Understanding central bank balance sheets: drivers, determinants, and projections of the OeNB’s profits and losses

Claudia Kwapil (), Matthias Meiksner () and Anna Stelzer ()
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Claudia Kwapil: Oesterreichische Nationalbank, Economic Analysis Division, http://www.oenb.at
Matthias Meiksner: Oesterreichische Nationalbank
Anna Stelzer: Oesterreichische Nationalbank

OeNB Bulletin, 2025, issue Q3/25-4, 22

Abstract: This paper examines the evolution of the Oesterreichische Nationalbank’s (OeNB) balance sheet and its profit and loss dynamics. Following a decade of unconventional monetary policy, Eurosystem central banks have experienced sustained financial losses in recent years. This study explores the drivers behind these losses. Using a simulation, the paper illustrates the OeNB’s projected balance sheet and net interest income over a 15-year horizon across 32 scenarios, varying assumptions regarding demand for banknotes, excess reserves, and asset yields. The results highlight that the future usage of central bank money (whether in the form of banknotes or the digital euro) is the most influential factor for profitability. The analysis underscores that central bank losses and negative capital are not inherently problematic, provided the institution fulfils its price stability mandate and thereby maintains public trust. The paper concludes that financial strength can support central bank independence, but credibility ultimately hinges on consistent policy performance.

Keywords: Monetary policy; net interest income; Eurosystem; central bank losses; negative capital (search for similar items in EconPapers)
JEL-codes: E42 E52 E58 (search for similar items in EconPapers)
Date: 2025
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