This time, the central banks of the euro zone cannot hope for any additional cash blessing from the top currency watchdogs. The Bundesbank also gets nothing. Reason: The ECB annual surplus for 2022 is zero.
For the first time in a long time, the European Central Bank (ECB) has to offset a loss from its business with its risk provisions. The bottom line is therefore a “black zero” for 2022, as the ECB announced on Thursday in Frankfurt.
The usual distribution of profits to the national central banks of the euro zone, such as the Bundesbank, will therefore not take place. In 2021, the ECB had made a small profit of 192 million euros. Since Croatia’s accession, 20 national central banks have now belonged to the euro area.
The balanced annual result is only possible because the ECB has released 1.6 billion euros from its risk provisions for compensation. After the release, the central bank’s risk provisions amount to almost 6.6 billion euros.
The central bank explains the losses on the one hand with rising interest payments. The background to this development is above all the rising key interest rates in the currency area. In addition, the ECB calls for precautionary write-downs on its own assets and assets denominated in US dollars. This is justified with the rising yields, ultimately the rising interest rates on the capital markets. As a result of this development, the prices of existing securities fall, which reduces their value.
Increased key interest rates due to high inflation
The rising interest rates on the financial markets are mainly due to the fact that, in addition to the ECB, many other central banks have also raised their key interest rates sharply in response to the high inflation. On the one hand, rising interest rates lead to rising interest payments on the part of the central banks. On the other hand, the assets in the portfolio decrease in value in mathematical terms.
The bottom line is that the interest income of the ECB amounts to 900 million euros, after 1.566 billion euros in the previous year. The ECB put the write-downs at 1.8 billion euros. Compared to the previous year, these have increased significantly, in 2021 they were only 133 million euros. Personnel costs fell slightly by EUR 22 million to EUR 652 million. At EUR 594 million, fee income from financial supervision was slightly more than in the previous year.
The balance sheet total of the entire Eurosystem, ie including the national central banks, which was inflated by securities purchases, fell from 8.564 trillion in the previous year to 7.956 trillion euros. The main explanation for the decline is that euro area commercial banks have repaid part of previously extended long-term loans (TLTROs) or some of these loans have expired. The ECB had also extended the loans during the corona pandemic in order to keep the flow of credit going during the crisis.