Quantitative limits are usually set as a percent of capital. Most countries set the limits in terms of a measure
of overall capital. A few establish the limit in terms of tier I capital. One country set its limits in terms of banks’
working capital (Appendix Table 7). Most countries impose symmetric limits for long and short positions, but a
few have markedly different limits for short and long positions.
2
The limits on the overall positions as a percent
of capital ranged from 1 to 150 percent, with a large number of countries setting the limit at 20 percent of
capital. Similarly, limits on short positions as percent of capital ranged from 5 to 100 percent, with several
countries setting the limit at 10 percent of capital. A few respondents set the limits as a nominal figure.
Most quantitative limits apply either continuously or for overnight positions. In over half of the
respondents that imposed quantitative limits, the limits applied on overnight positions, with banks being able to
exceed the limits during the day. In about a third of the countries imposing quantitative limits, the limits apply
continuously, with banks in principle not being able to exceed the limits during the day. In a few countries, the
limits are not as tight, as they only apply to the positions at the end of the week or month.
The frequency of verification of compliance with the limits varied widely. The most popular response was
that compliance was verified monthly. Ten countries verified compliance every day, twenty other verified
randomly, and other ten verified compliance during normal onsite examinations, several of which took place
annually (Canales-Kriljenko, 2003).
_______________________________
1
See Abrams and Beato (1998).
2
A few countries used the limits as a policy tool, tightening them when facing exchange rate pressures and
relaxing them when those pressures were not present.
3
Most countries include all on-balance sheet foreign currency-denominated assets and liabilities in the positions
subject to limits. About 60 percent of respondents to the particular question also included off-balance sheet
positions. A few countries also included assets indexed to a foreign currency.
20
Most survey respondents indicated that the supervisory authority imposed the limits. A few
countries indicated that the limits were set directly by bank management, but the supervisory
authority did monitor the foreign exchange positions.
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