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Balance sheet: Once again no Bundesbank profit for the federal government

Balance sheet: Once again no Bundesbank profit for the federal government

The Federal Minister of Finance could really use a windfall from Frankfurt. But nothing is likely to come of this in the long term.

The federal government must also forgo transferring profits from the Bundesbank for 2023. For the fourth time in a row, the bottom line on the balance sheet is zero, as the central bank announced on Friday. In order to avoid a loss, the Bundesbank had to spend a double-digit billion sum from its risk provisions and reserves.

As a result of the interest rate turnaround, interest income collapsed and was negative for the first time at minus 13.9 billion euros. “We assume that the burdens for the current year will again be significant. They are likely to exceed the remaining reserves,” said Bundesbank President Joachim Nagel. “We expect not to be able to distribute profits for a long time.” The Bundesbank’s last loss was in 1979.

ECB distribution was also canceled

The Eurosystem’s central banks have purchased government and corporate bonds on a large scale in recent years in order to stimulate the economy and mitigate the economic consequences of the pandemic. Many of these securities pay relatively low interest rates. At the same time, central banks are now having to pay commercial banks significantly higher interest rates for parked funds. The European Central Bank (ECB) reported a loss for 2023 for the first time since 2004. As was the case a year before, the ECB’s distribution to the national central banks in the euro area was canceled.

The Bundesbank had already avoided a loss in 2022 by using around one billion euros from its risk provisions. The Bundesbank has now completely dissolved the remaining so-called risk provisions of 19.2 billion euros. In addition, around 2.4 billion euros were withdrawn from reserves. According to the information, reserves of almost 700 million euros remain.

For years, the Ministry of Finance had traditionally budgeted for a Bundesbank profit of 2.5 billion euros in the federal budget. In 2019, the then head of department and current Chancellor Olaf Scholz was able to enjoy the highest Bundesbank profit since the financial crisis: 5.85 billion euros.

Source: Stern

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