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Central Bank Losses and Experiences in Selected Countries
Author:
Ms. Claudia H Dziobek
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Mr. John W. Dalton
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Series:
IMF Working Papers
Volume/Issue:
Volume 2005: Issue 072
Language:
English
Publication Date:
01 Apr 2005
DOI:
https://doi.org/10.5089/9781451860917.001
ISBN:
9781451860917
ISSN:
1018-5941
Pages:
13
Keywords:
WP; central bank; loss; bank; central bank loss; unrealized loss
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Under normal circumstances, a central bank should be able to operate at a profit with a core level of earnings derived from seigniorage. Losses have, however, arisen in several central banks from a range of activities including monetary operations under extreme conditions and financial sector restructuring. The paper discusses the impact of losses on central bank operations and lays out the principles and practices for handling central bank losses. It is suggested that losses should be disclosed as a reduction of the central bank's net worth unless covered by the government. Governments may cover losses through recapitalization of the central bank, and this will create a new central bank asset, usually in the form of government securities held by the central bank. Six case studies illustrate the circumstances under which losses may arise, their coverage, and central banks' disclosure practices.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund