Germany’s Bundesbank yields no profit for first time in decades

Berlin (dpa) – The coronavirus crisis left the German government empty-handed in 2020, as the Bundesbank failed to distribute a profit for the first time in more than four decades, the central bank said on Wednesday.

Emergency monetary policy measures taken in response to the crisis impacted the central bank’s balance sheet “noticeably,” according to a statement.

In 2019, the Bundesbank distributed a profit of 5.9 billion euros (7.1 billion dollars).

The bank was forced to step up its provisions for general risks last year by 2.4 billion euros, to 18.8 billion euros.

“This greater level of risk-provisioning is the main reason why the Bundesbank is posting a balanced annual result for 2020 and not distributing a profit for the first time since 1979,” Bundesbank president Jens Weidmann said at a press conference.

Weidmann said the bank was expecting another top-up of the risk provisions for 2021, “especially since the risk situation is not likely to change in any major way.”

But it wasn’t just risk-provisioning that weighed on the bank’s end result for 2020; the Bundesbank said interest expenses increased, due to favourable rates offered to support credit institutions, while interest income decreased.

The German Finance Ministry traditionally plans for a profit paid out from the Bundesbank of 2.5 billion euros annually – including for this year.

Since the introduction of the euro in 1999, the Bundesbank has made a profit every year, the highest being in 2001 at more than 11.2 billion euros.

The Bundesbank also gets a cut of the European Central Bank’s profit.

However, at just more than 1.6 billion euros, this was significantly lower in 2020 than the 2.4-billion-euro result a year earlier.

The ECB’s surplus is distributed to the national central banks of the 19 countries that make up the eurozone.

The Bundesbank receives around 26 per cent – the largest share – in line with its share of paid-in capital.