German central bank reports profit

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DBBundesbank Reuters. A sign is seen outside the headquarters Germany's federal bank Deutsche Bundesbank in Frankfurt.

Frankfurt - The German central bank or Bundesbank clocked up profit of 4.6 billion euros ($6.4 billion) in 2013, all of which would be transferred to government coffers, it said on Thursday.

“The Deutsche Bundesbank posted profit of 4.6 billion euros in 2013 after 664 million euros a year earlier, which, according to Bundesbank law, was transferred in full to the federal government,” the central bank said in a statement.

Bundesbank president Jens Weidmann explained that the seven-fold increase in profit - despite low interest income - was due to the fact that the central bank did not set aside any additional risk provisions last year.

“The risk situation has eased to some extent,” Weidmann said.

However, it would not be appropriate for the Bundesbank to run down the existing risk provisions of 14.4 billion euros just yet “as the lower key interest rates meant that the Bundesbank was likely to post a smaller profit in 2014, thus reducing its available financial resources,” Weidmann said.

The main source of the Bundesbank's profit last year was interest income of 7.3 billion euros, down from 11.0 billion euros in 2012.

At the same time, interest expenses declined to 1.7 billion euros from 2.7 billion euros, resulting in net interest income of 5.6 billion euros, compared with 8.3 billion euros.

“The decline of 2.7 billion euros in net interest income is due primarily to the key interest rate cuts made by the European Central Bank in May and November 2013,” said Bundesbank executive board member Rudolf Boehmler.

Looking at the wider economy, president Weidmann said the financial and sovereign debt crisis had continued to have a defining influence on economic developments in 2013.

“The countries worst affected by the crisis have made discernible progress in the necessary process of adjusting their economies, and confidence is gradually being restored,” he said.

Even so, the heavy debt burden and the ongoing structural problems in the euro area meant that the European and global economies remained very vulnerable to shocks, Weidmann warned

In view of the continuing challenges, it would clearly be premature to declare that the sovereign debt crisis was over, said Weidmann who also sits on policy-making governing council of the European Central Bank.

“Substantial and persistent efforts will be needed to achieve a lasting solution to the crisis and its underlying structural causes,” he said.

Weidmann said expansionary monetary policy had helped the world economy pick up speed again over the course of 2013.

The German economy had likewise recovered from the brief dip seen in the latter part of 2012 and early part of 2013, he noted.

The pace of growth in the German economy was “likely to increase again in 2014 and 2015”, said Weidmann, adding that growth in Germany had been sustained for some time now by domestic activity.

That was thanks to the robust state of the German economy, Weidmann said, pointing to the low unemployment rate, ongoing employment growth and a rise in gross wages and salaries. - Sapa-AFP



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