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>>> Bundesbank denies it may need recapitalisation on bond-buying losses


Reuters

June 26, 2023


https://www.reuters.com/markets/europe/bundesbank-may-need-recapitalisation-cover-bond-buying-losses-ft-2023-06-26/


FRANKFURT, June 26 (Reuters) - Germany's Bundesbank denied on Monday a report that it might need a bailout to cover losses arising from the European Central Bank's bond-buying scheme.

Earlier, the Financial Times had cited a report by Germany's federal audit office as saying possible Bundesbank losses were substantial and could required recapitalisation of the bank with budgetary funds.

The Bundesbank said its balance sheet would probably be considerably burdened in the future by the rapid and strong rise in interest rates in connection with large bond holdings.

In 2023, the financial buffers would probably still be sufficient, it said. After that, the burdens could temporarily exceed the buffers.

However, it said that would not necessarily cause a need for recapitalisation by the federal government. Instead, the Bundesbank would report losses carried forward, which it could offset with future profits.

Even in the case of a loss carry-forward, the Bundesbank's balance sheet would be sound, it said, adding it had considerable own funds, including valuation reserves.

Last year the Bundesbank recorded its first loss in more than four decades as a string of ECB rate hikes cut the value of its bond holdings and generated a loss on ultra cheap loans to commercial banks.

It said at the time that further losses were likely as interest rates keep rising, reducing the value of bonds accumulated during the years when inflation was very low.

The German federal audit office declined to comment on the FT report.

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