By fudging their balance sheets to recategorize losses as "deferred assets," the European Central Bank and the US Federal Reserve are venturing into the unknown. Both would do well to abandon the financial nonsense, work out recapitalization agreements with their beneficial owners, and prepare for large realized losses.
NEW YORK – The European Central Bank recently reported its first annual operating loss since 2004. Its losses for 2023 amounted to €1.3 billion ($1.41 billion), following the release of €6.6 billion from its provision for financial risks. In its accounting treatment of this loss, the ECB is relying on the same misleading fudge as the US Federal Reserve Board, which has conjured up a “deferred asset” category to deal with excessive losses.
NEW YORK – The European Central Bank recently reported its first annual operating loss since 2004. Its losses for 2023 amounted to €1.3 billion ($1.41 billion), following the release of €6.6 billion from its provision for financial risks. In its accounting treatment of this loss, the ECB is relying on the same misleading fudge as the US Federal Reserve Board, which has conjured up a “deferred asset” category to deal with excessive losses.