The Bundesbank, Germany’s central bank, will not distribu te a profit to the F ederal Government for the first time since 1979 following the noticeable impact that the emergency monetary policy measures implemented in response to the pandemic had on th e balance sheet of the bank, which hat to substantially increase its risk provisions.
“ This higher level of risk provisioning is the main reason why the Bundesbank is publishing a balanced annual result for 2020 and is not distributing a profit for the f irst time since 1979,” Bundesbank President Jens Weidmann explained at the press conference held on Wednesday to present the annual accounts of the institution, which last year handed out a profit of 5.85 billion.
The German central bank’s net interest income in 2020 declined by 38.2% to €2.87 billion, while it posted losses of 1.55 billion euros for financial operations and risk write-downs against the profit of 2.28 billion in 2019. At the same time, revenues coming from commissions remained stable at 55 million.
In this regard, the Bundesbank highlighted that its interest expenses rose by 101% to 2.60 billion euros. The institution was forced to offer higher yields because emergency measures enabled banks to obtain funding at more favorable rates and they made greater use of this option.
Provisions for general risks were increased by 2.4 billion euros last year to 18.8 billion in the wake of the institution’s assessment suggesting a significant incre ase in risks, particularly over interest rates and default in the monetary policy portfolio.