Crisis Everywhere: ECB Profit Falls 15% in 2009

Friday, March 05, 2010

We will have to wait for the annual report on April 19 to check the balance of higher expenses to see how much inflation the European Central Bank (ECB) experiences itself.
According to first results published on Thursday, the ECB's expenses rose a stunning 4.4% in 2009, while inflation receded below 1% in the Eurozone. Representative of the worldwide crisis the second biggest central bank in the world reports a 15% cut in it's 2009 profit.
The ECB issued the following preliminary figures for the last year:
The ECB earned a surplus of €2,218 million in 2009, compared with a surplus of €2,661 million in 2008. Following a technical adjustment to its risk provision, the ECB’s declared net profit for 2009 amounted to €2,253 million.

The Governing Council also decided, following the establishment of the programme for the purchase of covered bonds, to extend, as a matter of prudence, the scope of the provision to cover credit risk, in addition to foreign exchange rate, interest rate and gold price risks. The size of the provision is reviewed annually.
Following a decision by the Governing Council, out of the net result for 2009 an amount of €787 million, comprising the ECB’s entire income on euro banknotes in circulation, was distributed to the national central banks (NCBs) on 5 January 2010. The Governing Council decided on 4 March 2010 to distribute the remaining €1,466 million to the NCBs.
The ECB’s regular income is derived primarily from investment earnings on its holding of foreign reserve assets and its paid-up capital, and from interest income on its 8% share of total euro banknotes in circulation. Interest income in 2009 was affected by lower average interest rates on US dollar-denominated assets as well as a lower marginal rate for the Eurosystem’s main refinancing operations compared with 2008.
The ECB earned total net interest income of €1,547 million from all sources, compared with €2,381 million in 2008. Excluding the interest income of €787 million earned on the share of banknotes in circulation, net interest income amounted to €760 million, compared with €151 million in 2008. The ECB paid remuneration of €443 million to the NCBs on their claims in respect of the foreign reserve assets transferred by them to the ECB, which is €957 million less than in 2008, while interest income on foreign reserve assets amounted to €700 million in 2009, compared with €1,036 million in the previous year.
Realised gains arising from financial operations rose by €440 million, to €1,103 million. This increase was due mainly to (a) higher gains generated from sales of securities, and (b) higher gains from the sale of gold, owing to the significant rise in the price of gold in 2009, combined with the larger volume of gold sold in that year.
The ECB’s administrative expenses on staff, rental of premises, professional fees, and other goods and services amounted to €380 million (€364 million in 2008). Depreciation charges on fixed assets amounted to €21 million.


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