ECB balance sheet contracts by €37.3 billion, annual loss significantly lower

The European Central Bank's balance sheet contracted by €37.3 billion in 2025, primarily due to the decline in monetary policy securities. The ECB also reported a significantly lower annual loss compared to the previous year.

Unwinding monetary stimulus

The ECB's balance sheet decreased by €37.3 billion in 2025, reaching €603.3 billion.

This contraction was primarily driven by the discontinuation of reinvestments of principal payments from maturing securities under the Asset Purchase Programme (APP) and the Pandemic Emergency Purchase Programme (PEPP).

As a result, monetary policy portfolios declined by €51.5 billion to €325.3 billion.

The APP portfolio decreased by €33.7 billion, and the PEPP portfolio fell by €17.8 billion.

These redemptions led to a corresponding decline in intra-Eurosystem liabilities.

Euro-denominated securities for monetary policy purposes constituted 54% of the ECB's total assets.

The ECB reiterated that its activities are conducted in pursuit of its mandate, not for profit generation.

Foreign reserves and green commitments

The ECB's foreign reserve assets increased by €13.6 billion to €116.8 billion in 2025, largely driven by an €18.9 billion rise in gold holdings due to higher market prices.

However, foreign currency holdings, including US dollars and Japanese yen, decreased by €4.8 billion to €55.2 billion, primarily due to currency depreciation against the euro.

The US dollar remained the dominant foreign currency at 78%.

The ECB's own funds portfolio also expanded by €0.4 billion to €23.1 billion, with green investments growing from 28% to 33% of the portfolio, aligning with decarbonisation goals.

Unwinding, not without cost

The continued balance sheet contraction reflects a deliberate unwinding of unconventional monetary policy, signaling a return to traditional operations.

The reduced annual loss is positive, yet highlights lingering financial costs from extensive asset purchase programs.

Growing green investments demonstrate a climate commitment, though their direct influence on systemic financial stability remains modest.