The auditor said the Bundesbank’s bond-buying losses were “substantial” and “could necessitate a recapitalisation with budgetary funds.”
The ECB’s steep rate hikes led the Bundesbank to lose €1 billion of its bond holdings last year alone.
That is because the central bank is now paying commercial banks more interest on deposits at the Bundesbank than the interest it earns on its bonds.
Earlier in March, German central bank President Joachim Nagel warned that the “burdens on the Bundesbank’s profit and loss account are likely to increase considerably in the years to come.”
He noted that the Bundesbank’s reserves of €19.2 billion are likely to be wiped out in the coming years.
Nagel said that while its buffers would be sufficient to cover losses this year, he warned that in subsequent years, “the burdens will probably exceed our financial buffers.”
That said, Nagel expects that current losses will be transferred to the Bundesbank’s balance sheet and covered by future profits “over the course of time,” adding that, for now, “the Bundesbank’s balance sheet is sound.”