The European Central Bank (ECB) announced the largest loss in its history last year due to hard monetary policy.
ECB announced its financial results for 2024.
So, last year the bank lost 7.94 billion euros due to interest rate policy. It has also become the biggest loss in the 25-year history of the bank due to high interest expenses.
In 2023, the ECB announced losses of 1.27 billion euros after creating reserves for financial risks in the amount of 6.62 billion euros. However, the ECB announced that the bank would not be able to reduce the deficit by 2024, since these reserves were used.
In 2023, the ECB for the first time since 2004 announced losses. In 2004, the bank showed a loss of 1.63 billion euros due to course losses caused by the rapid growth of the Euro exchange rate.
The ECB statement says that these losses arose after many years of significant profits: “Losses are the result of political actions necessary to perform the main mandate of the Eurosystem to maintain price stability. This policy required the ECB expansion of the balance sheet, mainly due to the purchase of financial assets with a fixed rate and long -term financial assets. It can work effectively and fulfill its main mandate to maintain price stability, despite any losses. “
Increasing interest rates led to an increase in the net interest expenditures of the ECB last year. Pure interest expenses, which in 2023 amounted to 7.19 billion euros, were recorded at 6.98 billion euros last year.
The main reason for balance loss was an aggressive increase in interest rates in 2022 and 2023, when the ECB fought with high inflation in the eurozone.
Although the value of the obligations of the ECB was still associated with floating interest rates, these rates increased significantly as a result of a strict monetary policy. In contrast, percentage income from assets has not grown to such an extent. The reason is that these assets mainly have a fixed rate and are long -term.
In the fight against inflation above 10 percent, the ECB increased the interest rates 10 times until September 2023. Then the ECB began to mitigate the monetary policy in July 2024 as inflation decreased and reduced interest rates four times until the end of 2024.
The bank’s statement noted that the ECB can bear losses in the coming years: “In this case, it is expected that these losses will be less than those that took place in 2023 and 2024. Then the ECB will begin to receive Profit “.
The total balance of the bank’s balance last year decreased by 33 billion euros compared to the previous year and amounted to 641 billion euros. The amount spent on staff increased from 676 million euros to 844 million euros.
The task of the ECB is to maintain price stability, however, any profit or loss is defined as a by -product.