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Saturday 18 November 2017

Bundesbank profit dented by increase to risk buffers

The Bundesbank has cut its 2013 outlook for gross domestic product growth next year
The Bundesbank has cut its 2013 outlook for gross domestic product growth next year

THE Bundesbank's 2012 profit remained broadly unchanged at €664m less than half of what the German government was expecting, as the central bank put more money aside to protect it from the euro zone debt crisis.

The Bundesbank is concerned about risks the European Central Bank has taken on to help banks through the crisis, for example by accepting lower-rated assets in return for cash, exposing it to larger losses if a bank fails to repay.

On Tuesday, the Bundesbank said it increased its risk buffers by €6.7bn to €14.4bn, which means that the amount it has transferred to the German government was hardly changed from last year's €643m, despite "significantly higher interest income" in 2012, it said.

The German government had expected €1.5bn.

"Despite significantly higher interest income, there was scarcely any rise in the profit owing to a further steep increase in risk provisioning," Bundesbank President Jens Weidmann said in a statement, adding that the financial and debt crisis was the most significant risk for the German economy.

The government is set to pass almost the full Bundesbank profit on to Greece following an agreement by euro zone finance ministers and the International Monetary Fund in November to pass on the profits from the Eurosystem's Greek bond portfolio back to Athens to help with the country's debt servicing.

German Finance Minister Wolfgang Schaeuble had earlier earmarked at least € 600m for Greece from Germany alone.

The Bundesbank did not say how much of the €11bm it generated from interest income last year - its most important source of profit - came from Greek bond holdings.


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