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Non-standard Monetary Policy Measures and the Balance Sheets of Eurosystem Central Banks

Author

Listed:
  • Donnery, Sharon

    (Central Bank of Ireland)

  • Doran, David

    (Central Bank of Ireland)

  • Gleeson, Ruth

    (Central Bank of Ireland)

  • Carroll, Konstantina

    (Central Bank of Ireland)

Abstract

The ECB’s on-going non-standard monetary policy measures have led to changes in the composition and size of euro area national central banks’ (NCBs) balance sheets. These changes have increased and broadened the financial risk exposures of central banks, and led to a substantial increase in potential interest rate mismatch risk. Nonetheless, the Treaty mandates the Eurosystem to implement monetary policy measures to achieve price stability, even if it results in losses for the Eurosystem or individual NCBs. This article examines the changes to central bank balance sheets and risks as a result of these non-standard measures. Given that the ability of central banks to generate income is a central aspect of independence, interest rate risk and the associated implications for central bank income are discussed, along with steps to mitigate some of these risks.

Suggested Citation

  • Donnery, Sharon & Doran, David & Gleeson, Ruth & Carroll, Konstantina, 2017. "Non-standard Monetary Policy Measures and the Balance Sheets of Eurosystem Central Banks," Quarterly Bulletin Articles, Central Bank of Ireland, pages 79-94, July.
    • Handle: RePEc:cbi:qtbart:y:2017:m:07:p:79-94
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    References listed on IDEAS

    as
    1. christiaan Pattipeilohy, 2016. "A comparative analysis of developments in central bank balance sheet composition," BIS Working Papers 559, Bank for International Settlements.
    2. Vergote, Olivier & Studener, Werner & Efthymiadis, Ioannis & Merriman, Niall, 2010. "Main drivers of the ECB financial accounts and ECB financial strength over the first 11 years," Occasional Paper Series 111, European Central Bank.
    3. Christensen, Jens H.E. & Lopez, Jose A. & Rudebusch, Glenn D., 2015. "A probability-based stress test of Federal Reserve assets and income," Journal of Monetary Economics, Elsevier, vol. 73(C), pages 26-43.
    4. Vergote, Olivier & Studener, Werner & Efthymiadis, Ioannis & Merriman, Niall, 2010. "Main drivers of the ECB financial accounts and ECB financial strength over the first 11 years," Occasional Paper Series 111, European Central Bank.
    5. Christiaan Pattipeilohy, 2016. "A comparative analysis of developments in central bank balance sheet composition," DNB Working Papers 510, Netherlands Central Bank, Research Department.
    6. Philip Turner, 2014. "The exit from non-conventional monetary policy: what challenges?," BIS Working Papers 448, Bank for International Settlements.
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    Cited by:

    1. Stephen Wright & Charmaine Portelli, 2018. "The True Size of the ECB: New Insights from National Central Bank Balance Sheets," Birkbeck Working Papers in Economics and Finance 1807, Birkbeck, Department of Economics, Mathematics & Statistics.
    2. Dirk Broeders & Paul Wessels, 2022. "On the capitalisation of central banks," Occasional Studies 2004, DNB.

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