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Bundesbank burns through more than E20 billion to cover huge losses
Next stop: gold revaluation?
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By Martin Arnold
Financial Times, London
Friday, February 23, 2024
The German central bank has burnt through the entire E19.2 billion of provisions it built up to cover financial risks as well as most of its E3.1 billion reserves to absorb the huge losses it made last year due to higher interest costs.
The Bundesbank warned it expected to make another "significant" loss this year, exceeding the E700 million of remaining reserves, as it reported today that it would have made a E21.6 billion loss had it not drawn down the funds set aside to cover financial risks.
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The sharp downturn in the German central bank's performance is embarrassing for one of the country's most respected institutions, especially as it has been aggravated by the European Central Bank's vast bond-buying program, which Bundesbank officials opposed.
The losses stem from a divergence between the sharply higher interest rate the Bundesbank pays to commercial banks on their deposits and the returns from its vast portfolio of government bonds, many of which have locked in low or even negative rates for many years. ...
... For the remainder of the report:
https://www.ft.com/content/36546ed0-c153-4747-bb56-bf89192e92da
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