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<p>The Bundesbank’s balance sheet and those of other central banks in the eurozone are currently showing high “operating“ losses due to the discrepancy between the low interest bearing securities holdings from bond purchases and the now higher interest bearing commercial bank deposits. However, the current accounting practice does not reflect the associated losses in value anywhere near the market level – even though, according to the PSPP ruling of the German Federal Constitutional Court, the sale of securities before final maturity should be the rule. Even under the current valuation practice, an equity gap cannot be ruled out in the future, which is generally seen as unproblematic for central banks. However, there are risks in the context of recapitalisation by the state. Within the eurozone, national and European requirements could make such capital injections necessary.</p>
</abstract>

The Bundesbank’s balance sheet and those of other central banks in the eurozone are currently showing high “operating“ losses due to the discrepancy between the low interest bearing securities holdings from bond purchases and the now higher interest bearing commercial bank deposits. However, the current accounting practice does not reflect the associated losses in value anywhere near the market level – even though, according to the PSPP ruling of the German Federal Constitutional Court, the sale of securities before final maturity should be the rule. Even under the current valuation practice, an equity gap cannot be ruled out in the future, which is generally seen as unproblematic for central banks. However, there are risks in the context of recapitalisation by the state. Within the eurozone, national and European requirements could make such capital injections necessary.

Bundesbank Losses: Accounting Practice and Possible Obligation of the Federal Government to Make Additional Contributions

Wirtschaftsdienst

This work is licensed under the Creative Commons Attribution 4.0 International License.

Bundesbank-Verluste: Bilanzierungspraxis und etwaige Nachschusspflicht des Bundes

The Bundesbank’s balance sheet and those of other central banks in the eurozone are currently showing high “operating“ losses due to the discrepancy between...

Bundesbank Losses: Accounting Practice and Possible Obligation of the Federal Government to Make Additional Contributions

Published Online: Jul 18, 2024

Page range: 497 - 502

DOI: https://doi.org/10.2478/wd-2024-0127

© 2024 Arne Hansen, published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.