FRANKFURT (Reuters) - The European Central Bank reported a steep rise in costs on Thursday, as it digested the expense of hiring hundreds of supervisors to watch the euro zone's banks.
Laying out its annual accounts for 2014, the ECB said the jump in wages and costs and the squeeze on income from its record low interest rates meant profits fell by almost a third to 989 million euros (730 million pounds) from 1.440 billion euros.
The bank's hiring drive as it prepared to become the euro zone banking supervisor late last year saw wages and other staff costs jump by a quarter to 301 million euros from 241 million last year.
Other administrative costs, linked to renting extra offices for the roughly 1000 supervisory staff it plans to have, as well as other services to run its operations climbed by over 30 percent.
The costs of bank supervision will be clawed back from banks, with the exception of 2014.
The European Central Bank and the 18 national central banks then forming the euro zone currency bloc held 18.1 billion euros ($20.67 billion) of Greek bonds at the end of last year, it said.
The ECB bought the bonds at the height of the European debt crisis under its Securities Markets Programme, along with debt from Ireland, Spain, Italy and Portugal. The bonds will stay on its balance sheet for another 3.7 years on average.
The ECB will distribute the year's profits to the 18 euro zone national central banks that it represented at that time - Lithuania joined at the start of this year - in two chunks. An initial 841 million was transferred on Jan. 30 with the remaining 148 million to be handed over on Feb. 20.
The bank also saw profits from the Italian, Spanish, Greek, Irish and Portuguese government bonds that it bought under it SMP crisis programme drop to 728 million euros from 962 million in 2013 as the bonds expired.
This year, however, it will kick-off a new plan that is expected to see it buy roughly 1 trillion euros worth of government bonds from across the bloc.