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Research on central bank capital and credibility evolved from being an interest of developing countries to that of developed countries, following the 2008 global financial crisis. There is growing concern about central bank balance sheets at exit from quantitative easing. This paper surveys the literature in this context. It starts by citing early literature, which suggests that a central bank with insufficient capital may be pressured to pursue an inflationary policy at a time of crisis, thereby jeopardizing its credibility. A theoretical analysis of this problem is carried out using central bank budget constraints, and its intertemporal variant, leading to consideration of the solvency of the central bank. Several central banks make fiscal transfers to the government, and their solvency situation is influenced by whether they have fiscal transfers to and from the government or not. [ABSTRACT FROM AUTHOR]

We tested the reliability of different versions of the Z-score and CAMELS-based financial strength indices (aggregated from bank-level data) in detecting periods of banking crisis on a sample of 20 Central, Eastern, and Southeastern European (CESEE) countries during 1995-2014. We demonstrated that the predictive power of both types of accounting-based measures is weak. Our results cast some doubt on their usefulness in academic research and in the macroprudential monitoring framework for emerging economies. Thus, there is a need to strengthen the informational content of accounting data through more frequent and higher-quality data disclosures, including exposures allowing for analysis of interconnectedness and network effects for systemic banking risk monitoring. [ABSTRACT FROM AUTHOR]