Central Bank Losses and Experiences in Selected Countries

14 Pages Posted: 3 Mar 2006

See all articles by John Dalton

John Dalton

affiliation not provided to SSRN

Claudia Dziobek

International Monetary Fund (IMF)

Date Written: April 2005

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.

Keywords: central bank balance sheet, central bank losses

JEL Classification: E58, F34, G15

Suggested Citation

Dalton, John and Dziobek, Claudia Helene, Central Bank Losses and Experiences in Selected Countries (April 2005). IMF Working Paper, Vol. , pp. 1-14, 2005. Available at SSRN: https://ssrn.com/abstract=888118

John Dalton (Contact Author)

affiliation not provided to SSRN

Claudia Helene Dziobek

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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