In addition, if the central bank incurs losses, it might undermine confidence of general public in the central bank’s policy conduct and ultimately in the currency. Keeping those points in mind, the Bank has laid out three elements to be considered. The first element is a perspective of neutrality, which prevents discretionary credit allocation to individual firms.
The second is to conduct the purchases for a necessary period and on an appropriate scale. That would ensure that the purchases are a bridging measure until the market function recovers. The third is to ensure the Bank’s financial soundness. Since the losses of the purchases impose costs on taxpayers, it is important to avoid the concentration of credit risks in a specific firm.