European Central Bank into negative territory for the first time in 20 years

The European Central Bank (ECB) suffered a loss on its balance sheet in 2023 for the first time in almost 20 years.

NEWSROOM

FEBRUARY 29, 2024

photo: Unsplash

For the first time in almost two decades, the Eurozone central bank is in the red, Tagesschau from Deutschland informs. It’s not just consumers and businesses that are suffering from high interest rates; the ECB itself is also feeling the effects.

The European Central Bank (ECB) suffered a loss on its balance sheet in 2023 for the first time in almost 20 years. The central bank estimated losses at around 1.3 billion euros. The reason is an increase in interest rates as part of the fight against high inflation.

The usual distribution of profits to the eurozone’s national central banks, including the German Bundesbank, is being canceled once again. It was still a black zero in 2022 – but the ECB had already refrained from handing out money to the central banks of the 20 eurozone countries.

Prior to this, the ECB had been making significant profits for almost two decades.

In fulfilling its task of overseeing monetary policy, the ECB has been taking vigorous action since the summer of 2022 to combat the temporarily high rise in inflation and raising key interest rates ten times in a row – an unprecedented process in the history of the central bank.

The ECB is also suffering from high interest rates.

However, rising interest rates in financial markets do not come without consequences for monetary authorities: among other things, they mean that central banks have to spend more on interest, but at the same time earn less from it. Central bank assets — mostly fixed-rate securities with long maturities — also lose mathematical value.

All this is likely to continue to burden central bank balance sheets in the future, with the ECB likely to make losses over the next few years, monetary authorities said.