Britain's Foreign Currency Reserves Below World Top 20

The Bank of England holds far less in foreign currency reserves than a number of smaller countries including Poland, Israel and Denmark.

Research conducted by Deutsche Bank shows that Britain is ranked 24<sup>th in the world and holds less than 1% of the world's reserves at $70bn (£42.1bn, €50.8bn.)

The People's Bank of China holds the greatest share of foreign exchange reserves, more than $3tn which is more than a third of the global total. Japan and Saudi Arabia are the next big players, with 10% and 6% of global reserves respectively.

Foreign exchange reserves (forex) are a key weapon that can be deployed by a central bank to defend the national currency. The theory goes that holding large reserves of stable foreign currencies allows banks to buy the national currency if there's any trouble.

However, this has not always worked in practice. Russia's recent experience with the rouble shows that foreign reserves cannot always halt a currency's devaluation.

The Russian central bank announced that is has spent $22.3bn and €2.3bn euros this year to buy Russian roubles in a bid to maintain its value. Despite the central bank's huge forex sell-off, the rouble has already plunged 7% this year and remains vulnerable.

Russian currency and stocks have been battered by the Ukraine crisis. Investors remain wary of a prolonged crisis over Ukraine, with the possibility of military conflict and deeper sanctions still a distinct possibility.

Meanwhile, George Osborne recently signalled that Britain may expand its forex reserves in the near future. The British pound has been robust throughout the global financial crisis, making life harder for Britain's exporters, who sell goods in sterling. The chancellor signalled in his latest budget that he would be willing to extend the UK's forex reserves and weaken sterling in a bid to boost the UK's exporters.