The European Central Bank (ECB) has announced a record loss of €1.3 billion following the release of €6.6 billion for financial risks.

The loss follows nearly two decades of substantial profits at the central bank.

The ECB said that its raising of key interest rates to combat inflation in the euro area resulted in increased interest expenses on ECB liabilities that are subject to variable interest rates.

The loss occurred after interest income on the ECB’s assets did not increase to the same extent or at the same pace, since those assets largely have fixed interest rates and long maturities.

The ECB said that it is likely to continue incurring losses over the next few years.

The organisation added that following this period it is projected to return to making sustained profits.

“The financial strength of the ECB is further underlined by its capital and its substantial revaluation accounts, which together amounted to €46 billion at the end of 2023,” said the ECB. “In any case, the ECB can operate effectively and fulfil its primary mandate of maintaining price stability regardless of any losses.”

The central bank went on to say that the losses have no impact on its ability to conduct effective monetary policy.

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