## Central Bank Losses and Experiences in Selected Countries

_IMF Working Papers, April 1, 2005_

## Source details

**Canonical URL:** [Central Bank Losses and Experiences in Selected Countries](https://www.imf.org/en/publications/wp/issues/2016/12/31/central-bank-losses-and-experiences-in-selected-countries-18139)

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## Bibliographic details
- Authors: Claudia H Dziobek, John W. Dalton
- Published: April 1, 2005
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451860917.001

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### Summary
- 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 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.

### Key findings and implications
- Causes of central bank losses:
  - Monetary operations under extreme conditions.
  - Financial sector restructuring.
- Operational and financial implications:
  - Losses affect central bank operations and net worth.
  - Disclosure practice recommended: record losses as a reduction of the central bank's net worth unless government covers them.
- Government coverage:
  - Governments may recapitalize central banks to cover losses.
  - Recapitalization generates a new central bank asset, typically government securities held by the central bank.

### Case studies and empirical content
- Six case studies are presented to illustrate:
  - Circumstances under which losses may arise.
  - How losses have been covered in practice.
  - Central banks' disclosure practices regarding losses.

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/central-bank-losses-and-experiences-in-selected-countries-18139_