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Central bank profit distribution and recapitalisation

Author

Listed:
  • Long, Jamie

    (Bank of England)

  • Fisher, Paul

    (Senior Research Fellow, King’s Business School, King’s College London, Data Analytics for Finance and Macro Research Centre)

Abstract

Central banks retain a portion of their net profits as reserves and distribute the remainder to their finance ministry, typically in the form of a dividend. Few central banks have a reciprocal arrangement in place for covering financial losses with a transfer of capital. This paper reports the findings of a survey of central bank profit distribution and recapitalisation arrangements across 70 jurisdictions and examines the range of features present, such as revaluation accounts and requirements for capital injections. The findings help establish the importance of a robust framework for managing central bank profit distribution and recapitalisation. The presence of such a framework should allow central banks to retain more of profits and access external resources when capital is low, and to function as an income generating asset for the government when capital is high, therefore ensuring both an appropriate use of public funds and the presence of a credible and financially independent central bank that stands ready to act when needed.

Suggested Citation

  • Long, Jamie & Fisher, Paul, 2024. "Central bank profit distribution and recapitalisation," Bank of England working papers 1069, Bank of England.
    • Handle: RePEc:boe:boeewp:1069
    as

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    File URL: https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2024/central-bank-profit-distribution-and-recapitalisation.pdf
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    References listed on IDEAS

    as
    1. Sujan Bandyopadhyay & Rishab Devnani & Sudipta Ghosh & Amartya Lahiri, 2021. "Central bank equity: facts and analytics," Indian Economic Review, Springer, vol. 56(1), pages 255-279, June.
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      More about this item

      Keywords

      Central bank balance sheet; central bank profit distribution; central bank recapitalisation; monetary policy; financial stability;
      All these keywords.

      JEL classification:

      • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
      • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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