DNB expects dramatic years after historic loss

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DNB expects dramatic years after historic loss

Due to the rapidly rising interest rates, De Nederlandsche Bank (DNB) has suffered a historic loss of almost half a billion euros. For the first time since 1931, the Dutch central bank records red figures. It is also expected that a loss will be recorded for the coming years, according to the bank’s annual report.

The central bank does not expect to be able to write black figures again until 2028. Topman Klaas Knot previously warned of the scenario that is now unfolding. For example, the central bank has to spend a lot on interest rates, while in recent years bonds have been bought en masse that have hardly risen in value.

Trick

With a handy trick, DNB has not suffered any accounting losses. By withdrawing 460 million euros from the reserves (which hold more than eleven billion), the net result was able to come to zero. However, the state cannot expect a dividend from DNB.

In the coming years, the losses could increase to such an extent that the built-up buffers are no longer sufficient and the State, as shareholder, has to step in. As it stands now, DNB could end up in the red with more than EUR 3 billion this year, and losses of billions will probably also be involved in the following years.

The pain is particularly felt in the fees that DNB pays to banks for their money that they store at the central bank. They are rising sharply due to higher interest rates. At the same time, DNB has hundreds of billions of euros worth of debt securities on its balance sheet that were bought up in the aftermath of the financial crisis and during the corona pandemic. But the income from those bonds is low.

Similarities with Silicon Valley Bank

To some extent, the problems are similar to those of the US Silicon Valley Bank that recently collapsed. ‘The difference is that they have not accrued a provision since 2015’, says Knot. There is also no risk of a bank run at DNB.

Klaas Knot, CEO of De Nederlandsche Bank (DNB) (ANP/EPA)

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