This article looks at the impact that recent monetary policy measures has had on central banks’ own balance sheets and how this has led to an increase in financial risk exposures for central banks, particularly the risk of an interest rate mismatch. The Central Bank of Ireland performed an analysis of the financial risk exposures on its own balance sheet and set aside a provision in its 2016 Annual Accounts to mitigate against these risks.
The ECB's on-going non-standard monetary policy measures have let 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.
Read the full signed article: Non-standard Monetary Policy Measures and the Balance Sheets of Eurosystem Central Banks.
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