When a company tells its shareholders it expects to make €9bn of losses over the next five years that will more than wipe out all its provisions and equity, it would usually trigger an existential crisis. The normal rules do not appear to apply to the Belgian central bank.
The National Bank of Belgium’s warning — which included the scrapping of its main dividend payment this year — did cause its shares to fall about 18 per cent last week. But it still was able to reassure investors that its financial woes “would not call into question its stability”.
“After all, a central bank can continue to operate, at least temporarily, with a negative capital position,” said the 172-year-old institution, which is one of the 19 national central banks that share the euro and are the main shareholders in the European Central Bank.