After almost two decades of considerable earnings, the European Central Bank (ECB) has announced that its audited financial statements for 2023 reflect a loss of €1,266 million. This may be the beginning of a downward trend, as the ECB predicts further losses in the coming years.
According to an ECB press release, the loss—representing the full release of the €6,620 million provision for financial risks—will be carried forward on the bank's balance sheet to offset future profits. Consequently, no profits will be distributed to the euro area national central banks (NCBs) for 2023.
The ECB explained in its press release that this loss is a result of policy actions taken to maintain price stability. These include higher interest expenses on ECB liabilities due to increasing key ECB interest rates in an effort to curb inflation and variable rates. Simultaneously, interest income from the ECB's assets did not increase at an equivalent rate due to fixed interest rates and long maturities. In 2023, the bank's net interest expense was €7,193 million; in contrast, net interest income amounted to €900 million in 2022.
As per another statement from the ECB press release, while it anticipates enduring losses over the next few years, it does expect to resume making sustained profits eventually. The bank emphasises that its financial condition remains robust and highlights its capital and revaluation accounts combined total of €46 billion at the end of 2023.
In terms of expenditures, according to the press release, staff costs at the ECB also saw an increase from €652 million in 2022 to €676 million in 2023. Similarly, administrative expenses rose from €572 million in 2022 to €596 million in 2023. On another note, write-downs totaled €38 million in 2023—a significant decrease compared with €1,840 million recorded in 2022.