The primary objective of the Eurosystem is price stability. The Eurosystem’s monetary policy is geared towards this objective. Monetary policy measures are reflected in central banks’ balance sheets. Central banks’ profitability can therefore fluctuate strongly over time. Both profits and losses are possible.

The Bundesbank’s balance sheet is sound. The Bundesbank holds considerable assets, which are (significantly) in excess of its current and future obligations. This is reflected in its sizeable valuation reserves, which totalled €388 billion as at the end of 2025. In addition, the Bundesbank anticipates that its financial burdens will pass and that it will subsequently generate profits again. These profits will be used to reduce losses with no need for external assistance and to replenish the provisions needed in the future. The accumulated loss will therefore not limit the Bundesbank’s ability to discharge its tasks.

At the end of the year, the Bundesbank values its gold holdings at market prices. If the market price is higher than the acquisition cost, there are valuation gains (unrealised gains). In accordance with the prudence principle set out in the Eurosystem’s accounting rules, these are not recognised in the profit and loss account. They are reported on the liabilities side of the balance sheet under the revaluation accounts item. As valuation reserves, they are part of the Bundesbank’s net equity capital and provide transparency about the actual values of the assets underlying them. r term. On balance, the relatively high policy rates mean that net interest income is currently negative, as was the case in 2023. 

Valuation reserves reflect changes in the value of gold, foreign exchange and securities holdings. Accumulated losses cannot be offset against them.

The Bundesbank will carry its losses forward and subsequently reduce them again using future profits.

A loss for the year is the result in the profit and loss account for a given financial year when expenses have exceeded revenue. Accumulated losses brought forward (profit and loss item 14) represent the loss from the previous year, or the accumulated losses carried forward from the previous years, and are added to the current loss for the year in the profit and loss account. Together with the withdrawal from reserves (profit and loss item 13), the result of the profit and loss account is the accumulated loss, which is reported as liability item 15 in the balance sheet. This accumulated loss corresponds to the accumulated losses brought forward reported in the profit and loss account in the following year.

Central banks differ fundamentally from enterprises and commercial banks because they always remain able to pay in their own currency. The Bundesbank’s balance sheet is sound. The Bundesbank remains able to fully discharge its tasks even in the event of an accumulated loss. What is crucial is that we in the Eurosystem do all that is needed to ensure price stability over the long term.

2025, like earlier years, was a year of considerable financial burdens for the Bundesbank. These burdens are reflected in profit and loss item 1 “Net interest income”. 

The sizeable portfolios of bonds that the Eurosystem and thus the Bundesbank built up through monetary policy asset purchase programmes play a notable role in this regard. Along with these asset holdings, commercial banks’ deposits with Eurosystem central banks were also increasing up to 2022. These are remunerated at the current deposit facility rate, one of the key interest rates. Owing to the key interest rate increases in 2022 and 2023, the Bundesbank – like other Eurosystem central banks – has to pay higher interest rates on these deposits. At the same time, interest income from the sizeable portfolios of bonds remains low, with the interest on these bonds being fixed for the longer term. As in 2024, the Eurosystem’s deposit facility rate exceeded the average remuneration rate for monetary policy securities holdings. As a result, net interest income was again negative. However, due to the declining bond holdings and the corresponding lower deposits as well as lower key interest rates, the burdens on net interest income were significantly lower in the 2025 financial year than in the year before. 

These interest burdens have also proportionally affected profit and loss item 3 “Net result of pooling of monetary income”. This is because the risk and returns arising from some securities held by the national central banks for monetary policy purposes have been pooled across the Eurosystem as monetary income. 

On balance, there was a loss for the year of €8.6 billion in 2025. In 2024, the Bundesbank recorded an accumulated loss of €19.2 billion. Together with the loss for the year from 2025, this results in an accumulated loss of €27.8 billion for 2025.

In the years prior to the pandemic, euro area inflation was too low. The ECB Governing Council therefore adopted a series of monetary policy measures, which included large-scale asset purchases. Other major central banks around the world also launched such purchase programmes. 

At the start of the pandemic, the ECB Governing Council initiated a further monetary policy asset purchase programme. Its aim was to counteract the risks to price stability and monetary policy transmission posed by the pandemic. The large-scale asset purchases played a major role in the sharp expansion of Eurosystem central banks’ balance sheets in recent years. The securities held for monetary policy purposes on the assets side of the balance sheet are offset mainly by larger deposits from commercial banks on the liabilities side. 

These additional assets and deposits have caused the risks on central banks’ balance sheets to increase, most notably interest rate risk. This stems from the fact that the bulk of the securities on the Bundesbank’s balance sheet are low-yielding over the long term, while the interest on commercial banks’ deposits is paid on a short-term basis at the current deposit facility rate. 

The strong rise in inflation starting in the second half of 2021 necessitated decisive monetary policy action. The ECB Governing Council therefore raised the key interest rates significantly in 2022 and 2023. As a result, interest rate risk has materialised due to interest expenses significantly exceeding interest income.

