Germany's central bank, the Bundesbank, reported a historic loss of approximately €19.2bn for 2024 the first annual deficit since 1979. The loss is attributed to swift interest rate hikes by the European Central Bank (ECB) to combat inflation, which significantly increased interest expenses while income from low-yield, long-dated securities lagged behind.
Bundesbank President Joachim Nagel stated at a Frankfurt presentation that although further losses in 2025 are expected, the peak of these financial burdens has likely been reached. The central bank, which had only €700m in reserves at the start of 2024, managed to avoid a loss in 2023 only by drawing on billions in provisions.
The Bundesbank’s situation reflects the broader challenges faced by eurozone central banks. The ECB itself recorded its second consecutive loss in 2024 its largest in over 25 years resulting in no profit distribution to national banks like the Bundesbank. However, despite the massive loss, Nagel and Vice President Sabine Mauderer emphasized that the bank’s balance sheet remains solid, buoyed in part by the increased value of its gold reserves. At the end of last year, the Bundesbank’s gold and foreign currency reserves were valued at about €267bn, a significant increase from the previous year.
Ultimately, the primary role of central banks is not profit-making but ensuring price and currency stability. With inflation on track to return to 2% in Germany by 2026, the Bundesbank remains focused on its core mission, confident that future operational gains will eventually offset the current losses.
