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

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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.

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  • Claudia Kwapil & Matthias Meiksner & Anna Stelzer, 2025. "Understanding central bank balance sheets: drivers, determinants, and projections of the OeNB’s profits and losses," OeNB Bulletin, Oesterreichische Nationalbank (Austrian Central Bank), issue Q3/25-4, pages 1-22.
    • Handle: RePEc:onb:oenbbu:y:2025:i:q3/25-4:b:4
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    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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