ECCB 2014-2015 Annual Report and Statement of Accounts

EASTERN CARIBBEAN CENTRAL BANK

Real GDP in the ECCU is projected to expand by 2.4 per cent in 2015 and 2.5 per cent in 2016. It is anticipated that the resolution and consolidation of the banking system and a deepening of the single financial space will facilitate improvements in both the transmission of monetary policy and the efficient utilisation of foreign inflows to the ECCU. R eserve M anagement The performance of the Bank’s foreign reserve assets is dependent on the performance of the US economy and the US Treasury market. The ECCB foreign reserve portfolio remained benchmarked against US Treasuries. The year was characterised by continued improvement in the US economy especially in the labour and manufacturing sectors. A dramatic decline in the price of crude oil spurred a significant decline in prices and inflation expectations. Shorter-dated US Treasury yields rose and prices fell as market participants factored in the sustained improvement in the US economy amid the end of the US Federal Reserve’s Quantitative Easing (QE) programme. However, longer-dated US Treasury yields fell and prices rose, given the benign inflation outlook. The ECCB continued to satisfy its reserve management objectives of preservation of capital and meeting liquidity needs. The duration of the ECCB’s The ECCB continued to satisfy its reserve management objectives of preservation of capital and meeting liquidity needs ] [

customised benchmark was rebalanced to two (2) years, ensuring that the risk tolerance of the Bank was preserved. A review of the performance of the Bank’s global custodian was completed to determine if the institution continued to meet the required standards in terms of the asset custody function. The performance of the custodian was deemed satisfactory and the Bank decided to retain its services for a further three years. For the fourth consecutive year, the Bank transferred funds from the lower yielding liquidity tranche to the higher yielding core tranche of the foreign reserves portfolio, as the total foreign reserves liquidity tranche maintained above-trend balances. C urrency M anagement During the period under review, the Currency Management Department focused on its main objectives which included: •  • Maintaining the integrity of the EC dollar by ensuring the availability of an adequate supply of high quality notes and coins; •  • Repatriating foreign currency notes in a timely manner; and •  • Facilitating the redemption and issue of EC notes and coins to commercial banks. As at 31 March 2015, the value of currency in circulation was EC$880.17 million. Banknotes accounted for $787.96 million or 89.53 per cent, while coins in circulation amounted to $92.21 million or 10.47 per cent. The aggregate currency in circulation at the end of the financial year reflected an increase of EC$53.03 million (6.41 per cent) over the total in the

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ECCB ANNUAL REPORT 2014/2015