The Bank Of France Recorded A Record Loss Of 17.7 Billion Euros In 2024!

The Bank of France finds itself in 2024 facing an unprecedented financial situation with an operating loss of 17.7 billion euros. This loss, far from being anecdotal, highlights deep vulnerabilities within the European financial system, exacerbated by inflation, rising interest rates, and the management of public debts.

The source of the colossal loss

The Bank of France recorded a loss of 17.7 billion euros in 2024, primarily due to the management of its government bond portfolio in a context of fluctuating interest rates. Several factors are at the origin of this loss:

• Massive purchases of low-yield bonds: at the time of the health crisis, the ECB had purchased government bonds with low yields (around 0.7%), in a framework of economic support. This impacted the profitability of the Bank of France’s assets.
• A gap between the interest rates of assets and liabilities: when interest rates increased to counter inflation, the ECB had to pay bank deposits at much higher rates (4%), while the bonds purchased at the beginning of the crisis generated much lower returns.
• The decline in yields: the yields of these bonds were insufficient to offset the high costs associated with the increased interest rates on bank deposits, which caused an imbalance in the accounts of the Bank of France.
• Uncompensated losses: although the Bank partially offset this loss with its reserves, a net amount of 7.7 billion euros remains unrecovered, which has affected the finances of the French state.

These elements explain the nature and extent of the loss suffered by the Bank of France. Moreover, they shed further light on the vulnerabilities of the European monetary system in the face of a changing economic context.

The implications for the state and prospects

In addition to these direct losses, the situation raises major concerns regarding French public finances.

The net loss of €7.7 billion in 2024 prevents the Banque de France from paying dividends to the State, thereby reducing the resources the State has available for its expenses.

This loss, although mitigated by accumulated reserves, shows a critical trend that began in 2023 with a deficit of €12.4 billion.

The fact that these losses are worsening year on year prompts reflection on the sustainability of this model as well as on the capacity of the Banque de France to maintain such management in such a volatile economic context.

However, financial authorities expect a reduction in losses in 2025, suggesting that the situation could stabilize if economic conditions improve. But this will largely depend on the evolution of interest rates and inflation, as well as the response of the ECB to prevent a collapse of national central banks.

In the long term, such a recurring loss could force the State to reassess its economic priorities, or even lead to adjustments in its budgetary policy.

This loss reveals the fragilities of the European economic system and raises questions about the sustainability of current monetary policy. The uncertainty that persists regarding the evolution of interest rates and the impact of these choices on public finances necessitates serious reflection on the future of the welfare state and the management of public finances in France.