Bundesbank may need bailout on ECB bond buying, auditor says
The Bundesbank may need an injection of government cash to cover losses on bonds acquired as part of the European Central Bank asset-purchase programmes, according to Germany’s federal auditor.
“It would be expected that the state would recapitalise the Bundesbank via the budget,” officials said in a report seen by Bloomberg.
The Bundesbank recorded zero profit for last year and drew down 1 billion euros (S$1.47 billion) in risk provisions after steep rate hikes in the eurozone collided with years of bond-buying.
Germany’s central bank said in March that losses will worsen in coming years and may not be fully covered by provisions already set aside, which then stood at 19.2 billion euros. It said at the time that losses will be carried forward and offset by future profits, suggesting a capital injection from the government won’t be needed.
However, the auditor reckons such shortfalls may not be sustainable, and the government should plan accordingly.
“Ongoing monetary policy activities – given their magnitude – harbour the risk of negative equity,” officials said. That gives rise to “doubts that the Bundesbank would be able to independently bear the losses in all cases.”
GET BT IN YOUR INBOX DAILY
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
“It’s not just the extreme case of a large member country leaving the monetary union that leads to negative equity in accounts at the Bundesbank,” the auditor said.
The audit office’s report was first reported by the Financial Times. BLOOMBERG
KEYWORDS IN THIS ARTICLE
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes
International
JPMorgan says India index inclusion on track, clients ready
Japan’s consumer spending extends declines as outlook weakens
World Bank sees economies reducing dependence on Russia for energy, on China for supply chains
Measuring the Trump vote: a years-long headache for US pollsters
European firms souring on China, lobby group warns
US lawmakers unveil bill to make it easier to restrict exports of AI models