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By Bank for International Settlements.

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For the purpose of providing an investment return on System holdings of foreign currencies or for the purpose of adjusting interest rates paid or received in connection with swap drawings, transactions with foreign central banks may be undertaken at non-market exchange rates. 4. It shall be the normal practice to arrange with foreign central banks for the coordination of foreign currency transactions. In making operating arrangements with foreign central banks on System holdings of foreign currencies, the Federal Reserve Bank of New York shall not commit itself to maintain any specific balance, unless authorized by the Federal Open Market Committee.

Even so, it is quite common for central bank laws to obscure who has the power over exchange rate policy. At the operational level, governance arrangements for interventions are also more opaque than for monetary policy. This is notable, since interventions are often carried out in secret, and might thus need tighter governance arrangements than otherwise. Well-considered procedures are also necessary to make the best use of public funds once the decision to intervene has been taken in principle.

In Chile, the central bank announced on 16 August 2001 that spot market interventions up to a maximum of USD 2 billion could occur until 31 December, and a similar announcement was made on 10 October 2002 for the period up to 10 February 2003 (Tapia and Tokman (2004)). Pre-announcement. In some countries (for example, Colombia, Mexico, Chile and Brazil) interventions are conducted by way of auctions. In such cases, auction parameters are announced in advance. Another interesting aspect is information flows from markets to the central bank.

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