ECB reports significantly lower loss of €1.3 billion for 2025

The European Central Bank reported a loss of €1,254 million for 2025, a significant reduction from the €7,944 million loss in 2024, primarily due to lower net interest expense. This loss will be offset against future profits, with no distribution to national central banks.

Interest mismatch narrows

The reduced loss in 2025 stems mainly from a significant decrease in net interest expense, a reversal of trends seen in prior years.

Losses since 2022 resulted from monetary policy actions to maintain price stability, which involved expanding the balance sheet with fixed-rate assets and incurring variable-rate liabilities.

Increases in key ECB interest rates in 2022 and 2023 immediately raised interest expenses on liabilities, while income on assets like APP and PEPP securities did not rise proportionally.

However, subsequent rate decreases since 2024 and a continual decline in ECB liabilities, due to maturing securities, are substantially mitigating this interest mismatch.

The average remuneration rate for TARGET balances, for instance, fell from 4.1 percent in 2024 to 2.3 percent in 2025, significantly lowering interest expenses.

Resilience despite currency shifts

The ECB expects to return to profit in 2026 or 2027, although this depends on future interest rates, foreign exchange rates, and balance sheet dynamics.

Despite current losses, the ECB maintains its operational effectiveness and ability to fulfill its primary mandate of price stability.

Its financial strength is underscored by robust capital and substantial revaluation accounts, totaling €71 billion at the end of 2025, an increase of €12 billion from 2024. Exchange rate write-downs, primarily from the depreciation of the Japanese yen, amounted to €1,316 million in 2025, partially offset by realised exchange rate gains.

Total staff costs decreased to €809 million, and other operating expenses slightly fell to €619 million.

Supervisory fee income amounted to €690 million.

Expected, yet reassuring

The ECB's continued loss, albeit significantly smaller, is an anticipated consequence of its necessary monetary policy tightening cycle.

The substantial reduction in net interest expense confirms that the financial impact of past policy is beginning to normalize.

This outcome, coupled with robust capital buffers, reinforces confidence in the central bank's financial resilience and its unwavering capacity to pursue its mandate.