Red numbers for the European Central Bank (ECB). According to the financial information released yesterday, the central bank recorded losses of 1,270 million euros in 2023, even after provisions of more than 6,600 million. The reason? The ECB is a victim of its own monetary policy, because it suffered the impact of the rise in interest rates. Not only has the cost increased for the institution chaired by Christine Lagarde, but the income from the returns on the bonds it bought massively during the stimulus years is long-term and modest.
What implications does this loss have? Technically, few. A central bank can always print currency and never goes bankrupt. But, as he explained in his study Do central banks losses matter? Frederik Ducrozet, Pictet analyst, one consequence is reputational. It is more difficult to demand fiscal discipline from governments if one does not meet one's own obligations.
Another risk is independence. If the losses continue, the ECB could then be forced to ask national states for recapitalization, which would undermine its credibility.
Likewise, for national banks, the ECB's losses could force the Frankfurt institute to reduce the remuneration of its deposits. The ECB's losses are also bad news for governments because, by not receiving dividends, they would be forced to resort to the debt market again, which goes against the budgetary rigor of the eurozone.
