Quarterly information on the CNB’s international reserves as of the end of 2021

The Czech National Bank has published information on the actively managed part of the international reserves portfolio as of the end of 2021 Q4. The euro value of the portfolio rose by around 8% in 2021, as a result of a positive return and purchases of foreign currency from clients.

The foreign currency return on the international reserves last year was 2.11%, while the koruna return was negative at -0.29% due to appreciation of the domestic currency.

The liquidity tranche of the international reserves, which is the part of the reserves earmarked for immediate use, recorded a negative return of -0.36%, as it comprises short-term euro investments bearing negative interest.

The investment tranche, which is the part of the reserves geared towards generating returns over the medium and long term, recorded a positive return of 3.4%. This was due mainly to the equity portfolio, while the bond portfolio – with the exception of its Chinese segment – recorded a negative result owing to rising yields.

The structure of the international reserves is still undergoing a process of transformation aimed at achieving greater diversification and a focus on longer-term returns. In 2021, this process involved an increase of about 5 percentage points in the investment tranche, which contains all return-oriented asset classes, at the expense of the liquidity tranche. As the share of the equity portfolio was set at 20% of the investment tranche, the intended result was to increase the share of the equity portfolio in the total international reserves to 16%. A total of EUR 23 billion was invested in equities at the end of 2021. The share of the equity portfolio in the total international reserves rose by 2.5 percentage points compared with the end of 2020 and by a full 6 percentage points compared with the end of 2019.

The portfolio of Chinese government bonds supplemented by policy bank bonds continued to expand, reaching 1.2% of the total international reserves. A gradual increase in the average maturity of the bond component of the international reserves and a rise in the share of the US dollar are important developments as regards risk and return.