The European Central Bank (ECB) achieved fiscal year 2022 with a balanced result by leaving its net profit at zero, compared to profits of 192 million recorded at the close of 2021, after resorting to 1,627 million euros from its provision for risks and thus cover the losses incurred during the year as a result of the sharp rise in interest rates.
In this way, the issuing institute of the euro zone explained that “profits will not be distributed to the national banks of the euro zone”. The recourse to the provision for financial risks rose in 2022 to a total of 1,627 million euros in order to cover the losses incurred during the year, in contrast to the 610 million provisioned in 2021.
“These losses are due to interest expenses related to the ECB’s net TARGET2 liability and unrealized capital losses on securities held in the equity and US dollar portfolios,” the entity explained, noting that, after the released amount , its provision was reduced to 6,566 million.
As reflected in the ECB’s profit and loss account, in the past year net interest income amounted to 900 million euros, below the 1,566 million in 2021, mainly due to the increase in interest expenses that remained from the TARGET2 liability , which stood at 2,075 million euros, compared to 22 million the previous year.
Interest income generated by the ECB’s share of all euro banknotes in circulation and interest expenses paid to the national central banks as remuneration for their foreign reserve assets transferred to the ECB stood at 736 million and 201 million euros respectively, when in 2021 they were zero in both cases.
“These variations were due to the increases in the interest rate of the main financing operations of the Eurosystem to levels above 0% from July 27, 2022,” explained the ECB, which has raised rates by 300 basis points since July of 2022.
“The variations were due to the increases in the interest rate of the main financing operations of the Eurosystem”
Net interest income generated by securities held with monetary policy fines increased to 1,534 million in 2022, 52.3% above the figure for 2021, while net interest income from foreign reserve assets increased up to 798 million euros, compared to 197 million a year earlier. “These increases were mainly the result of higher yields in the euro area and the United States, respectively,” the central bank said.
Likewise, the unrealized capital losses in the year 2022 amounted to 1,840 euros, well above the 133 million corresponding to 2021, as a result of the unrealized losses due to the price of the securities held in the portfolios of US dollar resources due to the increase in bond yields.
