 billion.

*) The Bank of Finland’s foreign exchange reserves comprise USD, GBP and JPY denominated fixed income investments and items denominated in IMF Special Drawing Rights (SDRs). The foreign exchange reserves are categorised as part of the Bank of Finland’s financial assets.