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ECB has made no profits for the first time.

 The cent­ral bank has made no profits for the first time in 15 years after write­downs on bond invest­ments made as part of its crisis-fight­ing meas­ures.

ECB

The European Cent­ral Bank made no profits for the first time in 15 years in 2022 after suf­fer­ing write­downs on its bond invest­ments, with ana­lysts pre­dict­ing years of losses fol­low­ing the reversal of its ultra-loose mon­et­ary policies.

Since the global fin­an­cial crisis, rate­set­ters around the world have bought vast amounts of bonds at ultra-high costs to counter low infla­tion and fin­an­cial risks but are now start­ing to shrink their bal­ance sheets.

As rates rise, the interest cent­ral banks pay on com­mer­cial lenders’ reserves is likely to out­strip the interest earned on bonds bought under crisisfight­ing pro­grammes.

Daniel Gros, a fel­low at the Centre for European Policy Stud­ies think-tank, estim­ated that euro­zone cent­ral banks includ­ing the ECB, could be hit by about €600bn of losses on their invest­ments in gov­ern­ment bonds if interest rates rose to 3 per cent and stayed there for six years.

«ECB losses should have next to no impact on the con­duct of mon­et­ary policy unless it becomes a polit­ical issue,» said Fre­derik Ducrozet at Pic­tet Wealth Man­age­ment, adding that some par­lia­ments could call for cent­ral banks to be recap­it­al­ised.

Ducrozet estim­ated the ECB would suf­fer €90bn of losses on the mis­match between the higher interest it pays to national cent­ral banks and the interest it earns on bonds in 2023 and again in 2024. However, the scale of losses would be lower if it cut rates next year.

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  1. Daniel24 February 2023 at 10:53

    I wasn't expecting any profits. It seems things are pretty rocky at the European Central Bank. Seeing as things are, I think 90BN EUROS is a good loss but I feel it will be bigger.

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