Financial asset management
The Central Bank of Malta owns and manages its financial assets which consist of portfolios that vary in terms of asset classes and currency composition.* Financial assets are held in both euro and foreign currency. According to Article 127(2) of the Treaty on the Functioning of the European Union, the Bank's reserves, along with those of the other national central banks and the official reserves of the European Central Bank, form part of the reserves held by the Eurosystem. The Bank has a pooling arrangement with the Central Bank of Ireland to manage a share of foreign reserves on behalf of the European Central Bank.
The Board of Directors is responsible for approving the Bank's overall strategic asset allocation proposed by the Bank's Investment Policy Committee. The Investment Policy Committee is also entrusted with monitoring the performance of the non-monetary policy portfolios and making tactical adjustments. Prior to the adoption of the euro, the primary purpose of the reserves was to safeguard the value of the domestic currency and to support the exchange rate peg. Following the Bank's membership in the Eurosystem, when managing its financial assets, the Bank aims to maintain an adequate level of liquidity, preserve capital and maximise return in line with the risk parameters approved by the Board of Directors. As from 2023, sustainability became a fourth investment objective as the Bank has in recent years been increasingly adopting sustainable and responsible investment strategies in its non-monetary policy portfolios, also in line with the Eurosystem's commitments in this regard.**
*These are distinct from the monetary policy portfolios used for the Eurosystem's monetary policy transmission.
**Eurosystem agrees on common stance for climate change-related sustainable investments in non-monetary policy portfolios.