According to the “Financial Times”, the Federal Court of Auditors has warned that the ECB’s turnaround in interest rates could force the federal government to recapitalize the Bundesbank in the future, meaning that it would have to adjust its capital structure. This can happen, for example, with a cash injection from Berlin. On Monday, the newspaper quoted a report by the Bonn auditors that the Bundesbank might have to recapitalize itself with taxpayers’ money due to possible significant losses.
The Federal Court of Auditors declined to comment on the article. The turnaround in interest rates had recently weighed on the results of the German central bank. In 2022, it only generated a black zero. The distribution to the federal government was canceled for the third year in a row. When asked, the Bundesbank stated that the Bundesbank’s balance sheet would probably be significantly burdened in the future by the rapid and sharp rise in interest rates in connection with the large bond portfolios. In 2023, the financial buffers would probably still be sufficient. After that, the charges could actually temporarily exceed the buffers.
However, the Bundesbank rejected the assumption that a recapitalization by the federal government would then be necessary: In this case, the Bundesbank would report loss carryforwards, which it could offset with the help of future profits. Even if a loss is carried forward, the Bundesbank’s balance sheet is solid. It owns a considerable amount of its own funds, including valuation reserves. Bundesbank President Joachim Nagel declared in the fall that the state would not have to inject additional capital. The ECB and the national central banks of the euro countries had launched bond purchase programs worth billions in recent years to stimulate the economy and mitigate the consequences of the corona pandemic. However, the high bond holdings are currently yielding only low interest. On the other hand, as part of the ECB interest rate turnaround, the euro watchdogs now have to pay the commercial banks high interest rates again for their deposits at the central bank. The Bundesbank had already been in the red for seven years in the 1970s.