The European Central Bank (ECB) reported a loss for the first time in almost 20 years. The central bank based in Frankfurt put the loss at 1.266 billion euros. The reason is the increased interest rates in the fight against high inflation. The usual distribution of profits to the national central banks of the Eurozone such as the Bundesbank is canceled again. The Deutsche Bundesbank is presenting its annual report this Friday.
Last year, after the ECB only achieved a balanced result, there was no money for the 20 national central banks in the euro area. The last time the ECB reported a loss of 1.6 billion euros was in 2004.
Without the release of the 6.6 billion in risk provisions, the loss last year would have been significantly higher. However, the ECB’s task is not to make profits, but rather to ensure price stability. Since the summer of 2022, the euro currency watchdogs have countered the temporarily significant rise in inflation in the common currency area with an unprecedented series of ten key interest rate increases in a row.
Losses are also expected in the coming years
The rising interest rates on the financial markets are leading to rising interest expenses on the part of the central banks, with which interest income is not keeping pace. At the same time, the assets in the portfolio, most of which are fixed-interest securities with long terms, lose mathematical value.
This is likely to initially put further strain on the central bank’s balance sheets. The ECB will probably suffer losses in the next few years, but will then probably make sustainable profits again, the monetary authorities said. Regardless of possible losses, the ECB can in any case “work effectively and fulfill its main mandate of maintaining price stability.” The central bank also referred to its billions in capital resources.
The bottom line is that the ECB’s interest expenses amounted to 7.19 billion euros; the year before, the central bank had recorded interest income of 900 million euros. The ECB put the depreciation at 38 million euros after 1.8 billion euros in the previous year. Personnel costs rose slightly from 652 million to 676 million euros. Fee income from financial supervision increased to 654 million euros after 594 million euros in the previous year.
