The euro zone’s central banks made as much as €14 billion last year from holding the sovereign bonds of crisis-hit countries racing to cut public spending to comply with deficit-reduction targets, official data suggested yesterday.
The European Central Bank said it earned €1.1 billion in interest income from its share of a €208 billion portfolio of sovereign debt issued by Italy, Greece, Spain, Portugal and Ireland.
The bonds were purchased under the now defunct Securities Markets Programme, which ran from mid-2010 and was designed to calm financial market fears of a euro zone break-up.
The ECB for the first time also published a previously confidential breakdown of the portfolio, revealing just days ahead of Italy’s general election that Rome was by far the biggest beneficiary of the bond-buying, with €99 billion of its bonds being held by the SMP at the end of 2012.
Declared profit
The ECB’s declared profit represents just 8 per cent of the total portfolio, with the rest being retained among the euro zone’s 17 national central banks that helped conduct SMP operations. Assuming the yield on the ECB’s share is roughly the same as the rest, that implies total interest income of about €14 billion.
Although that figure is relatively small compared with the huge fiscal consolidation taking place across Europe, for smaller countries like Ireland it is significant.
No breakdown of which central banks were most active in SMP operations is publicly available, but of the declared ECB profits, the German Bundesbank will retain the largest share because it represents the largest share of the ECB’s capital key. – (Copyright The Financial Times Limited 2013)
