The Deutsche Bundesbank posted a profit of €2.95 billion for the 2014 financial year, compared with €4.59 billion in 2013. The profit was transferred in full today to the Federal Government of Germany pursuant to section 27 number 2 of the Bundesbank Act (Bundesbankgesetz). "The profit is lower than in the previous year mainly because of the decline in interest income," Bundesbank President Jens Weidmann explained at the Bundesbank’s annual press conference. Risk provisions remain unchanged at €14.4 billion after they were increased a number of times in previous years. "The risks arising from the Securities Markets Programme and from the Eurosystem refinancing loans have diminished. At the same time, however, the key interest rate cuts in June and September 2014 have led to a decline in the anticipated annual result for 2015 and thus in the Bundesbank's available financial resources," Mr Weidmann pointed out. Nonetheless, risk provisions remain high because, amongst other things, the ECB Governing Council's decision to launch new asset purchase programmes gives rise to additional credit risks. The Bundesbank President explicitly referred to the risks arising from the purchase programmes for euro-denominated covered bonds (CBPP3) and for asset-backed securities (ABSPP).

The most important source of the Bundesbank's profit in 2014 was interest income totalling €4.0 billion (2013: €7.3 billion), €3.8 billion (€7.0 billion) of which was in euro. This was partly offset by interest expenditure of €0.9 billion (€1.7 billion), resulting in net interest income of €3.1 billion (€5.6 billion). The decline, by €2.4 billion, in net interest income was due primarily to the ECB's key interest rates being lower on average over the year. The net result of financial operations, write-downs and risk provisions led to income of just under €0.5 billion (2013: net loss of €0.4 billion due to write-downs on foreign exchange assets and US dollar securities).

Total assets as at 31 December 2014 stood at €770.8 billion (€801.0 billion). "In spite of the slight decline in total assets, the Bundesbank's balance sheet continues to be marked by monetary and foreign exchange operations related to the financial and sovereign debt crisis. In all likelihood, the purchase programmes will expand the bank's total assets during the course of 2015," explained Executive Board member Joachim Nagel, who is responsible for Accounting and Controlling.

On the liability side, note should be made of the marked decrease in liabilities related to monetary policy operations, by €51 billion to €90 billion. This decline was driven, above all, by the expiry of the fixed-term deposits resulting from liquidity-absorbing fine-tuning operations related to the Securities Markets Programme. The euro balances of non-resident depositors – notably foreign central banks – likewise fell significantly in the reporting year, by €40 billion to €12 billion. "The decline was primarily influenced by the introduction of the negative interest rate in June 2014," Mr Nagel explained.

On the assets side, monetary policy operations led to an increase in the volume of credit institutions' refinancing with the Bundesbank by €14 billion to €66 billion, primarily due to the first two targeted longer-term refinancing operations in September and December 2014. After falling in the previous year, the TARGET2 claim on the ECB went down again in 2014, from €510 billion to €461 billion. Thus, the return flow of central bank money from the German banking system via TARGET2 continued in the reporting year, albeit to a lesser extent.

Items in the Bundesbank balance sheet which are subject to market price movements, such as gold and foreign currency holdings, are valued at market prices. Valuation gains arising from this are not recognised in the profit and loss account but are reported instead under the balance sheet liability item "Revaluation accounts". This item climbed from €88.1 billion in 2013 to €104.5 billion in 2014 predominantly on account of the 13% increase in the price of gold.

Commenting on the current monetary policy stance in the euro area, the Bundesbank President said that the government bond purchase programme had caused fiscal and monetary policy to become even more closely intertwined. Member states might become less inclined to embrace budget consolidation and reform measures if they become accustomed to the very favourable funding conditions. On the topic of Greece, Mr Weidmann explained that it was up to governments and parliaments to decide whether they were willing to further increase their Greek exposure and cover the Greek state's funding needs. "This is less of a task for the Eurosystem than it has ever been," Weidmann stressed. Turning to Germany, he stated that the essentially upbeat situation and the rosy outlook for the economy should not mean turning a blind eye to the risks facing economic growth. "Complacency in economic policy matters has no place in Germany," the Bundesbank President explained.