Central Bank Losses and Experiences in Selected Countries

 
Author/Editor: Dalton, John W. ; Dziobek, Claudia Helene
 
Publication Date: April 01, 2005
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
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, 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.
 
Series: Working Paper No. 05/72
Subject(s): Central banks | Brazil | Chile | Czech Republic | Hungary | Korea, Republic of | Thailand | Currency issuance

Author's Keyword(s): Central bank balance sheet | central bank losses
 
English
Publication Date: April 01, 2005
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA2005072 Pages: 13
Price:
US$15.00 (Academic Rate:
US$15.00 )
 
 
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