Central banks' risky investments could lead to financial instability, study finds.
Central banks have been using a new method since 2008 where they borrow money from commercial banks and invest it in risky assets. The study looked at how this affects the central banks' financial stability. They found that as long as central banks pay dividends equal to their income, they will not go bankrupt. In some cases, the government may even pay the central bank. If not managed properly, central banks' debts to commercial banks could grow during crises. Overall, the risks to financial stability are low in practice, even though they exist in theory.