The FINANCIAL -- The European Central Bank’s (ECB’s) audited financial statements for 2017 show that the net profit increased by €82 million, to €1,275 million, mainly as a result of higher net interest income earned on the US dollar portfolio and the asset purchase programme (APP) portfolio.
Net interest income totalled €1,812 million in 2017 (2016: €1,648 million). Net interest income on foreign reserve assets increased to €534 million (2016: €370 million) owing to higher interest income earned on the US dollar portfolio. Net interest income arising from the APP increased by €140 million, to €575 million, as a result of the continuing securities purchases under this programme. Conversely, as a result of redemptions, net interest income earned under the Securities Markets Programme (SMP) decreased to €447 million (2016: €520 million). The ECB’s interest income from its SMP holdings of Greek government bonds amounted to €154 million (2016: €185 million).
Realised gains arising from financial operations decreased to €161 million (2016: €225 million). The decrease in net realised gains was mainly due to lower price gains on US dollar securities, according to ECB.
Write-downs amounted to €105 million (2016: €148 million), primarily as a result of a decrease in the market value of a number of securities held in the US dollar portfolio alongside an increase in the relevant yields.
Impairment tests are conducted on the securities held by the ECB in its monetary policy portfolios, which are valued at amortised cost (subject to impairment). Based on the results of these tests, no impairment losses have been recorded for these portfolios.
The fees charged to supervised entities amounted to €437 million (2016: €382 million). These fees are charged in order to recover expenses incurred by the ECB in the performance of its supervisory tasks. The increase in 2017 relates predominantly to work associated with the targeted review of internal models (TRIM) and an increase in the number of ECB staff working in banking supervision.
Total staff costs and other administrative expenses increased to €535 million (2016: €467 million) and €539 million (2016: €487 million) respectively, mainly owing to the increase in expenses related to the ECB’s supervisory tasks.
The ECB’s net profit is distributed to the euro area national central banks (NCBs). The Governing Council decided to make an interim profit distribution, amounting to €988 million, to the euro area NCBs on 31 January 2018. At yesterday’s meeting, the Governing Council decided to distribute the remainder of the profit, amounting to €287 million, on 23 February 2018.
The total size of the ECB’s Balance Sheet increased by 19% to €414 billion (2016: €349 billion). This increase was almost exclusively due to the securities purchased under the APP.
The continuing purchases of securities under the APP led to an increase in the consolidated balance sheet of the Eurosystem, which rose by 22% to €4,472 billion (2016: €3,661 billion). The Eurosystem’s holdings of securities held for monetary policy purposes increased by €732 billion to €2,386 billion (2016: €1,654 billion). The APP holdings increased by €754 billion to €2,286 billion, while securities held under the first two covered bond purchase programmes and the SMP declined by €9 billion and €13 billion respectively owing to redemptions.