It also notes that there is a general approach of using tranching when constructing reserve portfolios. The SAA framework determines tranche sizes where relevant. Most central banks invest in cash, cash equivalents and fixed income instruments, with the US dollar and the euro being common currencies in all portfolios.
Challenges facing reserves managers With that contextual backdrop, and before moving on to discuss some of the challenges faced by reserves managers, it is worth reflecting on one of the consequences of the global financial crisis that we are still grappling with today. This is the deterioration in the credit quality of the reserve currencies.