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Home > Education and Museum > The Capital Needs of Central Banks
 

The Capital Needs of Central Banks

​The book, edited by Sue Milton (CCBS) and Peter Sinclair (University of Birmingham and Bank of England), is based on the papers and discussions held at a CCBS conference on how much capital central banks need to fulfil their remits and retain their independence.

Central banks have evolved over many years and sometimes centuries as policy-making, not profit-making, institutions and yet they are structured legally and financially like 'for-profit' companies of the twenty-first century. The question is what an appropriate level of equity, or capital, is for a central bank to have so that it can function without hindrance to the achievement and maintenance of policy goals?

This collection takes the reader through historical, theoretical and factual discussions on why central banks exist and the role - actual and intended - they have in assisting their home nation in achieving monetary and financial stability. The contributions analyse the different ways central banks are funded and how funding arrangements may impact on their independence. The objectives is to explore these themes first from the academic and practitioners views - those of the economist, accountants and lawyers - and then to introduce practical experiences from a range of central banks facing different economic and socio-political environments. The reader will be able to access the full breadth of views on this important subject: it is the first time that the theorist and practitioner, the accountant, the economist and the lawyer come together in one volume.

The main observation is that there is no single, quantifiable formula that central banks can use to calculate capital levels. There is a wide range of factors to consider, e.g., the historical context; the cultural, social and political contexts; and, in terms of the presentation of financial statements, profit and loss sharing arrangements and what accounting conventions are being used. If these are considered alongside the, often idiosyncratic, mandates individual central banks have, a qualitative understanding of what is an appropriate level of capital is achieved.
The Capital Needs of Central Banks