The German central bank reports a record loss of 20 billion euros, and the European Central Bank faces a “loss assessment” regarding future stimulus policies.

According to the Zhitong Finance APP, the German central bank stated that the European Central Bank must consider potential loss risks when deciding whether to stimulate demand through large-scale Bonds purchases in the future.

In the report on the assessment of the European Central Bank’s monetary policy Global Strategy released by the German central bank on Wednesday, it pointed out that the excess liquidity generated by such debt purchase operations has led to increased interest expenses, and that the recent loss situation has been “more severe than expected.”

The report from the German central bank shows that it is expected to incur a loss of nearly 20 billion euros (approximately 23 billion dollars) in 2024, marking the first annual loss since the 1970s, and suggests that it may continue to face smaller losses in the coming years.

The European Central Bank itself also recorded a record loss of 8 billion euros. The German central bank emphasized: “In evaluating the large-scale Assets purchase tools under the environment of interest rate limits in the future, the Euro system should also consider the possible accompanying balance sheet risks.”

The German central bank has recorded a historic loss for the first time since the 1970s.

Last month, policymakers at the European Central Bank completed a nearly year-long strategic assessment aimed at preparing for more frequent economic shocks and inflation fluctuations. The European Central Bank retained all policy tools including Algo easing, but did not specify the circumstances for their use.

Evaluation documents and statements from certain officials suggest that given the losses at the central bank and the chain effects of asset bubbles, there may be more cautious use of Algo easing in the coming years.

European Central Bank decision-makers agreed to conduct a ‘comprehensive proportional assessment’ before implementing unconventional tools, and it was made clear that when two alternative tools can produce similar effects, the potential impact on the central bank’s balance sheet must be considered—this point was also emphasized by the German central bank.

The German central bank stated that ‘current and foreseeable losses will not jeopardize the euro area’s ability to maintain price stability,’ but officials and economists are concerned that the situation may change.

When discussing such losses, ECB Executive Board member Schnabel stated last year: ‘Even if the central bank is not a profit-maximizing institution, such a situation could still harm credibility.’