Use of SDRs in the Acquisition of Hybrid Capital Instruments of the Prescribed Holders

May 15, 2024

Preview Citation

Format: Chicago

Use of SDRs in the Acquisition of Hybrid Capital Instruments of the Prescribed Holders, (USA: International Monetary Fund, 2024) accessed December 21, 2024

Summary

On May 10, 2024, the IMF’s Executive Board approved the use of Special Drawing Rights (SDRs) for the acquisition of hybrid capital instruments issued by prescribed holders. This new use of SDRs, which adds to seven already authorized prescribed SDR operations, is subject to a cumulative limit of SDR 15 billion to minimize liquidity risks. The Executive Board also established a strong expectation that contributors channeling SDRs to prescribed holders under such capital contributions have Voluntary Trading Arrangements (VTAs) in place to ensure sufficient liquidity and equitable distribution of potential SDR exchanges into currencies. A review of the proposed use is expected to be conducted when cumulative hybrid capital contributions surpass SDR 10 billion or two years after the authorization, whichever comes first.

Subject: Central Banks, Currencies, Financial institutions, Financial regulation and supervision, International monetary system, Liquidity risk, Loans, Monetary policy, Money, Political economy, Reserve assets

Keywords: Capital instrument, Currencies, Global, Hybrid Capital Instrument, IMF members channeling SDR, International monetary system, Liquidity risk, Loans, Prescribed Holders, Prescribed SDR operation, Reserve Asset, Reserve assets, SDR channeling, Special Drawing Right, Transparency policy, Use of SDR, Voluntary Trading Arrangement

Publication Details

Pages:

31
Volume:

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DOI:

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Issue:

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Series:

Policy Paper No. 2024/026
Stock No:

PPEA2024026
ISBN:

9798400275876
ISSN:

2663-3493

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