"Prominent journalist alleges potential accounting deception at the Bundesbank, or outright deceit from the director of the European Central Bank."
Article Title: Bundesbank's Financial Losses Raise Concerns: A Look at the Facts
The Bundesbank, Germany's central bank, has been making a loss, according to Frank Pöpsel, the Chief Editor of BÖRSE ONLINE. The loss in 2024 is estimated to be around €20 billion, primarily due to higher interest payments on excess liquidity created by the European Central Bank's (ECB) bond-buying programs, also known as quantitative easing.
This surge in liquidity has led to a significant increase in the cost of servicing this liquidity, resulting in substantial accounting losses for the Bundesbank. The bank warns that such losses need to be considered in future monetary policy decisions, as they affect central bank finances.
The issue at hand centers on a mismatch between the higher interest expenses and the income generated from the Bundesbank's assets. As liquidity surges due to the ECB’s monetary policy measures, the cost of servicing this liquidity rises, leading to these accounting losses.
While the Bundesbank’s losses are related to monetary policy mechanics, other reports highlight structural economic issues in Germany, such as deteriorating competitiveness of exports and energy costs. However, these are more about broader economic challenges rather than directly causing the balance sheet losses.
Frank Pöpsel has also raised the topic of Target claims, which are the claims of the Bundesbank against the ECB. These claims, amounting to 1.2 trillion euros, are listed as claims in the Bundesbank's balance sheet under point 9.
There is a discrepancy between the ECB's and the Bundesbank's views on the nature of Target claims. Isabel Schnabel, now at the ECB, claims that these Target claims are not actual claims but just a bookkeeping entry. This disagreement adds another layer of complexity to the financial situation of the Bundesbank.
It's important to note that the Bundesbank did not build up enough provisions during the long period of low interest rates. This, coupled with the current losses, has led to the depletion of all provisions in 2023. The Bundesbank's bonds, which are on the asset side, barely yield any interest, sometimes even negative interest.
The suggestion that the Bundesbank is committing balance sheet fraud or that the ECB director is lying about the financial situation of the Bundesbank has been raised by some, but without concrete evidence to support these claims.
In conclusion, the Bundesbank's financial losses in 2024 are primarily due to higher interest payments on excess liquidity created by the ECB’s bond-buying programs. This causes a mismatch on the bank's balance sheet: liabilities (interest on excess liquidity) have increased faster than income from assets. The bank warns that such losses need to be considered in future monetary policy decisions, as they affect central bank finances. These financial losses are distinct from the broader economic issues Germany faces, such as declining export competitiveness and energy price impacts.
The Bundesbank's financial losses in 2024 are a result of increased interest payments on excess liquidity from the European Central Bank's (ECB) bond-buying programs, impacting the bank's business operations and finance. This is due to the surge in liquidity leading to a significant rise in the cost of servicing this liquidity, resulting in substantial accounting losses.
The higher interest expenses and the insufficient provisions built up by the Bundesbank during the long period of low interest rates have led to a mismatch on the bank's balance sheet, with liabilities (interest on excess liquidity) increasing faster than income from assets.