The monetary policy decisions made by the Eurosystem in the past are likely to result in further financial burdens for the Bundesbank in the future as well. There is considerable uncertainty about these. The Bundesbank expects the accumulated loss to increase for a few more years before it can be brought back down. However, based on current information, the loss for the year is likely to shrink again in 2026 for the following reasons: 

• all outstanding monetary policy securities holdings will continue to decline in line with their maturities, meaning that the volume of commercial banks’ interest-bearing deposits will also decrease;
• the negative interest margin from the remuneration of monetary policy securities and commercial banks’ deposits is likely to narrow further.

Later profits will be used to bring the accumulated loss back down in the future and to set aside risk provisions. The Bundesbank therefore does not expect to be distributing any profits for quite some time.

The Bundesbank has made provisions to account for the financial risks on its balance sheet. As early as in its 2016 annual accounts, the Bundesbank began to build up provisions on its balance sheet for interest rate risk and to address these risks in its annual press conferences. 

Additional risk provisioning was the main reason why the Bundesbank did not distribute any profit in 2020 or 2021. The provision for general risk thereby rose to €20.2 billion. 

In 2022, a portion of the provision for general risk was released to offset losses, which reduced the provision to €19.2 billion. In 2023, the provision for general risk was released in full to offset a proportional amount of losses. In addition, €2.4 billion was withdrawn from the reserves to offset the residual loss for the year. This meant that €0.7 billion in reserves remained available for 2024. After this was released, the Bundesbank recorded an annual loss of €19.2 billion for 2024, which was carried forward to 2025. Together with the current loss for the year of €8.6 billion, this results in an accumulated loss of €27.8 billion as at the end of 2025.

The statutory reserves are regulated by Section 27 of the Bundesbank Act (Bundesbankgesetz – BBankG). As part of the Bundesbank’s liable capital, these must be allocated directly to equity capital and are available for covering losses. They are allocated as part of the appropriation of profit until the legally defined maximum value is reached and reported separately in the profit and loss account. 

Provisions – with the exception of the provision for Eurosystem monetary policy operations – are formed in accordance with the Commercial Code (Handelsgesetzbuch – HGB). They are formed for uncertain liabilities of the Bundesbank vis-à-vis third parties (including staff) when establishing the profit or loss in the financial statements, even if they increase losses, and are thus allocated to debt capital. They are expended when used and may only be released if the reason for their formation has ceased to exist. Staff provisions are currently the most significant provisions.

Pursuant to Section 26 of the Bundesbank Act, a liability item for general risks associated with domestic and foreign business (provision for general risk) can also be created. The allocation amount is reviewed annually when establishing profit or loss, taking account of generally accepted risk indicators. As a buffer against risks, the provision for general risk has the character of equity capital and is part of net equity capital. Its allocation does not increase losses. It can be released to offset risks that have arisen or if the risk situation improves.

The Bundesbank posted losses in the 1970s and reduced them again using later profits. At that time, too, the Bundesbank was able to fully discharge its tasks.

Even in the 1970s, the Bundesbank had considerable hidden valuation reserves from its gold and foreign exchange holdings that were far in excess of the losses recorded back then.

The Bundesbank’s monetary policy asset purchases have consisted of large-scale fixed-income securities with predominantly very low interest rates and, in some cases, very long residual maturities. On the liabilities side, these holdings (in addition to banknote circulation and other non-interest-bearing items) are offset above all by commercial banks’ short-term interest-bearing deposits at the deposit facility rate. The divergence in maturities results in an open interest rate position and thus an interest rate risk.

In addition to the open interest rate position in the Bundesbank’s balance sheet, the risks arising from the longer-term securities holdings of the other national central banks subject to profit and risk sharing and the ECB must also be taken into account on a pro rata basis. 

The interest rate risk incurred weighs on the profit and loss items net interest income (P&L 1) and net result of pooling of monetary income (P&L 3). The size and longevity of future financial burdens arising from interest rate risk are uncertain. They depend on a number of factors, in particular future developments in key interest rates and the size and structure of the balance sheet.

More detailed information on interest rate risk in the Bundesbank balance sheet and the open euro interest rate position can be found in the Annual Report for 2021, with updates in the Annual Reports for 2022 to 2024.

The primary objective of the ECB and the euro area national central banks is to maintain price stability. Profits and losses of the national central banks, including the Bundesbank, arise from the performance of tasks within the scope of their responsibility, including the definition and implementation of monetary policy.

Policy rate hikes and cuts have a direct impact on the Bundesbank’s income and expenditure levels. However, the exact impact depends on general interest rate movements and the structure of the Bundesbank’s balance sheet.

In the Eurosystem, accounting is based on the principles established by the Governing Council of the ECB, which take into account the specific needs of monetary policy in the euro area. Pursuant to the Governing Council’s decision, securities are accounted for at amortised cost for monetary policy purposes, regardless of whether they are held until maturity.

The difference between the acquisition and redemption value (premium or discount) upon acquisition is amortised over the securities’ remaining contractual life in accordance with the internal rate of return method, presented as part of interest income (amortisation) and included in the acquisition value (amortised cost).

The Governing Council has decided that, as in the previous year, the ECB’s loss for the year for 2025 will not be borne by the national central banks. This means that the ECB’s current loss for the year is not reflected in the Bundesbank’s 2025 annual accounts. However, the ECB will not be able to distribute profits in future as long as and to the extent that the ECB initially uses future profits to cover its own accumulated losses brought forward.