December 2, 2008

Archived - Minister of Finance Releases Report on Management of Canada's Foreign Reserves

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The Honourable Jim Flaherty, Minister of Finance, today released the Report on the Management of Canada's Official International Reserves for April 1, 2007 to March 31, 2008.

This annual report provides details on official international reserves operations, primarily related to the Exchange Fund Account (EFA), which is a portfolio of assets held under the Currency Act to provide foreign currency liquidity to the Government and to promote orderly conditions for the Canadian dollar in the foreign exchange markets, if required.

The report notes:

  • Financial market conditions in 2007–08 were marked by major disruptions to credit markets; however, the EFA was well positioned to cope with this turbulence, reflecting its prudent risk management policies and practices.
  • The market value of the official international reserves increased to US$43.1 billion as of March 31, 2008 from US$39.3 billion as of March 31, 2007.
  • In 2007–08, the assets held in the EFA portfolio generated a positive spread or return of 21 basis points over the cost of the liabilities used to fund the assets. The return was up 11 basis points from the previous year. However, the portfolio was not immune to the effects of the financial crisis and experienced unrealized losses in the market value of assets and liabilities; the net total return on a mark-to-market basis for the period was a loss of US$394 million.
  • An internal review of EFA credit risk policies was undertaken in 2007–08. Stand-alone credit ratings for commercial banks, which do not include the assumption of government support, are now used to assess the relative credit quality of EFA investments.
  • An external review conducted as part of the Government's Treasury Evaluation Program concluded that existing risk management policies are in line with leading practices and that the framework is effective in identifying, monitoring and mitigating risks.

The report can be viewed on the Department of Finance website at

For further information, media may contact:

Chisholm Pothier
Press Secretary
Office of the Minister of Finance

Jack Aubry
Media Relations
Department of Finance

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