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The Bank of Finland ended its 2024 financial year with no profit, repeating the result from the previous year, as rising interest expenses on central bank deposits continued to weigh on earnings. The bank posted an operating loss of €1.03 billion, which was fully offset by reducing existing financial provisions.
The Parliamentary Supervisory Council confirmed the financial statements on Thursday, based on the proposal from the Bank’s Board.
“The interest paid on central bank deposits considerably weakened the Bank of Finland’s operating profit for 2024,” said Marja Nykänen, Deputy Governor of the Bank of Finland. “The Bank’s capital remained strong.”
The primary cause of the loss was the high level of interest paid on commercial bank deposits held at the central bank. This interest cost reached €3.7 billion in 2024, far exceeding income from the Bank’s assets. Net interest income stood at €-1.1 billion, a decrease of €64 million from 2023.
The European Central Bank (ECB) began raising rates in 2022 to curb inflation, peaking in September 2023 when the deposit facility rate reached 4.0%. Although rates began to fall in mid-2024, the average annual deposit rate remained high at 3.73%, limiting the impact of the reductions on the full-year result.
The Bank of Finland covered the loss by using its remaining general provision and reducing its provision against real value loss by €241 million. As a result, no operating profit remained.
Holdings of monetary policy securities, primarily Finnish government bonds, fell from €90 billion to €82 billion over the year. While no new securities were purchased, existing bonds remain on the balance sheet due to their long maturities.
The Bank highlighted the structural interest rate mismatch on its balance sheet. While many assets yield fixed returns, liabilities, such as deposits, are tied to variable interest rates, exposing the institution to ongoing interest rate risk.
Central banking profit, which includes earnings from monetary policy operations across the Eurosystem, stood at €-937 million, an improvement from €-1.03 billion in 2023. Operating expenses for the Bank and the Financial Supervisory Authority (FIN-FSA) totalled €73 million.
The full financial statements were published on 28 March in Finnish. English and Swedish versions will follow in April.
HT
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Source: www.helsinkitimes.fi
