While central bank investment tranches are Low banking sector exposure is accompanied in some ways comparable to sovereign portfolios, by lesser build-up in the levels of reserves and they are differentiated by the former's broader a growing appetite for risk assets market functions In this year’s report, we have expanded our central While there are similarities in the approach taken to bank sample and segmented the central bank investment tranches (in terms of risk asset allocation universe into developed and emerging markets to and development of internal capability), central banks understand differences in strategy and pace of change have a broader set of functions, including local market with respect to investment tranches. Within developed money supply, the role of lender of last resort and market central banks, we further segmented them currency exchange rate regime management. These _ into two categories: those with high exposure to factors have considerable influence over investment financial markets (DM High FME) and those with strategy and capacity, and differentiate central banks low exposure (DM Low FME?). We summarise these from sovereign investors. classifications in figure 27. In last year’s report, we focused on emerging While there are various means of calculating market (EM) central banks due to their increasing reserves adequacy (with import coverage and short- use of investment tranches (reserves sub-portfolios term debt coverage most frequently cited in figure which prioritise investment return over liquidity), 28), all measures link level of reserves to potential which have similar allocations to sovereign investor drawdown of funds. Following the Global Financial portfolios. We noted that many of the respondent Crisis of 2008, DM High FME central banks increased banks were moving up the risk spectrum in response estimates of the likelinood and size of potential to achieving capital preservation in the face of low drawdowns, increasing the leve