Have you ever wonder if the European Central Bank makes a profit? 

ecb-exchange-rate-impact-1

When you think of the European Central Bank (ECB), do you think of a bank aiming to make a profit? It is certainly true that the ECB publish annual accounts, so the profits are there for all to see.

But in fact ECB is working towards a completely different goal – to keep prices stable in the euro area. Sometimes ECB make a profit as a side effect of our efforts – and since ECB is a public institution, these profits can benefit you.

So how does it all work?

Like other central banks, the ECB earns income from a number of sources. These range from interest income related to banknote issuance known as “seigniorage income” to interest income on foreign currency reserves, investments and bonds purchased as part of the asset purchase programme.

The ECB uses some of this income to do its job, i.e. the activities it performs in the interests of keeping prices stable in the euro area. This includes running its offices and paying staff. Work related to the ECB’s role in banking supervision is paid for by the commercial banks themselves.

What happens if there is money left over?

Some money may be set aside to cover any future losses. But after that, any remaining ECB profits go to the national central banks of the euro area countries, as the shareholders of the ECB.

european central bank

The central banks may save some of this money or use some in their work, but profits usually go to the country’s government, thus contributing to its budget. This benefits euro area taxpayers.

And what if the ECB makes a loss?

Almost every year since it was founded, the ECB has reported a net profit, but of course it is also possible for the central bank to make a loss. If the ECB recorded a loss, it would first use the money set aside in previous years. If this were not enough, the ECB might ask the national central banks of the euro area countries to cover the remaining loss with the income from their monetary policy operations. Any further amount may be recorded on the ECB’s balance sheet, to be offset against any net income received in the future.

Source: ECB – Does the ECB make a profit?

Leave a Comment


Broker Cyprus TopFX