While the majority central banks it is expected to suffer losses, mainly due to rising yields on bonds they bought under the quantitative easing programs, Bank of Greece he is not exposed to any risk, instead he continues and will continue to make a profit. This is the result of many factors and, above all, the very good management of the investment portfolio by the relevant services of the Bank of Greece, which allows it to belong to the only 10% of central banks at the international level, which will be the “exception”. to the general rule of loss.

fast zoom interest rates actions that central banks have taken internationally to combat the surge in inflation has led to a surge in the interest payments they pay to commercial banks on the deposits they themselves have created with the huge support they have provided through quantitative easing (QE) programs. As the Bank for International Settlements pointed out in a report on Tuesday, “rising interest rates are hurting profits or even causing losses for some central banks, especially those that have been buying domestic currency assets for macroeconomic and financial stability purposes.”

Banks that have already reported losses or warned of the possibility of losses due to their bond buying programs are the central banks of Australia, Belgium, Japan, New Zealand, the Netherlands, England, Sweden, as well as the Federal Reserve and the European Central Bank. “A series of unprecedented failures has resulted in an unprecedented high rate of inflation, which we must combat by raising interest rates. This leads to an increase in interest costs that we pay to banks. In this case, our profits are reduced, and we may even incur losses, ”the ECB said in a statement last November.

The national banks of the Eurosystem, coordinated by the ECB, bought bonds when yields were low, so their income comes from low interest rates. However, their spending has now skyrocketed. The expenses consist of a) the interest they pay to commercial banks on their deposits, which rose rapidly from -0.5% to 2.5%, and b) the interest they pay on government deposits, which also rose to 2. 5%. % from -0.5%-0%.

At the same time, estimated losses arise because the value of the assets they hold (such as bonds) has decreased due to higher interest rates.

Three reasons

Only 10% of central banks will be the “exception” to the general loss rule.

However, the Bank of Greece stands out in this general “rule” as it will continue to take profits. And there are three reasons:

• First, the Bank has a large investment portfolio that contains diversified investment opportunities that systematically generate significant returns through very careful management of the bank’s risk and asset management services.

• Second, because Greece was not investment grade, the Bank of England did not buy bonds under the ECB’s quantitative easing program (APP), although it participated in the emergency PEPP program due to the pandemic. This means that it is far less risk-averse than other central banks, while Greek bond yields have not been as low or negative as other European countries (under the PEPP), so they have made a relative return.

• The third factor relates to a technical issue called “monetary income redistribution”. Programs such as APP are “regular” – unlike PEPP – and form part of the ECB’s cash income. The total money income is redistributed among all countries in accordance with the capital available to each of them. The key of Greece is at the level of 2.0117%, so the profitability of the bank also depends to some extent on this factor.

Thus, the Bank is expected to continue to take profits while it can continue to pay dividends to the government. At the same time, since its shares are listed on the Athens Stock Exchange, it supports the domestic market and also supports the Greek government bond market by purchasing securities worth about 40 billion euros, keeping the yield at a level that competes with Italian bonds (which are investment grade).