Dear Delegate,

The last 12 months have seen central bank balance sheets used in force to help shore up financial markets in the wake of the credit crisis.

The consequences will soon be felt.

Central banks will, for example, have to account for new risks to their balance sheets resulting from the expanded forms of collateral accepted in money-market operations. And sharp adjustments in exchange rates mean that many central banks could face substantial losses resulting from revaluation of foreign exchange reserves.

Today, all central banks recognise the need to develop a framework for accountability and transparency consistent with their financial and operational independence.

This includes mastering new techniques of risk measurement and management and the adoption of a credible financial reporting standard.

But is there, in fact, a conflict of interest between demands for transparency and when a central bank needs to act discreetly in a crisis – or to prevent one?

More broadly, experts continue to debate whether standards for financial reporting, governance and internal controls developed for commercial entities are applicable in central banks. Can these standards be applied to reflect the unique risks and responsibilities associated with their role as national monetary authorities? How should profit be recognised and how can distribution arrangements be strengthened?

This course is designed to equip delegates in charge of the financial reporting function to tackle these challenges.

The roundtable format encourages the international group of delegates to learn from each other, and from the unrivalled expertise of an elite panel of speakers, including: Friedrich Karrer from the Oesterreichische Nationalbank, Olivier Morelle from the European Central Bank, Sheila Vokey from the Bank of Canada, and Chris Sermon and Andrew Hawkins from PricewaterhouseCoopers.

We are delighted to welcome Kenneth Sullivan, a former CFO of the Reserve Bank of New Zealand and a leading authority on financial reporting for central banks, as chairman again.

This is the tenth year in which Central Banking Publications Ltd has hosted seminars at Cambridge. Already, more than 1,500 central bankers and supervisors from over 110 countries have benefited from attending. I look forward to welcoming you to Cambridge.

Yours sincerely,

Robert Pringle
Managing Director, Central Banking Publications Ltd

Key issue in financial reporting
Led by the chairman Kenneth Sullivan

Financial reporting frameworks and dividend policy in currency volatility
Led by the chairman, Kenneth Sullivan

A critical issue for central banks seeking to maintain an appropriate level of capital is dividend policy. However this is an extremely controversial issue, affecting relations with the government. One of the key questions today is how a central bank should account appropriately for currency volatility. This session explores the concept of distributable earnings and a capital maintenance model. The chairman will review the conceptual issues and put forward practical implications and solutions.

Evolving disclosures: the challenges of IFRS 7 and amendments to IAS 1 (SRIE)
Chris Sermon
Senior Manager, Banking and Capital Markets, PricewaterhouseCoopers

Developments in IFRS present new challenges for central banks. Transparency requirements in IFRS 7 potentially require disclosures that could conflict with systemic stability issues. How should a central bank manage the disclosures of the currency risk associated with their reserves portfolios? Amendments to IAS 1 are bringing additional disclosure requirements regarding capital frameworks and a new framework for reporting comprehensive income. The speaker will discuss best practice in these areas based on experience with central banks from around the world.

Benchmarking and reporting functional performance
Frederik Leufstadius
Controller, Sveriges Riksbank

Central bank management has to have access to accurate and comprehensive information about operational and financial performance to ensure that the institution is run efficiently and effectively. Additionally, external stakeholders increasingly demand such performance information, in particular about the costs of functions carried out. Since central banks often lack private-sector counterparts and face unique financial challenges, benchmarking and comparison are key tools. The speaker will outline recent developments in the provision of management information at his central bank.

How to write management commentary
Robin Darbyshire
Former Financial Accountant, Bank of England (invited)

Management commentary – information outside the financial statements designed to help outsiders understand an organisation’s business – is a key means for central banks to help account for their actions. The International Accounting Standards Board is currently considering a framework which would require commercial firms to produce such commentaries. For central banks these additional disclosures may be particularly appropriate: allowing the explanation of the unique features of the central bank’s role and balance-sheet structure. However, no template exists for what a central bank’s management commentary should include. This session explores how central banks can use management commentary to supplement their financial disclosures.

Risk management and finance
Andrew Hawkins
Partner, PricewaterhouseCoopers

The ongoing revolution in central bank risk management practice creates a series of challenges for financial officers in central banks. On the one hand they must agree a sensible delineation of responsibilities with their risk management teams, particularly as regards valuation methodologies, controls and compliance. On the other they face the challenge of reporting transparently information about risk exposures arising from increasingly complex balance sheets. On top of this there is the new challenge of trying to measure and report non-financial risks. This session looks at some of these important fault lines, drawing on the speaker’s work with leading central banks.

Managing and reporting operational risk
Sheila Vokey
Chief Financial Services and Chief Accountant, Bank of Canada

Central banks’ operational risk management is highly complex given their diverse roles and functions. The ability to report on its effective management is a key element in the bank’s accountability framework. This session examines what is now regarded as best practice for central bank operational risk management and its reporting.

Financial strength, capital maintenance and profitability
Friedrich Karrer
Director, Division Financial Statements, Oesterreichische Nationalbank

While central banks are facing reduced earnings on both domestic and foreign portfolios, ministers of finance still expect dividends. As financial buffers are used to cover losses and where interest income is low, central banks may find they have limited ability to create risk provisions. And while central banks can and do function with negative net worth, this can undermine financial independence and threaten monetary policy goals. This session explores how central banks can best create and maintain adequate financial buffers in their balance sheets.

Profits, capital and risks
Workshop led by the chairman, Kenneth Sullivan

The day concludes with a workshop drawing together the key themes from earlier sessions. Discussion will focus on how the issues discussed can be formulated into policies, practices or controls for delegates’ institutions.

Implementing sound IT systems for financial reporting
Olivier Morelle
Senior Expert, European Central Bank

One of the most challenging areas for central bank finance departments is the choice and implementation of IT systems for accounting. Accounting for the complex balance sheets of central banks is impossible without specialised software. However, the operational risks associated with such complex IT projects are high. One solution is for central banks to cooperate with vendors and each other to develop a central-bank-specific accounting system. This option holds out the hope of lower costs, and a tried-and-tested solution. This session explores some of the key issues in systems choice for central bank finance.

Course summary and conclusions
Roundtable discussion led by the chairman, Kenneth Sullivan

This session will review the findings of the days’ discussions and draw together the themes covered by the course. Delegates will summarise the lessons learned and generate priorities for action on their return. There will also be an opportunity to raise any remaining issues or questions for the chairman and the rest of the group to discuss.