Non-standard Monetary Policy Measures and the Balance Sheets of Eurosystem Central Banks

Sharon Donnery, David Doran, Ruth Gleeson and Konstantina Carroll
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Sharon Donnery: Central Bank of Ireland
David Doran: Central Bank of Ireland
Ruth Gleeson: Central Bank of Ireland
Konstantina Carroll: Central Bank of Ireland

Quarterly Bulletin Articles, 2017, 79-94

Abstract: The ECB’s on-going non-standard monetary policy measures have led 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. This article examines the changes to central bank balance sheets and risks as a result of these non-standard measures. Given that the ability of central banks to generate income is a central aspect of independence, interest rate risk and the associated implications for central bank income are discussed, along with steps to mitigate some of these risks.

Date: 2017-07
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Persistent link: https://EconPapers.repec.org/RePEc:cbi:qtbart:y:2017:m:07:p:79-94

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