According to the European Central Bank’s own higher-ups, it’s not possible for a central bank like the ECB to become bankrupt. This is because this type of bank is able to absorb losses without requiring fresh capital or becoming insolvent. For this reason, it’s safe to say that the European Central Bank is not going bankrupt. Profits and losses for this bank are defined as “paper profits and losses”. The bank’s role is not to turn a profit and this is why it will continue to run regardless of how things are going in terms of profits and losses. It isn’t run as a traditional, private bank is and the goals of the bank are not profit-based.
How Does the ECB Make Money?
This bank does business by giving loans to corporations, companies and governments. As well, it purchases debts in order to make a profit. When it loans out money, it’s paid back with interest and this leads to profits. Various financial crises have actually made central banks, such as the ECB, grow in size and scale. Therefore, most in-the-know financial experts are confident that the European Central Bank will carry on, whether it’s in the red or in the black.
The bank is actually willing to nix potential profits by offering loans at no interest. It began this initiative in order to give the economy a boost. Clearly, profit isn’t the overarching motive of ECB executives. They have a different agenda, which is giving borrowers the ability to access money in the form of extremely affordable loans, with a mind to helping businesses start up and assisting existing businesses with staying afloat and thriving in a shaky financial climate. In March, the bank slashed interest rates for loans to zero, all over the “Eurozone”. The bank also stepped up the process of printing out new money. It’s all about helping to stabilise European economies.
Since the bank has altruistic goals which are designed to benefit Europe as a whole, and since the bank has the power to print more money when its VIPs deem it necessary, it’s not subject to typical business rules. In other words, even if the bank is in bad shape, with a lot of paper losses on its ledgers, it will soldier on. It exists to support Europeans and to keep Europe relevant in a business sense. This makes the ECB very different from a conventional bank, which is focused on profits and losses exclusively.
This Bank Sets An Example
Now that you know the answer to the question, “Is the European Central Bank going bankrupt?”, you have a deeper understanding of how this bank functions and what its agenda is. This bank, which has its headquarters in Frankfurt, Germany, expects to keep its interest rates at rock bottom for at least another twelve months and encourages other financial institutions in Europe to consider offering credit for very low interest rates. The bank is more robust than it may seem and it sets the tone for other financial institutions in Europe and worldwide.