ECB Avoids 2022 Loss Thanks to Release of €1.6 Billion Buffer

(Bloomberg) -- The European Central Bank reported zero profit for 2022, deploying buffers it set aside in earlier years to dodge a loss linked to stimulus-driven bond-buying.

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Tapping those reserves became necessary after asset purchase-related interest payments to the euro area’s national central banks jumped to about €2 billion ($2.1 billion). That was due to borrowing costs being raised to tackle surging inflation.

The ECB’s loss was offset by the release of about €1.6 billion in risk provisions, which now amount to €6.6 billion, according to a statement Thursday from the ECB.

Writedowns, meanwhile, surged to €1.8 billion, “mainly stemming from unrealized price losses on securities held in the own funds and US dollar portfolios owing to increased bond yields,” the ECB said.

The picture for the currency bloc as a whole will only be completed in the coming weeks as national central banks report their own financial results. Much of the ECB’s trillions of euros of bond-buying has been conducted through those institutions.

Central-bank finances around the globe have been warped by their fight against the worst inflation in decades, which followed years of stimulus that inflated their balance sheets. Bank for International Settlements General Manager Agustin Carstens has cautioned against focusing too much on the issue, saying the job of monetary authorities is to safeguard price stability, not generate profits.

Some of the euro zone’s national central banks have already warned of losses as higher interest rates make the cost of servicing deposits built up through quantitative easing soar.

Dutch central bank chief Klaas Knot has said his institution may see “considerable” shortfalls in the coming years, and that in an extreme case, a capital injection from taxpayers “may be necessary.” The National Bank of Belgium, meanwhile, has flagged potential losses of about €9 billion through 2027.

Germany’s Bundesbank, which releases its financial statement on March 1, didn’t distribute any profit to the government in the last two years, choosing instead to boost its risk provisions after the pandemic triggered even more bond-buying.

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