German central bank to lose 19.8 billion euros in 2024 due to high interest rates

Bundesbank President Joachim Nagel presented the bank's financial report for 2024 to the public at a press conference in Frankfurt.

The Bundesbank report noted that the bank lost 19.8 billion euros last year, and that 700 million euros of this was offset by risk provisions.

The bank suffered losses due to the low income from bonds it purchased during the period when interest rates were low and the increase in interest payments to banks.

Central banks in the eurozone pay deposit interest on deposits they receive from commercial banks. This rate was 4% until June 2024, but is now at 2.75% after the ECB cuts.

The Bundesbank last reported a balance sheet loss in 1979. The loss was equivalent to around 2.9 billion euros.

Nagel said in his presentation at the press conference that the bank's losses would be smaller in the future, adding, "The peak of annual burdens has probably been passed."

Stressing that the Bundesbank's balance sheet remained "solid" with high gold reserves, Nagel said the bank had the capacity to offset its losses with profits in the future. "The Bundesbank's mobility is completely unlimited," he said.

Pointing out that the ECB could cut interest rates further if inflation falls to the European Central Bank's (ECB) 2 percent target this year, Nagel said, "This would allow us as the governing council to reduce key interest rates even further."

Nagel added that they expect annual inflation in the country to return to the 2 percent limit in a sustainable manner in 2026.