European Central Bank (ECB) Posts Second Consecutive Loss
Frankfurt, Germany – The European Central Bank (ECB) has reported a loss of 7.9 billion euros for 2024, marking the second year of losses and the highest deficit in the organization’s history.
Causes of the Loss
The ECB’s losses stem primarily from the impact of rapidly rising interest rates. To combat soaring inflation, the ECB began aggressively raising interest rates in mid-2022, resulting in higher interest payments on its bonds. Additionally, declining financial market values led to unrealized losses on the ECB’s bond portfolio.
Impact on National Central Banks
The ECB’s losses have direct consequences for national central banks within the eurozone. The traditional profit distribution from the ECB, which would have gone to institutions like Germany’s Bundesbank, has been suspended for the second consecutive year.
Bundesbank’s Financial Situation
The Bundesbank is scheduled to present its annual financial report on February 25th. In 2023, the bank narrowly avoided a loss due to surplus funds set aside for potential losses. However, Bundesbank President Joachim Nagel has indicated that the bank anticipates a prolonged suspension of profit distributions to the German government.
ECB’s Financial Outlook
The ECB acknowledges the possibility of further losses in the coming years but anticipates that they will be less severe than in 2023 and 2024. The bank remains optimistic about its long-term financial health and its ability to fulfill its mandate of maintaining price stability in the eurozone.
Monetary Policy and Inflation
The ECB emphasized that its financial losses are a byproduct of necessary monetary policy decisions. By raising interest rates, the ECB has successfully curbed inflation, which has retreated from record levels.
Zinsausgaben and Wertberichtigungen
The ECB’s interest expenses amounted to 6.98 billion euros in 2023, slightly lower than the previous year’s 7.19 billion euros. However, impairment losses on its bond portfolio increased significantly, from 38 million euros in 2023 to 269 million euros in 2024.
Maintaining Price Stability
Despite the financial challenges, the ECB stressed its continued commitment to its primary function of ensuring price stability in the eurozone. The bank remains confident in its ability to effectively carry out its mandate while navigating the current macroeconomic environment.
