Volker Wieland: "Central banks cannot become insolvent" (FAZ, ZDF)

The Deutsche Bundesbank will not be able to transfer a profit to the federal budget for 2023 either - and this for the fourth time. Instead, it is facing operating losses. In interviews with "Frankfurter Allgemeine Zeitung" and the German news program "heute", Prof. Volker Wieland explains why the central bank can nevertheless continue to operate and pursue monetary policy.

Unlike a commercial bank, the aim of a central bank is not to generate the highest possible profits, as the FAZ summarizes. "Moreover, central banks cannot become insolvent because they put legal tender into circulation themselves," says Wieland. A central bank can therefore always settle its liabilities. Technically speaking, there is no obstacle to fulfilling its tasks.

"The central bank can build up positive equity again through future profits and post negative equity until then," Wieland continues, also saying on ZDF:  "The central bank can carry forward losses in the expectation that future profits will ultimately help it to offset the losses". Such a situation is by no means unusual. As an example, Wieland refers  to the central banks in the Czech Republic, Switzerland and Israel, which continued to pursue a stability-oriented monetary policy even with negative equity, as well as the situation of the Bundesbank in the 1970s.

However, Wieland sees risks for the reputation of a central bank should this phase last longer, according to the FAZ.

Frankfurter Allgemeine Zeitung: "Milliardenverlust aus Zinsgeschäft"

ZDF-"heute-Nachrichten": "Bilanz der Deutschen Bundesbank"