The European Central Bank’s Financial Statements for 2022

The European Central Bank (ECB) recently released its audited financial statements for 2022, showing that the ECB’s profit was zero (2021: €192 million). This result was due to a release of €1,627 million from the provision for financial risks to cover losses incurred during the year. This article will review the financial statements key points, providing a solid argument for the article, a Related Facts section, a Key Takeaway section, and a succinct conclusion.

Net Interest Income

Net interest income totaled €900 million in 2022 (2021: €1,566 million). The main driver of the decrease compared to the previous year was the interest expense resulting from the ECB’s net TARGET2 liability, which amounted to €2,075 million (2021: €22 million interest income). Interest income earned on the ECB’s share of total euro banknotes in circulation and interest expense paid to the NCBs as remuneration of their claims regarding foreign reserves transferred to the ECB amounted to €736 million and €201 million, respectively (2021: zero for both). These changes resulted from the increased interest rates on the Eurosystem’s main refinancing operations to above 0% since 27 July 2022.

Net interest income from securities held for monetary policy purposes increased to €1,534 million (2021: €1,006 million), while net interest income on foreign reserve assets increased to €798 million (2021: €197 million). These increases resulted mainly from the higher euro area and US yields.

Write-Downs

Write-downs amounted to €1,840 million (2021: €133 million), mainly stemming from unrealized price losses on securities held in the own funds and US dollar portfolios owing to increased bond yields. Impairment tests were conducted on the securities held by the ECB in its monetary policy portfolios, which are valued at amortized cost (subject to impairment). Based on the results of these tests, no impairment losses were recorded for these portfolios.

Staff Costs and Administrative Expenses

Total staff costs decreased to €652 million (2021: €674 million), mainly due to actuarial valuation gains relating to other long-term benefits. Other administrative expenses increased to €572 million (2021: €564 million), mainly because of a gradual return to normal activity levels following the pandemic and the ongoing development and improvement of banking supervision-related IT systems.

Supervisory fee income, derived from fees charged to recover expenses incurred by the ECB in the performance of its supervisory tasks, amounted to €594 million (2021: €578 million). The total size of the ECB’s Balance Sheet increased by €19 billion to €699 billion.

Related Facts

The ECB’s profit was zero for 2022, compared to €192 million in 2021. This was due to a release of €1,627 million from the provision for financial risks to cover losses incurred during the year, mainly from the interest expense resulting from the ECB’s net TARGET2 liability and security write-downs in the own funds and US dollar portfolios. The total size of the ECB’s Balance Sheet increased by €19 billion to €699 billion.

Key Takeaway

The European Central Bank’s financial statements for 2022 show that the ECB’s profit was zero (2021: €192 million). This was due to a release of €1,627 million from the provision for financial risks to cover losses incurred during the year. The total size of the ECB’s Balance Sheet increased by €19 billion to €699 billion.

Conclusion

The European Central Bank’s financial statements for 2022 show that the ECB’s profit was zero (2021: €192 million). The main driver of the decrease compared to the previous year was the interest expense resulting from the ECB’s net TARGET2 liability, which amounted to €2,075 million (2021: €22 million interest income). The total size of the ECB’s Balance Sheet increased by €19 billion to €699 billion.