IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2005-072.html
   My bibliography  Save this paper

Central Bank Losses and Experiences in Selected Countries

Author

Listed:
  • Ms. Claudia H Dziobek
  • Mr. John W. Dalton

Abstract

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.

Suggested Citation

  • Ms. Claudia H Dziobek & Mr. John W. Dalton, 2005. "Central Bank Losses and Experiences in Selected Countries," IMF Working Papers 2005/072, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2005/072
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=18139
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mr. Alfredo Mario Leone, 1993. "Institutional and Operational Aspects of Central Bank Losses," IMF Policy Discussion Papers 1993/014, International Monetary Fund.
    2. Mr. Peter Stella, 1997. "Do Central Banks Need Capital?," IMF Working Papers 1997/083, International Monetary Fund.
    3. Mr. Charles Enoch, 1998. "Transparency in Central Bank Operations in the Foreign Exchange Market," IMF Policy Discussion Papers 1998/002, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sweidan, Osama D. & Widner, Benjamin, 2008. "Transparency and central bank losses in developing countries," Research in Economics, Elsevier, vol. 62(1), pages 45-54, March.
    2. Beckerman,Paul E., 2000. "How small should an economy's fiscal deficit be? - a monetary programming approach," Policy Research Working Paper Series 2308, The World Bank.
    3. Michele Cavallo & Marco Del Negro & W. Scott Frame & Jamie Grasing & Benjamin A. Malin & Carlo Rosa, 2019. "Fiscal Implications of the Federal Reserve's Balance Sheet Normalization," International Journal of Central Banking, International Journal of Central Banking, vol. 15(5), pages 255-306, December.
    4. Osama Sweidan, 2008. "The Asymmetric Loss Function and the Central Banks' Ability in Developing Countries," Global Economic Review, Taylor & Francis Journals, vol. 37(3), pages 387-403.
    5. Stephen Quinn & William Roberds, 2016. "Death of a Reserve Currency," International Journal of Central Banking, International Journal of Central Banking, vol. 12(4), pages 63-103, December.
    6. Wilko Bolt & Jon Frost & Hyun Song Shin & Peter Wierts, 2024. "The Bank of Amsterdam and the Limits of Fiat Money," Journal of Political Economy, University of Chicago Press, vol. 132(12), pages 3919-3941.
    7. Nyborg, Kjell G., 2017. "Central bank collateral frameworks," Journal of Banking & Finance, Elsevier, vol. 76(C), pages 198-214.
    8. Hileman, Garrick, 2012. "The seven mechanisms for achieving sovereign debt sustainability," Economic History Working Papers 42878, London School of Economics and Political Science, Department of Economic History.
    9. Philippe Muller & Mark Zelmer, 1999. "Greater Transparency in Monetary Policy: Impact on Financial Markets," Technical Reports 86, Bank of Canada.
    10. Beine, Michel & Bernal, Oscar, 2007. "Why do central banks intervene secretly?: Preliminary evidence from the BoJ," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 17(3), pages 291-306, July.
    11. Mr. Alain Ize, 2006. "Spending Seigniorage: Do Central Banks Have a Governance Problem?," IMF Working Papers 2006/058, International Monetary Fund.
    12. Nyborg, Kjell G., 2017. "Reprint of: Central bank collateral frameworks," Journal of Banking & Finance, Elsevier, vol. 83(C), pages 232-248.
    13. Martin Mandel & Vladimír Zelenka, 2009. "Ztráta centrální banky - účetní a ekonomický pohled na příkladě České národní banky [Central bank Losses. An Economic and Accounting Perspective Using the Example of the Czech National Bank]," Politická ekonomie, Prague University of Economics and Business, vol. 2009(6), pages 723-739.
    14. Dietrich Domanski & Richhild Moessner & William R. Nelson, 2014. "Central banks as lender of last resort: experiences during the 2007-2010 crisis and lessons for the future," Finance and Economics Discussion Series 2014-110, Board of Governors of the Federal Reserve System (U.S.).
    15. Andrew Filardo & Stephen Grenville, 2012. "Central bank balance sheets and foreign exchange rate regimes: understanding the nexus in Asia," BIS Papers chapters, in: Bank for International Settlements (ed.), Are central bank balance sheets in Asia too large?, volume 66, pages 76-110, Bank for International Settlements.
    16. Sascha Buetzer, 2022. "Advancing the Monetary Policy Toolkit through Outright Transfers," IMF Working Papers 2022/087, International Monetary Fund.
    17. José Miguel Cardoso da Costa, 2022. "On the solvency and credibility of a central bank," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    18. Jorge E. Restrepo L. & Luis Salomó S. & Rodrigo O. Valdés P., 2009. "Macroeconomy, Monetary Policy and Central Bank Capitalization," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 12(1), pages 5-38, April.
    19. Martin Cincibuch & Tomáš Holub & Jaromír Hurník, 2009. "Central Bank Losses and Economic Convergence," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(3), pages 190-215, August.
    20. Andreas Hoffmann & Axel Loeffler, 2017. "Surplus liquidity, central bank losses and the use of reserve requirements in emerging markets," Review of International Economics, Wiley Blackwell, vol. 25(5), pages 990-998, November.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:2005/072. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.